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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐
Check the appropriate box:
☐ | Preliminary Proxy Statement |
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☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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☒ | Definitive Proxy Statement |
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☐ | Definitive Additional Materials |
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☐ | Soliciting Material under § 240.14a-12 |
CARGURUS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)all boxes that apply):
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April 22, 2021
Dear Stockholder:
You are cordially invited to attend the 20212022 Annual Meeting of Stockholders of CarGurus, Inc., which will be held virtually on Wednesday,Tuesday, June 2, 20217, 2022 at 1:3:00 p.m., eastern time, conducted via live audio webcast at www.virtualshareholdermeeting.com/CARG2021CARG2022.
Pursuant to the Securities and Exchange Commission rules that allow issuers to furnish proxy materials to stockholders over the internet, we are posting the proxy materials on the internet and delivering to our stockholders a Notice of Internet Availability of Proxy Materials. This delivery process will allow us to provide stockholders with the information they need quickly and efficiently, while lowering the costs of delivery and reducing the environmental impact of the Annual Meeting. On or about April 22, 2021,27, 2022, we will begin mailing to our stockholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access or request a copy of our Proxy Statement for the 20212022 Annual Meeting of Stockholders and our Annual Report on Form 10-K for the year ended December 31, 2020.2021.
The Notice of Annual Meeting of Stockholders and the Proxy Statement contain details of the business to be conducted at the Annual Meeting.
Your vote is important. Whether or not you plan to attend the Annual Meeting, we hope you will vote as soon as possible. You may vote over the internet, by telephone or by mailing a proxy card. Voting over the internet, by telephone or by written proxy will ensure your representation at the Annual Meeting regardless of whether or not you attend. Please review the instructions in the proxy materials regarding each of these voting options.
Thank you for your ongoing support of CarGurus.
Very truly yours,
Jason Trevisan
Chief Executive Officer and Director
CARGURUS, INC.
2 Canal Park, 4th Floor
Cambridge, Massachusetts 02141 USA
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 2, 20217, 2022
The 20212022 Annual Meeting of Stockholders of CarGurus, Inc. (the “Annual Meeting”) will be held on Wednesday,Tuesday, June 2, 20217, 2022 at 1:3:00 p.m., eastern time. The Annual Meeting will be a virtual stockholder meeting, conducted via live audio webcast, through which you can submit questions and vote online, just as you could at an in-person meeting. We believe that a virtual stockholder meeting provides greater access for those who may want to attend the Annual Meeting and therefore we have chosen this approach over an in-person meeting.
The Annual Meeting can be accessed by visiting www.virtualshareholdermeeting.com/CARG2021CARG2022 and entering your 16-digit control number (included on the Notice of Internet Availability of Proxy Materials mailed to you). At the Annual Meeting, stockholders will consider and act upon the following matters:
2022;
Stockholders of record on our books at the close of business on April 6, 2021,12, 2022, the record date for the Annual Meeting, are entitled to notice of, and to vote at, the Annual Meeting or any adjournment or postponement thereof. For instructions on how to vote your shares, please refer to the instructions on the Notice of Internet Availability of Proxy Materials you received in the mail, the question and answer titled “How do I vote?” beginning on page 2 of this Proxy Statement or, if you requested to receive printed proxy materials, your enclosed proxy card. If your shares are held in “street name,” that is, held for your account by a broker or other nominee, you will receive instructions from the holder of record that you must follow for your shares to be voted.
Whether or not you plan to attend the virtual Annual Meeting, we urge you to take the time to read our proxy materials and vote your shares.
By Order of the Board of Directors,
Kathleen B. Patton
General CounselChief Financial Officer, Treasurer and Secretary
April 22, 202127, 2022
TABLE OF CONTENTS
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
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PROPOSAL 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
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PROPOSAL 3 NON-BINDING ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS |
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CARGURUS, INC.
2 Canal Park, 4th Floor
Cambridge, Massachusetts 02141 USA
PROXY STATEMENT
For the Annual Meeting of Stockholders on June 2, 20217, 2022
This Proxy Statement and related materials are being furnished to you on the internet, or at your request a printed version will be delivered to you by mail, in connection with the solicitation of proxies by our Board of Directors (“Board of Directors”) for use at the 20212022 Annual Meeting of Stockholders (the “Annual Meeting”) to be held virtually on Wednesday,Tuesday, June 2, 20217, 2022 at 1:3:00 p.m., eastern time, and at any adjournment or postponement thereof. You are entitled to vote if you were a stockholder of record as of the close of business on April 6, 2021.12, 2022. As used in this Proxy Statement, the terms “CarGurus,” “the Company,” “we,” “us,” and “our” mean CarGurus, Inc. unless the context indicates otherwise.
We are providing access to our proxy materials on the internet. Commencing on April 22, 2021,27, 2022, we mailed a Notice of Internet Availability of Proxy Materials (the “Notice”) to each stockholder, and a printed copy of our proxy materials to stockholders who requested them. The Notice contains instructions on how to access our proxy materials and how to vote. If you would like to receive a paper or email copy of our proxy materials, please follow the instructions in the Notice. If you requested printed versions of these materials by mail, the materials will include a proxy card for the Annual Meeting.
All proxies will be voted in accordance with the instructions contained in those proxies. If no choice is specified, the proxies will be voted for the three Class III director nominees and in favor of Proposals 2 and 3.
We are first making available this Proxy Statement and the accompanying proxy card to stockholders on or about April 22, 2021.27, 2022.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Q.Why did I receive these proxy materials?
A. We are providing these proxy materials to you in connection with the solicitation by our Board of Directors of proxies to be voted at the Annual Meeting to be held virtually on Tuesday, June 7, 2022 at 3:00 p.m., eastern time.
Q.What proposals am I voting on?
A. There are three proposals scheduled for a vote:
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Proposal 1: the election of three Class III directors;
Proposal 2: the ratification of the selection of Ernst & Young LLP (“Ernst & Young”) as our independent registered public accounting firm for the year ending December 31, 2021;2022; and
Proposal 3: a non-binding advisory vote to approve the compensation of our Named Executive Officers.
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Q.Who can vote at the Annual Meeting?
A. Our Board of Directors has fixed April 12, 2022 as the record date for the Annual Meeting. If you were a stockholder of record as of the close of business on the record date, you are entitled to vote (including by proxy) all of the shares that you held on that date at the Annual Meeting and at any postponement or adjournment thereof. On the record date, we had 98,921,655102,326,152 shares of Class A common stock outstanding (each of which entitles its holder to one vote per share) and 18,146,90315,999,173 shares of Class B common stock outstanding (each of which entitles its holder to ten votes per share).
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| Q. How do I attend the Annual Meeting? A. The Annual Meeting will be held virtually on Tuesday, June 7, 2022 at 3:00 p.m., eastern time. The Annual Meeting will be a virtual stockholder meeting, conducted via live audio webcast, through which you can submit questions and vote online. The Annual Meeting can be accessed by visiting www.virtualshareholdermeeting.com/CARG2022 and entering your 16-digit control number (included on the Notice mailed to you). Information on how to vote during the Annual Meeting is discussed below. |
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| Q. Can I attend the Annual Meeting in person? A. We will be hosting the Annual Meeting via live audio webcast on the internet. You will not be able to attend the meeting in person. Any stockholder can listen to the Annual Meeting live via the internet at www.virtualshareholdermeeting.com/CARG2022, where you can also vote online. The webcast will start at 3:00 p.m., eastern time, on June 7, 2022 but we encourage stockholders to access the Annual Meeting online prior to its scheduled start time. Stockholders may vote while connected to the Annual Meeting on the internet. In order to do so, you will need the 16-digit control number included on the Notice mailed to you. Please be aware that you bear any costs associated with your internet access, such as usage charges from internet access providers and telephone companies. If you have any technical difficulties or any questions regarding the virtual meeting website, please call the support team at the numbers listed on the log-in screen. Q. Can I ask questions during the Annual Meeting? A. Yes. Stockholders may submit questions during the Annual Meeting via the internet at www.virtualshareholdermeeting.com/CARG2022 after logging in with the 16-digit control number included on the Notice mailed to you. We will endeavor to answer as many questions pertinent to Annual Meeting matters as time permits, but we do not intend to address any questions that are not pertinent to Annual Meeting matters. Questions that are substantially similar may be grouped, summarized and answered together to avoid repetition. Q. If I am unable to attend the virtual Annual Meeting, can I listen to the Annual Meeting by telephone? A. No. The Annual Meeting is only accessible via the live audio webcast at www.virtualshareholdermeeting.com/CARG2022. If you are unable to join the live audio webcast, a recording will be available on www.virtualshareholdermeeting.com within 24 hours after the meeting concludes. Q.What happens if the meeting is postponed or adjourned? A. Your proxy may be voted at the postponed or adjourned meeting. You will still be able to change your proxy until it is voted. Q.How do I vote? A.If your shares are registered directly in your name, you may vote: (1) |
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(1) Over the Internet: Go to the website of our tabulator, Broadridge Financial Solutions, Inc. (“Broadridge”), at www.proxyvote.com. Use the vote control number printed on your Notice to access your account and vote your shares. You must specify how you want your shares voted or your internet vote cannot be completed, and you will receive an error message. Your shares will be voted according to your instructions. You must submit your internet proxy before 11:59 p.m., eastern time, on June 1, 2021,6, 2022, the day before the Annual Meeting, for your proxy to be valid and your vote to count.
(2) By Telephone: Call 1-800-690-6903, toll free from the United States, Canada and Puerto Rico, and follow the recorded instructions. You must specify how you want your shares voted and confirm your vote at the end of the call or your telephone vote cannot be completed. Your shares will be voted according to your instructions. You must submit your telephonic proxy before 11:59 p.m., eastern time, on June 1, 2021,6, 2022, the day before the Annual Meeting, for your proxy to be valid and your vote to count.
(3) By Mail: If you requested printed copies of the proxy materials, complete and sign your enclosed proxy card and mail it in the enclosed postage prepaid envelope to Broadridge. Your shares will be voted according to your instructions. Broadridge must receive the proxy card not later than June 1, 2021,6, 2022, the day before the Annual Meeting, for your proxy to be valid and your vote to count.
If you mail in your proxy card but do not specify how you want your shares voted, they will be voted as recommended by our Board of Directors.
(4) During the Annual Meeting via www.virtualshareholdermeeting.com/CARG2021CARG2022: You may attend the Annual Meeting via the internet and vote during the Annual Meeting. Please have your Notice in hand when you access the website and then follow the instructions.
If your shares are held in “street name,” meaning they are held for your account by a broker or other nominee, you may vote:
(1) Over the Internet or by Telephone: You will receive instructions from your broker or other nominee if they permit internet or telephonic voting. You should follow those instructions.
(2) By Mail: You will receive instructions from your broker or other nominee explaining how you can vote your shares by mail. You should follow those instructions.
