Compensation Committee Report
The following report of the compensation committee does not constitute solicitation material, and shall not be deemed filed or incorporated by reference into any other filing by us under the Securities Act of 1933, or the Securities Exchange Act of 1934.
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis, as required by Item 402(b) of Regulations S-K, with our management. Based on this review and these discussions, the compensation committee recommended to our Board that the Compensation Discussion and Analysis be included in our annual report on Form 10-K and proxy statement on Schedule 14A.
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| Respectfully submitted by the members of the compensation committee of our Board: |
| | Brandon Arrindell (Chairman) |
| | Ronald A. Sege |
| | Rafael Torres |
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Fiscal 2023 Summary Compensation Table
The following table provides information regarding the compensation of our principal executive officer and principal financial officer as of June 30, 2023. We refer to these executive officers as our “named executive officers.”
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Name and Principal Position | | Fiscal
Year | | Salary | | Bonus | | Stock
Awards (1) | | Option
Awards (1) | | All Other
Compensation (2)(3) | | Total
Compensation | |
Robert J. Pera | | 2023 | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 976,546 | | | $ | 976,546 | | |
Chief Executive Officer | | 2022 | | — | | | — | | | — | | | — | | | 478,907 | | | 478,907 | | |
| | 2021 | | — | | | — | | | — | | | — | | | 118,629 | | | 118,629 | | |
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Kevin Radigan | | 2023 | | 445,000 | | 125,000 | | 507,285 | | — | | | 4,400 | | | 1,081,685 | |
Chief Accounting and Finance Officer | | 2022 | | 420,000 | | 100,000 | | 197,451 | | — | | | 5,200 | | | 722,651 | |
| | 2021 | | 420,000 | | 100,000 | | 212,548 | | — | | | 5,025 | | | 737,573 | |
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(1) | The amounts in this column represent the aggregate grant date fair value of the RSUs or option awards, as applicable, computed in accordance with FASB Topic ASC 718. See the Notes to Consolidated Financial Statements contained in our Annual Report for fiscal 2023 for a discussion of assumptions made in determining the grant date fair value and compensation expense of our RSUs and stock options. For additional information, refer to the footnotes of our Consolidated Financial Statements contained in our Annual Report for fiscal 2023 for the assumptions made in the valuation of the RSUs and option awards. These amounts reflect our accounting expense for these awards, and do not correspond to the actual value that will be recognized by named executive officers. |
(2) | For Mr. Radigan, amounts under this column for fiscal years 2023, 2022 and 2021 consisted of only employer contributions for 401(k) plan. |
(3) | For Mr. Pera, the amount reported reflects incremental costs for personal use of the Company airplane and is determined by calculating an hourly variable rate (e.g., landing, parking and flight planning fees, fuel expenses based on a rolling average cost per flight, catering, crew travel and other miscellaneous variable costs) for the aircraft and then multiplying the result by the hours flown for personal use and any flight hours for plane repositioning (or “deadhead”) flights associated with personal use of the Company airplane. The amount does not include the fixed costs that do not change based on usage, such as crew salaries and hangar storage costs. In addition, family members and guests of Mr. Pera may occasionally accompany him on business travel on the Company airplane at no or de minimis incremental cost to us. Amount reported also includes reimbursements of FICA taxes related to Mr. Pera’s personal use of Company airplane. |
CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and applicable SEC rules, we have prepared the ratio of annual total compensation of our Chief Executive Officer, to the annual total compensation of the median employee of the Company. The pay ratio included in this information is a reasonable estimate calculated in a consistent manner with Item 402(u) of Regulations S-K
For fiscal year 2023, the total compensation for the median employee of the Company was $68,683. For fiscal year 2023, our Chief Executive Officer, Mr. Pera did not receive compensation from the Company, other than the incremental costs for personal use of the Company airplane of $976,546. As such, for the fiscal year ended June 30, 2023, the ratio of the annual total compensation of the CEO to the annual total compensation of our median employee was approximately 14.22 to 1.
