•reviewing and making recommendations to our board of directors with respect to the compensation of our directors;
•reviewing and making recommendations to our board of directors with respect to our executive compensation policies and plans;
•implementing and administering our incentive and equity-based compensation plans;
•determining or, with respect to our Chief Executive Officer, recommending to the board of directors the number of shares underlying, and the terms of, restricted share awards and options to be granted to our directors, executive officers, and other employees pursuant to these plans;
•assisting management in complying with our proxy statement and annual report disclosure requirements;
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•producing a report on executive compensation to be included in our annual proxy statement;
•assisting our board of directors in producing the compensation report to be included in our annual report filed in the Netherlands and to be posted on our website in accordance with best practice of the DCGC;
•reviewing and monitoring matters related to human capital management, including talent acquisition and retention; and
•attending to such other matters as are specifically delegated to our compensation committeeCompensation Committee by our board of directors from time to time.
During fiscal year 2019,2021, our compensation committeeCompensation Committee held three meetings.
four meetings and also acted by unanimous written consent.
Nominating and Corporate Governance Committee
Our nominatingNominating and corporate governance committeeCorporate Governance Committee is comprisedcomposed of Messrs. Fenton and Puttagunta and Ms. Marooney, each of whom is anon-executive member of our board of directors. Mr. Puttagunta is the chair of our nominatingNominating and corporate governance committee.Corporate Governance Committee. Our board of directors has determined that each member of our nominating and corporate committee meets the requirements for independence under the rules of the NYSE. The nominatingNominating and corporate governance committeeCorporate Governance Committee is responsible for, among other things:
•identifying, recruiting, and recommending to our board of directors qualified candidates for election as directors and recommending a slate of nominees for election as directors at our annual general meeting of shareholders;
•developing and recommending to our board of directors corporate governance guidelines as set forth in our rules of the board of directors, including the committee’s selection criteria for director nominees, and implementing and monitoring such guidelines;
•overseeing compliance with legal and regulatory requirements applicable to us;
•reviewing and making recommendations on matters involving the general operation of our board of directors, including board size and composition, and committee composition and structure;
•recommending to our board of directors nominees for each committee of our board of directors;
•annually facilitating the assessment of our board of directors’ performance as a whole and of the individual directors, and the performance of our committees of the board of directors as required by applicable law, regulations, and the corporate governance guidelines and exchange listing standards;standards
•overseeing our environmental, social and governance activities, programs and public disclosure, including in light of any feedback received from shareholders of the Company; and
•overseeing our board of directors’ evaluation of executive officers.
During fiscal year 2019,2021, our nominatingNominating and corporate governance committeeCorporate Governance Committee held one meeting.
two meetings and also acted by unanimous written consent.
We have posted the charters of our audit, compensation,Audit, Compensation, and nominatingNominating and corporate governance committees,Corporate Governance Committees, and any amendments thereto that may be adopted from time to time, on our website at https://ir.elastic.co. Information on or that can be accessed through our website is not part of this proxy statement.
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Environmental, Social and Governance Matters
We believe that operating Elastic in an environmentally and socially responsible manner, while employing principled, effective and transparent governance practices, will help drive long-term value for all of our
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stakeholders, including our shareholders, employees, customers, creditors and communities. Consistent with this belief, Elastic has taken the following steps in pursuit of those objectives.
Governance
Our board of directors sets high standards for itself, and the officers and employees of the Company. Implicit in this philosophy is the importance of sound corporate governance. We believe it is the duty of the board of directors to serve all our stakeholders, including our shareholders, and to oversee the management of the Company’s business. To fulfill its responsibilities, the board of directors follows the procedures and standards set forth in our corporate governance guidelines, board rules, code of business conduct and ethics and other governance policies. To further promote better governance and a higher standard of ethical and professional conduct across the entire company, we have mandatory trainings and policy acknowledgments for employees with respect to our code of business conduct and ethics and other significant compliance policies. We also maintain an ethics hotline where employees and third parties can confidentially report any concerns about possible violations of our code of business conduct and ethics and compliance policies. We thoroughly investigate any compliance-related reports we receive through the hotline or other reporting channels and take appropriate remedial action when warranted. You can find certain of our governance documents and compliance policies on our website at www.elastic.co.
We believe that good corporate governance provides a strong foundation for operating our business in a manner that is fair, ethical and responsible and is therefore essential to the long-term success of our company. Our board of directors and its committees participate in setting the tone for our company in this regard, as they regularly review and, as appropriate, update various corporate governance and other key policy documents in light of current regulations and best practices, and monitor and strive to ensure compliance with such corporate governance and key policy documents.
We recognize the importance of diversity within our board of directors and we believe that our business benefits from a board of directors with a wide range of skills and variety of different backgrounds and that a diverse composition contributes to a well-balanced decision-making process by the board of directors. As such, we have a diversity policy that identifies the importance of considering potential director candidates’ diversity, including nationality, age, gender, race, ethnicity, education and experience. Twenty-five percent of our directors are female, and our board of directors is compliant with the State of California’s rules requiring certain publicly traded companies to have a minimum number of female directors and directors from underrepresented communities.
We believe that our efforts for effective corporate governance are illustrated by the following practices:
•Seven out of eight directors are independent under the applicable rules and regulations of the SEC and the listing requirements and rules of the NYSE.
•Our board of directors has both a Lead Independent Director and a Vice-Chairman, both of whom are independent.
•All of our board committees are comprised of independent directors.
•The functioning of our board of directors and board committees is evaluated at least annually.
•The leadership structure of our board of directors is reviewed regularly.
•Our key corporate governance and compliance policies are reviewed regularly.
•Our board of directors and its committees may hire outside advisors independently of management.
•Our insider trading policy contains anti-hedging and anti-pledging provisions.
Investing in People
Our employees (whom we call “Elasticians”) and our culture are vital to Elastic’s long-term success. We invest in our people by focusing on:
•Attracting, engaging and retaining talent;
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•Maintaining our strong company culture;
•Enhancing our diversity, equity and inclusion (“DEI”);
•Continuing strong employee engagement;
•Facilitating continuous employee learning and development; and
•Offering effective total rewards, including employee well-being.
Our management regularly updates our board of directors and its committees on human capital trends and employee-focused activities and initiatives.
Our Culture
We describe our culture by the Elastic “source code,” the things that make Elastic, Elastic. Our source code guides our culture, business, product development, people practices and brand. The guiding ideas are:
•Home, Dinner. There is no such thing as work-life balance. We are successful if we find balance in life. Elastic empowers its employees with the flexibility to do so. Be home for dinner, go for a run midday, care for a sick child, or visit a parent. Finding balance means being more innovative and efficient at work. Which makes for a better Elastic.
•Space, Time. It’s easy to get stuck in a day-to-day work pattern. Allowing for the space and time to dream requires conscious effort. Embracing a high failure rate does, too. Fulfillment comes from doing the obvious and dreaming up the un-obvious. Both are foundations of Elastic.
•IT, Depends. It’s pretty complicated to make some things simple, and even more complicated to make other things possible. We embrace and value the knowledge required to do both. When a question is asked, buckle up. Sh*t is about to get real. Your journey will likely start with “it depends.”
•Progress, SIMPLE Perfection. Perfection is not a destination. Color inside the lines or color outside the lines. Just pick a color. It’s as simple as 2048. An Elastic that moves is an Elastic that survives, thrives, and stands the test of time.
•01.02, /FORMAT. Our products are distributed by design, our company is distributed by intention. With many languages, perspectives, and cultures, it’s easy to lose something in translation. Over email and chat, doubly so. Until we get a perpetual empathy machine, don’t assume malice. A distributed Elastic makes for a diverse Elastic, which makes for a better Elastic.
•As YOU, Are. We all come in different shapes with different interests and skills. We all have an accent. Celebrate it. Just come as you are. No need to invest neurons trying to fit an arbitrary mold. We’d rather you put them to work shaping Elastic.
•HUMBLE, Ambitious. Ambition drives us to challenge ourselves and the people around us to do better. It is not an excuse to be an *sshole. Be humble. Be ambitious. At Elastic, we are both.
•Speed, SCALE, Relevance. Elastic is a search company. We focus on value to users by producing fast results that operate at scale and are relevant. This is our DNA. We believe search is an experience. It is what defines us, binds us, and makes us unique.
Elastic was born a distributed company and continues to be distributed by design. We have designed our processes, systems, and teams so that employees can generally perform their jobs without needing to be physically present in the same room or even in the same time zone. Just as distributed systems are more resilient, we believe that being distributed helps build a strong company that can scale and adapt as new challenges arise. Having a distributed workforce gives us a global candidate pool, which gives us the opportunity to cast a wider recruiting net, a critical aspect of helping open our pipelines to a broader set of diverse talent.
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Diversity, Equity and Inclusion
Our focus on DEI is critical to how we develop, strengthen and sustain a sense of belonging and inclusion among all Elasticians.
Balanced Teams. We strive to be an employer of choice for a diverse and inclusive workforce through our talent brand, talent attraction, development, and retention efforts. Our recruiting approach is underpinned by the desire to create balanced teams at Elastic, which includes considering broad aspects of diversity from race and gender mix as well as diversity of thought, experience and tenure when recruiting new team members. In fiscal year 2021, the created-by-women-for-women workplace review site, Fairygodboss, recognized Elastic as number one in the Best Technology Company for Women category, and as one of the best workplaces for women in two additional categories: Best Company for Women, and Best Company Where CEOs Support Gender Diversity.
Elastician Resource Groups. We strive to embed DEI deep within our culture through various initiatives, projects and programs, the centerpiece of which is the Elastician Resource Groups, which are organizationally sponsored, self-organized, Elastician-run groups. Aligned to specific shared identities, interests, affinity or allyship, such as Latinx, parent(s), disability or accessibility, Black, LGBTQ+ and others, each group identifies goals and objectives with executive sponsorship to ensure that they provide tangible benefits and result in all Elasticians feeling a sense of belonging.
Code of Conduct. All of our employees must adhere to a code of business conduct and ethics that sets standards for appropriate behavior and, as mentioned above, are required to complete annual training on the code of business conduct and ethics and training to help prevent, identify and report any type of discrimination and harassment.
Employee Engagement
We are committed to ensuring that Elasticians have a voice in how we can collectively make Elastic a better place to work.
New Employee Onboarding. Our new employee onboarding experience is centered around attending “X-School”, our extensive new-hire orientation program, which enables new Elasticians to meet and collaborate with other new Elasticians from around the globe and to learn about our products and solutions.
Engagement Surveys. We maintain a regular pulse on how our employees are feeling through two primary feedback mechanisms – an annual employee engagement survey and a mid-year pulse survey check-in. The results of these surveys are reviewed at the company, functional, team and manager level, with action plans put in place annually. Elasticians were highly engaged in providing feedback in fiscal year 2021, with very high participation rates for the mid-year and annual surveys as well as high engagement scores across a spectrum of questions.
Learning and Development
Our Learning & Organizational Development team’s mission to enable Elasticians to pursue their purpose, in work and life, makes for a better Elastic. To that end, we have a variety of ways in which we support the continuous learning and development of all Elasticians, including access to on-demand video based learning.
We also conduct specific programs to develop managers and leaders at Elastic, including our flagship Leadership Performance Program, an externally-led program focused on high-performing leaders who have the potential to have a significant strategic impact on the achievement of our long-term objectives.
Total Rewards
Compensation, Benefits and Well-being. We provide market competitive compensation which typically includes cash compensation as well as equity awards. Reflecting our interest in the whole person, we provide programs designed to enable Elasticians to meet their well-being goals, from starting a family to being at their physical and emotional best. These programs include market competitive medical and dental programs, in addition to focus on mental health and holistic well-being. We provide market competitive paid time off programs, including offering 16 weeks of paid leave to all new parents. In addition, we also provide retirement and income protection plans, which include a 401k plan with a dollar-for-dollar match by Elastic up to 6% of eligible earnings up to a plan-limit maximum for U.S.-based Elasticians as well as similar competitive plans outside of the United States.
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Fair Pay. We have fair and consistent compensation practices through our use of local third-party market data specific to each country, where available, so that we understand local compensation and cost of labor levels. We retain external experts to review our compensation outcomes on an ongoing basis to ensure they are bias-free and fairly reward employee performance and contributions. We take great pride in our focus on fair pay and the positive results we’ve established. Our external review continues to validate that we have gender-based pay parity between male and female Elasticians globally.
Involvement in the Community. Through Elastic Cares, employees can support the charitable organizations that matter the most to them on a local and global level. Elastic Cares is a program consisting of donation matching, our nonprofit organization program which provides our technology for free to certain nonprofit organizations, and our volunteer time off (“VTO”) initiative. Employees are encouraged to volunteer for these organizations throughout the year using our VTO program which provides our employees with 40 hours of volunteer time each year.
COVID-19 Response
During the COVID-19 pandemic, our primary focus was and continues to be on the safety and well-being of our employees and their families. In the fourth quarter of fiscal 2020, we closed our offices globally and required our employees to work remotely. Additionally, due to concerns over risks related to travel and large gatherings, we have replaced our in-person events, including our internal global all-hands, annual flagship conference and other in-person marketing events, with web-based virtual events. Given the significant personal and professional impact of the COVID-19 pandemic, we provided reimbursements for home office equipment and established specific learning opportunities for our employees that allowed teams to better connect to each other, including fun activities to help teams bond. To allow employees to deal with and alleviate the physical, mental, and emotional effects of the pandemic on themselves and loved ones, we offered two weeks of COVID leave and implemented company-wide days off called “Shut It Down Days” twice per month.
Elastic Community Engagement
At Elastic, community matters. We recognize that our team extends beyond our employees to our community of users, which includes all the users who download our software. Our users interact with us on our website and forums and on Twitter, GitHub, Stack Overflow, Quora, Facebook, Weibo, WeChat, and more. In order to build products that best meet our users’ needs, we focus on, and invest in, continuing to build a strong community. Each download of the Elastic Stack is a new opportunity to educate our next contributor, hear about a new use case, explore the need for a new feature, or meet a future member of the team. Community is more than code and it is core to our identity, binding our products closely together with our users.
To recognize the contributions of our community members, we have an Elastic Contributor Program to recognize the hard work of our awesome contributors, encourage knowledge sharing within the Elastic community and to build friendly competition around contributions. Further, we created the Elastic Excellence Awards program, which celebrates philanthropic, innovative and transformative projects and the people behind them. Through our engagement with our community through programs such as the Elastic Contributor Program and Elastic Excellence Awards, we aim to acknowledge and recognize our valued community members who have brought us to where we are now.
Global Data Privacy
Working to maintain the trust and confidence of our customers is at the center of our global privacy and information security program. Elastic’s data protection program leverages technology and robust governance practices in an effort to protect data. We have dedicated teams that include seasoned privacy and compliance counsel, our chief information security officer, our data protection officer, and experienced security operations teams working to protect data. We invest in technical, organizational, and administrative measures throughout our infrastructure, including our cloud offerings. Elastic’s program includes transparency, physical and logical controls, vulnerability monitoring, data availability, supply-chain risk management and a legal compliance framework designed to address applicable laws and regulations relating to privacy and information security. Further, our
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services have been independently audited and are the subject of numerous certifications and attestations relating to specified privacy and security standards.
Environmental Impact and Sustainability
Although greenhouse gas emissions and water and energy usage are not material factors to the day-to-day operations of our business as a provider of software solutions, we believe that environmentally responsible operating practices are important to generating value for our stakeholders, being a good partner to our customers, and being a good employer to our employees.
As a company distributed by design we have a distributed workforce, which helps reduce our environmental footprint by decreasing long commutes and the environmental impact, energy usage and waste that can come with operating numerous large physical offices that would typically be needed to house a traditional in-office workforce. While we do have physical office spaces throughout the world, the space is limited and we strive to limit the amount of space used to what is necessary to support our operations globally, and as noted previously, we support a distributed workforce by providing reimbursements for home office equipment.
We also recognize the foundational value that promoting an ethical business environment brings to all market participants and strive to support a business environment that allows us and our suppliers to flourish. We have adopted and make publicly available a global vendor code of conduct and are working to develop programs using several industry standards such as, among others, International Standards Organization and Responsible Business Alliance (formerly Electronic Industry Citizenship Coalition).
Company goals are aspirational and may change. Statements regarding the Company’s goals are not guarantees or promises that they will be met.
Policies Governing Director Nominations
Director Nomination Process
Our board of directors is responsible for selecting its own members. Our board of directors delegates the selection and nomination process to the nominatingNominating and corporate governance committee,Corporate Governance Committee, with the expectation that other members of the board of directors, and of management, will be requested to take part in the process as appropriate. The nominatingNominating and corporate governance committeeCorporate Governance Committee makes recommendations to the board of directors regarding the size and composition of the board of directors. The nominatingNominating and corporate governance committeeCorporate Governance Committee is responsible for ensuring that the composition of the board of directors accurately reflects the needs of the Company’s business and, in furtherance of this goal, for proposing the addition of members and the necessary resignation of members for purposes of obtaining the appropriate members and skills. The nominatingNominating and corporate governance committeeCorporate Governance Committee recommends, and our board of directors provides a binding nomination for a candidate to stand for appointment as director by the meeting of the shareholders.
Generally, our nominatingNominating and corporate governance committeeCorporate Governance Committee identifies candidates for director nominees in consultation with management, through the use of other advisors, through the recommendations submitted by shareholders or through such other methods as the nominatingNominating and corporate governance committeeCorporate Governance Committee deems to be helpful to identify candidates. Candidates recommended by shareholders and other stakeholders are given appropriate consideration in the same manner as other candidates. Once candidates have been identified, our nominatingNominating and corporate governance committeeCorporate Governance Committee confirms that the candidates meet all of the minimum qualifications for director nominees established by the nominatingNominating and corporate governance committee.Corporate Governance Committee. The nominatingNominating and corporate governance committeeCorporate Governance Committee may gather information about the candidates through interviews, detailed questionnaires, background checks or any other means that the nominatingNominating and corporate governance committeeCorporate Governance Committee deems to be appropriate in the evaluation process. The nominatingNominating and corporate governance committeeCorporate Governance Committee then meets as a group to discuss and evaluate the qualifications and skills of each candidate, both on an individual basis and taking into account the overall composition and needs of the board of directors. Based on the results of the evaluation process, the nominatingNominating and corporate governance committeeCorporate Governance Committee recommends candidates as director nominees to our board of directors in order for the board of directors to draw up a binding nomination for appointment by the meeting of the shareholders.
Shareholders may submit proposals related to the composition of the board of directors as provided in our articles of association and by Dutch law. Such proposals are forwarded to the chairmanchairperson of the nominatingNominating and corporate governance committeeCorporate Governance Committee for consideration. All directors are appointed by the annual general meeting of the
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shareholders (or an extraordinary meeting of the shareholders) at the binding nomination of the board of directors. Additionally, if a binding nomination of the board of directors has been overruled and a subsequent non-binding nomination by the board of directors has been rejected, shareholders may propose a resolution to appoint a board member that was not nominated by the board of directors, and any such resolution requires at least atwo-thirds majority orof the votes cast at the annual general meeting, provided such majority represents more than half the issued share capital.
Qualifications
In recommending candidates to the board of directors, the nominatingNominating and corporate governance committeeCorporate Governance Committee takes into consideration the board of directors’ criteria for selecting new directors, including, but not limited to, integrity, past achievements, judgment, intelligence, relevant experience and the ability of the candidate to devote adequate time to duties of the board of directors. The nominatingNominating and corporate governance committeeCorporate Governance Committee does not assign specific weights to particular criteria, and no particular criterion is a prerequisite for any candidate. We do however consider diversity in reviewing director candidates and do not discriminate on the basis of race, religion, sexual orientation, sex or national origin. Under Dutch law, as a company with fewer than 30% of the directors being women, we are required to disclose the rationale behind our failure to have a specified diversity percentage for the board of directors and our efforts to obtain such diversity. In order for the board of directors to fulfill its responsibilities, our nominatingNominating and corporate governance committeeCorporate Governance Committee believes that the board of directors should include directors possessing a blend of experience, knowledge and ability, regardless of other characteristics.
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Shareholder Communications
The Company has a process for shareholders and other interested parties who wish to communicate with our board of directors, or with an individual member or members of our board of directors. Shareholders and other interested parties who wish to communicate with our board of directors may write to our board of directors at the address of the Company’s registered office at Keizersgracht 281, 1016 ED Amsterdam, the Netherlands. These communications will be received by our General Counsel and will be presented to our board of directors inat the discretion of our General Counsel, in consultation with appropriate directors, as necessary. Certain items that are unrelated to our board of directors’ duties and responsibilities may be excluded, such as mass mailings, product complaints or inquiries, job inquiries, business solicitations and patently offensive or otherwise inappropriate material. The full text of our policies and procedures for bilateral contacts with shareholders, including information regarding how to contact ournon-management directors, is available on our website at www.elastic.co.
ir.elastic.co.
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee isCompensation Committee during our fiscal year 2021 was or has formerly been an officer or employee of our company.Company. None of our executive officers currently serves, or in the past year has served, as a member of the compensation committeeCompensation Committee or director (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of any entity that has one or more executive officers serving on our compensation committeeCompensation Committee or our board of directors.
Non-Executive Director Compensation
Eachnon-executive director is eligible to receive compensation for his or her service consisting of annual cash retainers and equity awards. Our board of directors has the discretion to revisenon-executive director compensation as it deems necessary or appropriate, in accordance with our remuneration policy as previously adopted by the Annual Meeting.
an annual general meeting of shareholders (the “Remuneration Policy”).
Cash Compensation. AllIn fiscal 2021, all non-executive directors were eligible to receive the following cash compensation for their services:
•$30,000 per year for service as a board member;
•$10,000 per year additionally for service as lead independent director;
•$20,000 per year additionally for service as chairmanchairperson of the audit committee;
•$8,500 per year additionally for service as an audit committeeAudit Committee member;
•$12,000 per year additionally for service as chairmanchairperson of the compensation committee;
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•$5,000 per year additionally for service as a compensation committeeCompensation Committee member;
•$7,500 per year additionally for service as chairmanchairperson of the nominatingNominating and corporate governance committee;Corporate Governance Committee; and
•$4,000 per year additionally for service as a nominatingNominating and corporate governance committeeCorporate Governance Committee member.
All cash payments tonon-executive directors, (the “Retainer Cash Payments”)or the retainer cash payments, are paid quarterly in arrears on a prorated basis.