(3) During the Annual Meeting via www.virtualshareholdermeeting.com/CARG2021CARG2022: You may contact your broker or other nominee who holds your shares to obtain a broker’s proxy. A broker’s proxy is not the form of proxy enclosed with this Proxy
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Statement. You will not be able to vote shares you hold in street name via the internet during the Annual Meeting unless you have a proxy from your broker or other nominee issued in your name giving you the right to vote your shares.
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| Q.Can I change my vote? A.If your shares are registered directly in your name, you may revoke your proxy and change your vote before or during the Annual Meeting. To do so, you must do one of the following:
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(1) Vote over the internet or by telephone as instructed above. Only your latest internet or telephone vote is counted. You may not change your vote over the internet or by telephone after 11:59 p.m., eastern time, on June 1, 2021.6, 2022.
(2) Sign a new proxy and submit it by mail as instructed above. Only your latest dated proxy that was received by Broadridge by June 1, 20216, 2022 will be counted.
(3) Attend the Annual Meeting via www.virtualshareholdermeeting.com/CARG2021CARG2022 and vote again.
If your shares are held in street name, you may submit new voting instructions by contacting your broker or other nominee. You may also vote online during the Annual Meeting if you obtain a broker’s proxy as described in the answer above.
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| Q.Will my shares be voted if I do not return my proxy? A.If your shares are registered directly in your name, your shares will not be voted if you do not vote over the internet, by telephone, by returning your proxy or by voting online during the Annual Meeting.
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If your shares are held in street name, your broker or other nominee may, under certain circumstances, vote your shares if you do not timely return your proxy. Brokers and other nominees can vote their customers’ unvoted shares on discretionary matters but cannot vote such shares on non-discretionary matters. If you do not timely return a proxy to your broker or other nominee to vote your shares, your broker or other nominee may, on discretionary matters, either vote your shares or leave your shares unvoted.
The election of directors (Proposal 1) and the non-binding advisory vote on the compensation of our Named Executive Officers (Proposal 3) are non-discretionary matters. The ratification of the appointment of our independent auditors (Proposal 2) is a discretionary matter.
We encourage you to provide voting instructions to your broker or other nominee. This ensures that your shares will be voted at the Annual Meeting according to your instructions.
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Q.How many shares must be present to hold the Annual Meeting?
A. Shares representing a majority of the votes applicable to all of our shares of common stock issued and outstanding and entitled to vote must be present to hold the Annual Meeting and conduct business. This is called a quorum. For purposes of determining whether a quorum exists, we count as present any shares that are voted over the internet, by telephone or by completion and submission of a proxy or that are represented virtually at the Annual Meeting. Further, for purposes of establishing a quorum, we will count as present shares that a stockholder holds even if the stockholder votes to withhold or abstain or votes on only one of the proposals. In addition, we will count as present shares held in street name by brokers or other nominees that indicate on their proxies that they do not have authority to vote those shares on Proposals 1 and 3. If a quorum is not present, we expect to adjourn the Annual Meeting until we obtain a quorum.
Q.What vote is required to approve each proposal and how are votes counted?
A.Proposal 1 – Election of Three Class II Directors
The three nominees for Class III director receiving the highest number of votes FOR election will be elected as directors. This is called a plurality. Proposal 1 is a non-discretionary matter. Therefore, if your shares are held in street name and you do not instruct your broker or other nominee how to vote your shares on Proposal 1, your broker or other nominee cannot vote your shares on Proposal 1. Shares held in street name by brokers or nominees who indicate on their proxies that they do not have authority to vote the shares on Proposal 1 will not be counted as votes FOR or WITHHELD from any nominee and will be treated as “broker non-votes.” Broker non-votes will have no effect on the voting on Proposal 1. With respect to Proposal 1, you may:
vote FOR all nominees;
vote FOR any nominee(s) and WITHHOLD your vote from the other nominee(s); or
WITHHOLD your vote from all nominees.
Votes that are withheld will not be included in the vote tally for Proposal 1 and will not affect the results of the vote.
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Proposal 2 – Ratification of Appointment of Independent Auditors
To approve Proposal 2, stockholders holding a majority of the votes cast on the matter must vote FOR the proposal. Proposal 2 is a discretionary matter. Therefore, if your shares are held in street name and you do not instruct your broker or other nominee how to vote your shares, your broker or other nominee may vote your shares on Proposal 2. If you vote to ABSTAIN on Proposal 2, your shares will not be voted FOR or AGAINST the proposal and will also not be counted as votes cast or shares voting on the proposal. Voting to ABSTAIN will have no effect on the voting on Proposal 2.
Although stockholder approval of our Audit Committee’s appointment of Ernst & Young as our independent registered public accounting firm for the year ending December 31, 20212022 is not required, we believe that it is advisable to give stockholders an opportunity to ratify this appointment. As an advisory vote, this proposal is not binding. The outcome of this advisory vote will not overrule any decision by us or our Board of Directors (or any committee thereof). However, if this proposal is not approved at the Annual Meeting, our Audit Committee may reconsider its appointment of Ernst & Young as our independent registered public accounting firm for the year ending December 31, 2021.2022.
Proposal 3 – Non-Binding Advisory Vote to Approve the Compensation of Our Named Executive Officers
To approve Proposal 3, stockholders holding a majority of the votes cast on the matter must vote FOR the proposal. Proposal 3 is a non-discretionary matter. If your shares are held in street name and you do not instruct your broker or other nominee how to vote your shares, your broker or other nominee cannot vote your shares on Proposal 3. Therefore, voting to ABSTAIN and broker non-votes will have no effect on the outcome of this proposal.
Advisory votes on the compensation of our Named Executive Officers are non-binding; however, as described in more detail in Proposal 3, our Board of Directors and Compensation Committee will review and consider the outcome of this vote when making future decisions regarding our executive compensation program.
Q.How does the Board of Directors recommend that I vote?
A. Our Board of Directors unanimously recommends that you vote your shares:
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“FOR” the nominees for election as directors listed in Proposal 1;
“FOR” the ratification of the appointment of Ernst & Young as our independent registered public accounting firm for the year ending December 31, 2021;2022; and
“FOR” the approval, on a non-binding advisory basis, of the compensation of our Named Executive Officers.
Q.How many votes do I have? A. On each matter to be voted upon, you have one vote for each share of Class A common stock and ten votes for each share of Class B common stock you owned as of April 12, 2022. The Class A common stock and Class B common stock will vote together as a single class on all proposals described in this Proxy Statement. Q.Are there other matters to be voted on at the Annual Meeting? A. We do not know of any matters that may come before the Annual Meeting other than the election of three Class II directors, the ratification of the appointment of our independent registered public accounting firm and the non-binding advisory vote to approve the compensation of our Named Executive Officers. If any other matters are properly presented at the Annual Meeting, the persons named in the accompanying proxy will vote, and otherwise act, in accordance with their judgment on the matter. Q.Is my vote confidential? A. Proxy instructions, ballots, and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within CarGurus or to third parties, except as necessary to meet applicable legal requirements, to allow for the tabulation of votes and certification of the vote, or to facilitate a successful proxy solicitation. Q.Where can I find the voting results? A. We will report the voting results in a Current Report on Form 8-K within four business days following the adjournment of the Annual Meeting. Q.What are the costs of soliciting these proxies? A. We will bear all expenses of this solicitation, including the cost of preparing and mailing these proxy materials. Directors, officers and employees of CarGurus may also solicit proxies in person or by other means of communication. Such directors, |
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officers and employees will not be additionally compensated but may be reimbursed for reasonable out-of-pocket expenses in connection with such solicitation. We may engage the services of a professional proxy solicitation firm to aid in the solicitation of proxies from certain brokers, bank nominees and other institutional owners. Our costs for such services, if retained, will not be significant. Q.Who may I contact if I have any additional questions? A. If you hold your shares directly, please call the Company’s Legal Department at (617) 354-0068. If your shares are held in street name, please contact the telephone number provided on your voting instruction form or contact your broker or nominee holder directly. 5
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IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS
For the 20212022 Annual Meeting of Stockholders on June 2, 20217, 2022
This Proxy Statement and the 20202021 Annual Report to Stockholders are available for viewing, printing and downloading at www.proxyvote.com.
A copy of our Annual Report on Form 10-K (including financial statements and schedules) for the year ended December 31, 2020,2021, as filed with the Securities and Exchange Commission (“SEC”) except for exhibits, will be furnished without charge to any stockholder after written or verbal request to:
CarGurus, Inc.
Attn: Investor Relations
2 Canal Park, 4th Floor
Cambridge, Massachusetts 02141 USA
Telephone: +1 (617) 354-0068
This Proxy Statement and our Annual Report on Form 10-K for the year ended December 31, 20202021 are also available on the SEC’s website, www.sec.gov.
BOARD OF DIRECTORS AND MANAGEMENT
Information Regarding Directors and Director Nominees
Our amended and restated certificate of incorporation provides for the classification of our Board of Directors into three classes, each having as nearly an equal number of directors as possible. The terms of service of the three classes are staggered so that the term of one class expires each year.
Our Board of Directors currently consists of eight directors. Class I consists of Lori Hickok, Greg Schwartz and Jason Trevisan, each with a term expiring at the Annual Meeting. Class II consists of Steven Conine, Stephen Kaufer and Anastasios Parafestas, each with a term expiring at the annual meeting of stockholders to be held in 2022.2024. Class II consists of Steven Conine, Yvonne Hao and Stephen Kaufer, each with a term expiring at the Annual Meeting. Class III consists of Ian Smith and Langley Steinert, each with a term expiring at the annual meeting of stockholders to be held in 2023.
At each annual meeting of stockholders, directors are elected for a full term of three years to continue or succeed those directors whose terms are expiring. Our Board of Directors has nominated Ms. HickokHao and Messrs. SchwartzConine and TrevisanKaufer for election at the Annual Meeting as Class III directors, each to serve for a term ending in 2024,2025, or until their respective successors have been duly elected and qualified.
