NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 8, 2021
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Time and Date
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8:30 a.m. Eastern Time on June 8, 2021
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Place
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Our Annual Meeting will be held in a virtual meeting format only, via the Internet, with no physical in-person meeting. Stockholders will be able to participate in the virtual meeting at www.virtualshareholdermeeting.com/YEXT2021.
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Items of Business
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1. To elect Howard Lerman, Brian Distelburger and Julie Richardson as Class I directors to hold office until our Annual Meeting of Stockholders in 2024 and until his or her successor has been elected or appointed;
2. To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2022;
3. To approve, on an advisory basis, the compensation of our named executive officers; and
4. To transact any other business that may properly come before the Annual Meeting or any adjournment or postponement of the Annual Meeting.
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Adjournments and
Postponements
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Any action on the items of business described above may be considered at the Annual Meeting at the time and on the date specified above or at any time and date to which the Annual Meeting may be properly adjourned or postponed.
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Record Date
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You are entitled to notice of and to vote at the Annual Meeting and at any adjournment or postponement that may take place only if you were a stockholder as of the close of business on April 15, 2021.
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Proxy Materials
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We are pleased to take advantage of Securities and Exchange Commission rules that allow us to furnish the proxy statement for our Annual Meeting and our annual report for the fiscal year ended January 31, 2021 (together, the "proxy materials") to stockholders on the Internet. On or around April 22, 2021, we will mail stockholders entitled to vote at the Annual Meeting a notice containing instructions on how to access these proxy materials. The proxy materials may also be accessed directly via the Internet at www.proxyvote.com using the control number located on your notice or proxy card.
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Voting
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Your vote is very important. Whether or not you plan to attend the Annual Meeting, we encourage you to read this proxy statement and submit your proxy or voting instructions as soon as possible. You may vote over the Internet or by telephone. In addition, if you requested printed copies of the proxy materials, you may submit your proxy or voting instruction card for the Annual Meeting by completing, signing, dating and returning your proxy or voting instruction card in the pre-addressed envelope provided. For specific instructions on how to vote your shares, please refer to the section entitled “Questions and Answers” beginning on page 1 of this proxy statement and the instructions on the proxy or voting instruction card. You can revoke a proxy prior to its exercise at the Annual Meeting by following the instructions in the accompanying proxy statement.
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By order of the Board of Directors,
Ho Shin
General Counsel & Corporate Secretary
TABLE OF CONTENTS
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Page
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Proxy Statement Questions and Answers
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Directors and Corporate Governance
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Board Composition
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Director Independence
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Board Leadership
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Board Committees and Meetings
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Identifying and Evaluating Director Nominees
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Governance Structure
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Risk Oversight
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Compensation Risk Assessment
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Compensation Committee Interlocks
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Communications with Directors
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Compensation of Non-Employee Directors
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Outside Director Compensation Policy
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Executive Officers
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Compensation Discussion and Analysis
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Summary
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Executive Compensation Philosophy, Objectives, and Design
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Compensation-Setting Process
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Use of Competitive Data
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Executive Compensation Program Components
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Tax and Accounting Considerations
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Compensation Committee Report
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Executive Compensation
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Summary Compensation Table
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Grants of Plan-Based Awards
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Outstanding Equity Awards
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Option Exercises and Stock Vested
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401(k) Plan
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Pension Benefits
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Non-Qualified Deferred Compensation
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CEO Pay Ratio
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Named Executive Officer Employment Arrangements
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Potential Payments Upon Termination or Change in Control
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Indemnification
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Beneficial Ownership of Shares of Common Stock
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Certain Relationships and Related Person Transactions
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Policies and Procedures for Transactions with Related Persons
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Transactions and Relationships with Directors, Officers and 5% Stockholders
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Proposals Requiring Your Vote - Item 1 - Election of Class I Directors
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Proposals Requiring Your Vote - Item 2 - Ratification of Independent Registered Public Accounting Firm
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Proposals Requiring Your Vote - Item 3 - Advisory Vote to Approve the Compensation of our Named Executive Officers
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Transaction of Other Business
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Requirements, Including Deadlines, for Submission of Proxy Proposals, Nomination of Directors and Other Business of Stockholders
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Appendix A
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YEXT, INC.