Because there has been no significant change in our employee population or employee compensation arrangements since the median employee was identified in fiscal 2021, the median employee that was used for purposes of calculating the CEO pay ratio for fiscal 2023 is the same employee that we identified for disclosure for fiscal 2021.
The median employee was identified by reviewing the consistently applied compensation measure of annual cash base salary, per payroll records, for all Ubiquiti employees, including its consolidated subsidiaries, as of June 30, 2021, which was the last pay period for the 2021 fiscal year. Any salaries denominated in foreign currencies were translated to U.S. dollars at the corresponding exchange rate as of June 30, 2021. We used the annual cash base salary as our consistently applied compensation measure as it represents the primary compensation component paid to all of our employees each fiscal year and is the one pay component that has a similar definition and is reported in a similar manner globally. All of the Company’s full time and part time employees were included in the calculation and adjustments were made to annualize base salary for any employees not employed by Ubiquiti for the entire fiscal year or any unpaid leave during the fiscal year. Mr. Pera was excluded from the calculation of median employee for the purposes of this determination.
After identifying the median employee based on the criteria described above, the total compensation for this employee was calculated using the same methodology that was used in the 2023 Summary Compensation Table.
This pay ratio is an estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. SEC rules do not specify a single methodology for identification of the median employee or calculation of the pay ratio, and other companies may use assumptions and methodologies that are different from those used by us in calculating their pay ratio. As such, the pay ratio reported by other companies may not be comparable to the pay ratio as reported above.
Grants of Plan-Based Awards for Fiscal 2023
The following table provides information regarding grants of plan-based awards to each of our named executive officers during fiscal 2023.
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Name | | Grant Date | | Stock Awards (#)(1) | | Option Awards: Number of Securities Underlying Options (#) | | Exercise or Base Price of Option Awards ($) | | Grant Date Fair Value of Stock and Option Awards ($) (2) |
Kevin Radigan | | 8/9/2022 | | | | 1,628 | | | | — | | | | | — | | | | $ | 507,285 | | |
| Robert J. Pera | | — | | | | | — | | | | | — | | | | | — | | | | | — | | |
(1) Represents an award of RSUs, whereby the shares subject to the award vest with respect to 25% of the shares on each anniversary of July 1, 2023.
(2) Represents grant date fair value computed in accordance with FASB Topic ASC 718.
Outstanding Equity Awards at June 30, 2023
The following table presents certain information concerning outstanding equity awards held by each of our named executive officers at June 30, 2023.
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| | Stock Awards (1) |
Name | | Number of Shares that Have Not Vested (#) | | Market Value of Shares That Have Not Vested ($) (2) |
Kevin Radigan | | 3,072 | | | $ 539,904(3) |
Robert J. Pera | | — | | | — | |
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| (1) | 965 and 2,107 stock awards listed in this outstanding equity awards table were granted under our 2010 Plan and 2020 Plan, respectively. |
| (2) | The market value of securities reflected in this table is based upon the closing price of the common stock on June 30, 2023, which was $175.75 per share. |
| (3) | Includes (i) 381 RSUs granted on August 6, 2019 that will vest on July 1, 2023; (ii) 584 RSUs granted on August 18, 2020 that will vest on equal installments on July 1, 2023 and July 1, 2024; (iii) 479 RSUs granted on August 20, 2021, that will vest in substantially equal installments on July 1, 2023, July 1, 2024, and July 1, 2025; and (iv) 1,628 RSUs granted on August 9, 2022, that will vest in equal installments on July 1, 2023, July 1, 2024, July 1, 2025, and July 1, 2026. |
Option Exercises and Stock Vested in Fiscal 2023
The following table presents certain information concerning the exercise of stock options and the vesting of stock awards held by our named executive officers during fiscal 2023.
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Name | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) |
| Kevin Radigan | | 1,423 | | | $ | 349,759 | |
| Robert J. Pera | | — | | | — | |
Pension Benefits & Nonqualified Deferred Compensation
We do not provide a pension plan for our employees and no named executive officers participated in a nonqualified deferred compensation plan during fiscal 2023.