Director Qualifications
The following table and biographical descriptions provide information as of April 1, 20212022 relating to each director and director nominee, including his or hereach director’s age and period of service as a directormember of our company; his or her boardBoard of directorsDirectors; Board of Directors committee memberships; his or her business experience during the past five years, including directorships at other public companies; and the other experience, qualifications, attributes or skills that led our Board of Directors to conclude such person should serve as a director of our company:
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| Steven Conine | Lori Hickok | Stephen Kaufer | Anastasios Parafestas | Greg Schwartz | Ian Smith | Langley Steinert | Jason Trevisan |
Skills & Experience |
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Independent | ✓ | ✓ | ✓ | ✓ | ✓ |
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Additional Board of Directors Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Executive Leadership | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Online Marketplace Industry | ✓ |
| ✓ |
| ✓ |
| ✓ | ✓ |
Innovation & Technology | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Strategic Planning | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Corporate Governance | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Financial Reporting; Accounting; Taxation |
| ✓ |
| ✓ |
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Internet & Media | ✓ | ✓ | ✓ |
| ✓ | ✓ | ✓ | ✓ |
Finance & Investment Management | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Oversight of Data Privacy and Cybersecurity | ✓ | ✓ | ✓ | ✓ | ✓ |
| ✓ | ✓ |
Human Capital Management | ✓ | ✓ | ✓ |
| ✓ |
| ✓ | ✓ |
Audit Committee Financial Expert |
| ✓ |
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Additional Information |
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Board Class/ Term Ends | Class II 2022 | Class I 2024* | Class II 2022 | Class II 2022 | Class I 2024* | Class III 2023 | Class III 2023 | Class I 2024* |
Age | 48 | 57 | 58 | 65 | 48 | 50 | 57 | 46 |
Tenure | 3 | 3 | 13 | 15 | 3 | 13 | 15 | 1 |
Director Nominee
Continuing Director
* If elected at the 2021 Annual Meeting
The ✓ indicates that the item is a specific qualification, skill or experience that the director or director nominee brings to our Board of Directors. The lack of ✓ for a particular item does not mean that the director or director nominee does not possess that qualification, characteristic, skill or experience. We expect each director to be knowledgeable in several of these areas.
The responsibilities of each of the committees of our Board of Directors is further detailed below.
Audit Committee
The responsibilities of the Audit Committee include, among other things:
The Audit Committee operates under a written Charter that satisfies applicable Nasdaq standards and is available on our website at https://investors.cargurus.com at “Governance.” The Audit Committee met four times during 2021.
Compensation Committee
The purpose of the Compensation Committee is, to the extent such tasks are not performed by our full Board of Directors, to oversee our compensation philosophy, policies, plans, and benefit programs and to discharge the responsibilities of our Board of Directors relating to the compensation of our officers.
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Except to the extent that our full Board of Directors undertakes any responsibility directly, the responsibilities of the Compensation Committee include, among other things:
Because we are a controlled company under Nasdaq rules, the Compensation Committee is not required to be fully independent. If such rules change in the future or we no longer meet the definition of a controlled company under current rules, we will adjust the composition of the Compensation Committee in order to comply with such rules.
The Compensation Committee operates under a written Charter that satisfies applicable Nasdaq standards and which is available on our website at https://investors.cargurus.com at “Governance.” The Compensation Committee met five times during 2021.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee has ever been an executive officer or employee of ours. None of our executive officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee.
Board of Directors Role in Risk Oversight
Our Board of Directors oversees the management of risks inherent in the operation of our business and the implementation of our business strategies. Our Board of Directors performs this oversight role by using several different levels of review. In connection with its review of the operations and corporate functions of our company, our Board of Directors addresses the principal risks associated with those operations and corporate functions. In addition, our Board of Directors reviews the risks associated with our business strategies periodically throughout the year as part of its consideration of undertaking any such business strategies. Our Board of Directors has also implemented – and is responsible for overseeing – an executive compensation recovery, or “clawback,” policy (the “Clawback Policy”) that allows the Company to recoup certain incentive-based cash compensation from its officers pursuant to such policy.
The Audit Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management are undertaken. The Audit Committee also monitors compliance with legal and regulatory requirements, in addition to oversight of the performance of our internal audit function. As part of this function, the Audit Committee oversees cybersecurity matters and regularly meets with members of management responsible for data privacy, technology and information security risks to discuss these risks, risk management activities, incident response plans, best practices, the effectiveness of our security measures and other related matters.
The Compensation Committee assesses and monitors the extent to which our incentive compensation policies and programs for employees may encourage excessive risk-taking and the relationship between risk management policies and practices and compensation, and evaluates compensation policies and practices that could mitigate any such risk.
People and Talent
Our investment in our greatest asset – our people – is integral to our core values, evidenced by our inclusion of employee engagement, retention targets and cultural efforts as components of our 2021 strategic and organizational initiatives. Our Board of Directors oversees our people and talent efforts and views building our culture – from employee development and retention to diversity, equity, inclusion and belonging initiatives – as key to driving long-term value for our business and helping to mitigate risks.
Diversity, Inclusion and Belonging and Equal Employment Policy
We are an equal opportunity employer and strive to build and nurture a culture where inclusiveness is a reflex, not an initiative. With support from our Diversity, Inclusion and Belonging Advisory Team, we seek to foster diversity, equity, inclusion and belonging (“DEIB”), and to build a workplace where everyone can thrive. We believe that our commitment to these efforts helps us attract and
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retain the best talent, enables employees to realize their full potential and drives high performance through innovation and collaboration. In 2021, based on data from employees who chose to self-identify, on a year-over-year basis we increased representation among women and non-binary employees (32.8% to 35.1%) and maintained representation among underrepresented racial minorities (30.0% to 30.1%) within our U.S. workforce. We also saw year-over-year increases in the U.S. among women and non-binary employees in technical (23.3% to 25.9%) and management-level roles (34.2% to 38.6%), as well as among underrepresented racial minorities in technical roles (43.6% to 45.7%).
While we expect to make further progress on these important initiatives, during 2021 we made significant strides toward fostering a culture that welcomes diversity, promotes equity and inclusivity, and ensures belonging, including by:
Building on the progress we made in 2021 on DEIB, we believe we entered 2022 with a strong foundation in place for goal setting, feedback and accountability, and both top-down and bottom-up strategies as we seek to continue to make meaningful progress towards these shared objectives.
Employee Engagement
In order to ensure that we are meeting our people and talent objectives,Each year, we conduct an employee engagement survey at least annually to help our management team gain insight into and gauge employees’ feelings, attitudes, and behaviors around working at CarGurus. Our latest survey, completed in December 2020,September 2021, had a participation rate of over 87%approximately 85% of our eligible employees worldwide. The survey results indicateindicated that we excelexcelled in areas including manager empathy, alignment to company goals and belonging.career development, belonging, as well as overall excitement about CarGurus’ future. Based on employee feedback, we also identified certain company-wide focusopportunity areas including with respect to improving the resourcesimprove engagement and benefits we can provide for our employees as they continue to work outside of our offices during the COVID-19 pandemic, which we believe is important to ourdrive long-term success. Our culture has ledand commitment to strong employee satisfaction and pride thatbuilding a workplace where we can all thrive has been widely recognized as evidencedexternally with the following awards: Built In Boston’s “Best Places to Work” in 2019, 2020, 2021 and 2021;2022; the Mass TLC “Tech Top 50” Company Culture in 2020; Fortune’sFortune’s “Best Places to Work” in 2019; Computerworld’sComputerworld’s “Best Places to Work in IT” in 2019 and 2020; Boston Business Journal’sJournal’s “Best Places to Work” in 2015, 2016, 2017, 2018, 2019 and 2021; and Boston Globe’sGlobe’s “Top Place to Work” in 2014, 2015, 2016 and 2018.2018; Comparably’s 2021 “Best Perks & Benefits,” “Best Work-Life Balance,” and “Best CEO;” and Comparably’s 2022 “Best Places to Work” lists for the Boston Metropolitan Area and Best Company Outlook.
Training and Development
Our people and talent strategy is essential for our ability to continue to develop and market innovative products and customer solutions. We continually invest in our employees’ career growth and provide employees with a wide range of development opportunities, including mandatory quarterly compliance training courses as well as one-on-one, virtual, social and self-directed learning, mentoring, coaching, and external development. In 2020, more than 96%2021, nearly 100% of our employees participated in learning and development activities worldwide.
Charitable Giving
One of our core values is integrity, which we endeavor to achieve by acting responsibly and considering the impact of our actions on one other, our partners and the world around us. Our Charitable Giving program, established in 2018, highlights our commitment to this core value by supporting our local communities. This program allows our employees to submit nominations for grants to tax-exempt organizations, which are then reviewed by a committee of our employees and awarded to selected charities on a quarterly basis. Despite the challenges caused by the COVID-19 pandemic,During 2021, we continued to fund our Charitable Giving program and awarded approximately $200,000 in grants to 2024 charitable organizations in 2020.organizations.
In addition to our Charitable Giving program, and as a reflection of our commitment to justice and equality, together with our employees during 2020 we donated over $95,000 to organizations dedicated to improving racial justice – $50,000 of which was in the form of a direct Company contribution and the remainder of which was evenly split between Company and employee contributions from a matching gift program.18
Environmentally Conscious
We also believe that it is important to conduct business in an environmentally responsible manner. For example, the building that will house our future headquarters in Boston, Massachusetts will offer cutting edge systems for energy efficiency and sustainability, consistent with a LEED Gold certified building, will be easily accessible by public transportation and will have electric vehicle charging stations and indoor bike racks. For our employees in our offices, we encourage participation in a robust recycling program that includes recycling bins at every employee desk and conference room as well as next to all trash receptacles in our office kitchens. We also incentivize low-carbon-producing means of transportation via public transportation subsidies and by offering a
generous annual stipend for employees who bike to work.
In addition, during 2020 we addedoffer an Environmental, Social and Governance (“ESG”) focused fund option through Calvert Investments (the “Calvert Fund”) towith our available lineup of funds under our Section 401(k) plan for our eligible U.S. employees. The Calvert Fund targets responsible investments in companies that provide positive leadership through business operations focused on materially improving societal outcomes, including those that will affect future generations.
We will continue to invest in our employees, culture and community, and we expect to consider and report on ESG factors as they evolve within the Company.
Communicating with our Board of Directors
Our Board of Directors gives appropriate attention to written communications that are submitted by stockholders and other interested parties and will respond if and as appropriate. Our General CounselSecretary is primarily responsible for monitoring communications to our Board of Directors from stockholders and other interested parties and for providing copies or summaries of such communications to members of our Board of Directors as she considersthey consider appropriate.
Communications are forwarded to all members of our Board of Directors if they relate to important substantive matters and include suggestions or comments that our General CounselSecretary considers to be important for the members of our Board of Directors to know. In general, communications relating to corporate governance and corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances and duplicative communications.
Stockholders and other interested parties who wish to send communications on any topic to our Board of Directors should address such communications to: The Board of Directors, c/o Secretary, CarGurus, Inc., 2 Canal Park, 4th Floor, Cambridge, Massachusetts 02141 USA.
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Additionally, we have established a confidential process for reporting, investigating and resolving employee and third-party concerns related to accounting, auditing and similar matters under the Sarbanes-Oxley Act of 2002. Stockholders and other interested parties may confidentially provide information to our Audit Committee or to one or more of our individual directors by using the confidential and anonymous financial concern hotline that is operated by an independent, third-party service. Within the United States and Canada, the ethics hotline can be reached by telephone, toll-free, at 1-877-325-9953 or worldwide via the internet at https://www.whistleblowerservices.com/CARG/.
Executive Officers Who Are Not Directors
Certain information regarding our executive officers who are not also directors, as of April 1, 2021,2022, is set forth below.