61 Ninth Avenue
NEW YORK, NEW YORK 10011
PROXY STATEMENT QUESTIONS AND ANSWERS
The information provided in the “Questions and Answers” format below is for your convenience only and is merely a summary of the information contained in this proxy statement. You should read the entire proxy statement carefully.
Why am I receiving these proxy materials?
You are receiving these proxy materials from us because you were a stockholder of record at the close of business on April 15, 2021 (the “Record Date”). The Board of Directors of Yext, Inc., a Delaware corporation (“Yext,” the “Company,” “we,” “us,” or “our”), has made these proxy materials available to you on the Internet or, upon your request, by delivering printed versions of these materials to you by mail, in connection with our solicitation of proxies for use at our 2021 Annual Meeting of Stockholders (the “Annual Meeting”) which will take place on June 8, 2021 at 8:30 a.m. Eastern Time.
How do I attend and vote at the Annual Meeting?
In light of coronavirus, or COVID-19, for the safety of all of our people, including our stockholders, we have determined that the Annual Meeting will be held in a virtual meeting format only, via the Internet, with no physical in-person meeting. Stockholders will be able to attend the virtual meeting, vote and submit questions electronically during the meeting by visiting the virtual meeting platform at www.virtualshareholdermeeting.com/YEXT2021. Stockholders will need the 16-digit control number included in Notice of Internet Availability of Proxy Materials (the “Notice”), on the proxy card, or in the instructions that accompanied the proxy materials to join the Annual Meeting. The meeting will begin promptly at 8:30 a.m. Eastern Time on June 8, 2021. We encourage you to access the meeting prior to the start time. We are monitoring developments regarding COVID-19 and preparing in the event any modifications to our Annual Meeting are necessary or appropriate. If we determine to make any change to the date, time or procedures of our Annual Meeting, we will announce such changes in advance on our website http://investors.yext.com.
What if I have technical difficulties during the meeting or trouble accessing the virtual Annual Meeting?
We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during check-in or the meeting, please call the technical support number that will be posted on the virtual meeting platform log-in page.
Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of printed proxy materials?
Pursuant to the “notice and access” rules adopted by the Securities and Exchange Commission, we have elected to provide stockholders access to our proxy materials over the Internet. Accordingly, we sent a Notice to all of our stockholders as of the Record Date. The Notice includes instructions on how to access our proxy materials over the Internet and how to request a printed copy of these materials. Internet distribution of our proxy materials is designed to expedite receipt by stockholders, lower the cost of the Annual Meeting and conserve natural resources. However, if you would prefer to receive paper copies of our proxy materials, please follow the instructions included in the Notice.
What is the purpose of the Annual Meeting?
For stockholders to vote on the following proposals to:
•elect Howard Lerman, Brian Distelburger and Julie Richardson as Class I directors to hold office until our Annual Meeting of Stockholders in 2024 and until his or her successor has been elected or appointed;
•ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2022; and
•approve, on an advisory basis, the compensation of our named executive officers.
How does the Board of Directors recommend I vote on these proposals?
The Board recommends that you vote:
•FOR the election of Howard Lerman, Brian Distelburger and Julie Richardson as Class I directors;
•FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2022; and
•FOR the approval, on an advisory basis, of the compensation of our named executive officers.
Who is entitled to vote at the Annual Meeting?
Holders of Yext common stock at the close of business on the Record Date are entitled to receive the Notice and to one vote for each share of common stock at the Annual Meeting. As of the Record Date, there were 126,106,511 shares of common stock outstanding and entitled to vote at the Annual Meeting.
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
If your shares are registered directly in your name with Yext’s transfer agent, Broadridge Corporate Issuer Solutions, Inc., you are considered the “stockholder of record” with respect to those shares, and the Notice was sent directly to you by the Company. As a stockholder of record, you have the right to grant your voting proxy directly to the individuals listed on the proxy card or to vote by attending the Annual Meeting.
If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the “beneficial owner” of shares held in street name. The Notice and, upon your request, the proxy materials have been forwarded to you by your broker, bank or other nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares by following their instructions for voting. You are also invited to attend the virtual meeting. However, since you are not the stockholder of record, please refer to your Notice or other information forwarded by your broker, bank or other nominee to see which voting options are available and instructions and requirements to vote your shares.
How can I vote my shares?