Employment Agreements
We currently have an employment agreement with Mr. Radigan. The employment agreement provides for at will employment, base salary, term of the agreement, eligibility to participate in any of our bonus plans or programs, standard employee benefit plan participation and eligibility to receive stock option grants. The employment agreement contains certain severance benefits in favor of the executives.
Mr. Radigan has served as our Chief Accounting Officer since May 2016. In March 2016, we entered into an employment agreement with Mr. Radigan. In fiscal 2019 Mr. Radigan’s title changed to Chief Accounting and Finance Officer. For fiscal 2023, Mr. Radigan earned a base salary of $445,000, and was eligible for an annual target bonus equal to $125,000, based on the discretion of our Board. For fiscal 2024, Mr. Radigan's base salary was increased to $475,000, and he will be eligible for an annual target bonus equal to $100,000. The agreement provided that Mr. Radigan was an at-will employee and his employment may be terminated at any time by us or Mr. Radigan. In addition, Mr. Radigan is entitled to severance benefits upon termination of employment as described below under “- Potential Payments upon Termination or Change of Control.”
Potential Payments upon Termination or Change of Control
We currently have employment agreements with Mr. Radigan, our Chief Accounting and Finance Officer. The description and table that follow describe the payments and benefits that may be owed by us to these named executive officers upon our named executive officer’s termination under certain circumstances.
Employment Agreement with Mr. Radigan
The employment agreement with Mr. Radigan provides that, if we terminate Mr. Radigan other than for Cause (as defined below), or if Mr. Radigan terminates his employment for Good Reason (as defined below), Mr. Radigan will continue to receive his then-effective base salary during a six-month severance period (collectively, the “severance payment”), less applicable withholding and deductions, subject to certain reductions and conditions set forth in his employment agreement. In order to receive the severance payment, Mr. Radigan is obligated to provide us with an executed release of claims.
For the purpose of the employment agreement with Mr. Radigan, “Cause” means:
a.intentional and material dishonesty in the performance of the executive’s duties for the Company;
b.conduct (including conviction of or plea of nolo contendere to a felony) which has a direct and material adverse effect on the Company or its reputation;
c.material failure to perform the executive’s reasonable duties or comply with his obligations under the employment agreement or the Company’s confidential information and invention assignment agreement after receipt of written notice specifying the failure, if the executive does not remedy that failure within 10 days of receipt of written notice from the Company, which notice will state that failure to remedy such conduct may result in termination for Cause; or
d.an incurable material breach of the Company’s confidential information and invention assignment agreement, including, without limitation, theft or other misappropriation of the Company’s proprietary information.
For the purpose of the employment agreement with Mr. Radigan, “Good Reason” means, without his consent:
a.a material reduction of the executive’s duties, position or responsibilities;
b.a more than 10% reduction by the Company in the executive’s base salary as in effect immediately prior to such reduction (other than temporary reductions generally applicable to senior executives of the Company);
c.any material breach of Mr. Radigan’s employment agreement by the Company; or
d.any office relocation to a location that is more than 50 miles further from the executive’s primary residence.
The following table shows the amounts Mr. Radigan would have received in the event of his employment is terminated by the Company without Cause or if Mr. Radigan terminates his employment with the Company for Good Reason, assuming the termination took place on June 30, 2023, the last business day of our most recent completed fiscal year. Mr. Radigan’s employment agreement does not provide any change of control payments.
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Name | | Benefits | | Involuntary Termination |
Kevin Radigan | | Severance Payment (Salary) | | $ | 225,000 | | (1) |
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| (1) | The severance payment amount for Mr. Radigan would be divided into 6 equal monthly payments if the executive officer were terminated without Cause or if the Mr. Radigan resigned for Good Reason. |
Pay Versus Performance
As required by pay versus performance Rule 402(v) of Regulation S-K adopted by the SEC in 2022 (“PVP Rules”), we are providing the following information about the relationship between executive “compensation actually paid” and certain financial performance measures of the Company. For further information concerning Ubiquiti’s pay-for-performance philosophy and how we align executive compensation with our performance, refer to our “Compensation Discussion and Analysis” (or “CD&A”).