Name | Age | Positions(s) |
Thomas Caputo |
| Chief Product Officer |
Andrea Eldridge |
| Chief People Officer |
Scot Fredo |
| Chief Financial Officer, Treasurer and |
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| Chief Technology Officer |
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| Chief Marketing Officer |
Samuel Zales |
| Chief Operating Officer and President |
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Thomas Caputo. Thomas Caputo has served as our Chief Product Officer since February 2019. Mr. Caputo also served as our Senior Vice President of Product from January 2017 to February 2019. Prior to joining CarGurus, from July 2012 to January 2017, Mr. Caputo served as the Chief Product Officer at Fiksu Inc. (“Fiksu”), a mobile marketing company. Prior to Fiksu, from January 2011 to August 2012, Mr. Caputo was Vice President of Product Management at [x+1] Inc. (“[x+1]”), a digital marketing company, which was acquired by Rocket Fuel Inc. in August 2014. Prior to joining [x+1], from October 2007 to January 2011, Mr. Caputo served as Vice President at Advanced Technology Ventures (“ATV”), a venture capital firm. Prior to joining ATV, from August 2003 to October 2007, Mr. Caputo served as a Group Product Manager at Microsoft Corporation. Mr. Caputo holds a Master of Science degree from Stanford University, a Master of Business Administration degree from Stanford University Graduate School of Business and a Bachelor of Arts degree from Dartmouth College.
Andrea Eldridge. Andrea Eldridge has served as our Chief People Officer since February 2020. Prior to joining CarGurus, from October 2018 to November 2019, Ms. Eldridge served as Senior Vice President, Talent & Employee Experience for Cengage Learning, Inc. (“Cengage”), an educational content and technology company. Prior to joining Cengage, from February 2006 to February 2018, Ms. Eldridge held various positions in talent, marketing and general management at Ahold USA, a subsidiary of Ahold Delhaize, a global grocery retailing group. Ms. Eldridge holds a Bachelor of Arts degree from Wellesley College.
Scot Fredo. Scot Fredo has served as our Chief Financial Officer and Treasurer since January 2021 and our Secretary since October 2021. Mr. Fredo previously served as our Senior Vice President, Financial Planning & Analysis from January 2019 to January 2021 and as our Vice President, Financial Planning & Analysis from January 2016 through January 2019. Before joining CarGurus, from May 2011 to January 2016, Mr. Fredo held the role of Director, Financial Planning & Analysis at HubSpot, Inc., a publicly traded customer relationship management platform. Mr. Fredo holds a Bachelor of Science degree from Babson College and a Master of Business Administration degree from Northeastern University.
Kyle Lomeli.Matthew Quinn. Kyle LomeliMatthew Quinn has served as our Chief Technology Officer since February 2019. Mr. Lomeli served as our Senior Vice President of Engineering from August 2018 to February 2019, as our Vice President of Dealer Solutions from January 2016 to August 2018, as a Director of Engineering from August 2013 to January 2016, and as a Senior Software Architect from April 2008 to August 2013.2022. Prior to joining CarGurus, from August 2002January 2020 to April 2008,December 2021, Mr. LomeliQuinn was Vice President of Engineering at the small business referral network, Alignable, Inc. He has also led large development teams at technology companies such as Audible, Inc. (“Audible”), where he served in roles including Vice President of Software Development from June 2015 to December 2019, as well as Vistaprint, a Cimpress plc company (“Vistaprint”), and Amazon.com, Inc. (“Amazon”). Mr. Quinn pioneered Vistaprint’s promotional products business, built and led their digital services Engineering team, managed teams on Amazon’s Fire Phone launch, served as a Lead Security Developerthe site lead for Intralinks, Inc., a global technology provider of inter-enterprise content managementAudible’s Boston office and collaboration solutions.led teams that launched Audible on Alexa, FireTV and Kindle. Mr. LomeliQuinn holds a Master of Science degree in Management from Boston University and a Bachelor of Arts and Sciences degree from Oberlin College.
Kathleen Patton. Kathleen Patton has served as our General Counsel since February 2019 and our Secretary since September 2017. Ms. Patton also served as our Senior Vice President, General Counsel from August 2017 to February 2019. Ms. Patton previously served as the Senior Vice President, General Counsel, and Secretary of Demandware, Inc. (“Demandware”), a provider of enterprise-class cloud commerce solutions for retailers and branded manufacturers, from June 2015 until August 2016 and as Demandware’s Associate General Counsel from April 2012 until June 2015. From June 2010 until March 2012, Ms. Patton was Associate General Counsel at Stream Global Services, Inc. (“Stream”), a business process outsource service provider specializing in customer relationship management. Prior to joining Stream, Ms. Patton worked in law firms, as the Director of Practice Development at Brown Rudnick LLP, the Practice Director at Day Pitney LLP, a corporate partner and associate at McDermott, Will & Emery LLP and an associate at Walter, Conston, Alexander & Green, P.C. Ms. Patton holds a Juris Doctor degree from Georgetown University Law CenterEmmanuel College and a Bachelor of Arts degree in Mathematics and Computer Science from Dartmouth College.the College of the Holy Cross.
Sarah Welch.Dafna Sarnoff. Sarah WelchDafna Sarnoff has served as our Chief Marketing Officer since February 2019. Ms. Welch also served as our Senior Vice President of Consumer Marketing from February 2016 to February 2019.December 2021. Prior to joining CarGurus, Ms. Sarnoff led Marketing for several technology and growth companies, including Aura Sub, LLC, a digital security innovator, from September 2020 to November 2021; Intersection Parent, Inc., an experience-driven media and technology company from August 20112016 to January 2016, Ms. Welch was Chief Marketing OfficerSeptember 2020; and General Manager, Consumer at Gazelle,Yodle, Inc. (“Gazelle”(acquired by Web.com Group, Inc.), a consumer electronics marketplace where she oversaw the end-to-end consumer experience including all aspects ofdigital marketing product management, customer care, and direct-to-consumer sales. PriorSaaS business, from November 2012 to Gazelle, from January 2005 to July 2011,August 2016. Ms. WelchSarnoff also held various
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positions leadership roles over ten years at TripAdvisor, an online marketplace for travel-related content. Her rolesAmerican Express Company, in both consumer and B2B marketing, after starting her career at TripAdvisor included Vice President of the TripAdvisor Media Group from July 2009 to August 2011, Vice President of Marketing from March 2008 to July 2009, and Director from January 2005 to March 2008.Bain & Company, Inc. Ms. WelchSarnoff holds a Master of Business Administration degree from Stanford University GraduateHarvard Business School of Business and a Bachelor of Arts degree in Mathematics from Brown University.Dartmouth College.
Samuel Zales. Samuel Zales has served as our Chief Operating Officer since September 2017 and as our President since February 2019. Mr. Zales also served as our Chief Revenue Officer from December 2015 to September 2017 and as our President of Dealer Operations and International from November 2014 to December 2015. Prior to joining CarGurus, from January 2014 to October 2014, Mr. Zales was Executive Vice President of Zeta Interactive, a marketing software company that acquired ClickSquared, Inc. (“ClickSquared”), in January 2014. From March 2013 to January 2014, Mr. Zales was Chief Executive Officer of ClickSquared, a marketing software company. Prior to ClickSquared, Mr. Zales was a consultant to multiple technology and software companies and served on the boards of four venture-backed companies. From October 2008 to November 2011, Mr. Zales was President of Zoom Information, Inc. (“ZoomInfo”), a software-as-a-service company, where he led day-to-day operations and oversaw the company’s growth strategy into the marketing services and sales intelligence arenas. Prior to ZoomInfo, from January 2007 to October 2008, Mr.
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Zales was Chief Executive Officer of BuyerZone.com LLC (“BuyerZone”), a division of Reed Business Information, a business unit of Reed Elsevier PLC, which acquired BuyerZone in January 2007. From November 1999 to January 2007, Mr. Zales was President and Chief Executive Officer of BuyerZone, an online marketplace for business purchasing, which he led to its acquisition by Reed Business Information. Mr. Zales holds a Master of Business Administration degree from the Kellogg Graduate School of Management at Northwestern University and a Bachelor of Arts degree from Dartmouth College.
AUDIT COMMITTEE REPORT
The report of the Audit Committee is not considered to be “soliciting material,” is not deemed “filed” with the SEC, and is not to be incorporated by reference into any filing of the Company under the Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
The Audit Committee has reviewed (i) the audited consolidated financial statements of the Company as of and for the year ended December 31, 2020,2021, (ii) management’s report on its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020,2021, and (iii) the report from Ernst & Young, the Company’s independent registered public accounting firm, on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020.2021. The Audit Committee has met with representatives of Ernst & Young, with and without management present, to discuss the results of their examinations; their evaluations of the Company’s internal control, including internal control over financial reporting; and the overall quality of the Company’s financial reporting.
The Company’s management is responsible for the Company’s financial reporting process, including its system of internal controls, and for the preparation of its consolidated financial statements in accordance with generally accepted accounting principles. The independent registered public accounting firm audits the annual consolidated financial statements prepared by management in accordance with standards of the Public Company Accounting Oversight Board (the “PCAOB”), expresses an opinion as to such financial statements and issues a report on the effectiveness of the Company’s internal control over financial reporting. The Audit Committee is responsible for providing independent, objective oversight of the Company’s accounting functions and internal controls.
The Audit Committee also received from, and discussed with, Ernst & Young the written disclosures and other communications that the Company’s independent registered public accounting firm is required to provide to the Audit Committee, including the matters required to be discussed by the Statement on Auditing Standards No. 1301, as amended (Communication with Audit Committees), as adopted by the PCAOB, in Rule 3200T.
Ernst & Young also provided the Audit Committee with the written disclosures and the letter required by Rule 3526 of the PCAOB requiring independent registered public accounting firms annually to 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. The Audit Committee has reviewed this disclosure and has discussed with Ernst & Young their independence from the Company.
Based on these discussions and the Company’s review of the representations and information provided by management and the Company’s independent registered public accounting firm, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20202021 for filing with the SEC.
By the Audit Committee of the Board of Directors of CarGurus, Inc.
Lori Hickok (Chair)
Anastasios ParafestasYvonne Hao
Greg Schwartz
Compensation Discussion and Analysis
This Compensation Discussion and Analysis discusses the principles underlying our executive compensation policies and decisions and the most important factors relevant to an analysis of these policies and decisions. In addition, we explain how and why the Compensation Committee arrived at the specific compensation policies and decisions involving our executive officers during the year ended December 31, 2020.2021. During 2020,2021, these individuals were:
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Samuel Zales, our Chief Operating Officer and President;
Thomas Caputo,Andrea Eldridge, our Chief ProductPeople Officer; and
Scot Fredo, our Chief Financial Officer, Treasurer and Secretary(1);
| (1) Effective January 21, 2021, Mr. Steinert transitioned from his role as Chief Executive Officer to becoming our Executive Chairman, and Mr. Trevisan succeeded Mr. Steinert in such role. Previously, Mr. Trevisan served as Chief Financial Officer, Treasurer and President, International. Upon Mr. Trevisan’s appointment to Chief Executive Officer, Mr. Fredo succeeded him in the roles of Chief Financial Officer and Treasurer. (2) Pursuant to the Separation Agreement dated November 16, 2021, Ms. Welch’s employment with the Company terminated effective as of December 3, 2021. Ms. Sarnoff succeeded Ms. Welch as Chief Marketing Officer effective December 8, 2021.