Equity Compensation.Nondiscretionary, In fiscal year 2021, our non-executive directors were eligible for nondiscretionary, automatic grants of restricted stock units, were made to ournon-executive directors, except for anynon-employee director who either (i) beneficially owns more than 2% of the outstanding and issued share capital of the Company, or (ii) is a partner or a member of any venture capital
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firm that owns securities of the Company representing more than 2% of the outstanding and issued share capital of the Company.
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•Initial award. Any person who would have first became an eligible non-executive director would have been granted an award of restricted stock units covering a number of shares having a grant date fair value equal to $170,000 pro-rated for the amount of time that remains in the 12-month period prior to the next scheduled annual general meeting of the Company’s shareholders (and if the date of such annual general meeting of the Company’s shareholders is not known, the one-year anniversary of the most recent Annual Award granted to non-executive directors), rounded down to the nearest whole share (the “Initial Award”). The shares underlying the Initial Award will settle on the earlier of (i) the one-year anniversary of the date the Initial Award is granted or (ii) the day prior to the date of the annual general meeting of the Company’s shareholders next following the date the Initial Award is granted, subject to continued service through the applicable vesting date.
•Annual award. For fiscal year 2021, on the date of the general meeting of the Company’s shareholders, each eligible non-executive director was eligible to be granted an award of restricted stock units covering a number of shares having a grant date fair value equal to $170,000 (the “Annual Award”). The shares underlying the Annual Award will settle on the earlier of (i) the one-year anniversary of the date the Annual Award is granted or (ii) the day prior to the date of the annual general meeting of our shareholders next following the date the Annual Award is granted, subject to continued service through the applicable vesting date.
The grant date fair value is computed in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
GAAP.
Any award of restricted stock units granted under ournon-executive director compensation policy will fully vest and become exercisable in the event of a change in control, as defined in our amended and restated 2012 Stock Option Plan (the “2012 Plan”) provided that the director remains a director through such change in control. Further, our 2012 Plan as described below under the section titled “Employee Benefit and Share Plans,” provides that in the event of a merger or change in control, as defined in our 2012 Plan, each outstanding equity award granted under our 2012 Plan that is held by anon-executive director will fully vest, all restrictions on the shares subject to such award will lapse, and with respect to awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels, and all of the shares subject to such award will become fully exercisable, if applicable, provided such director remains a director through such merger or change in control.
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Fiscal 2021 Non-Executive Director Compensation Table
The table below shows the total compensation awarded to ournon-executive directors during fiscal year 2019:
Name | Fees earned or paid in cash($) | Stock Awards ($)(1) | Option Awards($)(1) | Total ($) | ||||||||||||
Jonathan Chadwick(2) | 31,535 | — | 1,644,000 | 1,675,535 | ||||||||||||
Peter Fenton | 26,375 | — | — | 26,375 | ||||||||||||
Caryn Marooney(3) | 573 | 87,087 | — | 87,660 | ||||||||||||
Elizabeth Nelson(4) | — | — | — | — | ||||||||||||
Chetan Puttagunta | 30,161 | — | — | 30,161 | ||||||||||||
Steven Schuurman | 17,201 | — | — | 17,201 | ||||||||||||
Michelangelo Volpi(5) | — | — | — | — | ||||||||||||
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| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | |||||||||||||||||||||||
| Jonathan Chadwick(2) | 55,000 | 169,890 | (3) | 224,890 | ||||||||||||||||||||||
| Peter Fenton(4) | 46,000 | 169,890 | (3) | 215,890 | ||||||||||||||||||||||
| Alison Gleeson(4) | 35,000 | 169,890 | (3) | 204,890 | ||||||||||||||||||||||
| Caryn Marooney(4) | 34,000 | 169,890 | (3) | 203,890 | ||||||||||||||||||||||
| Chetan Puttagunta(4) | 56,000 | 169,890 | (3) | 225,890 | ||||||||||||||||||||||
| Steven Schuurman(5) | 30,000 | — | 30,000 | |||||||||||||||||||||||
| Michelangelo Volpi(6) | — | — | — | |||||||||||||||||||||||
(1)The amounts shown represent the grant date fair value of restricted stock unit (“RSU”) awards granted in fiscal year 2021 for financial reporting purposes pursuant to the provisions of Financial Accounting Standards Board’s Accounting Standards Codification Topic 718, Compensation—Stock Compensation (“ASC 718”). Such amounts do not represent amounts paid to or realized by the non-executive director. See Note 11, “Equity Incentive Plans” of the notes to our consolidated financial statements in the Company’s Annual Report on Form 10-K for fiscal year 2021 regarding assumptions underlying valuation of equity awards. Additional information regarding the RSUs awarded to each non-executive director during fiscal year 2021 is set forth in the footnotes below.
(2)As of April 30, 2021, Mr. Chadwick held 1,487 RSUs and 162,500 options to purchase ordinary shares.
(3)Represents the aggregate grant date fair value of RSUs granted to the incumbent non-executive directors on October 21, 2020, under the terms of our non-executive director compensation policy for fiscal year 2021 and the 2012 Plan, and calculated in accordance with ASC 718 based on the closing market price of our ordinary shares on the grant date.
(4)As of April 30, 2021, the non-executive director held 1,487 RSUs and no options to purchase ordinary shares.
(5)The non-executive director did not receive any grants of RSUs or options to purchase ordinary shares in fiscal year 2021 in accordance with our non-executive director compensation policy, which provides that non-employee directors who, at the time of appointment or the date of the annual general meeting, either (i) beneficially owned more than 2% of the outstanding and issued share capital of the Company, or (ii) was a partner or a member of any venture capital firm that owns securities of the Company representing more than 2% of the outstanding and issued share capital of the Company, are not eligible to receive equity awards. As of April 30, 2021, the director held no RSUs or options to purchase ordinary shares.
(6)Mr. Volpi has waived his right to receive payments of director fees and the annual equity grant to directors. He would have been eligible to receive $38,500 in fees and an RSU award with a grant date fair value of $169,890 calculated in accordance with ASC 718 for his service as a director in fiscal year 2021.
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The board of directors of the Company is responsible for establishing broad corporate policies and monitoring the overall performance of the Company. The board of directors selects the Company’s senior management, delegates authority for the conduct of the Company’sday-to-day operations to those senior managers, and monitors their performance. Members of the board of directors are kept informed of the Company’s business by, among other things, participating in meetings of the board of directors and committees and by reviewing analyses and reports provided to them.
The board of directors is currently made up of seveneight directors. We have aone-tier board of directors, consisting of one executive director and sixseven non-executive directors. Under the Company’s Articlesarticles of Association,association, all directors may hold office for a maximum term of three years provided that such term shall lapse ultimately immediately after the close of the first annual General Meetinggeneral meeting held after three years have lapsed since the appointment, or until their earlier death, resignation or removal.
A director may be reappointed, and the three-year maximum term may be deviated from by resolution of the general meeting of shareholders upon a proposal of the board of directors.
The members of our board of directors have been appointed to staggered one,two- and three-year terms. The terms of Messrs. Banon and Fenton will expire at the Annual Meeting; the terms of Ms. Marooney and Messrs. Puttagunta and Schuurman will expire at the Annual Meeting;annual general meeting of shareholders to be held in 2022; and the terms of Ms. Gleeson and Messrs. Chadwick and Volpi will expire at the annual general meeting of the shareholders to be held in 2020; the terms of Messrs. Banon and Fenton will expire at the annual general meeting of the shareholders to be held in 2021; and the term of Ms. Marooney will expire at the annual general meeting of the shareholders to be held in 2022.
2023.
The board of directors, following the recommendation of the nominatingNominating and corporate governance committee,Corporate Governance Committee, has made a binding nomination to reelect Messrs. Puttaguntare-elect Mr. Banon as an executive director and SchuurmanMr. Fenton as a non-executive directors director in accordance with article 7.2 of the Company’s Articlesarticles of Association.
association.
The board of directors recommends a vote “FOR” the election of each of Messrs. PuttaguntaBanon and Schuurman.
Fenton.
If appointed, the terms of office for Messrs. PuttaguntaBanon and SchuurmanFenton will expire at the end of the 20222024 annual general meeting of shareholders.
Other than as disclosed in this proxy statement regarding compensation fornon-executive directors, which both Messrs. PuttaguntaMr. Fenton would receive, and Schuurman would receive,compensation received by Mr. Banon as our Chief Executive Officer, there are no arrangements or understandings between the nominees, directors or executive officers and any other person pursuant to which our nominees, directors or executive officers have been selected for their respective positions.
Required Vote
The proposals to elect
Messrs. PuttaguntaBanon and Schuurman mayFenton will each be overruled byappointed to the board of directors unless atwo-thirds majority of the votes cast representingfor such nominee at the Annual Meeting, which votes must represent more than one half of the issued and outstanding shares. If the nomination is not overruled, Messrs. Puttagunta and Schuurman respectively shall be appointed.
share capital, are cast against such nominee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES FOR DIRECTOR.
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ADOPTION OF DUTCH STATUTORY ANNUAL ACCOUNTS—VOTING PROPOSAL NO. 2
At the Annual Meeting, shareholders will be asked to adopt the Company’s Dutch statutory annual accounts (the “Dutch Statutory Annual Accounts”)Accounts for the fiscal year ended April 30, 2019 (“fiscal year 2019”),2021, which are prepared in accordance with International Financial Reporting Standards (“IFRS”). The report of PricewaterhouseCoopers Accountants N.V. for fiscal year 2019,2021, is included in the Dutch Statutory Annual Accounts.
In accordance with article 10.1.5 of the Company’s Articlesarticles of Association,association, the board of directors of the Company has determined that the net loss for fiscal year 20192021 is added to the other reserve-accumulated losses.
As a public company with limited liability company incorporated under the laws of the Netherlands, the Company is required by Dutch law to prepare the accounts and submit them to shareholders for adoption. The Company’s Dutch Statutory Annual Accounts are different from the consolidated financial statements contained in our annual report onForm 10-K for fiscal year 2019,2021, which were prepared in accordance with U.S. GAAP and filed with the SEC.
A copy of the Dutch Statutory Annual Accounts iswill be available free of charge on our website at ir.elastic.co,, at our offices at 800 West El Camino Real, Suite 350 Mountain View, California 94040 and at our offices in the Netherlands at Keizersgracht 281, 1016 ED Amsterdam.
A representative of PricewaterhouseCoopers Accountants N.V. is expected towill be present at the Annual Meeting and will be available to respond to appropriate questions from shareholders, and will be given an opportunity to make a statement.
Required Vote
The adoption of the Company’s Dutch Statutory Annual Accounts for fiscal year 20192021 requires an affirmative vote of a simple majority of votes cast in the Annual Meeting where at least one third of the issued and outstanding shares are represented.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ADOPTION OF OUR DUTCH STATUTORY ANNUAL ACCOUNTS.
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GRANT OF FULL DISCHARGE TO EXECUTIVE DIRECTOR—VOTING PROPOSAL NO. 3
At the Annual Meeting, our shareholders will be asked to grant a discharge to the executive director of the Company from his liability with respect to the performance of his duties as an executive director of the Company during fiscal year 2019.2021. The scope of the discharge extends to the facts that are apparent from the Dutch Statutory Annual Accounts and facts that are otherwise known to the general meeting of shareholders.
Required Vote
The approval to grant the discharge to the executive directors of the Company requires an affirmative vote of a simple majority of votes cast in the Annual Meeting where at least one third of the issued and outstanding shares are represented.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE GRANTING OF FULL DISCHARGE FROM LIABILITY TO THE EXECUTIVE DIRECTOR.
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GRANT OF FULL DISCHARGE TONON-EXECUTIVE DIRECTORS—VOTING
PROPOSAL NO. 4
At the Annual Meeting, our shareholders will be asked to grant a discharge to thenon-executive directors of the Company from their liability with respect to the performance of their duties asnon-executive directors of the Company during fiscal year 2019.2021. The scope of the discharge extends to the facts that are apparent from the Dutch Statutory Annual Accounts and facts that are otherwise known to the general meeting of shareholders.
Required Vote
The approval to grant the discharge to thenon-executive directors of the Company requires an affirmative vote of a simple majority of votes cast in the Annual Meeting where at least one third of the issued and outstanding shares are represented.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE GRANTING OF FULL DISCHARGE FROM LIABILITY TO THE NON-EXECUTIVE DIRECTORS.
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AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM—VOTING PROPOSAL NO. 5
Introduction
The audit committee of the Company’s board of directorsAudit Committee has selected PricewaterhouseCoopers LLP, an independent registered public accounting firm, to audit the U.S. GAAP consolidated financial statements of the Company for the fiscal year ending April 30, 2020.2022. In addition, the board of directors has directed that management submit the selection of PricewaterhouseCoopers LLP as the Company’s registered public accounting firm for ratification by the shareholders at the Annual Meeting. The board of directors recommends that shareholders vote “FOR” the ratification and selection of PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP also served as the Company’s independent registered public accounting firm for fiscal year 2019.2021. Representatives of PricewaterhouseCoopers LLP are expected towill be present at the meeting with the opportunity to make a statement if they desire to do so and are expected towill be available to respond to appropriate questions.
Although action by shareholders is not required by law, the board of directors has determined that it is desirable to request ratification of this selection by the shareholders. Notwithstanding the ratification of this selection by the shareholders, the audit committee,Audit Committee, in its discretion, may direct the selection of a new independent registered public accounting firm at any time during the year, if the audit committeeAudit Committee feels that such a change would be in the best interest of the Company and its shareholders. In the event of a negative vote on ratification, the audit committeeAudit Committee will reconsider its selection.
For the avoidance of doubt, this item does not relate to the appointment of a Dutch auditor for the audit of the Company’s Dutch Statutory Annual Accounts for the fiscal year ending April 30, 2020.2022. PricewaterhouseCoopers Accountants N.V. was appointed as the Company’s Dutch auditor at the Company’s extraordinary general meeting held on September 28, 2018.
Principal Accounting Fees and Services
The following table presents fees for professional audit services and other services rendered to the Company by its principal independent registered public accounting firm for fiscal years 20192021 and 2018.2020. The dollar amounts in the table and accompanying footnotes are in thousands.
| Fiscal Year 2019 | Fiscal Year 2018 | |||||||
Audit Fees(1) | $ | 2,860,938 | $ | 1,942,032 | ||||
Audit-Related Fees(2) | — | — | ||||||
Tax Fees(3) | 231,725 | 552,794 | ||||||
All Other Fees(4) | 1,204 | 941 | ||||||
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Total | $ | 3,093,867 | $ | 2,495,767 | ||||
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| Fiscal Year 2021 | Fiscal Year 2020 | |||||||||||||
| Audit Fees(1) | $ | 2,968,283 | $ | 3,107,628 | ||||||||||
| Audit-Related Fees(2) | 137,450 | 502,800 | ||||||||||||
| Tax Fees(3) | 10,316 | 16,500 | ||||||||||||
| All Other Fees(4) | 5,781 | 5,987 | ||||||||||||
| Total | $ | 3,121,830 | $ | 3,632,915 | ||||||||||
(1)Audit Fees consist of fees for professional services rendered in connection with the audit of our annual consolidated financial statements, the review of our quarterly condensed consolidated financial statements, and audit services that are normally provided by independent registered public accounting firms in connection with regulatory filings.
(2)Audit-Related Fees are fees for assurance and related services that are reasonably associated to the performance of the audit or review of our consolidated financial statements or internal control over financial reporting and are not included in “Audit Fees.” For the fiscal year ended April 30, 2020, these fees related to services in connection with our acquisition of Endgame, Inc.
(3)Tax Fees include fees for tax compliance and advice. Tax advice fees encompass a variety of permissible tax services, including technical tax advice related to federal and state income tax matters and assistance with tax audits.
(4)All Other Fees consist of aggregate fees billed for products and services provided by the independent registered public accounting firm other than those disclosed above. These services specifically relate to subscription fees paid for access to online accounting research software and regulatory applications.
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|
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All services provided by PricewaterhouseCoopers LLP for our fiscal years 20192021 and 20182020 were approved by our audit committee.
Audit Committee.
Pre-Approval of Audit andNon-Audit Services
The audit committeeAudit Committee has established a policy governing the Company’s use of its principal independent registered public accounting firm fornon-audit services. Under the policy, the audit committeeAudit Committee mustpre-approve all auditand non-audit services performed by the Company’s independent registered public accounting firm, unless subsequent approval is permitted under the rules and regulations of the SEC, in order to ensure that the provision of such services does not impair the public accountants’ independence.
Required Vote
The ratification of the selection of PricewaterhouseCoopers LLP requires an affirmative vote of a simple majority of votes cast in the Annual Meeting where at least one third of the issued and outstanding shares are represented.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING APRIL 30, 2020.
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REPORT OF THE AUDIT COMMITTEE
The audit committee of our board of directorsAudit Committee is responsible for assisting our board of directors in fulfilling its oversight responsibilities regarding the Company’s financial accounting and reporting processes, system of internal control, audit process, and process for monitoring compliance with laws and regulations.
Management of the Company has the primary responsibility for preparing the Company’s consolidated financial statements, as well as establishing and maintaining the integrity of the Company’s financial reporting process, accounting principles and internal controls. PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm, is responsible for performing an audit of the Company’s consolidated financial statements and internal control over financial reporting and expressing an opinion as to the conformity of such financial statements with U.S. generally accepted accounting principles.
principles and the effectiveness of the Company’s internal control over financial reporting.
In this context, the audit committee of our board of directorsAudit Committee reviewed and discussed the audited financial statements of the Company as of and for the year ended April 30, 20192021 with the Company’s management and PricewaterhouseCoopers LLP. The Audit Committee also discussed with PricewaterhouseCoopers LLP critical audit matters included in the firm’s audit opinion and discussed the firm’s opinion regarding the Company’s internal control over financial reporting. In addition, the Audit Committee discussed with PricewaterhouseCoopers LLP the overall scope, plans, and estimated costs of PricewaterhouseCoopers LLP’s audits. To ensure independence, the audit committee of our board of directorsAudit Committee met separately with PricewaterhouseCoopers LLP and members of the Company’s management. These reviews included discussion with the independent registered public accounting firm of matters required to be discussed pursuant to Auditing Standard No. 1301, “Communications with Audit Committees,” issued by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”). and the SEC. In addition, the audit committee of our board of directorsAudit Committee received the written disclosures and the letter from the independent registered public accounting firm required by the PCAOB requiring independent registered public accounting firms to annually disclose in writing all relationships that, in their professional opinion may reasonably be thought to bear on independence, to confirm their perceived independence and to engage in a discussion of independence, and it has discussed with PricewaterhouseCoopers LLP its independence from the Company.
The Audit Committee also met with PricewaterhouseCoopers LLP periodically to discuss the results of their examinations, the overall quality of the Company’s financial reporting and their reviews of the Company’s quarterly financial statements.
Based on the reviews and discussions described above, the audit committee of our board of directorsAudit Committee recommended to the board of directors the inclusion of the audited financial statements in the Company’s Annual Report on Form10-K for the fiscal year ended April 30, 20192021 for filing with the SEC.
Respectfully submitted by the members of the audit committee of the board of directors:
Audit Committee:
Jonathan Chadwick (Chair)
Chetan Puttagunta
Michelangelo Volpi
This report of the audit committeeAudit Committee is required by the SEC and, in accordance with the SEC’s rules, will not be deemed to be part of or incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically incorporate this information by reference, and will not otherwise be deemed “soliciting material” or “filed” under either the Securities Act or the Exchange Act.
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AUTHORIZATION OF THE BOARD OF DIRECTORS TO REPURCHASE SHARES IN THE CAPITAL OF THE COMPANY—VOTING PROPOSAL NO. 6
At the Annual Meeting, our shareholders will be asked to authorize the board of directors to, on the Company’s behalf, repurchase the Company’s ordinary shares up to a maximum of 10% of the issued share capital at the date of acquisition on a stock exchange or otherwise, at a price per share between (i) an amount equal to the nominal value of the ordinary shares and (ii) an amount equal to 110% of the market price of an ordinary share on such stock exchange, the market price being the average of the highest price on each of the five days of trading prior to the day of the acquisition, for a period of 18 months. This authorization, if given, will supersede and replace the board of directors existing repurchase authorization granted by shareholders on September 28, 2018.
October 21, 2020.
The purpose of this proposal is to give the board of directors flexibility in repurchasing ordinary shares for, among other considerations, the return of capital to its shareholders and/or, to the extent such authorization is required, to fulfill the Company’s obligations under its 2012 Plan.
Required Vote
The resolution to authorize the board of directors to repurchase shares in the capital of the Company requires an affirmative vote of a simple majority of votes cast in the Annual Meeting where at least one third of the issued and outstanding shares are represented.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE AUTHORIZATION OF THE BOARD OF DIRECTORS TO REPURCHASE SHARES IN THE CAPITAL OF THE COMPANY.
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NON-BINDING ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS—VOTING PROPOSAL NO. 7
At the Annual Meeting, our shareholders will be asked to approve, on a non-binding and advisory basis, the compensation of our Named Executive Officers. You are encouraged to review the section titled “Executive Compensation” and, in particular, the section titled “Executive Compensation—Compensation Discussion and Analysis” in this proxy statement, which provides a comprehensive review of our executive compensation program and its elements, objectives and rationale.
The vote on this resolution is not intended to address any specific element of compensation, rather the vote relates to the compensation of our Named Executive Officers in its totality, as described in this proxy statement in accordance with the compensation disclosure rules of the SEC.
In accordance with Section 14A of the Exchange Act rules, our shareholders are asked to approve the following non-binding resolution:
“RESOLVED, that the Company’s shareholders hereby approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers, as disclosed in the Company’s proxy statement for the 2021 annual meeting of shareholders, pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the compensation tables and the accompanying narrative.”
As this is an advisory vote, you are not voting to approve or disapprove of the board of directors’ recommendation. Nevertheless, our board of directors appreciates your input as it considers the compensation of our Named Executive Officers, and our board of directors and the Compensation Committee will take into account the outcome of the advisory vote when considering future executive compensation decisions. The next advisory shareholder vote on the compensation of our named executive officers will occur at our 2022 annual general meeting of shareholders.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE NON-BINDING RESOLUTION ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
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EXECUTIVE OFFICERS
The following table provides information regarding our current executive officers as of June 30, 2019. OfficersJuly 31, 2021. Executive officers are elected by our board of directors to hold office until their successors are elected and qualified. There are no family relationships among any of our directors or executive officers.
Name | Age | Position(s) | ||||||||||||
| Shay Banon | Executive Director, Chief Executive Officer and Chairman | |||||||||||||
| Janesh Moorjani | Chief Financial Officer | |||||||||||||
| President, Worldwide Field Operations | ||||||||||||||
| Ashutosh Kulkarni | 46 | Chief | ||||||||||||
| W.H. Baird Garrett | Senior Vice President and General Counsel | |||||||||||||
For a brief biography of Mr. Banon, please see “Board“Board of Directors and Corporate Governance – Continuing Directors.Governance—Nominees for Director.”