In the below pay versus performance table, we provide information about compensation of our named executive officers for each of the last 3 fiscal years (the “Covered Years”). Although the PVP Rules require us to disclose “compensation actually paid,” these amounts do not necessarily reflect compensation that our named executive officers actually earned in the Covered Years. Instead, “compensation actually paid” reflects a calculation computed in accordance with the PVP Rules, including adjusted values to unvested and vested equity awards during the Covered Years based on either year-end or vesting date stock prices, and various accounting valuation assumptions. “Compensation actually paid” generally fluctuates due to stock price achievement.
The PVP Rules require that we:
–choose a peer group or index for purposes of total shareholder return (“TSR”) comparisons, and we have chosen to use Standard & Poor’s Computer & Electronics Retail Index for this purpose which we used in our performance graph pursuant to Item 201(e) of Regulation S-K contained in our Annual Report on Form 10-K;
–show information about our cumulative TSR, cumulative Peer Group TSR, and our GAAP net income for the Covered Years.
–designate one “company-selected measure” as the financial performance measure that is most important to link pay to performance in fiscal year 2023 and present a tabular list of at least three financial performance measures, which in our assessment represent the most important measures to link pay to performance. The Company did not use any financial performance measures to link compensation actually paid to our named executive officers to Company performance for any of the fiscal years presented. Therefore, there is no “company-selected measure” disclosed for purposes of the table or analysis below, nor are there any financial performance measures disclosed as being the most important financial performance measures used by the Company to link compensation actually paid to our named executive officers to Company performance.
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Pay Versus Performance |
Year | Summary Compensation Table Total for PEO (a) | Compensation Actually Paid for PEO (b) | Average Summary Compensation Table Total for Non-PEO NEOs (c) | Average Compensation Actually Paid for Non-PEO NEOs (d) | Value of Initial Fixed $100 Investment Based On: | Net Income (g) |
Total Shareholder Return (e) | Peer Group Total Shareholder Return (f) |
| 2023 | $ | 976,546 | | $ | 976,546 | | $ | 1,081,685 | | $ | 752,445 | | $ | 103 | | $ | 104 | | $ | 407,641,000 | |
| 2022 | $ | 478,907 | | $ | 478,907 | | $ | 722,651 | | $ | 542,397 | | $ | 144 | | $ | 79 | | $ | 378,657,000 | |
| 2021 | $ | 118,629 | | $ | 118,629 | | $ | 737,573 | | $ | 1,206,425 | | $ | 180 | | $ | 135 | | $ | 616,584,000 | |
(a) Robert J. Pera served as the Company’s principal executive officer (PEO) for fiscal years 2021, 2022 and 2023. The amounts reported are the total compensation reported in the Summary Compensation Table for the applicable year for Mr. Pera.
(b) Amounts reported are the “compensation actually paid” to Mr. Pera, as computed in accordance with the PVP Rules, based on Mr. Pera’s total compensation reported in the Summary Compensation Table for the indicated fiscal years and adjusted under the PVP Rules as shown in the table below.
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PEO |
| | 2021 | 2022 | 2023 |
| Summary Compensation Table - Total Compensation | $ | 118,629 | $ | 478,907 | $ | 976,546 |
| - | Grant date fair value of stock awards and option awards granted in fiscal year | — | — | — |
| + | Fair value at fiscal year end of outstanding and unvested stock awards and option awards granted in fiscal year | — | — | — |
| + | Change in fair value of outstanding and unvested stock awards and option awards granted in prior fiscal rears | — | — | — |
| + | Fair value at vesting of stock awards and option awards granted in fiscal year that vested during fiscal year | — | — | — |
| + | Change in fair value as of vesting date of stock awards and option awards granted in prior fiscal years for which applicable vesting conditions were satisfied during fiscal year | — | — | — |
| - | Fair value as of prior fiscal year end of stock awards and option awards granted in prior fiscal years that failed to meet applicable vesting conditions during fiscal year | — | — | — |
| = | Compensation Actually Paid | $ | 118,629 | | $ | 478,907 | | $ | 976,546 | |
(c) Kevin Radigan served as the Company’s only other named executive officer for fiscal years 2021, 2022 and 2023. Amounts reported are the total compensation reported in the Summary Compensation Table for the applicable fiscal year for Mr. Radigan.