Stockholder of Record. The instructions for accessing proxy materials and voting can be found in the Notice that you received either by mail or e-mail. In order to access proxy materials and vote, you will need the 16-digit control number provided on the Notice. There are four ways a stockholder of record can vote:
(1) By Internet before the Annual Meeting: You may vote over the Internet at www.proxyvote.com. You will be asked to provide your 16-digit control number included on the Notice, on your proxy card or in the instructions that accompanied your proxy materials.
(2) By Internet at the Annual Meeting: You may vote during the Annual Meeting by joining the meeting at www.virtualshareholdermeeting.com/YEXT2021. To join the meeting, you will be asked to provide your 16-digit control number included on the Notice, on your proxy card or in the instructions that accompanied your proxy materials.
(3) By Telephone: You may vote over the telephone by calling the toll-free number listed in the proxy materials. You will be asked to provide your 16-digit control number included on the Notice, on your proxy card or in the instructions that accompanied your proxy materials.
(4) By Mail: If you requested printed copies of proxy materials, you may vote by mailing your proxy card as described in the proxy materials.
In order to be counted, proxies submitted by telephone or Internet before the Annual Meeting must be received by 11:59 p.m. Eastern Time on June 7, 2021. If you vote by telephone or Internet before the Annual Meeting, you do not need to return your proxy card or voting instruction card.
Beneficial Owner of Shares. If you are a beneficial owner of shares held of record by a broker, bank or other nominee, you may receive a Notice or instructions from your broker, bank or other nominee. If you received instructions from your broker, bank or other nominee, you must follow these instructions in order to instruct your broker, bank or other nominee on how to vote your shares. The availability of telephone or Internet voting before the Annual Meeting will depend on the voting process of your broker, bank or other nominee. You are also invited to attend the virtual meeting. However, since you
are not the stockholder of record, please refer to your Notice or other information forwarded by your broker, bank or other nominee to see which voting options are available and instructions and requirements to vote your shares.
All shares that have been properly voted and not revoked will be cast as votes at the Annual Meeting.
What happens if I decide to attend the Annual Meeting, but I have already voted or submitted a proxy covering my shares?
You may still attend the Annual Meeting. Please be aware that attendance at the Annual Meeting will not, by itself, revoke a proxy.
What can I do if I change my mind after I vote my shares?
If you are a stockholder of record, you can change your vote or revoke your proxy before it is exercised by:
•written notice of revocation to the Corporate Secretary of the Company;
•timely delivery of a valid, later-dated proxy or a later-dated vote by telephone or via the Internet; or
•voting at the Annual Meeting.
If you are a beneficial owner of shares, you should follow the instructions of your bank, broker or other nominee to change or revoke your voting instructions.
What shares can I vote?
You can vote all shares that you owned on the Record Date. These shares include (1) shares held directly in your name as the stockholder of record, and (2) shares held for you as the beneficial owner through a broker, bank or other nominee.
Is there a list of stockholders entitled to vote at the Annual Meeting?
The names of stockholders of record entitled to vote at the Annual Meeting will be available for ten days prior to the Annual Meeting and can be examined by any stockholder for any purpose germane to the Annual Meeting, between the hours of 9:30 a.m. and 4:30 p.m. Eastern, at our principal executive offices at 61 Ninth Avenue, New York, New York 10011, by contacting the Corporate Secretary of the Company. The list may also be accessed during the Annual Meeting through the virtual meeting platform at www.virtualshareholdermeeting.com/YEXT2021.
How are votes counted? How will abstentions and broker non-votes be treated at the Annual Meeting?
Each holder of common stock is entitled to one vote per share of common stock on each matter properly brought before the Annual Meeting.
Abstentions and broker non-votes will be considered present for purposes of determining the presence of a quorum. An abstention represents a stockholder’s affirmative choice to decline to vote on a proposal. Generally, a “broker non-vote” occurs on a matter when a broker is not permitted to vote on the matter without voting instructions from the beneficial owner and voting instructions are not given. Under the rules of the New York Stock Exchange, without voting instructions from the beneficial owners, brokers will have discretion to vote on the ratification of the appointment of our independent auditors (proposal no. 2) but not on the election of Class I directors (proposal no. 1) or the advisory vote on the compensation of our named executive officers (proposal no. 3). Therefore, in order for your voice to be heard, it is important that you vote. We strongly encourage you to vote - every vote is important. Please see “How many shares are required to approve the proposals being voted upon at the Annual Meeting?” below for details concerning how abstentions and broker non-votes will be counted for each proposal.