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We refer to these executive officers collectively in this Compensation Discussion and Analysis and the accompanying compensation tables as our “Named Executive Officers.”
Executive Summary
We areCarGurus is a global, multinational, online automotive platform for buying and selling vehicles that is building upon its industry-leading listings marketplace connecting buyerswith both digital retail solutions and sellers of newthe CarOffer online wholesale platform. The CarGurus marketplace gives consumers the confidence to purchase or sell a vehicle either online or in-person, and used cars. Usingit gives dealerships the power to accurately price, effectively market, instantly acquire and quickly sell vehicles, all with a nationwide reach. CarGurus uses proprietary technology, search algorithms and innovative data analytics we believe we are buildingto bring trust, transparency and competitive pricing to the world’s most trusted and transparent automotive marketplace and creating a differentiated automotive search experience for consumers. Our trusted marketplace empowers consumers with unbiased third‑party validation on pricing and dealer reputation as well as other information that aids them in finding “Great Deals from Top-Rated Dealers.”shopping experience. In addition to the United States, we operate online marketplaces under the CarGurus brand in Canada and the United Kingdom. WeIn the United States and United Kingdom, we also operate twothe Autolist and PistonHeads online marketplaces, respectively, as independent brands: PistonHeads in the United Kingdom and Autolist in the United States. We also hold a majority equity interest in CarOffer, an instant trade digital wholesale platform based in Plano, Texas.brands.
20202021 Executive Compensation Highlights
Consistent with our performance and compensation objectives, the Compensation Committee took the following actions relating to the compensation of our Named Executive Officers for 2020:2021:
2020 CEO Total Compensation MixBase Salary –At Approved increases in base salary from 3% to no more than 23% for Mr. Trevisan upon his request,promotion to demonstrate his confidenceChief Executive Officer, in the Companyeach case to promote retention for our Named Executive Officers, and further align his interests with those of our stockholders, further reducedmaintained Mr. Steinert’s annual base salary to $10,000 and eliminated his eligibility to receive an annual cash incentive award for his 2020 performance. As a result, 99.6% of Mr. Steinert’s target total direct compensation for 2020 was equity-based in the form of a restricted stock unit (“RSU”) award subject to time-based vesting.
Base Salary – Further reduced Mr. Steinert’s annual base salary to $10,000, and approved increases in base salary of no more than 32% to promote retention for our other Named Executive Officers.
COVID-19 Salary Reductions – At the request of our executive management team and in connection with an expense reduction plan adopted by our Board of Directors in response to the COVID-19 pandemic (the “Expense Reduction Plan”), approved a temporary reduction in the annual base salaries of our Named Executive Officers – except Mr. Steinert whose base salary had already been set at $10,000 – by 50% for the three-month period that commenced on April 16, 2020.
COVID-19 Impact onAnnual Cash Incentive Awards – Made annual cash incentive award payments, which represented approximately 89%134% on average of the target annual cash incentive award opportunity for the full year for our Named Executive Officers, based on our actual achievement against pre-established performance objectives, except for Mr. Steinert who did not receive an annual cash incentive award for 2020. The amounts paid reflect the adjustments to our performance objectives and reductions in the corresponding payout levels made during 2020 to account for the impact of the COVID-19 pandemic on our annual operating plan and overall business. In connection with the Expense Reduction
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RSUEquity Awards – Granted time-based RSUboth restricted stock unit (“RSU”) and non-qualified stock option (“NQSO”) awards that may be settled in shares of our Class A common stock, subject to certain vesting over four years.requirements. Each of our Named Executive Officers received aboth RSU awardand NQSO awards for retention purposes. Mr. Caputo andpurposes or, in the case of Ms. Welch each also received a second RSU award as an additional retention incentive.
20202021 Executive Compensation Policies and Practices
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We endeavor to maintain sound governance standards consistent with our executive compensation policies and practices. The Compensation Committee evaluates our executive compensation program on a regular basis to ensure consistency with our short-term and long-term goals given the dynamic nature of our business and the market in which we compete for executive talent. The following policies and practices were in effect during 2020:2021:
What We Do:
Annual Executive Compensation Review. The Compensation Committee annually reviews and approves our compensation strategy, including, as applicable, a review of our compensation peer group used for comparative purposes.
Compensation Risk Oversight. The Compensation Committee reviews the extent to which our incentive compensation policies and programs may encourage excessive risk-taking. At least annually, the Compensation Committee also reviews the relationship between our risk management policies and practices and compensation, and evaluates alternative compensation policies and practices that could mitigate any such risk.
Utilize Independent Compensation Advisor. Pursuant to its Charter, the Compensation Committee has authority to engage outside compensation consultants or other advisors to assist the committee in carrying out its duties. With respect to 20202021 executive compensation, the Compensation Committee engaged Compensia, Inc. (“Compensia”), a national compensation consulting firm, as its compensation consultant. Except as described below under “Compensation-Setting Process – Role of Compensation Consultant,” Compensia performed no consulting or other services for us in 2020.2021. Based on its review, the Compensation Committee has determined that Compensia is independent and does not have other relationships with us that would impair its independence.
Compensation At Risk. Our executive compensation program is designed so that a significant portion of the cash incentive compensation of our executive officers, including our Named Executive Officers, is “at risk” based on corporate performance, and all of their RSU and NQSO awards that were made or otherwise outstanding during 20202021 were “at risk” based on continued employment through applicable vesting dates.
Equity-Based Compensation. A significant portion of the total compensation we pay to our executive officers, including our Named Executive Officers, is in the form of equity-based compensation, which we believe aligns the interests of our executive officers and stockholders. In particular, 99.6%For example, 94% of Mr. Steinert’s targetTrevisan’s total direct compensation for 20202021 was in the form of a RSU award subject to time-based vesting.
“Double Trigger” Change of Control Provisions in Executive Equity Awards. Our current formforms of time-based RSU and NQSO award agreementagreements with our executive officers, including our Named Executive Officers, providesprovide for acceleration of unvested RSUs or NQSOs, as applicable, under such award solely in the event of a qualifying termination of employment within 12 months following a Change of Control (as defined in the Company’s Omnibus Incentive Compensation Plan (the “2017 Plan”)). Following the final vesting in January 2021None of the initial RSU award granted to Mr. Caputo in connection with the commencement of his employment, none ofour executive officers, including our Named Executive Officers, is currently entitled to “single trigger” acceleration of vesting of any currently outstanding equity awards. One of our other executive officers, however, has an outstanding RSU award granted under the 2017 Plan, 50% of which will accelerate and become fully vested upon a Change of Control (as defined in the 2017 Plan). See “Potential Payments upon Termination of Employment or Change in Control” below for the definition of “Change of Control” under the 2017 Plan.
Health or Welfare Benefits. Our executive officers, including our Named Executive Officers, participate in broad-based Company-sponsored health and welfare benefits programs on the same basis as our other full-time, salaried employees.
Exchange Act Rule 10b5-1 Plan Sales. We maintain an internal policy that prohibits our executive officers from buying or selling any shares of our Class A common stock in the open market outside of a pre-approved Exchange Act Rule 10b5-1 plan, regardless of whether or not they are in possession of material, nonpublic information.
Compensation Clawback Policy. During 2020, our Board of Directors adoptedWe maintain the Clawback Policy, which provides for the recoupment of certain incentive compensation from covered individuals, including executive officers, in connection with certain triggering events. See “Compensation Clawback Policy” below for more information.
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What We Don’t Do:
No Retirement Plans Other than Standard Plans Offered to Employees. We do not currently offer, nor do we have plans to provide, pension arrangements, retirement plans or nonqualified deferred compensation plans or arrangements to our executive officers, including our Named Executive Officers.
Limited Perquisites. WeExcept as described below in “Perquisites and Other Personal Benefits,” we do not provide significant perquisites or other personal benefits to our executive officers, including our Named Executive Officers, except as generally made available to our other full-time employees.
No Change-of-Control-Related Tax Gross-Ups. We do not provide any tax gross-ups that may arise due to the application of Sections 280G and 4999 of the Internal Revenue Code of 1986 (the “Code”) to our executive officers, including our Named Executive Officers.
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No Cash Severance Payments for Executives Arising Solely as a Result of a Change of Control. Our current agreements with our executive officers, including our Named Executive Officers, do not provide for any cash payments or other benefits that arise solely as a result of a change of control of the Company.
Hedging and Pledging Prohibitions. Our Insider Trading Policy prohibits our non-employee directors, executive officers, and certain other persons as may be designated by our General Counselthe administrator of such policy from (i) entering into hedging or monetization transactions or similar arrangements with respect to our securities and (ii) holding our securities in a margin account or pledging our securities as collateral for a loan, in each instance without prior approval from our General Counsel.
Compensation Decisions for 2021
For 2021, the Compensation Committee has made certain changes to our executive compensation program to enhance alignment with stockholder interests and better reflect current market practices (with reference to our compensation peer group). In particular, on February 10, 2021, the Compensation Committee granted annual equity awards to each of our executive officers, 50% of the value of which were in the form of time-based RSU awards, 25% of the value of which were in the form of performance-based RSU awards and 25% of the value of which were in the form of non-qualified stock options. The time-based RSU awards and stock options vest quarterly over four years. The performance-based RSU awards were granted by us for the first time and constitute a meaningful portion of the long-term equity incentive compensation for our executive officers. As determined by the Compensation Committee, 50% of these performance-based awards will be earned and vest, if at all, at the end of three- and four-year performance periods ending on December 31, 2023 and December 31, 2024, respectively, based on the change in our total stockholder return (“TSR”) compared to the TSR growth of the companies that comprise the S&P 500 Index as of the day before the applicable performance period.
We believe that we have designed an updated executive compensation program that reflects current market practices, effectively links pay and performance and is in the best long-term interests of our stockholders. We will continue to re-evaluate our executive compensation program to cause continued alignment in our compensation program, policies and practices. Stockholder input will continue to be an important consideration in our annual executive compensation evaluation process.
Stockholder Advisory Vote on Named Executive Officer Compensation
At the Annual Meeting, we will be conducting a non-binding stockholder advisory vote on the compensation of our Named Executive Officers (commonly known as a “Say-on-Pay” vote). This Say-on-Pay vote provides stockholders the opportunity to express their views on our Named Executive Officers’ compensation. This vote is not intended to advise on any specific element of our compensation programs, but rather on the overall compensation of our Named Executive Officers and the philosophy, policies and practices described in this Proxy Statement.