Janesh Moorjani has served as our Chief Financial OfficerCFO since August 2017. Prior to joining us, he served as Executive Vice President and Chief Financial OfficerCFO of Infoblox Inc., an IT automation and security company, from January 2016 until August 2017. From July 2013 to January 2016, Mr. Moorjani was with VMware, Inc., a provider of cloud and virtualization software and services, where he served in various roles, most recently as a Senior Vice President of Finance from January 2015 to January 2016. From October 2004 to June 2013, he served in a number of finance and sales roles at Cisco Systems, Inc. Mr. Moorjani holds a Bachelor of Commerce degree from Sydenham College of Commerce and Economics of University of Mumbai and an M.B.A. from the Wharton School of the University of Pennsylvania.
Aaron Katz
Paul Appleby has served as our President, Worldwide Field Operations since August 2020. Prior to joining us, he was the Chief Executive Officer of Kinetica DB, Inc., a developer of analytics and artificial intelligence software, from December 2017 to June 2020. Before this, Mr. Appleby served as President – Worldwide Sales and Marketing of BMC Software, Inc., an enterprise IT operations software company, from April 2014 to July 2017. Previously, Mr. Appleby served as Executive Vice President of Global Enterprise Sales of Salesforce.com, Inc., a provider of cloud-based customer relationship management systems from 2012 to 2014, Managing Director – EMEA and APJ of Travelex plc, a foreign exchange company, from 2006 to 2009, and Vice President APJ of Siebel Systems, a provider of customer relationship management software, prior to its acquisition by Oracle, from 2002 to 2006.
Ashutosh Kulkarni has served as our Chief RevenueProduct Officer since March 2017 and previously served as our Senior Vice President of Field Operations from July 2014 to March 2017. Prior to joining us, he served in various executive roles at salesforce.com, inc., a cloud computing company, from July 2002 to June 2014, most recently as Senior Vice President of Enterprise Sales from February 2013 to June 2014 and Senior Vice President of Enterprise Corporate Sales from April 2009 to January 2013. Mr. Katz holds a B.S. in Managerial Economics from the University of California, Davis.
Kevin Kluge has served as our Senior Vice President of Engineering since March 2017 and previously served as our Vice President of Engineering from July 2013 to March 2017.2021. Prior to joining us, he served as Executive Vice President Productsand Chief Product Officer, Enterprise Business Group, at Citrix Systems, Inc.McAfee Corp., a cloud and mobile computing technology company,digital provider of cyber security services, from July 2011October 2018 until July 2013.December 2020. Prior to joining McAfee Corp., Mr. Kluge joined Citrix in July 2011 through its acquisition of Cloud.com, where heKulkarni served as Senior Vice President Engineering.and General Manager at Akamai Technologies in the Web Performance and Web Security division and in the Web Experience division from August 2016 to October 2018 and August 2015 to August 2016, respectively. Prior to that, Mr. Kluge holds a B.S.Kulkarni held various senior leadership, product management, product marketing and engineering roles at Akamai Technologies, Informatica and Sun Microsystems. Mr. Kulkarni earned an M.S. in Computer Sciencecomputer engineering from Stanford University.
the University of Texas at Austin, an M.B.A. degree from the University of California, Berkeley and a B.E. in engineering from the University of Mumbai.
W.H. Baird Garrett has served as our General Counsel since June 2018 and as our Senior Vice President of Legal since July 2015. Prior to joining us, he was Of Counsel at VLP Law Group LLP from October 2008 to June 2015, where he served as the Chair of the Technology Transactions Practice Group from 2012 to 2015, and previously was an associate at Wilson Sonsini Goodrich & Rosati, P.C. Mr. Garrett previously served as a director of Full House Resorts, Inc., a casino developer and operator, from November 2014 to May 2019. Mr. Garrett holds a B.A. in International Relations from Pennsylvania State University, an M.A. in International Relations from the University of Chicago and a J.D. from the University of Virginia School of Law, where he was an Editor, and member of the Articles Review Board, of the Virginia Law Review.
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EXECUTIVE COMPENSATION
Summary
Compensation Table
The following tableDiscussion and narrative summarizesAnalysis
Introduction
This Compensation Discussion and explainsAnalysis provides information regarding the fiscal year 2021 compensation that we paid to, or that was earned by,program for our principal executive officer, our principal financial officer, and the three executive officers (other than our principal executive officer and principal financial officer) at fiscal year-end who were our most highly-compensated executive officers (our “Named Executive Officers”). For fiscal year 2021, our Named Executive Officers were:
•Shay Banon,our Chairman of the board of directors and CEO;
•Janesh Moorjani, our CFO;
•Paul Appleby, our President, Worldwide Field Operations;
•Ashutosh Kulkarni, our Chief Product Officer (“CPO”); and
•W.H. Baird Garrett, our Senior Vice President and General Counsel.
This Compensation Discussion and Analysis describes the material elements of our executive compensation program during fiscal year 2021. It also provides an overview of our executive compensation philosophy, including our principal compensation policies and practices. Finally, it analyzes how and why the Compensation Committee or, with regard to the compensation of our CEO, the non-executive directors serving on our board of directors arrived at the specific compensation decisions for our Named Executive Officers in fiscal year 2021 and discusses the key factors that the Compensation Committee considered in determining their compensation or, with regard to the compensation of our CEO, making recommendations to our board of directors.
Fiscal Year 2021 Executive Officer Appointments
On August 24, 2020, Mr. Appleby was appointed our President, Worldwide Field Operations, while on January 4, 2021, Mr. Kulkarni was appointed our Chief Product Officer. For details on the initial compensation arrangements with Messrs. Appleby and Kulkarni, please see “Executive Summary – Executive Compensation Highlights” below.
Executive Summary
Who We Are
Elastic is a search company. We deliver technology that enables users to search through massive amounts of structured and unstructured data for a wide range of use cases. Our primary offering is the Elastic Stack, a powerful set of software products that ingest and store data from any source, and in any format, and perform search, analysis, and visualization in milliseconds or less. The Elastic Stack is designed for direct use by developers to power a variety of use cases. We also offer three software solutions – Enterprise Search, Observability, and Security – built on the Elastic Stack. Our solutions are designed to be deployed everywhere: in public or private clouds, in hybrid environments, or in traditional on-premises environments. Our products are used by individual developers and organizations of all sizes across a wide range of industries.
Elasticsearch is the heart of the Elastic Stack. It is a distributed, real-time search and analytics engine and datastore for exploring all types of data including textual, numerical, geospatial, structured and unstructured. The Company was formed in 2012. Since then, we have added new products, released new features, acquired companies and created new solutions to expand the functionality of our products.
The Elastic Stack
The Elastic Stack is primarily composed of the following products:
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•Elasticsearch. Elasticsearch is the heart of the Elastic Stack. It is a distributed, real-time search and analytics engine and datastore for all types of data, including textual, numerical, geospatial, structured, and unstructured.
▪Kibana. Kibana is the user interface for the Elastic Stack. It is the visualization layer for data stored in Elasticsearch. It is also the management and configuration interface for all parts of the Elastic Stack.
The Elastic Stack also supports data ingest with a number of supporting products:
▪Logstash. Logstash is the dynamic data processing pipeline for ingesting data into Elasticsearch or other storage systems from a multitude of sources simultaneously.
▪Beats. Beats is the family of lightweight, single-purpose data shippers for sending data from edge machines to Elasticsearch or Logstash.
▪Elastic Agent. Elastic Agent, currently in beta, is a single, unified way to add monitoring for logs, metrics, and other types of data to each host. Elastic Agent includes integrated host protection and central management.
Some features of the Elastic Stack are free and open, available to users at no cost, while others require paid subscriptions. Paid proprietary features enable capabilities such as automating anomaly detection on time series data at scale through machine learning, facilitating compliance with data security and privacy regulations, supporting search across low cost cold and frozen data tiers, and allowing real-time notifications and alerts. The source code of both free and paid features in the Elastic Stack is visible to the public in the form of “open code.”
Our Solutions
We have built a number of solutions on top of the Elastic Stack to make it easier for organizations to use our software for common use cases. Like the Elastic Stack, our solutions comprise a combination of free and open features and paid proprietary features. Our solutions include:
▪Enterprise Search. Our Enterprise Search solution provides powerful search for documents and results living in websites, applications and workplaces. Enterprise Search includes: Workplace Search, a unified search platform for the workplace that seamlessly connects to the most widely used enterprise systems and tools; App Search, a flexible, API-driven tool for building search experiences to support websites and portals, e-commerce, mobile app search, and customer support; and Site Search, an easy way to bring powerful search to any website.
▪Observability. Our Observability solution enables unified analysis across the IT ecosystem of applications, networks, and infrastructure. Observability includes: Logs, to search and analyze petabytes of structured and unstructured logs; Metrics, to search and analyze numeric and time series data; application performance management, to deliver insight into application performance and health metrics and provide developers with confidence in their code; and Uptime, to easily track and monitor the availability of hosts, websites, services and applications.
▪Security. Our Security solution provides unified protection to prevent, detect, and respond to threats. Security includes: security information and event management, with integrations to network, host, user, and cloud data sources, as well as workflow and operations, shareable analytics, incident management, and investigations; and Endpoint Security, for prevention, detection and response in a single, stack-integrated agent.
Fiscal Year 2021 Financial Highlights
Fiscalyear2021was a strong year for us marked by significant growth in our business. Our fiscal year 2021 financial highlights included the following:
•Total revenue was $608.5 million, an increase of 42% year-over-year.
•SaaS revenue was $166.3 million, an increase of 80% year-over-year.
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•GAAP operating loss was $129.5 million, while GAAP operating margin was-21%.
•Non-GAAP operating loss was $7.3 million, while non-GAAP operating margin was-1%.
•GAAP net loss per share was $1.48,while non-GAAPnet loss per share was $0.09.
•Operating cash flow was $22.5 million with free cash flow of $18.3 million, or 3% free cash flow margin.
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide investors with certain non-GAAP financial measures, including non-GAAP operating loss, free cash flow, and free cash flow margin. For additional information and a full reconciliation for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP, please see the Non-GAAP Financial Measuressection of Item7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended April 30, 2021 filed with the SEC on June 25, 2021.
Executive Compensation Highlights
Consistent with our compensation objectives and following a review of data summarizing the competitive market environment and the other factors described below, the Compensation Committee (and, in the case of our CEO, the non-executive directors on our board of directors upon the recommendation of the Compensation Committee) took the following key actions with respect to the compensation of our Named Executive Officers for and during fiscal year 2021:
•Base Salaries – As part of the annual review of our executive compensation program, approved a base salary increase for our CEO of 6.7%inOctober 2020setting his annual base salary at$400,0001.Our other incumbent Named Executive Officers did not receive an annual base salary increase during fiscal year 2021.
•Long-Term Incentive Compensation of CEO – As part of the annual review of our executive compensation program, granted long-term incentive compensation in the form of an option to purchase ordinary shares with an award value2 of $3.75 million and a restricted stock unit (“RSU”) award that may be settled for ordinary shares with an award value of $3.75 million to our CEO in December 2020.
1 In March 2021, our CEO relocated from the United States to Israel. Accordingly, following our CEO’s relocation to Israel, all cash compensation paid to our CEO was denominated in New Israel Shekels (“ILS”). For purposes of this Compensation Discussion and Analysis, all compensation paid in ILS to our CEO has been converted into USD at an exchange rate of 0.3081 USD for each 1.00 ILS, which was the exchange rate in effect on April 30, 2021 (our fiscal year end).
2 For purposes of this Compensation Discussion and Analysis, “award value” generally means an economic target value, as distinct from the grant date fair value under ASC 718. The actual number of our ordinary shares subject to an equity award was determined by dividing the applicable award value by one of the following per share values, as applicable: (i) with respect to RSU awards granted to Messrs. Banon, Moorjani and Garrett and the RSU award with an award value of $1.5 million granted to Mr. Kulkarni, the value per share was equal to the trading average of our ordinary shares for the 15 trading days immediately prior to the applicable grant date, (ii) with respect to RSU awards granted to Messrs. Appleby and Kulkarni (other than the RSU award with an award value of $1.5 million granted to Mr. Kulkarni as noted above), the value per share was equal to the trading average of our ordinary shares for the calendar month in which the named executive officer commenced employment, (iii) with respect to stock options granted to Messrs. Banon, Moorjani and Garrett and the stock option with an award value of $0.5 million granted to Mr. Kulkarni, the value per share was calculated in accordance with the Black-Scholes option valuation methodology, which calculation assumed that the value of one of our ordinary shares was equal to the trading average of our ordinary shares for the 15 trading days immediately prior to the applicable grant date, and (iv) with respect to stock options granted to Messrs. Appleby and Kulkarni (other than the stock option with an award value of $0.5 million as noted above), the value per share was calculated in accordance with the Black-Scholes option valuation methodology, which calculation assumed that the value of one of our ordinary shares was equal to the trading average of our ordinary shares for the calendar month in which the named executive officer commenced employment.
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•Long-Term Incentive Compensation of Other Incumbent Named Executive Officers – As part of the annual review of our executive compensation program, granted long-term incentive compensation in December 2020 in the form of options to purchase ordinary shares to Messrs. Moorjani and Garrett with an award value of $1.5 million and $0.75 million, respectively, and RSU awards that may be settled for ordinary shares to Messrs. Moorjani and Garrett with award values of $1.5 million and $0.75 million, respectively.
•Compensation Arrangements with Mr. Appleby – In connection with his appointment as our President, Worldwide Field Operations, we entered into an employment offer letter dated August 9, 2020 (the “Appleby Employment Letter”) with Mr. Appleby. Pursuant to the Employment Letter, our initial compensation arrangements with Mr. Appleby were as follows:
◦an initial annual base salary of $500,000;
◦a one-time cash sign-on bonus in the amount of $200,000 (provided, however, that if he resigns, is no longer actively providing services, or his employment with the Company is terminated at any time during his first 12 months of employment, he will be responsible for reimbursing the Company this amount pro-rated by 1/12th for every month of employment served);
◦a target annual cash incentive award opportunity equal to 60% of his annual base salary, subject to the terms and conditions of the Company’s Executive Incentive Compensation Plan; and
◦subject to the approval of our board of directors or the Compensation Committee, new hire equity awards covering our ordinary shares with an aggregate approximate value of $8 million. Seventy-five percent of the value of Mr. Appleby’s new hire equity awards are in the form of an RSU award that may be settled for ordinary shares and 25% of the value of the awards are in the form of an option to purchase ordinary shares. Each of Mr. Appleby’s new hire equity awards vest over a four-year period as described in “Long-Term Incentive Compensation – New Hire Equity Award for Mr. Appleby.”
•Compensation Arrangements with Mr. Kulkarni – In connection with his appointment as our Chief Product Officer, we entered into an employment offer letter dated November 27, 2020 (the “Kulkarni Employment Letter”) with Mr. Kulkarni. Pursuant to the Kulkarni Employment Letter, our initial compensation arrangements with Mr. Kulkarni were as follows:
◦an initial annual base salary of $500,000;
◦a one-time cash sign-on bonus in the amount of $200,000 (provided, however, that if he resigns, is no longer actively providing services, or his employment with the Company is terminated at any time during his first 12 months of employment, he will be responsible for reimbursing the Company this amount pro-rated by 1/12th for every month of employment served);
◦a target annual cash incentive award opportunity equal to 60% of his annual base salary, subject to the terms and conditions of the Company’s Executive Incentive Compensation Plan; and
◦subject to the approval of our board of directors or the Compensation Committee, new hire equity awards covering our ordinary shares with an aggregate approximate value of $12 million. Seventy-five percent of the value of Mr. Kulkarni’s new hire equity awards are in the form of an RSU award that may be settled for ordinary shares and 25% of the value of the awards are in the form of an option to purchase ordinary shares. Each of Mr. Kulkarni’s new hire equity awards vest over a four-year period as described in “Long-Term Incentive Compensation – New Hire Equity Awards for Mr. Kulkarni.”
In addition, each of Messrs. Appleby and Kulkarni entered into our standard form of Change in Control and Severance Agreement.
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In establishing their initial compensation arrangements, we took into consideration the requisite experience and skills that a qualified candidate would need to manage a growing business in a dynamic and ever-changing environment, the competitive market for similar positions at other comparable companies based on a review of compensation survey data, the need to integrate each of them into the executive compensation structure that we had developed since our IPO, balancing both competitive and internal equity considerations, as well as the other named executive officers determined under Item 402(m)(2)factors described in “Compensation-Setting Process – Setting Target Total Direct Compensation” below. For a summary of RegulationS-K for fiscal years 2018the material terms and 2019. We refer to these executive officers as our named executive officers.
Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
Shay Banon | 2019 | 330,000 | — | — | 169,760 | — | 499,760 | |||||||||||||||||||||
Chief Executive Officer | 2018 | 400,000 | — | 7,514,361 | — | 306,494(3) | 8,220,855 | |||||||||||||||||||||
Janesh Moorjani | 2018 | 330,000 | — | — | 135,808 | 6,602(4) | 472,410 | |||||||||||||||||||||
Chief Financial Officer | 2019 | 272,820(5) | 200,000(6) | 3,462,657 | — | 23.600(4) | 3,959,077 | |||||||||||||||||||||
Aaron Katz | 2019 | 330,000 | 27,883(7) | — | 305,567 | 22,201(4) | 685,652 | |||||||||||||||||||||
Chief Revenue Officer | 2018 | 500,000 | 110,246(7) | 1,134,880 | — | — | 1,695,219 | |||||||||||||||||||||
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conditions of Messrs. Appleby’s and Kulkarni’s employment offer letters, see “
Executive Compensation Tables – Named Executive Officer Employment Letters” below.
•Annual Cash Incentive (Bonus) Plan – Finally, the Compensation Committee (and, in the case of our CEO, the non-executive directors serving on our board of directors upon the recommendation of the Compensation Committee) approved annual cash incentive awards under our Executive Incentive Compensation Plan to our each of our CEO, CFO, President, Worldwide Field Operations and CPO in the amount of $291,827, $275,825, $259,058, and $125,191, respectively. As discussed in greater detail below, Mr. Garrett was not eligible to receive an annual cash incentive award under our Executive Incentive Compensation Plan, which is consistent with our historical compensation practices.
Relationship Between Pay and Performance
We strive to design our executive compensation program to balance the goals of attracting, motivating, rewarding and retaining our Named Executive Officers with the goal of promoting the interests of our stakeholders, such as our users, customers, employees, creditors, shareholders and other stakeholders. To ensure this balance and to motivate and reward individual initiative and effort, we seek to ensure that our program is designed so that a meaningful portion of our Named Executive Officers’ annual target total direct compensation is both “at-risk” and variable in nature. While we do not determine either “variable” or “fixed” pay for each Named Executive Officer with reference to a specific percentage of target total direct compensation, consistent with our “pay-for-performance” philosophy, generally, we seek to emphasize variable pay over fixed pay.
Generally, this philosophy is reflected in the target total direct compensation opportunities of our Named Executive Officers. In fiscal year 2021, the majority of the target total direct compensation granted to Mr. Banon consisted of variable pay in the form of a target annual cash incentive award and long-term incentive compensation in the form of an option to purchase ordinary shares and an RSU award that may be settled for ordinary shares. As granted by the non-executive directors on our board of directors, fixed pay, primarily consisting of base salary, made up only 4.8% of Mr. Banon’s target total direct compensation, while variable pay, consisting of his target annual cash incentive award and long-term incentive compensation in the form of equity awards, made up 95.2% of his target total direct compensation.
In the case of Messrs. Moorjani, Appleby and Kulkarni, their target total direct compensation packages were similar to that of Mr. Banon, consisting of “at risk” variable pay in the form a target annual cash incentive award and long-term incentive compensation in the form of both an option to purchase ordinary shares and an RSU award that may be settled for ordinary shares. Given the modest levels of their base salaries, variable pay made up 89.8%, 94.3% and 96.1%of the target total direct compensation of Messrs. Moorjani, Appleby and Kulkarni, respectively, on an annualized basis, exclusive of signing bonuses of $200,000 received by each of Messrs. Appleby and Kulkarni during fiscal year 2021 (but inclusive of new hire equity awards).
Similarly, Mr. Garrett’s target total direct compensation package was considered to be largely comprised of “at risk” variable pay even though he did not participate in our Executive Incentive Compensation Plan. Even without a target annual cash incentive award, Mr. Garrett’s equity award made up 78.9%of his target total direct compensation for fiscal year 2021.
As we continue to mature as a public company, we believe that the compensation elements provided to all of our Named Executive Officers will continue to emphasize “at risk” and variable pay that should enable us to provide a balanced set of incentives for our Named Executive Officers to meet our business objectives and drive long-term growth.
Executive Compensation Policies and Practices
We endeavor to maintain sound governance standards consistent with our executive compensation policies and practices. The Compensation Committee reviews our executive compensation program on an annual basis to ensure consistency with our short-term and long-term goals given the dynamic nature of our business and the market
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in which we compete for executive talent. The following summarizes our executive compensation-related policies and practices that were in effect during fiscal year 2021:
What We Do:
•Maintain Independent Compensation Committee. The Compensation Committee is composed solely of independent directors who determine our compensation policies and practices (or, with regard to our CEO, recommend compensation policies and practices to our board of directors, who determine such policies and practices for our CEO) and who have established effective means for communicating with our shareholders regarding their executive compensation views and concerns, as described in this proxy statement.
•Periodic Executive Compensation Review. The Compensation Committee reviews and approves our compensation strategy periodically (or, with regard to the compensation strategy for our CEO, reviews and recommends to our board of directors to approve such strategy), including a review of our compensation peer group used for comparative purposes.
•Maintain Independent Compensation Advisor. The Compensation Committee has engaged its own compensation consultant to assist with the annual executive compensation review. This consultant performed only compensation-related services for us in fiscal year 2021.
•Compensation At-Risk. Our executive compensation program is designed so that in setting or recommending our Named Executive Officers’ compensation in a given year, the Compensation Committee considers whether a sufficient portion of their compensation is “at risk” based on corporate performance to align the interests of our Named Executive Officers and shareholders.
•Multi-Year Vesting Requirements. The annual equity awards granted to our Named Executive Officers vest over multi-year periods, consistent with current market practice and our retention objectives.
•“Double-Trigger” Change-in-Control Arrangements. Under our severance arrangements with our Named Executive Officers, all change-in-control payments and benefits are based on a “double-trigger” arrangement (that is, they require both a change-in-control of the Company plus a qualifying termination of employment before payments and benefits are paid).