(d) Amounts reported are the “compensation actually paid” to Mr. Radigan in the indicated fiscal year (as shown in footnote (c) above), as computed in accordance with the PVP Rules, based on the total compensation for Mr. Radigan reported in the Summary Compensation Table for the indicated fiscal years and adjusted under the PVP Rules as shown in the table below.
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| NEO Average |
| | 2021 | 2022 | 2023 |
| Summary Compensation Table - Total Compensation | $ | 737,573 | $ | 722,651 | $ | 1,081,685 |
| - | Grant date fair value of stock awards and option awards granted in fiscal year | 212,548 | 197,451 | 507,285 |
| + | Fair value at fiscal year end of outstanding and unvested stock awards and option awards granted in fiscal year | 364,950 | 158,606 | 286,121 |
| + | Change in fair value of outstanding and unvested stock awards and option awards granted in prior fiscal rears | 319,852 | (142,547) | (104,632) |
| + | Fair value at vesting of stock awards and option awards granted in fiscal year that vested during fiscal year | — | — | — |
| + | Change in fair value as of vesting date of stock awards and option awards granted in prior fiscal years for which applicable vesting conditions were satisfied during fiscal year | (3,402) | 1,138 | (3,444) |
| - | Fair value of prior fiscal year end of stock awards and option awards granted in prior fiscal years that failed to meet applicable vesting conditions during fiscal year | — | — | — |
| = | Compensation Actually Paid | $ | 1,206,425 | | $ | 542,397 | | $ | 752,445 | |
Equity Award Valuations: Equity values are calculated in accordance with FASB ASC Topic 718, and the valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant.
(e) Cumulative TSR is calculated by assuming that a $100 investment was made on the day prior to the first fiscal year reported above and that all dividends were reinvested until the last day of each reported Covered Year.
(f) Peer group TSR is calculated by assuming that a $100 investment was made in the Standard & Poor’s Computer & Electronics Retail Index, an independently prepared index that includes companies in the industry, on the day prior to the first fiscal year reported above and that all dividends were reinvested until the last day of each reported fiscal year.
(g) The PVP Rules require the disclosure of our GAAP net income for each year. The dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements for the applicable year.
Relationship Between Pay and Performance
In addition to the tabular disclosure above, the PVP Rules require us to describe the relationship between “compensation actually paid” and the performance measures shown in the main table above.
Below are graphs showing the relationship of “compensation actually paid” to our CEO and other named executive officer in fiscal years 2021, 2022 and 2023, to (1) our TSR and the Standard & Poor’s Computer & Electronics Retail Index TSR, and (2) our net income.
For further information concerning Ubiquiti’s executive compensation, refer to our “Compensation Discussion and Analysis” (or “CD&A”).
EQUITY COMPENSATION PLAN INFORMATION
The following chart sets forth certain information as of June 30, 2023, with respect to our equity compensation plans, specifically our 2020 Equity Incentive Plan, or the 2020 Plan, and the 2010 Equity Incentive Plan, or the 2010 Plan. The 2020 Plan and 2010 Plan have been approved by our stockholders.
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Plan Category | | Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights | | Weighted average
exercise price of
outstanding options,
warrants and rights | | Number of securities
remaining available for
future issuance under
equity compensation plans (3) | | |
Equity compensation plans approved by security holders | | 62,948 | (1)(2) | | $ | — | | | 4,937,512 | |
Equity compensation plans not approved by security holders | | — | | | | — | | | — | | | |
Total | | 62,948 | | | $ | — | | | 4,937,512 | |
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| (1) | This number includes 52,783 shares subject to outstanding awards granted under the 2020 Plan and 10,165 shares subject to outstanding awards granted under the 2010 Plan, of which all shares were subject to outstanding RSU awards. |
| (2) | There were no outstanding options outstanding under the 2010 or 2020 Plan. |
| (3) | Includes shares reserved for issuance under the 2020 Plan. |