At our 2019 Annual Meeting of Stockholders, our stockholders approved, on an advisory basis, a frequency of every year for casting advisory votes regarding our executive compensation. After considering the vote of stockholders on the matter, as well as our general compensation philosophy, we adopted an annual frequency for holding the Say-on-Pay vote. As a result, we held a Say-on-Pay vote at each of our 2020 and 2021 Annual MeetingMeetings of Stockholders, which received the approval of 97% of the votes cast for the proposal.proposal each such year. Although these results were advisory and not binding on the Company, our Board of Directors or the Compensation Committee, we value the opinions of our stockholders and commit to take the results of the Say-on-Pay vote into account when making subsequent decisions regarding the compensation of our Named Executive Officers.
Compensation Philosophy and Objectives
We believe in providing a competitive total compensation package to our executive officers, including our Named Executive Officers, through a combination of annual base salary, annual cash incentive award opportunities, equity awards and broad-based health and welfare benefit plans. Our executive compensation program is designed to achieve the following objectives:
attract, motivate and retain executive officers of outstanding ability and potential;
reward the achievement of key performance measures; and
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ensure that executive compensation is meaningfully related to the creation of stockholder value.
We believe that our executive compensation program should generally include short-term and long-term elements, including cash and equity compensation, and should reward consistent performance that meets or exceeds expectations. We evaluate the compensation provided to our executive officers to ensure it remains competitive relative to compensation paid by companies of similar size and geographic location operating in our industry, taking into account our relative performance, our financial and strategic objectives, and the performance of the individual executive officer.
Executive Compensation Design
The compensation arrangements for our executive officers, including our Named Executive Officers, consist of annual base salary, annual cash incentive award opportunities, long-term incentive compensation opportunities in the form of equity awards and certain broad-based employee health and welfare benefit plans. The key component of our executive compensation program continues to be equity compensation. We have generally emphasized the use of equity to provide incentives for our executive officers to focus on the growth of our overall enterprise value and, correspondingly, to create sustainable value for our stockholders.
Historically and during 2020,2021, our principal equity incentive vehicle was in the form of time-based RSU awards that may be settled in shares of our Class A common stock as they are earned.
We believe that RSU awards that may be settled in shares of our Class A common stock offer our executive officers a valuable long-term incentive that aligns their interests with the long-term interests of our stockholders. In February 2021, we utilized stock options and performance-based RSU awards to supplementexpanded the time-based RSUform of equity awards granted to our executive officers including our Named Executive Officers,to include performance-based RSU awards and NQSO awards in an attempt to further align our executive officers’ interests with the long-term interests of our stockholders. However, in February 2022, as part of the Compensation Committee’s continued evaluation of our executive compensation program and in order to ensure consistency with our short-term and long-term goals, the Compensation Committee amended the vesting provisions of the performance-based RSU awards granted to our executive officers in 2021 from performance-based to time-based (the “2022 PSU Amendment”). After a thorough review of our executive compensation program, the Compensation Committee believes that this approach more effectively links pay and performance, and serves as a compelling means of retaining our important talent in a competitive market, thus making it in the best long-term interests of our stockholders. See “Compensation Decisions for 20212022” above for more information on our 2021 executive equity compensation program design.information. Going forward, as we deem appropriate, we expect to continue to offer a combination of stock options,
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time-based RSU awards and performance-based RSU awards andawards; however, we may also introduce other forms of stock-based compensation awards into our executive compensation program to provide our executive officers with various types of equity incentives that further this objective.
We also offer cash compensation in the form of annual base salaries and annual cash incentive award opportunities. Typically, we have structured our annual cash incentive award opportunities to focus on the achievement of specific short-term financial and strategic objectives that will further our longer-term growth objectives.
We have not adopted any formal policies or guidelines for allocating compensation between current and long-term compensation, between cash and non-cash compensation or among different forms of non-cash compensation. Instead, the Compensation Committee reviews each element of executive compensation separately and also takes into consideration the value of each executive officer’s target total direct compensation opportunity (the sum of annual base salary, annual cash incentive award opportunity and equity awards) as a whole, and its relative size in comparison to our other executive officers. The Compensation Committee also considers amounts realizable from prior compensation awarded to each executive officer, including equity that is nearly- or fully-vested, when setting each individual’s target total direct compensation opportunity for the fiscal year.
The Compensation Committee reviews our executive compensation program at least annually. As part of this review process, the Compensation Committee considers whether our overall compensation philosophy is aligned with the interests of our stockholders while considering the compensation levels needed to ensure that our executive compensation program remains reasonable and competitive. In addition, the Compensation Committee considers our ability to achieve our retention objectives and the potential cost of replacing executive officers. From time to time the Compensation Committee may determine that it is in the best interest of the Company and our stockholders to modify, amend or otherwise adjust previous compensation awards.
Compensation-Setting Process
Role of the Compensation Committee
The Compensation Committee is responsible for reviewing and approving the compensation of our officers, including our Named Executive Officers, subject to any approval of our Board of Directors that the Compensation Committee determines to be desirable or is required by applicable law or Nasdaq listing standards. Specifically, the Compensation Committee oversees our compensation and benefit plans and policies, administers our equity compensation plans and reviews and approves (or makes recommendations to our Board of Directors regarding) the compensation of our officers.
RolesRole of our Chief Executive Officer and President
Our CEO and President evaluateevaluates at least annually the performance of each of our executive officers who reports to them and makemakes recommendations to the Compensation Committee with respect to annual base salary adjustments, target annual cash incentive award opportunities, actual award payments, and equity awards for each such executive officer. While the Compensation Committee takes these recommendations into consideration in its deliberations, it exercises its own independent judgment in approving the executive compensation of our executive officers.
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Role of Compensation Consultant
The Compensation Committee has the authority under its Charter to engage the services of a compensation consultant to assist it in carrying out its responsibilities. In each of 2019 and 2020,the past three years, the Compensation Committee formally retained Compensia to assist it in developing and overseeing the Company’s executive compensation program. Pursuant to these engagements, Compensia reviewed our existing compensation peer group and recommended an updated set of companies in 2019, which the Compensation Committee considered in determining our compensation peer group. After considering an updated analysisanalyses from Compensia, the Compensation Committee maintained this same compensation peer group for 2020.2020 but modified the compensation peer group for 2021. To assist the Compensation Committee with its consideration of 20202021 executive compensation decisions, Compensia provided the Compensation Committee with compensation data and an updated market analysis for similarly situated executive officers at these peer companies. Compensia also provided consulting services to the Company on an ad hoc basis regarding equity compensation matters and assisted with review of the “Compensation Discussion and Analysis” section of the Company’s 20202021 Proxy Statement.
Compensia maintains a policy that is specifically designed to prevent any conflicts of interest. In addition, the Compensation Committee has assessed the independence of Compensia taking into account, among other things, the factors set forth in Exchange Act Rule 10C-1 and Nasdaq listing standards, and concluded that no conflict of interest has arisen with respect to the work that Compensia performs for the Compensation Committee.
Competitive Positioning
As described above, in 2019, having considered the analysis and advice provided by Compensia, the Compensation Committee established our prior compensation peer group with the following set of peers, consisting of 20 publicly traded companies, which the Compensation Committee maintained in 2020subsequently modified to consist of the following set of peers for purposes of reviewing and considering our executive officers’ 20202021 base salaries, target annual cash incentive award opportunities and annual equity awards. The Compensation Committee believed that this compensation peer group accurately reflected the Company’s growth, opportunities and current market positioning. This group consisted of technology companies that the Compensation Committee determined operate within our industry, compete with us for
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talent, or are located in the same general geographic area. Other factors considered include comparable revenues, market capitalization and projected revenue growth. In connection with its review, the Compensation Committee removed as peers for 2021 Carbonite and LogMeIn because of their revised corporate statuses and Varonis Systems and Zillow since they fell outside of comparable revenue and market capitalization ranges.
The following companies were used by the Compensation Committee during 20202021 as our compensation peer group:
Alarm.com Holdings |
| Paylocity Holding | TripAdvisor |
Bottomline Technologies* | GrubHub | Pegasystems |
|
|
| Qualys | Wayfair |
|
| Rapid7 | Yelp |
| New Relic |
| Yext |
|
|
|
|
*Represents new addition to peer group.
The Compensation Committee considered both Compensia’s market analysis and compensation data drawn internally from publicly-available proxy statements and industry-specific survey data for this compensation peer group as reference points for its 20202021 executive compensation decisions. While the Compensation Committee takes into account peer company compensation practices, the Compensation Committee uses this information as one of many factors in its deliberations on compensation matters and does not set compensation levels to meet specific percentiles.
The Compensation Committee reviews the analyses prepared internally and by a compensation consultant based on the compensation data drawn from a compensation peer group to develop a subjective representation of the “competitive market” with respect to current executive compensation levels and related policies and practices. The Compensation Committee then evaluates how our pay practices and the compensation levels of our executive officers compare to the competitive market. As part of this evaluation, the Compensation Committee also reviews the performance measures and performance goals generally used within the competitive market to reward performance.
Management and the Compensation Committee strive to incorporate flexibility into our executive compensation program and the assessment process to respond to and adjust for the evolving business environment and the value delivered by our executive officers, including our Named Executive Officers.
Elements of Executive Compensation
The 20202021 compensation program for our executive officers, including our Named Executive Officers, consisted of three principal components:
annual base salary;
annual cash incentive awards; and
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long-term incentive compensation in the form of time-based RSU and NQSO awards that are settled in shares of our Class A common stock.
The following charts illustrate the composition of the 20202021 total direct compensation for Mr.Messrs. Steinert and Trevisan on a weighted-average basis and for our other Named Executive Officers in aggregate as comprised of annual base salary, annual cash incentive award opportunities and long-term incentive compensation in the form of equity awards. These compensation elements are considered to be performance-based, or “at-risk”,“at-risk,” with the exception of base salary.
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Base Salary
Annual base salary represents the fixed portion of the compensation of our executive officers, including our Named Executive Officers, and is an important element of compensation intended to attract and retain highly-talented individuals. Generally, we use annual base salary to provide each executive officer with a specified level of cash compensation during the year with the expectation that he or shethe executives will perform his or hertheir responsibilities to the best of his or her abilitytheir abilities and in our best interests.
Generally, the Compensation Committee reviews the annual base salaries of our executive officers, including our Named Executive Officers, at the beginning of each year and at that time establishes the annual base salary for that fiscal year as it determines to be necessary or appropriate. Typically, the Compensation Committee sets annual base salaries of our executive officers at levels that it believes are competitive with current market practices with reference to our compensation peer group (other than Mr. Steinert whose annual base salary is intentionally set lower than current market practices) after taking into consideration each individual executive officer’s role, his or her responsibilities, qualifications, experience, past performance and expected future contributions, his or her prior annual base salary with the Company and the annual base salary levels of our other executive officers (other than Mr. Steinert). The Compensation Committee does not apply specific formulas to determine annual base salary amounts.