•Health or Welfare Benefits. Our Named Executive Officers participate in broad-based Company-sponsored health and welfare benefit programs on the same basis as our other employees in the country of their employment.
•Succession Planning. Our board of directors and the Nominating and Corporate Governance Committee review the risks associated with our executive officer positions to ensure adequate succession plans are in place.
What We Don’t Do:
•No Executive Retirement Plans. We do not currently offer, nor do we have plans to offer, defined benefit pension plans or any non-qualified deferred compensation plans or arrangements to our Named Executive Officers other than the plans and arrangements that are available to all employees in the jurisdiction where the Named Executive Officer is located. Our Named Executive Officers in the United States are eligible to participate in our Section 401(k) plan on the same basis as our other employees in the United States, and our Named Executive Officer in Israel is covered by a Section 14 Arrangement under Israel Severance Pay Law, as are all other employees in Israel.
•Limited Perquisites. We provide minimal perquisites and other personal benefits to our Named Executive Officers.
•No Tax Payments on Perquisites.We do not provide any tax reimbursement payments (including “gross-ups”) on any perquisites or other personal benefits, other than on standard relocation benefits.
•No “Golden Parachute” Tax Payments on Change-in-Control Arrangements.We do not provide any excise tax reimbursement payments (including “gross-ups”) on payments or benefits contingent upon a
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change in control of the Company that our Named Executive Officers might owe as a result of the application of Sections 280G or 4999 of the Internal Revenue Code (the “Code”).
•No Hedging or Pledging of our Securities. We prohibit our employees, including our officers, and the members of our board of directors from engaging in hedging transactions or pledging our securities as collateral for a loan or holding our securities in a margin account.
Shareholder Advisory Vote on Named Executive Officer Compensation
At the Annual Meeting to which this proxy statement relates, we will be conducting our first shareholder advisory vote on the compensation of our Named Executive Officers (“Say-on-Pay” vote). We value the opinions of our shareholders. Our board of directors and the Compensation Committee will consider the outcome of the Say-on-Pay vote, as well as feedback received throughout the year, when making compensation decisions for our Named Executive Officers in the future.
At last year’s annual general meeting of shareholders, our shareholders indicated their approval of the recommendation that we solicit a Say-on-Pay vote on an annual basis. In accordance with that preference, our board of directors has determined that the Company will conduct a Say-on-Pay vote every year until the next shareholder advisory vote on the frequency of Say-on-Pay votes (the “Say-When-on-Pay” vote). The next required Say-When-on-Pay vote will take place no later than at the Company’s 2026 annual general meeting of shareholders.
Executive Compensation Philosophy and Objectives
Our executive compensation program is guided by our overarching philosophy of paying for demonstrable performance. We strive to provide an executive compensation program that is competitive, rewards achievement of our business objectives and aligns our Named Executive Officers’ interests with those of our shareholders. Consistent with this philosophy, we have designed our executive compensation program to achieve the following primary objectives:
•provide market competitive compensation and benefit levels that will attract, motivate, reward and retain a highly talented team of executives within the context of responsible cost management;
•establish a direct link between our financial and operational results and strategic objectives and the compensation of our executives;
•align the interests and objectives of our executives with those of our shareholders by linking their long-term incentive compensation opportunities to shareholder value creation and their cash incentives to our annual performance; and
•offer total compensation opportunities to our executives that, while competitive, are internally consistent and fair.
We structure the annual compensation of our Named Executive Officers using base salary and long-term incentive compensation in the form of equity awards. In addition, our CEO, CFO, President, Worldwide Field Operations and CPO are eligible to earn annual cash incentive awards. The design of our executive compensation program is influenced by a variety of factors, with the primary goals being to align the interests of our Named Executive Officers and shareholders and to link pay with performance.
We have not adopted policies or employed guidelines for allocating compensation between current and long-term compensation, between cash and non-cash compensation or among different forms of non-cash compensation. As described below, the Compensation Committee considers a variety of factors in determining the appropriate yearly mix among such compensatory elements, including our compensation philosophy and the value of unvested equity awards granted previously.
Compensation-Setting Process
Role of the Compensation Committee
The Compensation Committee discharges many of the responsibilities of our board of directors relating to the compensation of our Named Executive Officers, and periodically reviews and makes recommendations to our board
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of directors regarding their compensation, subject to the terms of our Remuneration Policy (as required by Dutch corporate law).Notwithstanding the responsibility of our board of directors, the Compensation Committee has the overall responsibility for overseeing our compensation and benefits policies generally, and overseeing and evaluating the compensation plans, policies and practices applicable to our Named Executive Officers. Our board of directors has delegated express authority to the Compensation Committee to serve as the administrator of the 2012 Plan.
The Compensation Committee has authority to make decisions regarding the compensation of our Named Executive Officers (other than our CEO) and makes recommendations to our board of directors regarding the compensation of our CEO. The non-executive directors on our board of directors make all final decisions regarding the compensation of our CEO with due observance to the Remuneration Policy adopted by our general meeting of shareholders in 2018.
In carrying out its responsibilities, the Compensation Committee evaluates our compensation policies and practices with a focus on the degree to which these policies and practices reflect our executive compensation philosophy, develops strategies and makes decisions that it believes further our philosophy or align with developments in best compensation practices, and reviews the performance of our Named Executive Officers when making decisions and recommendations with respect to their compensation.
The Compensation Committee’s authority, duties and responsibilities are further described in its charter, which is reviewed annually and revised and updated as warranted. The charter is available in the “Investor Relations” section of our website, which is located at ir.elastic.co by clicking on “Corporate Governance” under “Governance.”
The Compensation Committee retains a compensation consultant to provide support in its review and assessment of our executive compensation program; however, the Compensation Committee exercises its own judgment in making its decisions and recommendations with respect to the compensation of our Named Executive Officers.
Setting Target Total Direct Compensation
Each year, the Compensation Committee conducts an annual review of the compensation arrangements of our Named Executive Officers, typically during the first quarter of the fiscal year.As part of this review, the Compensation Committee evaluates the base salary levels and long-term incentive compensation of our Named Executive Officers, as well as the annual cash incentive awards for our Named Executive Officers who are eligible to receive such awards, and all related performance criteria.
The Compensation Committee does not establish a specific target for formulating the target total direct compensation of our Named Executive Officers. In making decisions and recommendations about the compensation of our Named Executive Officers, the members of the Compensation Committee are initially presented with a competitive market analysis prepared by its compensation consultant based on data gathered from the companies in our compensation peer group and considerations from broader executive compensation trends for its review and consideration. Drawing on this data, the members of the Compensation Committee then apply their professional experience to consider the following factors as applicable:
•our executive compensation program objectives;
•our performance against the financial, operational and strategic objectives established by the Compensation Committee and our board of directors;
•each individual Named Executive Officer’s knowledge, skills, experience, qualifications and tenure relative to other similarly-situated executives at the companies in our compensation peer group and/or selected broad-based compensation surveys;
•the scope of each Named Executive Officer’s role and responsibilities compared to other similarly situated executives at the companies in our compensation peer group and/or selected broad-based compensation surveys;
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•the prior performance of each individual Named Executive Officer, based on a subjective assessment of his or her contributions to our overall performance, ability to lead his or her business unit or function and work as part of a team;
•the potential of each individual Named Executive Officer to contribute to our long-term financial, operational and strategic objectives;
•our CEO’s compensation relative to that of our other Named Executive Officers, and compensation parity among our Named Executive Officers;
•the compensation practices of our compensation peer group and broader executive compensation trends and the positioning of each Named Executive Officer’s compensation in a ranking of executive officer compensation levels based on an analysis of competitive market data; and
•the recommendations of our CEO with respect to the compensation of our Named Executive Officers (except with respect to his own compensation).
These factors provide the framework for compensation decision-making regarding the compensation opportunity for each Named Executive Officer. No single factor is determinative in setting compensation levels, nor is the impact of any individual factor on the determination of pay levels quantifiable.
The Compensation Committee does not weigh these factors in any predetermined manner, nor does it apply any formulas in developing its compensation decisions and recommendations. The members of the Compensation Committee consider this information in view of their individual experience, knowledge of the Company, knowledge of the competitive market, knowledge of each Named Executive Officer and business judgment in making their decisions and recommendations.
The Compensation Committee does not engage in formal benchmarking against other companies’ compensation programs or practices to establish our compensation levels or make specific compensation decisions and recommendations with respect to our Named Executive Officers. Instead, in making its determinations, the Compensation Committee reviews information summarizing the compensation paid at a representative group of peer companies, to the extent that the executive positions at these companies are considered comparable to our positions and informative of the competitive environment, as well as from more broad-based compensation surveys to gain a general understanding of market compensation levels.
Role of Management
In discharging its responsibilities, the Compensation Committee works with members of our management, including our CEO. Our management assists the Compensation Committee by providing information on corporate and individual performance and management’s perspective on compensation matters. Our management also provides certain compensation data about our executive officers to Compensia, the Compensation Committee’s compensation consultant, which presents such information to the Compensation Committee as part of its review and analysis of our executive compensation program. The Compensation Committee solicits and reviews our CEO’s proposals with respect to program structures, as well as his recommendations for adjustments to annual cash compensation, long-term incentive compensation and other compensation-related matters for our Named Executive Officers (except with respect to his own compensation) based on his evaluation of their performance for the prior year.
The Compensation Committee reviews and discusses such proposals and recommendations with our CEO and considers them as one factor in determining and approving the compensation of our Named Executive Officers. Our CEO also attends meetings of our board of directors and the Compensation Committee at which executive compensation matters are addressed, except with respect to discussions involving his own compensation.
Role of the Compensation Consultant
The Compensation Committee has the sole authority to retain an external compensation consultant to assist it by providing information, analysis and other advice relating to our executive compensation program and the decisions resulting from its annual executive compensation review, including the authority to approve the consultant’s reasonable fees and other retention terms. The compensation consultant reports directly to the
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Compensation Committee and its chair, and serves at the discretion of the Compensation Committee, which reviews the engagement annually.
In fiscal year 2021, the Compensation Committee engaged Compensia to serve as its compensation consultant to advise on executive compensation matters, including competitive market pay practices for our Named Executive Officers, and with the data analysis and selection of the compensation peer group.
During fiscal year 2021, Compensia attended meetings of the Compensation Committee as requested and provided various services including the following:
•the review, analysis and updating of our compensation peer group;
•the review and analysis of the base salary levels, target annual cash incentive awards and long-term incentive compensation of our Named Executive Officers against competitive market data based on the companies in our compensation peer group and/or selected broad-based compensation surveys;
•an assessment of executive compensation trends within our industry, and updating on corporate governance and regulatory issues and developments;
•the review and analysis of the compensation package for our new CPO;
•the review of performance-based equity award alternatives, design and other considerations;
•assisting in the risk assessment of our compensation programs; and
•support on other ad hoc matters throughout the year.
The terms of Compensia’s engagement includes reporting directly to the Compensation Committee chair. Compensia also coordinated with our management for data collection and job matching for our executive officers. In fiscal year 2021, Compensia provided only compensation-related services for us.
The Compensation Committee has evaluated its relationship with Compensia to ensure that it believes that such firm is independent from management. This review process included a review of the services that such compensation consultant provided, the quality of those services and the fees associated with the services provided during fiscal year 2021. Based on this review, as well as consideration of the factors affecting independence set forth in Exchange Act Rule 10C-1(b)(4), Section 303A.05(c)(iv) of the rules of the NYSE relating to the independence of the Compensation Committee’s compensation advisors and such other factors as were deemed relevant under the circumstances, the Compensation Committee has determined that no conflict of interest was raised as a result of the work performed by Compensia.
Competitive Positioning
The Compensation Committee believes that peer group comparisons are useful guides to measure the competitiveness of our executive compensation program and related policies and practices. For purposes of assessing our executive compensation against the competitive market, the Compensation Committee reviews and considers the compensation levels and practices of a select group of peer companies. This compensation peer group consists of technology companies that are similar to us in terms of revenue, market capitalization and industry focus. The competitive data drawn from this compensation peer group is one of several factors that the Compensation Committee considers in making its decisions and recommendations with respect to the compensation of our Named Executive Officers.
The compensation peer group for fiscal year 2021, which was developed in January 2020 with the assistance of Compensia to analyze the compensation of our Named Executive Officers, was composed of publicly-traded technology companies against which we compete for executive talent. In identifying and selecting the companies for the compensation peer group, Compensia considered the following primary criteria:
•publicly-traded companies in the software and internet services sectors identified on a national basis, with a focus on California-based companies;
•similar revenues – within a range of ~0.5x to ~2.0x our trailing four fiscal quarters’ revenue; and
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•similar market capitalization – within a range of ~0.33x to ~3.0x our then-market capitalization.
After consultation with Compensia, the Compensation Committee approved the following compensation peer group for use when making its fiscal year 2021 executive compensation decisions:
| Alarm.com Holdings | HubSpot | Smartsheet | ||||||
| Alteryx | MongoDB | Tenable Holdings | ||||||
| Anaplan | New Relic | The Trade Desk | ||||||
| Avalara | Okta | Zendesk | ||||||
| Cloudera | Paylocity Holding | Zscaler | ||||||
| Coupa Software | Qualys | |||||||
| Five9 | SailPoint Technologies | |||||||
The Compensation Committee used data gathered by Compensia from the public filings of the companies in our compensation peer group, as well as data from custom data cuts drawn from the Radford Global Technology Survey and Radford Global Sales Survey databases that are similar to us in revenue, market capitalization and industry for purposes of providing additional perspective in the case of executive positions where the compensation peer group offered a limited number of relevant data points. This data permitted us to evaluate the competitive market when determining the total direct compensation packages for our Named Executive Officers, including base salary, target annual cash incentive awards and long-term incentive compensation.
The Compensation Committee reviews our compensation peer group at least annually and makes adjustments to its composition if warranted, taking into account changes in both our business and the businesses of the companies in the peer group.
Compensation Elements
Our executive compensation program consists principally of base salary and long-term incentive compensation in the form of equity awards. In addition, our CEO, CFO, President, Worldwide Field Operations and CPO are also eligible to receive annual cash incentive awards.
Base Salary
Base salary represents the fixed portion of the compensation of our Named Executive Officers and is an important element of compensation intended to attract and retain highly talented individuals. Generally, we use base salary to provide each Named Executive Officer with a specified level of cash compensation during the year with the expectation that he or she will perform his or her responsibilities to the best of his or her ability and in our best interests.
Generally, we establish the initial base salaries of our Named Executive Officers through arm’s-length negotiation at the time we hire the individual, taking into account his or her position, qualifications, experience and the base salaries of our other executive officers. Thereafter, the Compensation Committee reviews the base salaries of our Named Executive Officers each year as part of its annual review of our executive compensation program, with input from our CEO (except with respect to his own base salary), and makes adjustments (other than with respect to our CEO) that it determines are reasonable and necessary to reflect the scope of a Named Executive Officer’s performance, individual contributions and responsibilities, position in the case of a promotion and market conditions. With respect to our CEO, the non-executive directors serving on our board of directors determine any base salary adjustments upon the recommendation of the Compensation Committee.
In August 2020, the Compensation Committee reviewed the base salaries of our Named Executive Officers employed by the Company at such time. The Compensation Committee recommended to our board of directors that the base salary of our CEO be increased to be more competitive with the base salaries of similarly-situated chief executive officers at companies of comparable size and stage of maturity. The Compensation Committee also determined not to increase the base salaries of the other Named Executive Officers employed by the Company at such time. In making this recommendation and these decisions, the Compensation Committee took into consideration a competitive market analysis prepared by Compensia, the recommendations of our CEO (except with respect to his own base salary) and the current retention risks and challenges facing us, as well as the other factors
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described in “Compensation-Setting Process – Setting Target Total Direct Compensation” above. Subsequently, in October 2020, the non-executive directors on our board of directors increased the base salary of our CEO, effective as of November 1, 2020, upon the recommendation of the Compensation Committee.
The base salaries of our incumbent Named Executive Officers as determined in August 2020 for fiscal year 2021 were as follows:
| Named Executive Officer | Fiscal Year 2020 Base Salary | Fiscal Year 2021 Base Salary (1) | Percentage Change | |||||||||||||||||
| Shay Banon | $375,000 | $400,000 | 6.7% | |||||||||||||||||
| Janesh Moorjani | $365,000 | $365,000 | —% | |||||||||||||||||
| W.H. Baird Garrett | $400,000 | $400,000 | —% | |||||||||||||||||
(1)The revised base salary for Mr. Banon was effective November 1, 2020.
In connection with his appointment as our President, Worldwide Field Operations effective August 24, 2020, the Compensation Committee set the annual salary of Mr. Appleby at $500,000. In connection with his appointment as our Chief Product Officer effective January 4, 2021, the Compensation Committee set the annual salary of Mr. Kulkarni at $500,000. These base salaries were effective upon commencement of their respective employment with the Company.
The base salaries paid to our Named Executive Officers during fiscal year 2021 are set forth in “Executive Compensation Tables—Fiscal 2021 Summary Compensation Table” below.
Annual Cash Incentives
Our board of directors has adopted, and our general meeting of shareholders has approved, the Executive Incentive Compensation Plan (the “Bonus Plan”). The Bonus Plan is administered by the Compensation Committee. The Bonus Plan enables the Compensation Committee to provide cash incentive awards to selected employees, including our Named Executive Officers (other than our CEO), based upon our actual achievement as measured against performance metrics established by the Compensation Committee. In the case of our CEO, the performance metrics for his cash incentive awards and the actual payment of the awards are established by the non-executive directors serving on our board of directors, upon the recommendation from the Compensation Committee. The Compensation Committee believes that the financial performance measures used in the Bonus Plan contribute to driving the creation of long-term stakeholder value, including shareholder value, and play an important role in influencing the performance of our Named Executive Officers who participate in the plan, who are most directly responsible for our overall success.
Under the Bonus Plan, each fiscal year (generally during the first fiscal quarter) the Compensation Committee approves the terms and conditions that will serve as the basis for determining the eligibility for, and amount of, cash incentive awards to be paid under the Bonus Plan. Typically, performance under the Bonus Plan is measured semi-annually as of October 31st and April 30th of each fiscal year. After the end of each six-month period, the Compensation Committee reviews our actual achievement against the target levels for the corporate performance measures established for that period and determines the cash incentive awards, if any, to be paid under the plan. Awards are paid out following the approval by the Compensation Committee and, in the case of our CEO, the approval by the non-executive directors serving on our board of directors.
The Compensation Committee may, in its sole discretion and at any time, increase, reduce or eliminate a participant’s actual award. In the case of our CEO the non-executive directors serving on our board of directors determine whether our CEO’s actual award is increased, reduced or eliminated, taking into consideration the recommendation of the Compensation Committee. The actual award may be below, at or above a participant’s target annual cash incentive award, as determined at the Compensation Committee’s discretion or, in the case of our CEO, as recommended by the Compensation Committee to our board of directors for their discretionary action. The Compensation Committee may determine the amount of any change (or recommendation for any change in the case of our CEO) on the basis of such factors as it deems relevant, and it is not required to establish any allocation or weighting with respect to the factors it considers. In fiscal year 2021, neither the Compensation Committee nor, in the case of our CEO, the non-executive directors serving on our board of directors, exercised their discretion with respect to any of the actual cash incentive award payments made under the Bonus Plan.
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In June 2020, the Compensation Committee approved (or in the case of Mr. Banon, recommended to our board of directors) the financial performance metrics for fiscal year 2021 in connection with the Bonus Plan for fiscal year 2021 (the “Fiscal Year 2021 Bonus Plan”) to provide incentives for Messrs. Banon and Moorjani, the Named Executive Officers best positioned at that time to drive corporate performance to meet or exceed our principal business objectives as set forth in our fiscal year 2021 annual operating plan. In July 2020, the non-executive directors serving on our board of directors approved the financial performance metrics for Mr. Banon for fiscal year 2021, upon the recommendation of the Compensation Committee.
In connection with the hiring of Messrs. Appleby and Kulkarni and the Compensation Committee’s desire to incentivize such executive officers, who, as a result of their roles within the Company, are also best positioned to drive corporate performance to meet or exceed our principal business objectives as set forth in our fiscal year 2021 annual operating plan, the Compensation Committee approved, in August 2020 with respect to Mr. Appleby and in January 2021 with respect to Mr. Kulkarni, their participation in the Fiscal Year 2021 Bonus Plan using the same performance metrics that had been approved in June 2020 for Messrs. Banon and Moorjani.
The Compensation Committee believed that the provision of annual cash incentive award opportunities to these Named Executive Officers was appropriate because they had the ability to exert the greatest influence on the success of our business as a whole through their involvement in the development and execution of our core strategies. As a result, these Named Executive Officers were eligible to receive a cash incentive award based upon the attainment of the corporate performance metrics that were established by the Compensation Committee and which related to financial objectives that were important to us as approved by our board of directors as part of our annual operating plan. The annual operating plan for fiscal year 2021 was based on aspirational business goals (that is, stretch goals) in order to drive strong growth. The Compensation Committee approved corporate performance metrics or, in the case of our CEO recommended such action to our board of directors, commensurate with the operating plan target levels because it wanted to incentivize and stretch these Named Executive Officers to achieve extraordinary performance under the Company’s Executive Cash Incentive Plan. The Fiscal Year 2021 Bonus Plan was funded based on our actual results for the first and second halves of the fiscal year as evaluated against these performance metrics.
Target Annual Cash Incentive Award Opportunities
For purposes of the Fiscal Year 2021 Bonus Plan, target annual cash incentive awards were to be based upon a specific percentage of each eligible Named Executive Officer’s annual base salary. In June 2020, as part of its annual review of our executive compensation program, the Compensation Committee reviewed the target annual cash incentive award opportunities of Messrs. Banon and Moorjani. The Compensation Committee recommended to our board of directors that the target annual cash incentive award opportunity of Mr. Banon remain at the level set for the second half of fiscal year 2020. In addition, the Compensation Committee determined to leave the target annual cash incentive award opportunity of Mr. Moorjani at its fiscal year 2020 level. Further, in connection with the hiring of Messrs. Appleby and Kulkarni, the Compensation Committee set the target annual cash incentive award opportunities for each of them at 60% of their annual base salary, the same target annual cash incentive award opportunities as Messrs. Banon and Moorjani. In making the recommendation to our board of directors for Mr. Banon’s target annual cash incentive award opportunity and the decisions for the target annual cash incentive award opportunities of the other eligible Named Executive Officers, the Compensation Committee took into consideration a competitive market analysis prepared by Compensia, the recommendations of our CEO (except with respect to his own target annual cash incentive opportunity) and the current retention risks and challenges facing us, as well as the other factors described in “Compensation-Setting Process – Setting Target Total Direct Compensation” above. The target annual cash incentive opportunity of our CEO was approved by the non-executive directors serving on our board of directors in July 2020. Given the goals established by the Compensation Committee for the Fiscal Year 2021 Bonus Plan, it was determined that it would require extraordinary corporate performance for fiscal year 2021 for Messrs. Banon, Moorjani, Appleby and Kulkarni to earn their annual cash incentive award opportunity at target levels.