How many shares are required to approve the proposals being voted upon at the Annual Meeting?
The presence of the holders of a majority of the outstanding shares of common stock entitled to vote at the Annual Meeting, present in person or represented by proxy, is necessary to constitute a quorum. Virtual attendance at our Annual Meeting constitutes presence in person for purposes of quorum at the meeting. Assuming there is a proper quorum of shares represented at the Annual Meeting, the voting requirements for approval of the proposals at the Annual Meeting are as follows:
Proposal No. 1: Election of Class I Directors. The election of the three nominees as Class I directors requires a plurality of the voting power of the shares present or represented by proxy at the Annual Meeting and entitled to vote thereon. “Plurality” means that the three nominees for Class I director who receive the largest number of votes cast “for” are elected as directors. As a result, any shares not voted “for” a particular nominee (whether as a result of stockholder abstention or a broker non-vote) will not be counted in such nominee’s favor and will have no effect on the outcome of the election. You may vote "for" or "withhold" for each of the nominees for election as director.
Proposal No. 2: Ratification of Appointment of Independent Auditors. The ratification of the appointment of Ernst & Young LLP requires the approval of a majority of the voting power of the shares present or represented by proxy at the Annual Meeting and entitled to vote thereon. Abstentions are considered shares present and entitled to vote, and thus, will have the same effect as votes "against" the proposal. Broker non-votes are not expected to result from this proposal.
Proposal No. 3: Advisory Vote on the Compensation of our Named Executive Officers. The advisory vote regarding named executive officer compensation requires the approval of a majority of the voting power of the shares present or represented by proxy at the Annual Meeting and entitled to vote thereon. Abstentions are considered shares present and entitled to vote, and thus, will have the same effect as votes "against" the proposal. Broker non-votes will have no effect on the outcome of this proposal. Because this vote is advisory only, it will not be binding on us or on our Board. However, our Board or our compensation committee will consider the outcome of the vote when making future decisions regarding executive compensation.
Could other matters be decided at the Annual Meeting?
At the date of this proxy statement, we did not know of any matters to be raised at the Annual Meeting other than those referred to in this proxy statement. If other matters are properly presented at the Annual Meeting for consideration, the proxy holders named on the proxy card will have the discretion to vote on those matters for you.
Who will pay for the cost of this proxy solicitation?
We will pay the cost of soliciting proxies. Our directors, senior executives or employees, acting without special compensation, may also solicit proxies. Proxies may be solicited by personal interview, mail, electronic transmission, facsimile transmission or telephone. We are required to send copies of proxy-related materials or additional solicitation materials to brokers, fiduciaries and custodians who will forward these materials to the beneficial owners of our shares. On request, we will reimburse brokers and other persons representing beneficial owners of shares for their reasonable expenses in forwarding these materials to beneficial owners.
Who will count the vote?
Yext has designated a representative of Broadridge Financial Solutions, Inc. as the Inspector of Election who will tabulate the votes.
How may I obtain Yext’s Form 10-K and other financial information?
Stockholders can access our annual report on Form 10-K for the fiscal year ended January 31, 2021 ("Annual Report"), which contains financial information about the Company, on the Investor Relations section of the Company’s website at investors.yext.com or on the Securities and Exchange Commission’s website at www.sec.gov. Alternatively, current and prospective investors may request a free copy of our Annual Report from:
Yext, Inc.
61 Ninth Avenue
New York, New York 10011
Attn: Corporate Secretary
We also will furnish any exhibit to the Annual Report if specifically requested upon payment of charges that approximate our cost of reproduction. The website addresses in this proxy statement are included for reference only. The information contained on these websites is not incorporated by reference into this proxy statement.
DIRECTORS AND CORPORATE GOVERNANCE
Board Composition
Our Board of Directors currently consists of nine members, divided into three classes serving staggered three year terms. Upon expiration of the term of a class of directors, directors in that class will be eligible to be elected for a new three year term at the annual meeting of stockholders in the year in which their term expires. As a result of this classification of directors, it generally takes at least two annual meetings of stockholders for stockholders to effect a change in a majority of the members of our Board of Directors.
The principal occupations and certain other information about the nominees and the additional members of our Board (including the skills and qualifications that led to the conclusion that they should serve as directors), as of March 31, 2021 are set forth below.