In February 2020,2021, the Compensation Committee reviewed the annual base salary of each of our executive officers, including our Named Executive Officers.Officers (except for Ms. Sarnoff, whose employment commenced in December 2021). The Compensation Committee considered Compensia’s competitive market analysis, including a comparison of our Named Executive Officers’ annual base salaries to those of executives holding comparable positions at the companies in our compensation peer group, as well as its own assessment of our 20192020 performance and the other factors described above. The Compensation Committee also considered the appointments of Mr. Trevisan as the Company’s President, InternationalChief Executive Officer and Mr. ZalesFredo as the Company’s PresidentChief Financial Officer in January 2020 and February 2019, respectively,2021, as well as their respective additional
28
responsibilities in connection with such roles. Based on this review, the Compensation Committee determined that it was appropriate to adjustset the annual base salaries of our Named Executive Officers for 20202021 as follows:
Named Executive Officer
| 2020 Base Salary
| 2021 Base Salary(1)
| Percentage Increase
|
Mr. Steinert(2) | $ 10,000 | $ 10,000 | 0% |
Mr. Trevisan | $ 437,500 | $ 540,000 | 23% |
Mr. Zales | $ 500,000 | $ 500,000 | 0% |
Ms. Eldridge | $ 300,000 | $ 325,000 | 8% |
Mr. Fredo | $ 275,600 | $ 315,000 | 14% |
Ms. Sarnoff | N/A | $ 375,000 | N/A |
Ms. Welch(3) | $ 315,000 | $ 325,000 | 3% |
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Named Executive Officer
| 2019 Base Salary
| 2020 Base Salary(1)
| Percentage Increase
|
Mr. Steinert(2) | $50,000 | $10,000 | – |
Mr. Trevisan | $380,000 | $437,500 | 15% |
Mr. Zales | $380,000 | $500,000 | 32% |
Mr. Caputo | $300,000 | $315,000 | 5% |
Ms. Welch | $300,000 | $315,000 | 5% |
| These |
|
|
The amounts set forth above do not reflect the temporary reduction in the annual base salaries were effective as of January 1, 2021 (except for Ms. Sarnoff, whose employment commenced on December 8, 2021).
The actual base salaries paid to our Named Executive Officers in 20202021 are set forth in the “Summary Compensation Table” below.
Cash Incentive Awards
In 2020,2021, we provided our executive officers, including our Named Executive Officers other than Mr. Steinert, with the opportunity to earn cash incentive awards to encourage the achievement of our corporate performance objectives and to reward those individuals who significantly impact our corporate results based on the objectives set forth in our annual operating plan. The Compensation Committee determines and approves cash incentive award decisions for our executive officers.
In February 2018, the Compensation Committee approved the CarGurus, Inc. Annual Incentive Plan (the “Annual Incentive Plan”), providing an opportunity for certain of our salaried employees, including our Named Executive Officers, to earn annual cash incentive awards, as described below. Pursuant to the Annual Incentive Plan, each participant is eligible to receive a cash incentive award for the relevant fiscal year based on our level of achievement of one or more pre-established business and financial performance goals and the participant’s individual performance goals, if applicable, during such fiscal year. The amount actually paid to a participant could be more or less than his, her or theirthe participant’s target award, depending on the extent to which applicable performance goals were satisfied. Participants, including our Named Executive Officers, will not receive a payout for any performance measure that fails to achieve threshold level criteria.
In February 2020,2021, the Compensation Committee established the 20202021 performance measures and related target performance levels, as well as the corresponding weighting for each measure, for our executive officers, including our Named Executive Officers other than Mr. Steinert, under the Annual Incentive Plan (the “2020“2021 Annual Incentive Plan”).
Target Cash Incentive Award Opportunities
Under the Annual Incentive Plan, each participant’s actual annual cash incentive award is calculated, in part, by reference to a target annual cash incentive award opportunity based on either a percentage of his, her or theirthe participant’s annual base salary for the fiscal year or a specified dollar amount, in the case of our executive officers, as determined by the Compensation Committee. To set the target annual cash incentive award opportunities of our Named Executive Officers for 2020,2021, the Compensation Committee considered Compensia’s competitive market analysis, including a comparison of our Named Executive Officers’ target cash incentive award opportunities to those executives holding comparable positions at the companies in our compensation peer group, as well as its own assessment of our 20192020 performance and the other factors described in “Elements of Executive Compensation – Base Salary” above. The Compensation Committee also considered the appointments of Mr. Trevisan as the Company’s President, InternationalChief Executive Officer and Mr. ZalesFredo as the Company’s PresidentChief Financial Officer in January 2020 and February 2019, respectively,2021, as well as their respective additional responsibilities in connection with such roles. In February 2020,2021 (or November 2021 in the case of Ms. Sarnoff), the Compensation Committee determined to set the target annual cash incentive award opportunities of our Named Executive Officers for 20202021 as follows:
Named Executive Officer
| Target Cash Incentive
| Target Cash Incentive
| Percentage Change
|
Mr. Steinert(1) | – | – | – |
Mr. Trevisan | $ 472,000 | 87% | 30% |
Mr. Zales | $ 300,000 | 60% | (36)% |
Ms. Eldridge | $ 200,000 | 62% | 60% |
Mr. Fredo | $ 200,000 | 64% | 190% |
Ms. Sarnoff | $ 250,000 | 67% | N/A |
Ms. Welch(2) | $ 200,000 | 62% | 0% |
Named Executive Officer
| Target Cash Incentive
| Target Cash Incentive
| Percentage Increase
|
Mr. Steinert(1) | – | – | – |
Mr. Trevisan | $362,500 | 83% | 58% |
Mr. Zales | $468,000 | 94% | 103% |
Mr. Caputo | $200,000 | 63% | 0% |
Ms. Welch | $200,000 | 63% | 0% |
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The amount actually paid to a participant could be more or less than his, her or theirthe participant’s target annual cash incentive award, depending on the extent to which applicable performance goals were satisfied. For 2020,2021, the Compensation Committee initially provided that annual incentive awards for such year would be paid to our executive officers in two installments rather than in one lump sum,
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whereby (i) 40% of each executive officer’s target annual cash incentive award opportunity would be made in an initial lump sum payment following completion of our second fiscal quarter of 20202021 (the “First Half 20202021 Payment”) and (ii) the remainder of each executive officer’s full-year annual cash incentive award would be paid in a lump sum payment following the end of the 20202021 fiscal year based on the Compensation Committee’s evaluation of our actual performance as measured against the achievement of the pre-established corporate and individual performance goals. In connection with the Expense Reduction Plan, however, we elected not to proceed with paying the First Half 2020 Payments to any of our employees, including our Named Executive Officers. As a result, annual incentive awards for 2020 were paid in a single lump sum payment following the end of the 2020 fiscal year based on the Compensation Committee’s evaluation of our actual performance as measured against the achievement of the pre-established corporate and individual performance goals.
Corporate Strategic and Organizational Goals
Our Board of Directors approves annual strategic and organizational initiatives for the Company, which the Compensation Committee utilizes as the business performance goals upon which annual cash incentive award payments are based. The 20202021 strategic initiatives involved improvements to consumer retention, increasingour core business growth and profitability, as well as the value of consumer connections, development of new dealer products, growth of our consumer finance offering and digital retail platform and scaling of our international markets.wholesale businesses. The 20202021 organizational initiatives involved our technology infrastructure, activities related to employee engagement and enablement, as well as scaling our engineering team.improving representation and belonging for underrepresented populations at the Company in the U.S. Each of these initiative categories involved one or more quantitative and qualitative metrics as established by our management that had to be successfully completed for that portion of the initiative to be considered achieved. For 2020,2021, the threshold, target, and maximum performance levels for the number of strategic and organizational initiatives achieved and the corresponding payout levels on a sliding scale under the 20202021 Annual Incentive Plan were established as follows, which reflects adjustments made during 2020 to account for the impact of the COVID-19 pandemic on our business:follows:
Performance Measure
| Performance Level
| Payout Percentage
|
Strategic and Organizational Initiatives | Threshold |
|
Target (70%) |
| |
Maximum (100%) |
|
|
|
Corporate Financial Performance Goals
In addition, the Compensation Committee selected annual revenue and adjusted earnings before interest and taxes (“EBIT”), a non-U.S. generally accepted accounting principles (“GAAP”) financial measure, as the financial performance measurements for the fiscal year. For 2020,2021, the threshold, target, and maximum performance levels for annual revenue and adjusted EBIT, as set forth in our annual operating plan, (as modified due to the impact of the COVID-19 pandemic), and the corresponding payout levels on a sliding scale for achievement of such measures under the 20202021 Annual Incentive Plan, were established as follows, which reflects adjustments made during 2020 to account for the impact of the COVID-19 pandemic on our annual operating plan:follows:
Performance Measure
| Performance Level
| Payout Percentage
|
Annual Revenue | Threshold (95%) |
|
Target (100%) |
| |
Maximum (105%) |
| |
Adjusted EBIT | Threshold (90%) |
|
Target (100%) |
| |
Maximum (110%) |
|
We calculate “adjusted EBIT” as GAAP consolidated net income, adjusted to exclude: stock-based compensation expense, amortization of intangible assets, acquisition-related expenses, restructuring expenses, other expense (income),income, net, and the provision for (benefit from) income taxes.taxes, and net income attributable to redeemable noncontrolling interest.
The Compensation Committee determined that, for purposes of the 20202021 Annual Incentive Plan, these corporate financial measures were the most appropriate performance measures to use in determining cash incentive awards because, in its view, they were
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the best indicators of our successful execution of our annual operating plan. Thus, the threshold performance levels for these corporate performance goals were the minimum performance levels that had to be achieved before participants could earn any annual cash incentive awards relating to this measure. If the threshold performance goal for a particular measure was not achieved, then no award payments would be made under the 20202021 Annual Incentive Plan with respect to such measure.
The above-referenced performance objectives should not be interpreted as a prediction of how we will perform in future periods. As described above, the purpose of these objectives was to establish a method for determining the payment of annual cash incentive compensation in 2020 in view of the impact of the COVID-19 pandemic.2021. You are cautioned not to rely on these performance goals as a prediction of our future performance.