Corporate Performance Metrics
In June 2020, the Compensation Committee selected the following two performance metrics for the Fiscal Year 2021 Bonus Plan: calculated billings and non-GAAP operating margin percentage. The Compensation Committee believed these performance metrics were appropriate because,in its view, they continued to be the best indicators of our successful execution of our annual operating plan. In addition, they provided a strong emphasis on growth and managing profitability, which the Compensation Committee believed would most directly influence the creation of sustainable long-term shareholder value. Four-fifths of the target annual cash incentive award payout
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under the Fiscal Year 2021 Bonus Plan was based on the attainment of calculated billings goals, while one-fifth was based on the attainment of non-GAAP operating margin percentage goals.
For purposes of the Fiscal Year 2021 Bonus Plan:
▪“calculated billings” meant total revenue plus the increase in total deferred revenue as presented on or derived from our condensed consolidated statements of cash flows less the (increase) decrease in total unbilled accounts receivable in a given period; and
▪“non-GAAP operating margin percentage” meant GAAP operating margin excluding stock-based compensation expense, employer payroll taxes on employee stock transactions, amortization of acquired intangible assets and acquisition-related expenses.
In June 2020, the Compensation Committee established threshold, target and maximum achievement levels for each of these performance metrics for the first half of fiscal year 2021 (May 1, 2020 through October 31, 2020). Subsequently, in November 2020, the Compensation Committee established threshold, target and maximum achievement levels for each of these performance metrics for the second half of fiscal year 2021 (November 1, 2020 through April 30, 2021). In establishing these performance levels in May and November, the Compensation Committee set them at an amount that it believed was necessary to provide a target total cash compensation opportunity that was competitive in the market and to motivate the eligible Named Executive Officers to achieve an aggressive level of growth and profitability. The target achievement levels were set based on our operating plan for those periods. Following the Compensation Committee’s decisions in May and November, the bonus targets and thresholds for Mr. Banon for the first half of fiscal year 2021 were approved by the non-executive directors serving on our board of directors in July 2020 while the bonus targets and thresholds for the second half of fiscal year 2021 were approved by the non-executive directors serving on our board of directors in December 2020 (in each case upon the recommendation of the Compensation Committee).
To the extent that performance for either metric was below the threshold performance level, there would be no payout with respect to that metric. In addition, the potential payment for any metric was capped at the maximum performance level. Achievement levels and payout percentages for performance between the threshold and maximum performance levels were set forth in tables approved by the Compensation Committee.
The performance levels for the two performance metrics for the first half and second half of fiscal year 2021 were established as follows: (i) with respect to calculated billings, the payout percentage was 0% for achievement at less than 80% of target, 50% for achievement at 80% of target, 100% for achievement at 100% of target, and 150% for achievement at or above 120% of target; and (ii) with respect to non-GAAP operating margin percentage, the payout percentage was 0% for achievement more than five percentage points below target, 50% for achievement at five percentage points below target, 100% for achievement at target, and 150% for achievement at five or more percentage points above target. For both performance metrics, for achievement between threshold and target, and between target and maximum, the payout was to be determined on a linear interpolation basis.
Annual Cash Incentive Payouts
For the six-month period ended October 31, 2020, the achievement determined by the Compensation Committee was 108.4% of the calculated billings target. Our non-GAAP operating margin percentage exceeded the target level by five and four-tenths percentage points. Consequently, based on their weighting, the achievement of the performance metrics for the first half of fiscal year 2021 generated a combined payout percentage of 126.7% of the target annual cash incentive award opportunity for that six-month period.
For the six-month period ended April 30, 2021, the achievement determined by the Compensation Committee was 107.6% of the calculated billings target. Our non-GAAP operating margin percentage exceeded the target level by seven and two-tenths percentage points. Consequently, based on their weighting, the achievement of the performance metrics for the second half of fiscal year 2021 generated a combined payout percentage of 125.2% of the target annual cash incentive award opportunity for that six-month period.
Based on these determinations, the Compensation Committee recommended to our board of directors that Mr. Banon should receive and determined that Messrs. Moorjani, Appleby and Kulkarni should receive the following annual cash incentive award payouts under the Fiscal Year 2021 Bonus Plan for fiscal year 2021: (i) with respect to the first half of fiscal year 2021, amounts for Messrs. Banon, Moorjani and Appleby of $142,542.00, $138,741.00, and $71,271.00, respectively, and (ii) with respect to the second half of fiscal year 2021, amounts for Messrs.
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Banon, Moorjani, Appleby and Kulkarni of $149,285.09, $137,084.00, $187,787.00 and $125,191.00, respectively. The amounts paid to Messrs. Appleby and Kulkarni during the applicable period were prorated from their actual date of hire during each period to the end of the respective period.
In the case of Mr. Banon, the non-executive directors serving on our board of directors determined the annual cash incentive award payout for the first half of fiscal year 2021 in December 2020 and determined the annual cash incentive award payout for the second half of fiscal year 2021 in June 2021. The annual cash incentive award payouts for Messrs. Banon, Moorjani and Appleby for the first half of the fiscal year were paid in the third fiscal quarter of fiscal year 2021 and the annual cash incentive award payouts for Messrs. Banon, Moorjani, Appleby and Kulkarni for the second half of the fiscal year were paid in the first fiscal quarter of fiscal year 2022.
The annual cash incentive awards paid to our Named Executive Officers for fiscal year 2021 are set forth in “Executive Compensation Tables—Fiscal 2021 Summary Compensation Table” below.
Long-Term Incentive Compensation
We view long-term incentive compensation in the form of equity awards as a critical element of our executive compensation program. We use equity awards to incentivize and reward our Named Executive Officers for long-term corporate performance based on the value of our ordinary shares and, thereby, to align their interests with the interests of our stakeholders. The realized value of these equity awards bears a direct relationship to our stock price, and, therefore, these awards are an incentive for our Named Executive Officers to create value for our shareholders. Equity awards also help us retain our Named Executive Officers in a highly competitive market and as such contribute to the long-term value creation for all our stakeholders.
Currently, we use options to purchase ordinary shares and RSU awards with time-based vesting requirements that may be settled for ordinary shares to motivate, reward and retain our Named Executive Officers for long-term increases in the value of our ordinary shares. The Compensation Committee believes that because stock options provide for an economic benefit only in the event that our stock price increases over the exercise price of the option, these awards effectively align the interests of our Named Executive Officers with the interests of our stakeholders and provide our Named Executive Officers with a significant incentive to manage our business from the perspective of a person with an equity stake in the business. In addition, because RSU awards have value to the recipient even in the absence of stock price appreciation, the Compensation Committee believes that we are able to incentivize and retain our Named Executive Officers using fewer ordinary shares than would be necessary if we used stock options exclusively to provide an equity stake in the Company. Since the value of RSU awards increases or decreases with any increase or decrease in the value of the underlying ordinary shares, RSU awards also provide incentives to our Named Executive Officers that are aligned with the interests of our stakeholders.
To date, the Compensation Committee has not applied a rigid formula in determining the size of the equity awards to be granted to our Named Executive Officers as part of our annual focal review of equity awards. Instead, in making these decisions and, in the case of our CEO, its recommendation to our board of directors, the Compensation Committee has exercised its judgment as to the amount of the awards after considering the unvested equity holdings of each Named Executive Officer and the ability of these unvested holdings to satisfy our retention objectives. In addition, in granting equity awards to all of our employees, including our Named Executive Officers, the Compensation Committee considers the proportion of our total ordinary shares outstanding used for annual employee long-term incentive compensation awards (our “burn rate”) in relation to the annual burn rate ranges of the companies in our compensation peer group and other recently-public technology companies with which the members of the Compensation Committee are familiar, the potential economic and voting power dilution to our shareholders in relation to the median practice of the companies in our compensation peer group and other recently-public technology companies and the other factors described in “Compensation-Setting Process—Setting Target Total Direct Compensation” above.
Annual Equity Awards
In November 2020, as part of its annual review of our executive compensation program, and after taking into consideration a competitive market analysis prepared by Compensia and the recommendations of our CEO (except with respect to his own equity award), as well as the factors described in the preceding paragraph, the Compensation Committee determined that equity awards should be granted to Messrs. Moorjani and Garrett in the form of options to purchase ordinary shares and RSU awards with time-based vesting requirements that may be settled for ordinary shares. Further, the Compensation Committee determined that the dollar value of the stock options should comprise 50% of each Named Executive Officer’s fiscal year 2021 equity award, and the dollar value of the RSU awards
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should comprise the remaining 50% of the award. Accordingly, Mr. Moorjani received an option to purchase ordinary shares with an award value of $1.5 million and an RSU award with time-based vesting requirements that may be settled for ordinary shares with an award value of $1.5 million, while Mr. Garrett received an option to purchase ordinary shares with an award value of $750,000 and an RSU award with time-based vesting requirements that may be settled for ordinary shares with an award value of $750,000.
In the case of our CEO, after taking into consideration a competitive market analysis prepared by Compensia and the factors described above the Compensation Committee recommended to our board of directors that our CEO be granted an equity award for fiscal year 2021 in the form of an option to purchase ordinary shares with an award value of $3.75 million and an RSU award with time-based vesting requirements that may be settled for ordinary shares with an award value of $3.75 million. This fiscal year 2021 equity award for our CEO was approved by the non-executive directors on our board of directors in December 2020. The vesting schedule for such equity awards is set forth in the table below.
New Hire Equity Award for Mr. Appleby
In connection with his appointment as our President, Worldwide Field Operations effective August 24, 2020, in August 2020 the Compensation Committee approved an equity award for Mr. Appleby (which was granted on September 8, 2020) in the form of an option to purchase ordinary shares with an award value of $2.0 million and an RSU award with time-based vesting requirements that may be settled for ordinary shares with an award value of $6.0 million. The vesting schedule for such equity awards is set forth in the table below.
New Hire Equity Awards for Mr. Kulkarni
In connection with his appointment as our Chief Product Officer effective January 4, 2021, in February 2021 the Compensation Committee approved an equity award for Mr. Kulkarni in the form of an option to purchase ordinary shares with an award value of $2.5 million (which was granted on February 9, 2021) and an RSU award with time-based vesting requirements that may be settled for ordinary shares with an award value of $7.5 million (which was granted on March 8, 2021).
In March 2021, the Compensation Committee also approved an additional equity award for Mr. Kulkarni (which was granted on March 8, 2021) in the form of an option to purchase ordinary shares with an award value of $0.5 million and an RSU award with time-based vesting requirements that may be settled for ordinary shares with an award value of $1.5 million as a further new hire award to reflect the importance of his role and responsibilities with the Company. The vesting schedule for such equity awards is set forth in the table below.
The aggregate equity awards granted to our Named Executive Officers for fiscal year 2021 were as follows:
| Named Executive Officer | Stock Option (# of shares) | Stock Option (award value) | RSU Award (# of shares) | RSU Award (award value) | Aggregate Equity Awards (award value) | |||||||||||||||||||||||||||
| Shay Banon | 62,421 | (1) | $3,750,000 | 31,507 | (2) | $3,750,000 | $7,500,000 | |||||||||||||||||||||||||
| Janesh Moorjani | 24,968 | (1) | $1,500,000 | 12,602 | (2) | $1,500,000 | $3,000,000 | |||||||||||||||||||||||||
| Paul Appleby | 40,129 | (3) | $2,000,000 | 61,513 | (4) | $6,000,000 | $8,000,000 | |||||||||||||||||||||||||
| Ashutosh Kulkarni | 37,977 | (5) | $3,000,000 | 58,415 | (6) | $9,000,000 | $12,000,000 | |||||||||||||||||||||||||
| W.H. Baird Garrett | 12,484 | (1) | $750,000 | 6,301 | (2) | $750,000 | $1,500,000 | |||||||||||||||||||||||||
(1)The ordinary shares subject to the option vest in 48 equal monthly installments beginning on January 8, 2021, subject to continued service to us through the applicable vesting date.
(2)The ordinary shares subject to the award of RSUs vest in eight equal semiannual installments beginning on June 8, 2021, subject to continued service to us through the applicable vesting date.
(3)One-fourth of the ordinary shares subject to the option vest on September 8, 2021, and 1/48th of the ordinary shares subject to the option vest monthly thereafter, subject to continued service to us through the applicable vesting date.
(4)One-fourth of the ordinary shares subject to the RSU award vest on September 8, 2021, and one-eighth of the ordinary shares subject to the RSU vest in equal semiannual installments thereafter, subject to continued service to us through the applicable vesting date.
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(5)With respect to the option award with an award value of $2.5 million, one-fourth of the ordinary shares subject to the option vest on January 4, 2022, and 1/48th of the ordinary shares subject to the option vest monthly thereafter, subject to continued service to us through the applicable vesting date. With respect to the option award with an award value of $0.5 million, one-fourth of the ordinary shares subject to the option vest on March 8, 2022, and 1/48th of the ordinary shares subject to the option vest monthly thereafter, subject to continued service to us through the applicable vesting date.
(6)One-fourth of the ordinary shares subject to the RSU award vest on March 8, 2022, and one-eighth of the ordinary shares subject to the RSU award vest in equal semiannual installments thereafter, subject to continued service to us through the applicable vesting date.
The equity awards granted to our Named Executive Officers during fiscal year 2021 are set forth in “Executive Compensation Tables—Fiscal 2021 Summary Compensation Table” and “Executive Compensation Tables—Fiscal 2021 Grants of Plan-Based Awards Table” below.
Health, Welfare and Retirement Benefits
Our Named Executive Officers are eligible to participate in the same employee benefit plans, and on the same terms and conditions, as all other full-time, salaried employees in the jurisdiction where the Named Executive Officer is located. These benefits include medical, dental, and vision insurance, business travel insurance, an employee assistance program, health and dependent care flexible spending accounts, basic life insurance, accidental death and dismemberment insurance, short-term and long-term disability insurance and commuter benefits.
We maintain a Section 401(k) plan for our employees, including our Named Executive Officers. The Section 401(k) plan is intended to qualify under Section 401(k) of the Code, so that contributions to the plan by employees or by us, and the investment earnings thereon, are not taxable to the employees until withdrawn, and so that contributions made by us, if any, will be deductible by us when made. Employees may elect to reduce their current compensation by up to the statutorily prescribed annual limits and to have the amount of such reduction contributed to their accounts under the Section 401(k) plan. The Section 401(k) plan permits us to make contributions up to the limits allowed by law on behalf of all eligible employees. Typically, we make matching contributions to the plan up to 6% of a participating employee’s eligible compensation, to a maximum match of $17,400 for calendar year 2021, $17,100 for calendar year 2020 and $15,600 for calendar year 2019. All participating employees’ interests in our matching contributions, if any, vest immediately at the time of contribution. The Section 401(k) plan also contains a Roth component.
We also maintain defined-contribution plans for employees in certain other countries.
We do not offer any retirement benefits to our executive officer located in Israel, except to the extent certain social benefits are required pursuant to Israeli labor laws or are common practice in Israel, and such social benefits are applicable to all Israeli employees. Specifically, based on Israeli labor laws, an Israeli employee is entitled to severance pay upon termination of employment for any reason, including retirement, equal to the most recent monthly salary of such employee multiplied by the number of years of employment of such employee. We make a payment of 8.333% of each employee’s monthly base salary to an insurance or pension fund to pay for this future liability payable to our employees upon termination of their employment. In addition, we make a payment of up to 7.5% of each employee’s monthly base salary to another insurance or pension fund, and this accrued amount may be withdrawn by the employee only upon retirement (to the extent either the statutory severance or retirement amounts become payable to Mr. Banon, they will offset amounts otherwise payable to Mr. Banon under his employment agreement, as noted below). We generally provide all of our Israeli employees with a fixed travel allowance for commuting costs, except that we provide Mr. Banon with reimbursements for such costs, up to a maximum amount of ILS 550 per month. Also, as is customary in Israel applicable to all Israeli employees, we provide our Israeli employees with a certain amount of monthly contributions (7.5% of their base salary) to a savings fund designed for employee’s study and training purposes. The amounts of the above referenced benefits contributed by us to Mr. Banon in fiscal year 2021 are specified in the Fiscal 2021 Summary Compensation Table of this proxy statement.
We design our employee benefits programs to be affordable and competitive in relation to the market as well as compliant with applicable laws and practices. We adjust our employee benefits programs as needed based upon regular monitoring of applicable laws and practices and the competitive market.
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Perquisites and Other Personal Benefits
Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not provide significant perquisites or other personal benefits to our Named Executive Officers except as generally made available to our employees or in situations where we believe it is appropriate to assist an individual in the performance of his or her duties, to make him or her more efficient and effective, and for recruitment and retention purposes. During fiscal year 2021, none of our Named Executive Officers received perquisites or other personal benefits that were, in the aggregate, $10,000 or more for each individual.
In the future, we may provide perquisites or other personal benefits in limited circumstances, such as those described in the preceding paragraph. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the Compensation Committee. In the case of our CEO, the non-executive directors serving on our board of directors will approve all perquisites or other personal benefits and subject them to periodic review upon the recommendation of the Compensation Committee.
Employment Arrangements
We have entered into a written employment agreement with our CEO and employment letters with each of our other Named Executive Officers.The arrangement with our CEO was approved by the non-executivedirectors serving onour board of directors and our general meeting of shareholders consistent with Dutch legal requirements as they applied prior to our IPO. The arrangements with each of our other Named Executive Officers have been approved on our behalf by the Compensation Committee. We believe that these arrangements were necessary to secure the service of these individuals in a highly competitive job market.
Each of these employment arrangements does not have a specific term, provides for “at will” employment (meaning that either we or the Named Executive Officer may terminate the employment relationship at any time without cause) and generally set forth the Named Executive Officer’s initial base salary, target annual cash incentive opportunity, if applicable, and eligibility to participate in our standard employee benefit plans and programs.
Our CEO’s employment agreement also provides that he may be eligible to receive certain severance payments and benefits in connection with certain terminations of employment with the Company, including a termination of employment in connection with a change in control of the Company, provided that such severance payments and benefits will be reduced by any statutory severance benefits required to be provided to our CEO under applicable law. The amount and type of the severance payments and benefits provided under our CEO’s employment agreement, as well as the terms and conditions under which such severance payments and benefits may be provided, are identical in all material respects to the provisions regarding severance payments and benefits provided for in our change in control and severance agreements, as described under “Post-Employment Compensation” below.
For detailed descriptions of the employment arrangements with our Named Executive Officers, see “Executive Compensation Tables—Potential Payments upon Termination or Change in Control” below.
Post-Employment Compensation
In addition to the severance provisions contained in our CEO’s employment agreement, we have entered into change in control and severance agreements with each of our other Named Executive Officers (collectively, the severance provisions in our CEO’s employment agreement and the change in control and severance agreements are referred to as the “Severance Arrangements”). The Severance Arrangements provide for certain protections in the event of specified involuntary terminations of employment, including an involuntary termination of employment in connection with a change in control of the Company, in exchange for executing a separation agreement and release of claims in our favor that becomes effective and irrevocable and resigning from all positions the Named Executive Officer may hold as an officer or director.
The Severance Arrangements provide reasonable compensation in the form of severance pay and certain limited benefits to a Named Executive Officer if he or she leaves our employ under certain circumstances to facilitate his or her transition to new employment. Further, in some instances we seek to mitigate any potential employer liability and avoid future disputes or litigation by requiring a departing Named Executive Officer to sign a separation agreement and release of claims in a form and with terms acceptable to us providing for a general release of all claims as a condition to receiving post-employment compensation payments or benefits. We also believe that
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the Severance Arrangements help maintain our Named Executive Officers’ continued focus and dedication to their assigned duties to maximize stakeholder value if there is a potential transaction that could involve a change in control of the Company.
Under the Severance Arrangements, all payments and benefits in the event of a change in control of the Company are payable only if there is a connected involuntary loss of employment by a Named Executive Officer (a so-called “double-trigger” arrangement). In the case of the acceleration of vesting of outstanding equity awards, we use this double-trigger arrangement to protect against the loss of retention value following a change in control of the Company and to avoid windfalls, both of which could occur if vesting of either equity or cash-based awards accelerated automatically as a result of the transaction.
In the event of a change in control of the Company, to the extent that any of the amounts provided for under the Severance Arrangements would constitute a “parachute payment” within the meaning of Section 280G of the Code and could be subject to the related excise tax under Section 4999 of the Code, a Named Executive Officer will receive such payment as would entitle him or her to receive the greatest after-tax benefit, even if it means that we pay the Named Executive Officer a lower aggregate payment so as to minimize or eliminate the potential excise tax imposed by Section 4999 of the Code.
We do not provide any tax reimbursement payments (or “gross-ups”) on excise taxes relating to a change in control of the Company and have no such obligations in place with respect to any of our executive officers, including our Named Executive Officers.
We believe that having in place reasonable and competitive post-employment compensation arrangements, including in the event of a change in control of the Company, are essential to attracting and retaining highly qualified executive officers. The Compensation Committee does not consider the specific amounts payable under the post-employment compensation arrangements when determining the annual compensation for our Named Executive Officers. We do believe, however, that these arrangements are necessary to offer compensation packages that are competitive.
For detailed descriptions of the post-employment compensation arrangements with our Named Executive Officers, as well as an estimate of the potential payments and benefits payable under these arrangements, see “Executive Compensation Tables—Potential Payments upon Termination or Change in Control” below.
Other Compensation Policies
Equity Award Grant Policy
Our equity award grant policy governs our grant of equity awards under our 2012 Plan and such other equity compensation plans as we may adopt from time to time. Pursuant to our equity award grant policy, duly authorized equity awards are granted to employees on predetermined grant dates in a manner that is consistent with the terms set forth in the policy. Consistent with our policy:
•We do not grant long-term incentive awards in anticipation of the release of material non-public information and have never had a practice of doing so.
•We have never timed and do not plan to time the release of material non-public information for the purpose of affecting the value of executive compensation.
