FOX FACTORY HOLDING CORP. Investor Outreach
April 2024
Overview
- This reference document covers the following topics:
- Executive Summary / Key Messages (including Say-on-Pay voting history)
- Role of Our Compensation Committee
- Executive Compensation Goals and Objectives
- 2023 Officer Incentive Compensation Programs
- 2021-2023Performance-Based RSU Payout
For a detailed discussion and analysis, please see the current proxy filing which has the disclosure of our executive officer compensation program and practices for fiscal year 2023.
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Executive Summary / Key Messages
1. | We have a history of aligning pay with performance that has been strongly supported by our stockholders with | ||||||
five-year average Say on Pay support of 97.0%, which exceeds the 5-year average Say on Pay support for Russell | |||||||
3000 companies over the same time period (90.5%). | |||||||
2019 | 2020 | 2021 | 2022 | 2023 | |||
Annual Meeting | Annual Meeting | Annual Meeting | Annual Meeting | Annual Meeting | |||
98.8% | 97.1% | 96.2% | 96.1% | 96.6% | |||
5-Year Average Support: 97.0% | |||||||
2. | The Compensation Committee (the "Committee") held management strictly accountable to pre-set performance | ||||||
targets - no payout (0%) was earned under the 2023 performance-based cash bonus (annual, short-term | |||||||
incentive). | |||||||
3. | The Committee applied a permissible adjustment on the free cash flow ("FCF") metric on the performance-based | ||||||
long-term incentive award to account for the United Auto Worker ("UAW") strike that was outside management's | |||||||
control and significantly impacted FCF - this adjustment increased the value of the CEO award at time of payment | |||||||
by less than $200,000 (or about 3% of the CEO's 2023 Summary Compensation Table pay). | |||||||
4. | The CEO's compensation, as reflected in the 2023 Summary Compensation Table, declined by 22%, or $1.7 million, | ||||||
from $7.7 million in 2022 to $6.0 million in 2023. | |||||||
5. | Glass Lewis recommends "FOR" Say-on-Pay, quantitatively documenting strong pay-for-performance alignment. | 2 | |||||
Role of Our Compensation Committee
-
Our Compensation Committee consists of four of Fox's independent directors: Elizabeth A. Fetter (Committee Chair),
Dudley W. Mendenhall (Non-Executive Board Chair), Jean H. Hlay and Sidney Johnson. - Our Committee considers a variety of factors when making executive pay decisions, including:
- Financial results
- Stock price performance
- Feedback from investors
- Market typical and best practices, as informed by our independent compensation consultant
- Talent needs and concerns
- Our Committee annually reviews and updates our executive compensation goals and objectives to ensure our programs:
- Are market competitive
- Achieve our talent needs (attracting, engaging and retaining key talent)
- Align executive rewards to our business strategy to drive long-term stockholder value
- Evolve with our business and industry conditions
- Demonstrate aligned pay and performance outcomes
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Executive Compensation Goals and Objectives
- Our compensation programs are designed with the general goals and objectives of providing a market competitive pay package that achieves our talent needs (attracts, engages and retains) by directly aligning rewards to our business strategy to drive long-term stockholder value.
- For the Named Executive Officers (NEOs), this is achieved by emphasizing performance-based annual cash and long- term equity incentive awards which provide the majority of this group's target pay opportunity.
- Our executive compensation program is predominantly performance-based. As an executive's ability to impact operational performance increases, so does the proportion of his or her at-risk compensation. Target short- and long-term incentive compensation (where applicable) grows proportionately as job responsibilities increase, which encourages our officers to focus on the Company's long-term success and aligns with the long-term interests of our stockholders.
- The Committee also considers Company performance when determining the number of time-based RSUs and performance-based RSUs to award to our NEOs and the value of the earned shares reflect our stock price performance over the vesting/performance period making such compensation "at-risk" to the performance of the Company.
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2023 Officer Incentive Compensation Programs
Annual Performance-Based Cash Bonuses = No Payouts for 2023
Executives | Performance Metric | Weighting | 2023 Payout | ||||||
Dennison, Humphrey | Adjusted EBITDA | 100% | $0 | ||||||
Schemm, Merchant, Tutton, | Adjusted EBITDA | 75% | $0 | ||||||
Fletcher | Individual Performance | 25% | |||||||
Torres | Adjusted EBITDA | 50% | $0 | ||||||
Individual Performance | 50% | ||||||||
2023 Equity Grant Details = Awards Can Be Earned for the 2023-25 Vesting/Performance Period | |||||||||
RSU(1) | RSU(1) | PBRSU(2) | PBRSU(2) Perf. PBRSU(2) Metrics and | ||||||
Executives | Weighting | Vesting | Weighting | Period | Weightings | ||||
Dennison, Humphrey, | 50% | 3-year ratable | 50% | • | 50% Return on | ||||
Merchant, Tutton, Fletcher | Invested Capital | ||||||||
2023-2025 | |||||||||
Schemm (new hire grants in | • | 50% Free Cash | |||||||
58% | 3-year ratable | 42% | |||||||
June 2023) | Flow | ||||||||
Torres | None |
1) | RSU = Restricted Stock Units | |
2) | PBRSU = Performance-Based Restricted Stock Units | 5 |
2021-2023Performance-Based RSU Payout
- As disclosed in our proxy filing, the formula for determining achievement of the three-yearlong-term incentive goals resulted in achievement of 162.5% of the target. This amount was adjusted upward by the Committee to 200% of the target for the impact of the UAW strike, which was outside of our control and occurred in the second half of 2023.
- Through the third quarter of 2023 payouts were tracking at 200% of target.
- The UAW strike impacted our FCF; return on invested capital ("ROIC") remained above maximum performance and the achievement level was not impacted.
- The Committee believes that the adjustments were appropriate since over 90% of the performance period had been completed before the UAW strike and performance was tracking to exceed the maximum on both measures.
- Shown below are the goals and payouts for the 2021-2023 cycle.
- The goals were set in the first quarter of 2021 based on the long-range strategic plan at that time.
- This expands on the Compensation Discussion and Analysis in the Company's proxy statement to show threshold and maximum goals as well as adjusted FCF performance.
$ in millions
Performance Goals | Formulaic | Formulaic Payout | Adjusted | Final Payout | ||||
Performance Measure | Weighting | Threshold | Target | Maximum | Performance | (% of Target) | Performance | (% of Target) |
3-Year Average ROIC | 50% | 12.05% | 12.80% | 13.55% | 16.19% | 200% | 16.19% | 200% |
3-Year Cumulative Free Cash Flow | 50% | $226 | $263 | $300 | $273 | 125% | $300 | 200% |
Weighted Payout | 163% | 200% |
- Note: The 2023 performance-based cash bonus was not earned ($0 annual incentive) since results were below the goals set at the start of 2023.
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Disclaimer
Fox Factory Holding Corp. published this content on 22 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 April 2024 21:14:14 UTC.