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Individual Performance Goals
For purposes of the 20202021 Annual Incentive Plan, the Compensation Committee authorized (i) Mr. Steinert to establish one or more individual performance goals for Mr. Zales’Trevisan’s annual cash incentive award opportunity and (ii) Mr. ZalesTrevisan to establish one or more individual performance goals for each executive officer, including each Named Executive Officer other than Mr. Steinert and himself, as part of his or herthe executive’s annual cash incentive award opportunity. As part of our annual performance evaluation process, Messrs. Steinert and Zales,Trevisan, after consultation with Mr. ZalesTrevisan or each other executive officer, respectively, established his or herthe executive’s performance goals for the fiscal year. These performance goals were not intended to be formulaic, but rather to serve as the framework upon which Messrs. Steinert and ZalesTrevisan could evaluate the applicable executive officer’s overall performance. Such performance goals were established with reference to each individual executive officer’s position or function within the Company and included operational metrics that could reflect corporate or departmental goals or could include specific operational goals with respect to his or herthe executive’s area of responsibility. These performance goals also included the demonstration of leadership and effective decision-making, effective communication, promotion of our strategic and organizational initiatives and values, and commitment to excellence and work ethic and could include more specific objectives for the executive officer, such as the successful completion of major projects and organization capability building.
For our executive officers other than Mr. Steinert in 2020,2021, the Compensation Committee established performance ratings for the individual performance goals achieved and the corresponding payout levels under the 20202021 Annual Incentive Plan as follows:
Performance Measure
| Performance Rating
| Payout Percentage
|
Individual Performance Goals |
|
|
Developing |
| |
Strong |
| |
Leading |
| |
Outstanding |
|
Our executive officers other than Mr. Steinert were subject to reviews conducted by their respective direct managers at the conclusion of the 20202021 fiscal year (or, in the case of Ms. Welch, prior to her separation from the Company) to evaluate their performance for such year. These evaluations were the basis for the assessment of their performance rating against the pre-established individual performance goals.
Weighting of Performance Goals
In February 2020,2021, in connection with establishing the corporate performance goals for the fiscal year, the Compensation Committee also determined the relative weighting for our executive officers (other than Mr. Steinert) with respect to the business and financial performance goals and the individual performance goals. For purposes of the 20202021 Annual Incentive Plan, the weighting of the performance goals for our executive officers, including our Named Executive Officers other than Mr. Steinert, was as follows:
Performance Measure
| Weighting
|
Strategic and Organizational Initiatives | 30% |
Annual Revenue | 30% |
Adjusted EBIT | 10% |
Individual Performance Goals | 30% |
20202021 Annual Incentive Award Results
In July 2021, the Compensation Committee approved the First Half 2021 Payments for our Named Executive Officers as follows:
Named Executive Officer | Actual Cash Incentive Award |
Mr. Steinert(1) | – |
Mr. Trevisan | $ 188,800 |
Mr. Zales | $ 120,000 |
Ms. Eldridge | $ 80,000 |
Mr. Fredo | $ 80,000 |
Ms. Sarnoff(2) | – |
Ms. Welch(3) | $ 80,000 |
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In February 2022 (or November 2021 in the case of Ms. Welch), the Compensation Committee determined the total amounts to be paid to our executive officers, including our Named Executive Officers other than Mr. Steinert, under the 20202021 Annual Incentive Plan based on our actual performance for the 20202021 fiscal year (or, in the case of Ms. Welch, at the time of her separation from the Company) with respect to each corporate performance goal and each executive officer’s individual performance against his or
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herthe executive’s distinct performance goals. For 2020,2021, the actual results against the targets set for the corporate components under the 20202021 Annual Incentive Plan were as follows:
Performance Measure
| Achievement Percentage or Rating
| Payout Percentage
|
Strategic and Organizational Initiatives | 61% | 87.6% |
Annual Revenue | 127% | 200% |
Adjusted EBIT | 196% | 150% |
Individual Performance Goals | (1) | (1) |
Performance Measure
| Achievement Percentage or Rating
| Payout Percentage
|
Strategic and Organizational Initiatives | 62.9% | 69.9% |
Annual Revenue | 100.3% | 76.3% |
Adjusted EBIT | 103.2% | 83.0% |
Individual Performance Goals | (1) | (1) |
|
|
As a result, the target annual cash incentive award opportunities and the actual cash incentive award payments (inclusive of the First Half 2021 Payments) made to our Named Executive Officers (other than Mr. Steinert) for 20202021 were as follows:
Named Executive Officer
| Target Annual
| Actual Annual
| Percentage of
|
Mr. Steinert(1) | – | – | – |
Mr. Trevisan | $ 472,000 | $ 640,882 | 135.8% |
Mr. Zales | $ 300,000 | $ 407,340 | 135.8% |
Ms. Eldridge | $ 200,000 | $ 268,560 | 134.3% |
Mr. Fredo | $ 200,000 | $ 262,560 | 131.3% |
Ms. Sarnoff(2) | $ 16,438 | $ 21,580 | 131.3% |
Ms. Welch(3) | $ 200,000 | $ 262,500 | 131.3% |
Named Executive Officer
| Target Annual
| Actual Annual
| Percentage of
|
Mr. Steinert(1) | – | – | – |
Mr. Trevisan | $362,500 | $335,893 | 93% |
Mr. Zales | $468,000 | $433,649 | 93% |
Mr. Caputo | $200,000 | $176,320 | 88% |
Ms. Welch | $200,000 | $164,320 | 82% |
|
|
The annual cash incentive award payments made to our Named Executive Officers for 20202021 are set forth in the “Summary Compensation Table” below.
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Long-Term Incentive Compensation
Historically and during 2020,2021, we have used RSU awards with time-based vesting requirements to retain, motivate and reward our executive officers, including our Named Executive Officers, for long-term increases in the value of our Class A common stock and, thereby, to align their interests with those of our stockholders. In 2021, we expanded the form of equity awards granted to our executive officers to include performance-based RSU awards and NQSO awards in order to supplement the time-based RSU awards granted to our executive officers, including our Named Executive Officers, and in an effort to further align our executive officers’ interests with the long-term interests of our stockholders. Specifically, 50% of the value of the equity awards granted to our Named Executive Officers was awarded in the form of time-based RSU awards, 25% of the value was awarded in the form of performance-based RSU awards, and the remaining 25% of the value was awarded in the form of NQSOs. At grant, the Compensation Committee contemplated that the time-based RSU awards and NQSOs would vest quarterly over four years while the performance-based RSU awards would be earned and vest, if at all, at the end of three- and four-year performance periods ending on December 31, 2023 and December 31, 2024, respectively, based on the change in our total stockholder return (“TSR”) compared to the TSR growth of the companies that comprise the S&P 500 Index as of the day before the applicable performance period (the “PSU Peer Group Companies”). Because the value of these RSUequity awards increases with any increase in the value of the underlying shares of Class A common stock, the awards provide incentives to our executive officers that are aligned with the interests of our stockholders. As described below under the heading “Compensation Decisions for 2022,” the Compensation Committee determined to amend the vesting terms of the performance-based RSU awards from performance-based to time-based with retrospective effect to the date of grant, as it believes that the modified time-based vesting approach more effectively links pay and performance, and serves as a compelling means of retaining our important talent in a competitive market, thus making it in the best long-term interests of our stockholders. The disclosure reported herein in respect of the vesting of the performance-based RSU awards describes the vesting provisions in respect of the fiscal year ended December 31, 2021 and such disclosure does not give effect to the above-referenced modification of the vesting provisions of such awards.
Typically, the size and form of the equity awards granted to our existing or newly-hired executive officers are determined in the discretion of the Compensation Committee at a level that it believes is competitive with current market practices (with reference to our compensation peer group) and after taking into consideration each individual executive officer’s role and the scope of his or her responsibilities, qualifications, experience, past performance and expected future contributions, his or her current equity holdings and the potential equity awards to be granted to our other executive officers.
For its consideration of the size and form of equity awards to issue to our executive officers in 2020,2021, the Compensation Committee considered Compensia’s competitive market analysis, including a review of equity awards granted to executives holding comparable positions at the companies in our compensation peer group, as well as its own assessment of our 20192020 performance and the other factors described in “Elements of Executive Compensation – Base Salary” above. The Compensation Committee also considered the appointments of Mr. Trevisan as the Company’s President, InternationalChief Executive Officer and Mr. ZalesFredo as the Company’s PresidentChief Financial Officer in January 2020 and February 2019, respectively,2021, as well as their respective additional responsibilities in connection with such roles. The Compensation Committee also determined that it was advisable to grant Ms. Sarnoff equity awards as a new hire incentive. Additionally, while we typically grant equity awards to eachour executive officers on an annual basis, the Compensation Committee determined to increase the size of Mr. Caputothe 2021 awards granted to Messrs. Trevisan and Ms. WelchZales to cover the value of awards they would otherwise receive through 2024. As a second RSU award as
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an additional retention incentive.result, the Compensation Committee has indicated that it does not currently contemplate that Messrs. Trevisan and Zales would be eligible for another equity grant in respect of long-term incentive compensation until 2025. Based on this review, the Compensation Committee approvedgranted the grant of RSUfollowing equity awards in February 2020 to our Named Executive Officers as follows:in February 2021 and Ms. Sarnoff in December 2021:
Time-Based RSU Awards
Named Executive Officer
| RSU Award (number of shares)
| RSU Award (grant date fair value)(1)
|
Mr. Steinert |
| $ |
Mr. Trevisan |
| $ |
Mr. Zales |
| $ |
Ms. Eldridge | 31,592(2) | $ 1,124,991 |
Mr. |
| $ |
|
| |
Ms. |
| $ |
| 17,551(2) | $ |
| (1) The amounts reported represent the grant date fair value of the time-based RSU awards, as computed in accordance with the Financial Accounting Standard Board’s ASC Topic 718 (“FASB ASC Topic 718”), which excludes the impact of estimated forfeitures related to service-based vesting conditions, reflects the accounting cost for the equity awards, and does not correspond to the actual economic value that may be received by our Named Executive Officers from the equity awards. 33 (2) Annual retention award, vesting as follows: 6.25% of the RSUs subject to the award vests on the date that is three months following the vesting commencement date of January 1, 2021 and 6.25% of the RSUs subject to the award vests on the last day of each three-month period thereafter until the fourth anniversary of the vesting commencement date, contingent upon such Named Executive Officer remaining continuously employed by us through each applicable vesting date. (3) New hire award, vesting as follows: 25% of the RSUs subject to the award vests on the one-year anniversary of the vesting commencement date of December 1, 2021 and 6.25% of the RSUs subject to the award vests on the last day of each three-month period thereafter until the fourth anniversary of the vesting commencement date, contingent upon such Named Executive Officer remaining continuously employed by us through each applicable vesting date. (4) Ms. Welch’s employment with the Company terminated effective as of December 3, 2021. Performance-Based RSU Awards
(1) The amounts reported reflect the value of the performance-based RSU awards at the grant date based upon the grant date fair value determined utilizing a Monte Carlo simulation model, a generally accepted statistical technique used, in this instance, to simulate a range of possible future prices for the Company and the PSU Peer Group Companies over the applicable performance periods under the performance-based RSU awards, which reflects the accounting cost for the equity awards, and does not correspond to the actual economic value that may be received by our Named Executive Officers from the equity awards.
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