Compensation Recovery (“Clawback”) Policy
Pursuant to Dutch corporate law, our Remuneration Policy provides that the short-term and long-term variable remuneration of the directors of the Company, including our Chairman of our board of directors and CEO, whether payable in cash or equity, may be adjusted or partly or fully clawed back to the extent it was paid on the basis of incorrect information (i) underlying the targets to be achieved or (ii) regarding the circumstances on which the variable remuneration was made conditional.
As a public company, if we are required to restate our financial results due to our material noncompliance with any financial reporting requirements under the federal securities laws as a result of misconduct, the Chief Executive Officer and Chief Financial Officer may be legally required to reimburse Elastic for any bonus or other incentive-based or equity-based compensation they receive in accordance with the provisions of section 304 of the Sarbanes-
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Oxley Act of 2002. Additionally, we intend to implement a Dodd-Frank Wall Street Reform and Consumer Protection Act-compliant clawback policy to the extent that the requirements of such policy are finalized by the SEC.
Prohibition on Hedging and Pledging of Securities
Under our Insider Trading Policy, our employees, including officers, and the members of our board of directors are prohibited from engaging in transactions in publicly-traded options, such as puts and calls, and other derivative securities with respect to our securities (other than share options, share appreciation rights and other securities issued pursuant to Company benefit plans or other compensatory arrangements with the Company), and debt securities (such as debentures, bonds and notes). This includes any hedging or similar transaction designed to decrease the risks associated with holding our securities. In addition, our employees, including officers, and the members of our board of directors may not engage in short sales (that is, the sale of a security that must be borrowed to make delivery) or “sell short against the box” (that is, a sale with a delayed delivery) involving our securities.
Also, under our Insider Trading Policy, our employees, including officers, and the members of our board of directors may not pledge our securities as collateral for a loan or hold our securities in a margin account.
Tax and Accounting Considerations
The Compensation Committee takes the applicable tax and accounting requirements into consideration in designing and overseeing our executive compensation program.
Deductibility of Executive Compensation
Section 162(m) of the Code generally limits the amount we may deduct from our federal income taxes for compensation paid to our CEO and certain other current and former executive officers that are “covered employees” within the meaning of Section 162(m) to $1 million per individual per year, subject to certain exceptions. The regulations promulgated under Section 162(m) contain a transition rule that applies to companies that become subject to Section 162(m) by reason of becoming publicly held. Pursuant to this rule, certain compensation granted during a transition period (and, with respect to RSU awards, that are paid out before the end of the transition period) currently is not counted toward the deduction limitations of Section 162(m) if the compensation is paid under a compensation arrangement that was in existence before the effective date of the initial public offering and certain other requirements are met. We currently expect our transition period to expire at our annual general meeting of shareholders to be held in 2022, although it could expire earlier in certain circumstances.
Although the Compensation Committee may consider the tax implications as one factor in making compensation decisions for our covered employees, the Compensation Committee also considers other factors in making such decisions, including ensuring that our executive compensation program supports our business strategy. Consequently, the Compensation Committee retains the discretion and flexibility to compensate our Named Executive Officers in a manner consistent with the objectives of our executive compensation program and the best interests of the Company and our shareholders, which may include providing for compensation that is not deductible by the Company due to the deduction limit of Section 162(m). While the transition relief for newly-public companies may help to minimize the effect of the Section 162(m) deduction limit under Section 162(m) in the short-term, we expect that, going forward, some portion of our Named Executive Officers’ compensation will not be fully deductible by the Company for federal income tax purposes.
Accounting for Stock-Based Compensation
The Compensation Committee takes accounting considerations into account in designing compensation plans and arrangements for our executive officers and other employees. Chief among these is Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC Topic 718”), the standard which governs the accounting treatment of certain stock-based compensation. Among other things, ASC Topic 718 requires us to record a compensation expense in our income statement for all equity awards granted to our executive officers and other employees. This compensation expense is based on the grant date “fair value” of the equity award and, in most cases, will be recognized ratably over the award’s requisite service period (which, generally, will correspond to the award’s vesting schedule). This compensation expense is also reported in the compensation tables below, even though recipients may never realize any value from their equity awards.
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Executive Compensation Tables
Fiscal 2021 Summary Compensation Table
The following table provides information concerning compensation awarded to, earned by or paid to each of our Named Executive Officers for all services rendered in all capacities during the last three fiscal years during which such individuals were Named Executive Officers. The amounts reported reflect rounding, which may result in slight variations between amounts shown in the Total column and the sum of its components as reflected in the table.
| Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||
| Shay Banon | 2021 | 387,720 | (3) | — | 4,594,666 | 5,225,530 | 291,827 | (3) | 65,864 | (3)(4) | 10,565,607 | |||||||||||||||||||||||||||||||||||||||
| Chief Executive Officer | 2020 | 375,000 | — | — | 4,872,356 | (5) | 196,886 | — | 5,444,242 | |||||||||||||||||||||||||||||||||||||||||
| 2019 | 330,000 | — | — | — | 169,760 | — | 499,760 | |||||||||||||||||||||||||||||||||||||||||||
| Janesh Moorjani | 2021 | 365,000 | — | 1,837,750 | 2,090,179 | 275,825 | 17,100 | (6) | 4,585,853 | |||||||||||||||||||||||||||||||||||||||||
| Chief Financial Officer | 2020 | 365,000 | — | 863,304 | 2,669,951 | 191,636 | 16,298 | (6) | 4,106,189 | |||||||||||||||||||||||||||||||||||||||||
| 2019 | 330,000 | — | — | — | 135,808 | 6,602 | (6) | 472,410 | ||||||||||||||||||||||||||||||||||||||||||
| Paul Appleby | 2021 | 344,697 | 200,000 | 6,137,767 | 2,262,072 | 259,058 | 10,888 | (6) | 9,214,482 | |||||||||||||||||||||||||||||||||||||||||
| President, Worldwide Field Operations | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Ashutosh Kulkarni | 2021 | 164,773 | 200,000 | 6,495,748 | 3,416,442 | 125,191 | 3,750 | (6) | 10,405,903 | |||||||||||||||||||||||||||||||||||||||||
| Chief Product Officer | ||||||||||||||||||||||||||||||||||||||||||||||||||
| W.H. Baird Garrett | 2021 | 400,000 | — | 918,875 | 1,045,089 | — | — | 2,363,964 | ||||||||||||||||||||||||||||||||||||||||||
| Senior Vice President and General Counsel | 2020 | 400,000 | — | — | — | — | — | 400,000 | ||||||||||||||||||||||||||||||||||||||||||
| 2019 | 400,000 | — | — | — | — | 8,438 | (6) | 408,438 | ||||||||||||||||||||||||||||||||||||||||||
(1)The amounts shown represent the grant date fair value of RSU awards and options, as applicable, to settle or purchase ordinary shares granted to the Named Executive Officers for financial reporting purposes pursuant to ASC Topic 718. Such amounts do not represent the amounts paid to or realized by the Named Executive Officers. See Note 11, “Equity Incentive Plans” of the Notes to our consolidated financial statements in the Company’s Annual Report on Form 10-K for fiscal year 2021 regarding assumptions underlying valuation of equity awards.
(2)Except as otherwise indicated, the amounts reported represent the amounts earned based upon achievement of certain performance goals under our Executive Incentive Compensation Plan. The terms of the Executive Incentive Compensation Plan are summarized under “Compensation Discussion and Analysis—Compensation Elements—Annual Cash Incentives.”
(3)A portion of each listed amount was paid in ILS in connection with Mr. Banon’s transfer of employment to Israel in March 2021 and has been reported on an as-converted basis from ILS to U.S. dollars (“USD”) based on a spot currency exchange rate of 1 ILS=USD$0.3081 as of our fiscal year end, April 30, 2021. With respect to Salary, $50,220 was paid in ILS. With respect to Non-Equity Incentive Plan Compensation, $149,285 was paid in ILS. With respect to All Other Compensation, $8,174 was paid in ILS (see also footnote (4) below).
(4)The listed amount is the sum of the following amounts:(i) Cash payout of $57,690 in USD to Mr. Banon for earned and unused paid time off in accordance with applicable laws upon his relocation from the United States to Israel, (ii) contributions by Elastic of $4,184 in ILS to a severance fund under a Section 14 Arrangement pursuant to Israeli Severance Pay Law, (iii) contributions by Elastic of $3,264 in ILS to a pension and manager’s insurance fund pursuant to Israeli labor laws, and (iv) contributions by Elastic of $726 in ILS to an education savings fund.
(5)Mr. Banon declined to accept this option award in order to provide the Company with greater flexibility for additional grants to our other employees as awards for exceptional performance and future leadership. Accordingly, this option award was cancelled in August 2019.
(6)The amount disclosed represents Elastic’s contributions made under our Section 401(k) plan.
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Fiscal 2021 Grants of Plan-Based Awards
The following table provides information concerning each grant of an award made during fiscal year 2021 for each of our Named Executive Officers under any plan, other than Mr. Garrett who did not receive any awards in fiscal year 2021. See “Compensation Discussion and Analysis—Compensation Elements—Long-Term Incentive Compensation.” This information supplements the information about these awards set forth in the Fiscal 2021 Summary Compensation Table above.
| Estimated possible payouts under non-equity incentive plan awards(1) | All Other Stock Awards: Number of Shares of Stock or Units (#)(2) | All Other Option Awards: Number of Securities Underlying Options (#)(2) | Exercise or Base Price of Option Awards ($)(3) | Grant Date Fair Value of Stock Awards ($)(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Approval Date | Grant Date | Award Type | Threshold ($) | Target ($) | Maximum ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shay Banon | Annual Cash | 115,873 | 231,746 | 347,619 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/2/2020 | 12/8/2020 | RSUs | 31,507 | 4,594,666 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/2/2020 | 12/8/2020 | Options | 62,421 | 145.83 | 5,225,530 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Janesh Moorjani | Annual Cash | 109,500 | 219,000 | 328,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/23/2020 | 12/8/2020 | RSUs | 12,602 | 1,837,750 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/23/2020 | 12/8/2020 | Options | 24,968 | 145.83 | 2,090,179 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Paul Appleby | Annual Cash | 103,125 | 206,250 | 309,375 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/24/2020 | 9/8/2020 | RSUs | 61,513 | 6,137,767 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/24/2020 | 9/8/2020 | Options | 40,129 | 99.78 | 2,262,072 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ashutosh Kulkarni | Annual Cash | 50,000 | 100,000 | 150,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/23/21 3/4/21 | (5) | 3/8/2021 | RSUs | 58,415 | 6,495,748 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/5/2021 | 2/9/2021 | Options | 31,415 | 166.43 | 2,992,907 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/4/2021 | 3/8/2021 | Options | 6,562 | 111.20 | 423,534 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| W.H. Baird Garrett | 11/23/2020 | 12/8/2020 | RSUs | 6,301 | 918,875 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/23/2020 | 12/8/2020 | Options | 12,484 | 145.83 | 1,045,089 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)Reflects threshold, target and maximum potential payments for awards under the Fiscal 2021 Bonus Plan described in the section above entitled “Compensation Discussion and Analysis—Compensation Elements—Annual Cash Incentives.” Under these awards, the Named Executive Officers (other than Messrs. Kluge and Garrett) were eligible to receive a cash payout subject to the achievement of pre-established corporate performance metrics.
(2)All RSU awards and stock options were granted pursuant to the 2012 Plan.
(3)The exercise price of the stock options is equal to the closing market price of our ordinary shares on the date of grant.
(4)The amounts shown represent the grant date fair value of the RSU awards and options to purchase shares of ordinary shares granted to the Named Executive Officers for financial reporting purposes pursuant to ASC Topic 718. Such amounts do not represent the amounts paid to or realized by the Named Executive Officers. See Note 11, “Equity Incentive Plans” of the Notes to our consolidated financial statements in the Company’s Annual Report on Form 10-K for fiscal year 2021 regarding assumptions underlying valuation of equity awards.
(5)48,237 of the aggregate amount of RSU’s granted to Mr. Kulkarni on March 8, 2021 was approved on February 23, 2021 and 10,178 of the aggregate amount of RSU’s granted to Mr. Kulkarni on March 8, 2021 was approved on March 4, 2021.
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Fiscal 2021 Outstanding Equity Awards as of Fiscal Year End
The following table sets forth information regarding outstanding equity awards held by our Named Executive Officers as of April 30, 2021:
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Shay Banon | 12/8/2020 | (2) | 5,201 | 57,220 | 145.83 | 12/07/2030 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/2/2018 | (3) | 8,334 | 100,000 | 13.07 | 04/02/2028 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 9/7/2017 | (4) | 18,007 | — | 10.15 | 09/06/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/8/2020 | (5) | 31,507 | 3,800,374 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Janesh Moorjani | 12/8/2020 | (2) | 2,080 | 22,888 | 145.83 | 12/07/2030 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 6/8/2019 | (6) | — | 57,285 | 81.39 | 06/07/2029 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/2/2018 | (7) | — | 31,250 | 13.07 | 04/01/2028 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 9/7/2017 | (8) | 73,664 | — | 10.15 | 09/06/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/8/2020 | (5) | 12,602 | 1,520,053 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6/8/2019 | (9) | 10,607 | 1,279,416 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Paul Appleby | 9/8/2020 | (10) | — | 40,129 | 99.78 | 09/07/2030 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 9/8/2020 | (11) | 61,513 | 7,419,698 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ashutosh Kulkarni | 3/8/2021 | (12) | — | 6,562 | 111.20 | 03/07/2031 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/9/2021 | (13) | — | 31,415 | 166.43 | 02/08/2031 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 3/8/2021 | (14) | 58,415 | 7,046,017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| W.H. Baird Garrett | 12/8/2020 | (2) | 1,040 | 11,444 | 145.83 | 12/07/2030 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/2/2018 | (7) | 30,000 | 50,000 | 13.07 | 04/02/2028 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/25/2017 | (15) | 26,043 | 56,250 | 9.30 | 04/24/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/16/2016 | (16) | 6,399 | 2,084 | 5.46 | 05/15/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 12/8/2020 | (5) | 6,301 | 760,027 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)The market value of unvested RSUs is calculated by multiplying the number of unvested RSUs held by the applicable named executive officer by the closing market price of our ordinary shares on April 30, 2021, which was $120.62.
(2)The ordinary shares subject to the option vest in 48 equal monthly installments beginning on January 8, 2021, subject to continued service to us through the applicable vesting date.
(3)The ordinary shares subject to the option vest in 48 equal monthly installments beginning on May 2, 2018, subject to continued service to us through the applicable vesting date.
(4)The ordinary shares subject to the option vested in 48 equal monthly installments beginning on May 1, 2017, subject to continued service to us through the applicable vesting date. The option became fully vested on April 1, 2021
(5)The ordinary shares subject to the award of RSUs vest in eight equal semiannual installments beginning on June 8, 2021, subject to continued service to us through the applicable vesting date.
(6)The ordinary shares subject to the option vest in 48 equal monthly installments beginning on January 8, 2022, subject to continued service to us through the applicable vesting date.
(7)The ordinary shares subject to the option vest in 48 equal monthly installments beginning on November 1, 2019, subject to continued service to us through the applicable vesting date.
(8)The option is subject to an early option exercise provision and is immediately exercisable. One-fourth of the ordinary shares subject to the option vested on August 28, 2018, and 1/48th of the ordinary shares subject to the option vest monthly thereafter, subject to continued service to us through the applicable vesting date.
(9)The ordinary shares subject to the award of RSUs vest in eight equal semiannual installments beginning on June 8, 2022, subject to continued service to us through the applicable vesting date.
(10)One-fourth of the ordinary shares subject to the option vest on September 8, 2021, and 1/48th of the ordinary shares subject to the option vest monthly thereafter, subject to continued service to us through the applicable vesting date.
(11)One-fourth of the ordinary shares subject to the award of RSUs vest on September 8, 2021, and one-eighth of the ordinary shares subject to the award vest in six equal semiannual installments thereafter, subject to continued service to us through the applicable vesting date.
(12)One-fourth of the ordinary shares subject to the option vest on March 8, 2022, and 1/48th of the ordinary shares subject to the option vest monthly thereafter, subject to continued service to us through the applicable vesting date.
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(13)One-fourth of the ordinary shares subject to the option vest on January 4, 2022, and 1/48th of the ordinary shares subject to the option vest monthly thereafter, subject to continued service to us through the applicable vesting date.
(14)One-fourth of the ordinary shares subject to the award of RSUs vest on March 8, 2021, and one-eighth of the ordinary shares subject to the award vest in six equal semiannual installments thereafter, subject to continued service to us through the applicable vesting date.
(15)The ordinary shares subject to the option vest as follows: (i) 100,000 ordinary shares subject to the option vest in 48 equal monthly installments beginning on May 1, 2017; (ii) 75,000 ordinary shares subject to the option vest in 48 equal monthly installments beginning on May 1, 2018; and (iii) 75,000 ordinary shares subject to the option vest in 48 equal monthly installments beginning on May 1, 2019 in each case subject to continued service to us through the applicable vesting date.
(16)The ordinary shares subject to the option vest in 48 equal monthly installments beginning on July 1, 2017, subject to continued service to us through the applicable vesting date.
Fiscal 2021 Stock Option Exercises and Stock Vested Table
The following table presents, for each of our Named Executive Officers, the number of ordinary shares acquired upon the exercise of stock options during fiscal year 2021 and the aggregate value realized upon the exercise of stock options.
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||||||||||||||||||||||||
| Shay Banon | 1,277,524 | 143,864,620 | - | - | ||||||||||||||||||||||||||||||||||
| Janesh Moorjani | 302,403 | 29,299,030 | - | - | ||||||||||||||||||||||||||||||||||
| Paul Appleby | 0 | 0 | - | - | ||||||||||||||||||||||||||||||||||
| Ashutosh Kulkarni | 0 | 0 | - | - | ||||||||||||||||||||||||||||||||||
| W.H. Baird Garrett | 201,904 | 20,097,611 | - | - | ||||||||||||||||||||||||||||||||||
(1)The value realized on exercise is calculated as the difference between the market value of our ordinary shares underlying the options on the date of exercise and the applicable exercise price of those options.
Named Executive Officer Employment Letters
Shay Banon
We entered into an employment agreement with Shay Banon, our Chief Executive Officer,CEO, effective as of September 4, 2018.2018 and amended as of February 24, 2021. Pursuant to Mr. Banon’s employment agreement, Mr. Banon will continue to serve as ourat-will employee and as the executive director designated as our Chief Executive OfficerCEO and Chairman of the board of directors, with such Board membership on our board of directors subject to our articles of association, Board Rules, and any required shareholder approvals.
For fiscal year 2019,
Mr. Banon’s employment agreement provides for an annual basethat his salary of $330,000,will be subject to review and may be increased (but not decreased) based upon the Company’s normal performance review practices, eligibility to receive an annual performance bonus, with the target amount determined as 50% of Mr. Banon’s annual base salary, and eligibility to participate in employee benefit plans maintained from time to time for senior executives based in the United States.
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Pursuant to the employment agreement of Mr. Banon, Mr. Banon may be eligible to receive certain severance payments and benefits. The amount and type of the severance payments and benefits provided under Mr. Banon’s employment agreement, as well as the terms and conditions under which such severance payments and benefits may be provided, are identical in all material respects to the provisions regarding severance payments and benefits provided for in our change in control severance agreements, as described below under the heading “Executive“Executive Officer Change in Control and Severance Agreements.”
Janesh Mr. Banon is also eligible to receive any statutory severance benefits required to be provided by applicable law, and the severance payments and benefits provided in his employment agreement will be offset by the amount of any such statutory severance benefits.
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Employment Letters with Messrs. Moorjani,
Appleby, Kulkarni and Garrett
We have entered into an employment letter with each of Janesh Moorjani, our Chief Financial Officer.Paul Appleby, Ashutosh Kulkarni, and W.H. Baird Garrett. The employment letter doesletters do not have a specific term and provide that employment is “at-will.” Each of those employment letters provides that Mr. Moorjani is anat-will employee. For fiscal year 2019, Mr. Moorjani’sfor annual base salary was $330,000, and, he is eligible for anin the case of Messrs. Moorjani, Appleby and Kulkarni, the opportunity to earn annual target cashbonus incentive payment equalcompensation. In accordance with the employment letters, the Company may modify salaries and/or incentive compensation opportunities from time to 40% of his annual base salary.
Aaron Katz
We have entered into an employment letter with Aaron Katz, our Chief Revenue Officer. The employment letter does not have a specific term and provides that Mr. Katz is anat-will employee. For fiscal year 2019, Mr. Katz’s annual base salary was $330,000, and he is eligible for an annual target cash incentive payment equal to 90% of his annual base salary.
time as it deems necessary.
Executive Officer Change in Control and Severance Agreements
We have entered into change in control and severance agreements with each of Janesh Moorjani, Aaron Katz, Kevin Kluge,Paul Appleby, Ashutosh Kulkarni, and W.H. Baird Garrett. Additionally, as noted above, we have entered into an employment agreement with Mr. Banon that contains severance provisions that are identical in all material respects to those contained in the change in control and severance agreements.agreements (provided that the severance payments and benefits Mr. Banon receives under his employment agreement will be offset by any statutory severance benefits required to be provided to Mr. Banon under applicable law). Pursuant to each executive’s severance agreement, if we terminate the employment of the executive other than for “cause” (excluding by reason of the executive’s death or disability) or the executive resigns for “good reason” (as such terms are defined in the executive’s severance agreement), and, within 60 days following the executive’s termination, the executive executes a separation agreement and release of claims in our favor that becomes effective and irrevocable and resigns from all positions the executive may hold as an officer or director, the executive is entitled to receive (i) a lump sum payment equal to 6 months of the executive’s annual base salary, (ii) a lump sum payment equal to 50% of the executive’s annual target performance bonus as in effect for the fiscal year in which the termination occurs, and (iii) we will pay the premiums for coverage under “COBRA” for the executive and the executive’s dependents, if any, for up to 12 months following the executive’s termination of employment.
Pursuant to each executive’s severance agreement, if, within the 3 month period prior to or the 12 month period following a “change in control” (as defined in the executive’s severance agreement), the employment of the executive is terminated under the circumstances described in the above paragraph and, within 60 days following his termination, the executive executes a separation agreement and release of claims in our favor that becomes effective and irrevocable and resigns from all positions he may hold as an officer or director, the executive is entitled to receive (i) a lump sum payment equal to 12 months of the executive’s annual base salary, (ii) a lump sum payment equal to 100% of the executive’s annual target performance bonus as in effect for the fiscal year in which the termination occurs, (iii) we will pay the premiums for coverage under COBRA for the executive and the executive’s dependents, if any, for up to 12 months following the executive’s termination of employment, and (iv) vesting acceleration of 100% of any outstanding equity awards held by the executive on the date of the executive’s termination (in the case of an equity award with performance-based vesting, unless otherwise specified in the applicable equity award agreement governing such award, all performance goals and other vesting criteria will be deemed achieved at the greater of actual performance measured as of the date of termination or 100% of target levels).
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In the event any payment to an executive pursuant to the applicable severance agreement or otherwise would be subject to the excise tax imposed by Section 4999 of the Code (as a result of a payment being classified as a parachute payment under Section 280G of the Code), the executive will receive such payment as would entitle the executive to receive the greatestafter-tax benefit, even if it means that we pay the executive a lower aggregate payment so as to minimize or eliminate the potential excise tax imposed by Section 4999 of the Code.
Outstanding Equity Awards as of Fiscal Year End
Potential Payments Upon Termination or Change in Control
The following table setsbelow provides information with respect to potential payments and benefits to which our Named Executive Officers would be entitled under the arrangements set forth information regarding outstanding equity awards held by our named executive officersin, with respect to Messrs. Moorjani, Appleby, Kulkarni and Garrett, their change in control and severance agreements and, with respect to Mr. Banon, his employment agreement, assuming their employment was terminated as of April 30, 2019:
| Option Awards | Share Awards | |||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | |||||||||||||||
Shay Banon | 04/19/2016 | 605,250 | (1) | — | 5.46 | 04/18/2026 | ||||||||||||||
| 09/07/2017 | 432,159 | (2) | 432,159 | 10.15 | 09/06/2027 | |||||||||||||||
| 09/07/2017 | 314,297 | (3) | — | 10.15 | 09/06/2027 | |||||||||||||||
| 04/02/2018 | 100,000 | (4) | 300,000 | 13.07 | 04/02/2028 | |||||||||||||||
Janesh Moorjani | 09/07/2017 | 602,169 | (5) | — | 10.15 | 09/06/2027 | ||||||||||||||
| 04/02/2018 | — | (6) | 50,000 | 13.07 | 04/02/2028 | |||||||||||||||
Aaron Katz | 07/04/2014 | 513,037 | (3) | — | 4.26 | 07/03/2024 | ||||||||||||||
| 03/10/2016 | 415,889 | (7) | 294,588 | 5.46 | 03/09/2026 | |||||||||||||||
| 04/02/2018 | — | (6) | 200,000 | 13.07 | 04/02/2028 | |||||||||||||||
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Employee Benefit and Share Plans
2012 Stock Option Plan
The 2012 Plan currently permits the grant of incentive stock options, within the meaning of Section 422 of the Code, to our employees and any parent and subsidiary corporations’ employees, and for the grant of nonstatutory stock options, restricted stock, restricted stock units, and stock appreciation rights to our employees, directors and consultants and our parent, subsidiary and affiliate corporations’ employees and consultants. The 2012 Plan also permits the grant of performance shares and performance units to our employees, directors and consultants and our parent, subsidiary and affiliate corporations’ employees and consultants.
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Authorized shares. A total of 9,649,123 ordinary shares are available for issuance pursuant to the 2012 Plan2021, including in connection with a change in control as of April 30, 2019. In addition, shares2021. The amounts reported reflect rounding, which may become available under the 2012 Plan as described below.
The number of shares available for issuance under the 2012 Plan will include an annual increase on the first day of each fiscal year beginning in fiscal 2020, equal to the lesser of:
9 million shares;
5% of the outstanding ordinary shares as of the last day of our immediately preceding fiscal year; or
such other amount as our board of directors may determine.
If an award expires or becomes unexercisable without having been exercised in full, is surrendered pursuant to an exchange program, or, with respect to restricted stock, restricted stock units, performance units or performance shares, is repurchased due to failure to vest, the unissued shares (or for awards other than stock options or stock appreciation rights, the repurchased shares) will become available for future grant or sale under our 2012 Plan. With respect to stock appreciation rights, the net shares issued will cease to be available under the 2012 Plan and all remaining shares will remain available for future grant or sale under the 2012 Plan. Shares used to pay the exercise price of an award or satisfy the tax withholding obligations related to an award will become available for future grant or sale under our 2012 Plan. To the extent an award is paid out in cash rather than shares, such cash payment will not result in reducingslight variations between amounts shown in the numberTotal column and the sum of shares available for issuance under our 2012 Plan.
Plan administration. The 2012 Plan is generally administered by our compensation committee. Subject toits components as reflected in the provisionstable.
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| Name | Termination Reason | Base Salary ($) | Bonus ($) | Accelerated Vesting of Equity Awards ($)(1) | Continuation of Insurance Coverage ($)(2) | Total ($) | ||||||||||||||||||||||||||||||||
| Shay Banon | Termination Without Cause or Resignation for Good Reason in Connection with a Change in Control | 397,486 | 238,491 | 14,555,374 | 5,970 | 15,197,322 | ||||||||||||||||||||||||||||||||
| Termination Without Cause or Resignation for Good Reason | 198,743 | 119,246 | — | 5,970 | 323,959 | |||||||||||||||||||||||||||||||||
| Janesh Moorjani | Termination Without Cause or Resignation for Good Reason in Connection with a Change in Control | 365,000 | 219,000 | 14,917,805 | 17,333 | 15,519,139 | ||||||||||||||||||||||||||||||||
| Termination Without Cause or Resignation for Good Reason | 182,500 | 109,500 | — | 17,333 | 309,333 | |||||||||||||||||||||||||||||||||
| Paul Appleby | Termination Without Cause in Connection with a Change in Control | 500,000 | 300,000 | 8,255,986 | 21,302 | 9,077,288 | ||||||||||||||||||||||||||||||||
| Termination Without Cause | 250,000 | 150,000 | — | 21,302 | 421,302 | |||||||||||||||||||||||||||||||||
| Ashutosh Kulkarni | Termination Without Cause or Resignation for Good Reason in Connection with a Change in Control | 500,000 | 300,000 | 7,107,831 | 21,302 | 7,929,133 | ||||||||||||||||||||||||||||||||
| Termination Without Cause or Resignation for Good Reason | 250,000 | 150,000 | — | 21,302 | 421,302 | |||||||||||||||||||||||||||||||||
| W.H. Baird Garrett | Termination Without Cause or Resignation for Good Reason in Connection with a Change in Control | 400,000 | — | 12,639,270 | 21,302 | 13,060,572 | ||||||||||||||||||||||||||||||||
| Termination Without Cause or Resignation for Good Reason | 200,000 | — | — | 21,302 | 221,302 | |||||||||||||||||||||||||||||||||
(1)The administrator’s powers include the power to:
determine the fair market value of our ordinary shares;
selectaccelerated vesting of unvested RSUs is based upon the employees or consultants (including directors) to whom awards may be granted;
determine the number of our ordinary shares to be covered by each award, approve the forms of agreement and other related documents used under the 2012 Plan;
determine the terms and conditions, not inconsistent with the terms of the 2012 Plan, of any award granted thereunder, including but not limited to the exercise or purchaseclosing market price the time or times when awards may vest or be exercised, the circumstances when vesting will be accelerated or forfeiture restrictions will be waived, and any restriction or limitation regarding any award or ordinary shares that are covered by an award;
amend any outstanding award or agreement relating to any ordinary shares covered by an award, including any amendment adjusting vesting, provided that no amendment will be made that would materially and adversely affect the rights of any participant without his or her consent;
determine whether and under what circumstances an award may be settled in cash instead of ordinary shares, subject to applicable laws;
subject to applicable laws, implement an exchange program and establish the terms and conditions of such exchange program without consent of the holders of our ordinary shares, provided that no amendment or adjustment to an award that would materially and adversely affect the rights of any participant will be made without his or her consent;
approve addenda pursuant to the terms of the 2012 Plan or to modify the terms of, any outstanding award agreement or any agreement relating to any ordinary shares covered by an award held by participants who arenon-U.S. nationals or employed outside the United States with such terms and conditions as the administrator deems necessary or appropriate to accommodate differences in local law, tax policy or custom which deviate from the terms and conditions set forth in the 2012 Plan to the extent necessary or appropriate to accommodate such differences;
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construe and interpret the terms of the 2012 Plan and any award agreement or any agreement relating to any ordinary shares covered by an award, which constructions, interpretations and decisions will be final and binding on all participants;
authorize any person to execute on behalf of us any instrument required to effect the grant of an award previously granted by the administrator;
allow participants to satisfy withholding obligations in such manner as prescribed by the 2012 Plan; and
make all other determinations necessary or advisable for administering the 2012 Plan.
The administrator’s decisions are final and binding on all participants and any other persons holding awards.
Stock options. Stock options may be granted under our 2012 Plan. The exercise price of options granted under our 2012 Plan must at least be equal to the fair market value of our ordinary shares on April 30, 2021 of $120.62, multiplied by the datenumber of grant.unvested RSUs. The termvalue of an incentiveaccelerated vesting of unvested stock option may not exceed 10 years, except that with respect to any participant who owns more than 10% ofoptions is based on the voting power of all classes of our outstanding stock,difference between the term must not exceed five years and the exerciseclosing market price must equal at least 110% of the fair market value of our ordinary shares on the grant date. The administrator will determine the methodsApril 30, 2021 of payment of$120.62, and the exercise price of anper option which may include cash, shares or other property acceptable to the administrator, as well as other types of consideration permittedmultiplied by applicable law. After the termination of service of an employee, director or consultant, he or she may exercise his or her option for the period of time stated in his or her option agreement. Generally, if termination is due to death or disability, the option will remain exercisable for 12 months. In all other cases, the option will generally remain exercisable for 3 months following the termination of service. However, in no event may an option be exercised later than the expiration of its term. Subject to the provisions of our 2012 Plan, the administrator determines the other terms of options.
Stock appreciation rights. Stock appreciation rights may be granted under our 2012 Plan. Stock appreciation rights allow the recipient to receive the appreciation in the fair market value of our ordinary shares between the exercise date and the date of grant. Stock appreciation rights may not have a term exceeding 10 years. After the termination of service of an employee, director or consultant, he or she may exercise his or her stock appreciation right for the period of time stated in his or her award agreement. However, in no event may a stock appreciation right be exercised later than the expiration of its term. Subject to the provisions of our 2012 Plan, the administrator determines the other terms of stock appreciation rights, including when such rights become exercisable and whether to pay any increased appreciation in cash or with our ordinary shares, or a combination thereof, except that the per share exercise price for the shares to be issued pursuant to the exercise of a stock appreciation right will be no less than 100% of the fair market value per share on the date of grant.
Restricted stock. Restricted stock may be granted under our 2012 Plan. Restricted stock awards are grants of our ordinary shares that vest in accordance with terms and conditions established by the administrator. The administrator will determine the number of ordinary shares of restricted stock granted to any employee, director or consultant and, subject to the provisions of our 2012 Plan, will determine the terms and conditions of such awards. The administrator may impose whatever conditions for lapse of the restriction on the shares it determines to be appropriate (for example, the administrator may set restrictionsunvested options.
(2)This is based on the achievementpayment of specific performance goals or continued service to us); provided, however, that the administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. Recipientsmonthly COBRA premiums as of restricted stock awards generally will have voting and dividend rights with respect to such shares upon grant without regard to the restriction, unless the administrator provides otherwise. Shares of restricted stock as to which the restrictions have not lapsed are subject to our right of repurchase.
Restricted stock units. Restricted stock units may be granted under our 2012 Plan. Restricted stock units are bookkeeping entries representingApril 30, 2021 for an amount equal to the fair market value of one of our ordinary shares. Subject
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to the provisions of our 2012 Plan, the administrator will determine the terms and conditions of restricted stock units, including the vesting criteria (which may include accomplishing specified performance criteria or continued service to us) and the form and timing of payment. Notwithstanding the foregoing, the administrator, in its sole discretion, may accelerate the time at which any restricted stock units will vest.
Performance units and performance shares. The 2012 Plan permits the grant of performance units and performance shares. Performance units and performance shares are awards that will result in a payment to a participant only if performance goals established by the administrator are achieved or the awards otherwise vest. The administrator will establish organizational or individual performance goals or other vesting criteria in its discretion, which, depending on the extent to which they are met, will determine the number and/or the value of performance units and performance shares to be paid out to participants. After the grant of a performance unit or performance share, the administrator, in its sole discretion, may reduce or waive any performance criteria or other vesting provisions for such performance units or performance shares. Performance units shall have an initial dollar value established by the administrator prior to the grant date. Performance shares shall have an initial value equal to the fair market value of our ordinary shares on the grant date. The administrator, in its sole discretion, may pay earned performance units or performance shares in the form of cash, in shares or in some combination.
Non-executive directors. Our 2012 Plan provides that all eligiblenon-executive directors are eligible to receive all types of awards under the 2012 Plan (other than incentive stock options).
Non-transferability of awards. Unless the administrator provides otherwise, our 2012 Plan generally does not allow for the transfer of awards and only the recipient of an award may exercise an award during his or her lifetime.
Certain adjustments. In the event of certain changes in our capitalization, to prevent diminution or enlargement of the benefits or potential benefits available under our 2012 Plan, the administrator will adjust the number and class of shares that may be delivered under our 2012 Plan and/or the number, class and price of shares covered by each outstanding award and the numerical share limits set forth in our 2012 Plan. In the event of our proposed liquidation or dissolution, the administrator will notify participants as soon as practicable and all awards will terminate immediately prior to the consummation of such proposed transaction.
Merger or change in control. The 2012 Plan provides that in the event of a merger or change in control, as defined under the 2012 Plan, each outstanding award will be treated as the administrator determines, except that if a successor does not assume or substitute an equivalent award for any outstanding award, then such award will fully vest, all restrictions on the shares subject to such award will lapse, all performance goals or other vesting criteria applicable to the shares subject to such award will be deemed achieved at 100% of target levels and all of the shares subject to such award will become fully exercisable, if applicable, for a specified period prior to the transaction. The award will then terminate upon the expiration of the specified period. Additionally, the 2012 Plan provides that, in the event of a merger or change in control, each outstanding equity award granted under our 2012 Plan that is held by anon-executive director will fully vest, all restrictions on the shares subject to such award will lapse, and with respect to awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels, and all of the shares subject to such award will become fully exercisable, if applicable.
Amendment; termination. The administrator has the authority to amend or terminate the 2012 Plan provided such action will not materially and adversely affect the rights of any participant. The 2012 Plan will automatically terminate in 2028, unless we terminate it sooner.
Executive Incentive Compensation Plan
Our board of directors has adopted, and our general meeting has approved, the Executive Incentive Compensation Plan (the “Bonus Plan”). The Bonus Plan is administered by our compensation committee. The
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Bonus Plan will allow our compensation committee to provide cash incentive awards to selected employees, including our named executive officers, based upon performance goals established by our compensation committee.
Under the Bonus Plan, our compensation committee will determine the performance goals applicable to any award, which goals may include, without limitation: (i) attainment of research and development milestones, (ii) bookings, (iii) business divestitures and acquisitions, (iv) calculated billings, (v) cash flow, (vi) cash position, (vii) contract awards or backlog, (viii) customer renewals, (ix) customer retention rates from an acquired company, subsidiary, business unit or division, (x) earnings (which may include earnings before interest and taxes, earnings before taxes, and net taxes), (xi) earnings per share, (xii) expenses, (xiii) gross margin, (xiv) growth in shareholder value relative to the moving average of the S&P 500 Index or another index, (xv) internal rate of return, (xvi) market share, (xvii) net income, (xviii) net profit, (xix) net sales, (xx) new product development, (xxi) new product invention or innovation, (xxii) number of customers, (xxiii) operating cash flow, (xxiv) operating expenses, (xxv) operating income, (xxvi) operating margin, (xxvii) overhead or other expense reduction, (xxviii) product defect measures, (xxix) product release timelines, (xxx) productivity, (xxxi) profit, (xxxii) retained earnings, (xxxiii) return on assets, (xxxiv) return on capital, (xxxv) return on equity, (xxxvi) return on investment, (xxxvii) return on sales, (xxxviii) revenue, (xxxix) revenue growth, (xl) sales results, (xli) sales growth, (xlii) stock price, (xliii) time to market, (xliv) total shareholder return, (xlv) working capital, and (xlvi) individual objectives such as peer reviews or other subjective or objective criteria. Performance goals that include our financial results may be determined in accordance with GAAP or such financial results may consist ofnon-GAAP financial measures and any actual results may be adjusted by the compensation committee forone-time items or unbudgeted or unexpected items when determining whether the performance goals have been met. The goals may be on the basis of any factors the compensation committee determines relevant, and may be adjusted on an individual, divisional, business unit or company wide basis. The performance goals may differ from participant to participant and from award to award.
Our compensation committee may, in its sole discretion and at any time, increase, reduce or eliminate a participant’s actual award, and/or increase, reduce or eliminate the amount allocated to the bonus pool for a particular performance period. The actual award may be below, at or above a participant’s target award, in the compensation committee’s discretion. Our compensation committee may determine the amount of any reduction on the basis of such factors as it deems relevant, and it is not required to establish any allocation or weighting with respect to the factors it considers.
Actual awards will be paid in cash only after they are earned, which usually requires continued employment through the date a bonus is paid. Our compensation committee will have the authority to amend, alter, suspend or terminate the Bonus Plan provided such action does not impair the existing rights of any participant with respect to any earned bonus.
401(k) and Other Plans
We maintain a 401(k) plan for employees. The 401(k) plan is intended to qualify under Section 401(k) of the Internal Revenue Code, so that contributions to the 401(k) plan by employees or by us, and the investment earnings thereon, are not taxable to the employees until withdrawn, and so that contributions made by us, if any, will be deductible by us when made. Employees may elect to reduce their current compensation by up to the statutorily prescribed annual limits and to have the amount of such reduction contributed to their accounts under the 401(k) plan. The 401(k) plan permits us to make contributions up to the limits allowed by law on behalf of all eligible employees. We typically make matching contributions to the plan up to 6% of an eligible employee’s compensation. All eligible employees’ interests in our matching contributions, if any, vest immediately at the time of contribution. The 401(k) plan also contains a Roth component.
We also maintain defined-contribution plans for employees in certain other countries.
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Role of Compensation Consultant
Our compensation committee is authorized, in its sole discretion, to retain the services of one or more compensation consultants, outside legal counsel and such other advisers as necessary to assist with the execution of its duties and responsibilities. During fiscal year 2019, our compensation committee engaged Compensia, a nationally recognized compensation consulting firm, to serve as its independent compensation consultant and to conduct market research and analysis on our various executive positions, to assist the committee in developing appropriate incentive plans for our executives on an annual basis, to provide the committee with advice and ongoing recommendations regarding material executive compensation decisions, and to review compensation proposals of management. Compensia reports directly to our compensation committee and does not provide anynon-compensation related services to Elastic.
Limitation on Liability and Indemnification Matters
Our articles of association provide that we will indemnify our current and former directors against:
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(i)the reasonable costs of conducting a defense against claims resulting from an act or omission in performing their duties or in performing other duties we have asked them to fulfil;
(ii)any compensation or financial penalties they owe as a result of an act or omission as referred to under (i) above;
(iii)any amounts they owe under settlements they have reasonably entered into in connection with an act or omission as referred to under (i) above;
(iv)the reasonable costs of other proceedings in which they are involved as a current or former director, except for proceedings in which they are primarily asserting their own claims; and
(v)tax damage due to reimbursements in accordance with the above, to the extent this relates to the indemnified person’s current or former position with us and/or a group company and in each case to the extent permitted by applicable law.
No indemnification shall be given to an indemnified person insofar as:
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(i)it has been established in a final and non-appealable decision of the competent court or, in the event of arbitration, of an arbitrator, that the act or omission of the indemnified person can be described as deliberate (opzettelijk), willfully reckless (bewust roekeloos) or seriously culpable. In that case, the indemnified person must immediately repay the sums reimbursed by the Company, unless Dutch law provides otherwise or this would, in the given circumstances, be unacceptable according to standards of reasonableness and fairness; or
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(ii)the costs or the capital losses of the indemnified person are covered by an insurance policy and the insurer has paid out these costs or capital losses; or
(iii)the indemnified person failed to notify the Company as soon as possible of the costs or the capital losses or of the circumstances that could lead to the costs or capital losses.
Our articles of association will not eliminate a director’s duty of care, and in appropriate circumstances, equitable remedies, such as injunctive or other forms ofnon-monetary relief, will remain available under Dutch law. This provision also will not affect a director’s responsibilities under any other laws, such as the federal securities laws or other state or federal laws.
In addition to the indemnification included in our articles of association, we have entered into and expect to continue to enter into agreements to indemnify each of our current directors, officers and some employees. With specified exceptions, these agreements provide indemnification for certain expenses and liabilities incurred in
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connection with any action, suit, proceeding or alternative dispute resolution mechanism, or hearing, inquiry or investigation that may lead to the foregoing, to which they are a party, or are threatened to be made a party, by reason of the fact that they are or were a director, officer, employee, agent or fiduciary of our company,Company, or any of our subsidiaries, by reason of any action or inaction by them while serving as an officer, director, agent, or fiduciary, or by reason of the fact that they were serving at our request as a director, officer, employee, agent or fiduciary of another entity. In the case of an action or proceeding by, or in the right of, our companyCompany or any of our subsidiaries, no indemnification will be provided for any claim where a court determines that the indemnified party is prohibited from receiving indemnification. Our directors who are affiliated with venture capital funds also have certain rights of indemnification provided by their venture capital funds and the affiliates of those funds (which we refer to as the fund indemnitors). We believe that these provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain directors’ and officers’ liability insurance.
A shareholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions in our articles of association. Insofar as we may provide indemnification for liabilities arising under the Securities Act to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. There is no pending litigation or proceeding naming any of our directors or officers as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.
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REPORT OF THE COMPENSATION COMMITTEE
This report of the Compensation Committee is required by the SEC and, in accordance with the SEC’s rules, will not be deemed to be part of or incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically incorporate this information by reference, and will not otherwise be deemed “soliciting material” or “filed” under either the Securities Act or the Exchange Act.
The Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” required by Item 402(b) of Regulation S-K with management and based on such review and discussions, the Compensation Committee recommended to our board of directors that the “Compensation Discussion and Analysis” be included in this Proxy Statement and the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2021.
Respectfully submitted by the members of the Compensation Committee:
Peter Fenton (Chair)
Jonathan Chadwick
Alison Gleeson
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CEO PAY RATIO
Pursuant to Item 402(u) of Regulation S-K and Section 953(b) of the Dodd-Frank Act, presented below is the ratio of annual total compensation of our median compensated employee to that of Shay Banon, our Chief Executive Officer, in fiscal year 2021.
The ratio presented below is a reasonable estimate calculated in a manner consistent with SEC rules and applicable guidelines. The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. The pay ratio reported by other companies may not be comparable to the pay ratio reported below, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. As a result, and as explained by the SEC when it adopted these rules, in considering the pay ratio disclosure, shareholders should keep in mind that the rule was not designed to facilitate comparisons of pay ratios among different companies, even companies within the same industry, but rather to allow shareholders to better understand and assess each particular company’s compensation practices and pay ratio disclosures.
We identified the median employee using the following methodology:
For each member of the applicable employee population, we summed his or her target cash compensation and equity awards received during fiscal year 2021. For employees paid other than in U.S. dollars, we converted their compensation to U.S. dollars using our anticipated exchange rate for fiscal year 2021. With respect to equity awards, we determined the grant date fair value of restricted stock units and options awarded during fiscal year 2021 computed in accordance with FASB ASC Topic 718 using the closing price of our common stock on the date of grant for restricted stock units and the Black-Scholes option-pricing model for stock options.
In determining our employee population, we considered the individuals other than our CEO who were employed by us on March 1, 2021, whether employed in a full-time, part-time or temporary capacity. We did not include any contractors, agency workers or other non-employees.
After identifying the median employee, we then calculated the total fiscal year 2021 compensation for this individual using the same methodology we use to calculate the fiscal year 2021 amount reported for our Chief Executive Officer in the “Total” column of the Fiscal 2021 Summary Compensation Table as set forth in this proxy statement.
For our fiscal year 2021:
The fiscal year 2021 annual total compensation as determined under Item 402 of Regulation S-K for our Chief Executive Officer was $10,565,607, as reported in the “Total” column of the Fiscal 2021 Summary Compensation Table of this proxy statement. The fiscal year 2021 annual total for our median employee was $231,150. Thus, the ratio of our Chief Executive Officer’s total fiscal year 2021 compensation to our median employee’s total fiscal year 2021 compensation was 46:1.
Neither the Compensation Committee nor our management used this pay ratio in making compensation decisions.
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DELINQUENT SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
REPORTS
Section 16(a) of the Exchange Act requires our executive officers, directors and persons who beneficially own more than ten percent of our ordinary shares to file reports of their beneficial ownership and changes in ownership (Forms 3, 4 and 5, and any amendment thereto) with the SEC. Executive
Based solely on our review of the copies of such forms furnished to us and written representations from the directors and executive officers, directors, andgreater-than-ten-percent holders are required to furnish us with copies ofwe believe that all Section 16(a) forms they file. Based solely upon a review of the Forms 3, 4, and 5, as applicable, furnished to us forfiling requirements were timely met in fiscal year 2019, we have determined2021, except that, our executive officers, directors,due to administrative error: (A) a late Form 4 was filed for Mr. Garrett on November 24, 2020, with respect to one transaction that took place on October 30, 2020 andgreater-than-ten-percent beneficial owners (B) a late Form 4 was filed their beneficial ownership and change in ownership reportson April 1, 2021 for Mr. Puttagunta with the SEC in a timely manner.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In addition to the compensation arrangements discussed in the section titled “Executive Compensation,Compensation” and “Board of Directors and Corporate Governance,” the following is a description of each transaction since April 30, 2017May 1, 2020 and each currently proposed transaction in which:
•we have been or are to be a participant;
•the amount involved exceeded or will exceed $120,000; and
•any of our directors, executive officers or holders of more than 5% of our ordinary shares, or any immediate family member of, or person sharing the household with, any of these individuals or entities, had or will have a direct or indirect material interest.
Investors’ Rights Agreement
We are party to an investors’ rights agreement which provides, among other things, that certain holders of our ordinary shares have the right to demand that we file a registration statement or request that their shares of our ordinary shares be covered by a registration statement that we are otherwise filing.
Share Option Grants to Executive Officers
and Certain Directors
We have granted share options and restricted stock units to our named executive officers.officers and certain of our directors. For a description of these options and restricted stock units, see “Executive Compensation-Outstanding“Board of Directors and Corporate Governance—Non-Executive Director Compensation” and “Executive Compensation—Fiscal 2021 Outstanding Equity Awards as of Fiscal Year End.”
Offer Letters
We have entered into new employment letters and other arrangements containing compensation, termination and change of control provisions, among others, with our executive officers.
For a description of these arrangements, see “Executive Compensation-Named“Executive Compensation—Named Executive Officer Employment Letters.”
Indemnification Agreements
Our articles of association provide that we will indemnify our current and former directors. We have also entered into indemnification agreements with each of our executive officers who are notand directors. The indemnification agreements require us to indemnify our officers to the fullest extent permitted by Dutch law. See “Executive Compensation-Limitation“Executive Compensation—Limitation on Liability and Indemnification Matters.” We have entered into indemnification agreements with each of our directors and officers.
Policies and Procedures for Related Party Transactions
We have a formal written policy providing that our executive officers, directors, nominees for election as directors, beneficial owners of more than 5% of any class of our ordinary shares and any member of the immediate family of any of the foregoing persons, is not permitted to enter into a related-partyrelated party transaction with us without the consent of our audit committee,Audit Committee, or the board of directors, as the case may be, subject to the exceptions described below.
Our audit committeeAudit Committee is authorized to review and approve or ratify any related person transactions to the extent these are not material to (i) the company,Company, (ii) directors or (iii) persons holding at least 10% of the shares in the company.Company. Related person transactions that are material to (i) the company,Company, (ii) directors or (iii) persons holding at least 10% of the shares in the companyCompany will be reviewed by the audit committeeAudit Committee and approved and ratified by our board of directors. The approval or ratification of a related person transaction by the board of directors requires a majority of the votes of thenon-executive directors in favor of such proposal.
In approving or rejecting any such proposal, our audit committeeAudit Committee or board of directors, as the case may be, is to consider the relevant facts and circumstances available and deemed relevant to our audit committeeAudit Committee or board
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of directors, including whether the transaction is in, and not inconsistent with, the best interests of the companyCompany and its
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stakeholders, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, and the extent of the related party’s interest in the transaction. Our board of directors has determined that certain transactions will not require approval, including certain employment arrangements of executive officers; director compensation; transactions with another company at which a related party’s only relationship is as anon-executive employee, director or beneficial owner of less than 10% of that company’s shares and the aggregate amount involved does not exceed $120,000 in any fiscal year; transactions where a related party’s interest arises solely from the ownership of our ordinary shares and all holders of our ordinary shares received the same benefit on a pro rata basis; and transactions available to all employees generally.
We believe that we have executed all of the transactions set forth above on terms no less favorable to us than we could have obtained from unaffiliated third parties. It is our intention to ensure that all future transactions between us and our officers, directors, and principal shareholders and their affiliates, are approved by the audit committee of our board of directorsAudit Committee and are on terms no less favorable to us than those that we could obtain from unaffiliated third parties.
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EQUITY COMPENSATION PLAN INFORMATION
The following table presents information as of April 30, 2021 with respect to compensation plans under which our ordinary shares may be issued.
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights(1) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | ||||||||||||||||||||
| (a) | (b) | (c) | |||||||||||||||||||||
| Equity compensation plans approved by security holders | 10,870,314 | $20.09 | 15,737,819 | ||||||||||||||||||||
| Equity compensation plans not approved by security holders(2) | — | — | — | ||||||||||||||||||||
| Total | 10,870,314 | $20.09 | 15,737,819 | ||||||||||||||||||||
(1)This value is calculated based on the exercise price of options outstanding under the 2012 Plan.
(2)Excludes outstanding options to acquire 41,985 ordinary shares as of April 30, 2021 that were assumed in connection with our acquisition of Endgame, Inc. The weighted average exercise price of these outstanding options was $67.00 as of April 30, 2021. In connection with the acquisition of Endgame, Inc., we have only assumed outstanding options, and no further options may be granted under the Endgame, Inc. Amended and Restated 2010 Stock Incentive Plan.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the beneficial ownership of our ordinary shares as of August 9, 2019July 31, 2021 for:
•each person, or group of affiliated persons, who beneficially owned more than 5% of our ordinary shares;
•each of our current named executive officers;
•each of our current directors; and
•all of our current executive officers and directors as a group.
We have determined beneficial ownership in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by the footnotes below, we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting and sole investment power with respect to all ordinary shares that they beneficially owned, subject to applicable community property laws.
Applicable percentage ownership was based on 76,450,66191,770,228 ordinary shares outstanding as of August 9, 2019.July 31, 2021. In computing the number of ordinary shares beneficially owned by a person and the percentage ownership of such person, we deemed to be outstanding allany ordinary shares subject to equity awardsoptions held by the person that are currently exercisable or exercisable within 60 days of August 9, 2019.July 31, 2021 and any ordinary shares issuable to the person upon vesting of RSUs within 60 days of July 31, 2021. We did not deem such shares outstanding, however, for the purpose of computing the percentage ownership of any other person.
Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Elastic N.V., 800 West El Camino Real, Suite 350, Mountain View, California 94040.
Name of Beneficial Owner | Number of Shares | % | ||||||
5% Shareholders: | ||||||||
Entities affiliated with Benchmark(1) | 5,608,399 | 7.3 | ||||||
Entities affiliated with Index Ventures(2) | 5,476,424 | 7.2 | ||||||
Future Fund Investment Company No.5 Pty Ltd(3) | 4,919,489 | 6.4 | ||||||
Executive Officers and Directors: | ||||||||
Shay Banon(4) | 9,351,436 | 12.1 | ||||||
Janesh Moorjani(5) | 507,169 | * | ||||||
Aaron Katz(6) | 996,271 | 1.3 | ||||||
Jonathan Chadwick(7) | 200,000 | * | ||||||
Peter Fenton(8) | 5,759,628 | 7.5 | ||||||
Caryn Marooney | — | * | ||||||
Chetan Puttagunta | — | * | ||||||
Steven Schuurman(9) | 11,822,000 | 15.5 | ||||||
Michelangelo Volpi(10) | 5,476,424 | 7.2 | ||||||
All current executive officers and directors as a group (11 persons)(11) | 34,992,961 | 44.2 | ||||||
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| Name of Beneficial Owner | Number of Shares | % | ||||||||||||
| 5% Shareholders: | ||||||||||||||
| FMR LLC (1) | 9,543,976 | 10.4 | ||||||||||||
| The Vanguard Group (2) | 5,581,426 | 6.1 | ||||||||||||
| BlackRock, Inc. (3) | 5,080,324 | 5.5 | ||||||||||||
| Sylebra Capital Limited (4) | 4,705,317 | 5.1 | ||||||||||||
| Executive Officers and Directors: | ||||||||||||||
| Shay Banon (5) | 8,522,207 | 9.3 | ||||||||||||
| Janesh Moorjani (6) | 83,456 | * | ||||||||||||
| Paul Appleby (7) | 25,410 | * | ||||||||||||
| Ashutosh Kulkarni | — | * | ||||||||||||
| W.H. Baird Garrett (8) | 122,407 | * | ||||||||||||
| Jonathan Chadwick (9) | 158,542 | * | ||||||||||||
| Peter Fenton (10) | 213,740 | * | ||||||||||||
| Alison Gleeson (11) | 1,917 | * | ||||||||||||
| Caryn Marooney (12) | 3,329 | * | ||||||||||||
| Chetan Puttagunta (13) | 5,000 | * | ||||||||||||
| Steven Schuurman (14) | 9,697,000 | 10.6 | ||||||||||||
| Michelangelo Volpi | — | * | ||||||||||||
| All executive officers and directors as a group (12 persons) (15) | 18,833,008 | 20.4 | ||||||||||||
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* Represents less than 1%.
(1)This information is as of December 31, 2020, and based solely upon the information provided by FMR LLC (“FMR”) in a Schedule 13G filed on February 8, 2021, and reporting ownership as of December 31, 2020 (the “FMR 13G”). Based on the FMR 13G, FMR has sole voting power over 2,242,671 ordinary shares, and sole
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dispositive power over 9,543,976 ordinary shares. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR, representing 49% of the voting power of FMR. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR. Neither FMR nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the various investment companies registered under the Investment Company Act of 1940 (the “Fidelity Funds”), advised by Fidelity Management & Research Company, a wholly owned subsidiary of FMR, which power resides in the Fidelity Funds’ Boards of Trustees. Fidelity Management & Research Company carries out the voting of the shares under written guidelines established by the Fidelity Funds’ Boards of Trustees. The address of FMR is 245 Summer Street, Boston, MA 02210.
(2)This information is as of December 31, 2020, and based solely on the information provided by The Vanguard Group (“Vanguard”) in a Schedule 13G filed on February 10, 2021, and reporting ownership as of December 31, 2020 (the “Vanguard 13G”). Based on the Vanguard 13G, Vanguard has sole dispositive power over 5,483,853 ordinary shares, shared voting power over 48,690 ordinary shares, and shared dispositive power over 97,573 ordinary shares. The address for Vanguard is 100 Vanguard Blvd., Malvern, PA 19355.
(3)This information is as of December 31, 2020, and based solely on the information provided by BlackRock, Inc. (“BlackRock”) in a Schedule 13G filed on February 2, 2021, and reporting ownership as of December 31, 2020 (the “BlackRock 13G”). Based on the BlackRock 13G, BlackRock has sole voting power over 4,672,235 ordinary shares and sole dispositive power over 5,080,324 ordinary shares. The address for BlackRock is 55 East 52nd Street, New York, NY 10055.
(4)This information is as of December 31, 2020, and based solely on the information provided by Sylebra Capital Limited (“Sylebra HK”) in a Schedule 13G filed on February 4, 2021, and reporting ownership as of December 31, 2020 (the “Sylebra 13G”). Based on the Sylebra 13G, Sylebra HK has shared voting power over 4,705,317 ordinary shares and shared dispositive power over 4,705,317 ordinary shares. Sylebra HK may be deemed to beneficially own the ordinary shares by virtue of its position as the investment advisor to Sylebra Capital Partners Master Fund, Ltd (“SCP MF”), Sylebra Capital Parc Master Fund (“PARC MF”) and other advisory clients. Sylebra Capital Management (“Sylebra Cayman”) is the holding company and parent of Sylebra HK. Daniel Patrick Gibson owns 100% of the shares of Sylebra HK and Sylebra Cayman. In such capacities, Sylebra HK, Sylebra Cayman, and Mr. Gibson may be deemed to share voting and dispositive power over the ordinary shares held for SCP MF, PARC MF and other advisory clients. The address for Sylebra HK, Sylebra Cayman and Mr. Gibson is c/o Sylebra Capital Limited, 28 Hennessy Road, Floor 20, Wan Chai, Hong Kong.
(5)Consists of (i) 8,442,497 ordinary shares held of record by Mr. Banon and (ii) 79,710 ordinary shares subject to options exercisable within 60 days of July 31, 2021, all of which will be vested as of such date.
(6)Consists of (i) 14,636 ordinary shares held of record by Mr. Moorjani and (ii) 68,820 ordinary shares subject to options exercisable within 60 days of July 31, 2021, all of which will be vested as of such date.
(7)Consists of (i) 10,032 ordinary shares subject to options exercisable within 60 days of July 31, 2021, all of which will be vested as of such date, and (ii) 15,378 ordinary shares issuable upon vesting of RSUs scheduled to vest within 60 days of July 31, 2021.
(8)Consists of (i) 31,584 ordinary shares held of record by Mr. Garrett and (ii) 90,823 ordinary shares subject to options exercisable within 60 days of July 31, 2021, all of which will be vested as of such date.
(9)Consists of (i) 2,292 ordinary shares held of record by Mr. Chadwick and (ii) 156,250 ordinary shares subject to options exercisable within 60 days of July 31, 2021, of which 110,416 will be vested as of such date.
(10)Consists of 138,579 ordinary shares owned directly by the Peter Fenton Trust and 75,161 ordinary shares owned directly by the Peter Fenton Revocable Trust, for both of which Mr. Fenton serves as trustee.
(11)Consists of 1,917 ordinary shares held of record by Ms. Gleeson.
(12)Consists of 3,329 ordinary shares held of record by Ms. Marooney.
(13)Consists of 5,000 ordinary shares held of record by Mr. Puttagunta.
(14)Consists of 9,697,000 ordinary shares held of record by CMXI B.V. (“CMXI”). Clavis Directievoering B.V. serves as the managing director of CMXI. Mr. Schuurman, the controlling shareholder of CMXI, holds sole voting and dispositive power with respect to these ordinary shares.
(15)Consists of (i) 18,411,995 ordinary shares beneficially owned by our executive officers and directors, (ii) 405,635 ordinary shares subject to options exercisable within 60 days of July 31, 2021, of which 359,801 ordinary shares will be vested as of such date, and (iii) 15,378 ordinary shares issuable upon the vesting of RSUs scheduled to vest within 60 days of such date.
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FUTURE SHAREHOLDER PROPOSALS
You may submit proposals, including recommendations of director candidates, for consideration at the 2022 Annual Meeting, of shareholders to be held in 2020 (the “2020 AGM”), as follows:
For inclusion in Elastic’s proxy materials—Shareholders are eligible to present proper proposals for inclusion in Elastic’s proxy statement and for consideration at the 2020 AGM2022 Annual Meeting by submitting their proposals in writing to Elastic’s Corporate Secretary in a timely manner. Because Elastic is a Dutch public limited company whose shares are traded on a U.S. securities exchange, both U.S. and Dutch rules and time frames apply if shareholders wish to submit a proposal for consideration by Elastic shareholders at the 2020 AGM.
2022 Annual Meeting.
Under Dutch law and Elastic’s articles of association, if a shareholder is interested in submitting a proposed agenda item or a proposed resolution within the authority of shareholders to be presented at the 2020 AGM,2022 Annual Meeting, the shareholder must fulfill the requirements set forth in Dutch law and Elastic’s articles of association, including satisfying both of the following criteria:
•Elastic must receive the proposed agenda item (supported by reasons) or proposed resolution in writing (excludinge-mail and other forms of electronic communication) no later than 60 days before the date of the 2020 AGM2021 Annual Meeting (which date has not yet been declared by the Company’s board of directors); and
•The number of shares held by the shareholder, or group of shareholders, submitting the proposed agenda item or proposed resolution must equal at least 3% of Elastic’s issued share capital.
In addition to the above requirements, shareholder proposals must be received by Elastic’s Corporate Secretary no later than May 10, 2020April 29, 2022 and must otherwise have complied with the requirements of Rule14a-8 of the Securities Exchange Act, of 1934, as amended, in order to be included in the proxy statement for the 2020 AGM.
2022 Annual Meeting.
To be brought at the annual general meeting—In addition, you can find in Elastic’s articles of association an advance notice procedure for shareholders who wish to present certain matters at an annual general meeting of shareholders.
An item requested in writing by one or more shareholders and/or other persons entitled to attend the annual general meeting solely or jointly representing at least the percentage of the issued share capital as required by law shall be included in the notice of the meeting or announced in the same manner, if the Company has received the request, including the reasons, no later than on the day prescribed by law. However, the board of directors has the right not to place proposals from persons mentioned above on the agenda if the board of directors judges them to be evidently not in the interest of the Company.
Complete details regarding all requirements that must be met are found in our articles of association. You can obtain a copy of the relevant articles of association provisions by writing to Elastic’s Corporate Secretary at our principal executive offices at Elastic N.V., 800 West El Camino Real, Suite 350, Mountain View, California 94040 or by accessing Elastic’s filings on the SEC’s website atwww.sec.gov. www.sec.gov. All notices of proposals by shareholders, whether or not requested for inclusion in Elastic’s proxy materials, should be sent to Elastic’s Corporate Secretary at our principal executive offices.
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68
ANNUAL REPORT
A copy of our Annual Report on Form 10-K, excluding exhibits, for fiscal year 20192021 accompanies this proxy statement. A printed copy of either document, excluding exhibits, will be furnished without charge to beneficial shareholders or shareholders of record upon request to:
Elastic N.V.
800 West El Camino Real, Suite 350
Mountain View, California 94040
Attention: Investor Relations
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and annual reports with respect to two or more shareholders sharing the same address by delivering a single proxy statement or annual report, as applicable, addressed to those shareholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for shareholders and cost savings for companies.
Elastic has instituted householding for shareholders of record. Certain brokerage firms may have also instituted householding for beneficial owners of shares of Elastic’s ordinary shares held through brokerage firms. If your household has multiple accounts holding shares of Elastic’s ordinary shares, you may have already received householding notification from your broker. Please contact your broker directly if you have any questions or require additional copies of the annual report or this proxy statement. The broker will arrange for delivery of a separate copy of the annual report or this proxy statement promptly upon your request. Elastic shareholders may decide at any time to revoke a decision to household, and thereby receive multiple copies.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other information with the SEC. The SEC also maintains an internet website atwww.sec.gov that contains periodic and current reports, proxy and information statements, and other information regarding registrants that are filed electronically with the SEC.
These documents are also available, free of charge, through the InvestorsInvestor Relations section of our website, which is located at www.elastic.co.ir.elastic.co. The reference to our website address does not constitute incorporation by reference of the information contained on our website.
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OTHER MATTERS
Elastic knows of no other matters to be submitted at the Annual Meeting. If any other matters properly come before the Annual Meeting, it is the intention of the persons named in the proxy card to vote the shares they represent as the board of directors may recommend. Discretionary authority with respect to such other matters is granted by the execution of the proxy, whether through telephonic or Internet voting or, alternatively, by using a paper copy of the proxy card that has been requested.
It is important that your shares be represented at the Annual Meeting, regardless of the number of shares that you hold. You are, therefore, urged to vote by telephone or by using the Internet as instructed on the proxy card or, if so requested, by executing and returning, at your earliest convenience, the requested proxy card in the envelope that will have been provided.
THE BOARD OF DIRECTORS OF ELASTIC N.V.
Mountain View, California
, 2019
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PRELIMINARY COPYImportant Notice Regarding the Availability of Proxy Materials for the Annual Meeting:The Proxy Statement and Form10-K are available at www.proxyvote.comELASTIC N.V.Annual General Meeting of Shareholders October 29, 2019 4:00 PM Central European Time This proxy is solicited by the Board of DirectorsThe shareholder(s) hereby appoint(s) any civil law notary of Zuidbroek Corporate Law Notaries and their legal substitutes as proxies, each with the power to appoint his/her substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the ordinary shares of ELASTIC N.V. that the shareholder(s) is/are entitled to vote at the Annual General Meeting of Shareholders to be held at 4:00 PM Central European Time on October 29, 2019, at the Company’s offices at Keizersgracht 281, 1016 ED Amsterdam, The Netherlands.This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations.Continued and to be signed on reverse side0000427965_2 R1.0.1.18