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Name
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Position(s)
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Age
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Nominees:
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Howard Lerman
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Chief Executive Officer, Class I Director
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41
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Brian Distelburger
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President & Chief Operating Officer, Class I Director
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42
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Julie Richardson(1)(2)
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Class I Director
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57
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Continuing Directors:
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Jesse Lipson(3)
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Class III Director
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43
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Andrew Sheehan(1)(2)
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Class III Director
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63
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Hillary Smith(3)
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Class II Director
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54
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Michael Walrath(2)(3)
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Chairman and Class II Director
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45
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Seth Waugh(1)
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Class II Director
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63
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Tamar Yehoshua(3)
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Class III Director
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56
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(1) Member of the audit committee.
(2) Member of the nominating and governance committee.
(3) Member of the compensation committee.
Nominees for Election to a Three-Year Term Ending at the 2024 Annual Meeting
Howard Lerman is our Co‑Founder and Chief Executive Officer and has also served as a member of our Board of Directors since our inception in 2006. Prior to co‑founding Yext, Mr. Lerman founded and served as a senior manager of several privately held software companies. Mr. Lerman also co‑founded Confide, a privately held electronic messaging service, and served as its chairman from 2014 to 2020. Mr. Lerman is a graduate of Thomas Jefferson High School for Science and Technology and holds a B.A. in History from Duke University. Our Board of Directors believes that Mr. Lerman’s knowledge of our Company as a Co‑Founder and as a thought leader in the digital knowledge industry allows him to make valuable contributions to the Board of Directors.
Brian Distelburger is our Co‑Founder, President and Chief Operating Officer and has also served as a member of our Board of Directors since our inception in 2006. Prior to co‑founding Yext, Mr. Distelburger founded and served as a senior manager of a privately held software company. From September 2012 until its sale in April 2016, Mr. Distelburger also served as chairman of the board of directors of Food Genius, Inc., a privately held food service data provider. Mr. Distelburger also serves on the Cornell Entrepreneurship Advisory Council. Mr. Distelburger holds a Bachelor’s degree from Cornell University. Our Board of Directors believes that Mr. Distelburger’s knowledge of our Company as a Co‑Founder and as a thought leader in the digital knowledge industry allows him to make valuable contributions to the Board of Directors.
Julie Richardson has served as a director since May 2015. From November 2012 to October 2014, Ms. Richardson was a Senior Adviser to Providence Equity Partners LLC, a global asset management firm. From April 2003 to November
2012, Ms. Richardson was a Partner and managing director at Providence Equity, a private equity investment fund, and oversaw its New York office. Prior to Providence Equity, Ms. Richardson served as Global Head of JP Morgan’s Telecom, Media and Technology Group, and was previously a managing director in Merrill Lynch & Co.’s investment banking group. Ms. Richardson has served on the boards of directors of VEREIT, a publicly held real estate investment operating property company, since April 2015, UBS Group AG, a publicly held financial services company, since May 2017 and Datadog, Inc., a publicly held software company since May 2019. Ms. Richardson previously served on the boards of directors of Arconic from 2016 to 2018 and The Hartford Financial Services Group, Inc. from 2014 to April 2020. Ms. Richardson holds a B.B.A from the University of Wisconsin‑Madison. Our Board of Directors has determined that Ms. Richardson’s financial skills and investment management and financial services experience make her a qualified member of our Board of Directors.
Class II and Class III Directors
Jesse Lipson has served as a director since August 2012. Mr. Lipson has served as the founder and chief executive officer of Real Magic since October 2017. From January 2016 to March 2017, Mr. Lipson served as Corporate Vice President and General Manager of Cloud Services at Citrix, a publicly held network software company. Prior to that time, Mr. Lipson was Chief Executive Officer of ShareFile, a network software company, from 2005 to 2011, when it was acquired by Citrix. Mr. Lipson held various leadership positions with Citrix between October 2011 and his appointment as Corporate Vice President and General Manager of Cloud Services in January 2016. Mr. Lipson holds a B.A. in Philosophy from Duke University. Our Board of Directors has determined that Mr. Lipson’s extensive experience as an entrepreneur in the technology industry makes him a qualified member of our Board of Directors.
Andrew Sheehan has served as a director since May 2008. Since 2014, Mr. Sheehan has served as the Managing Member of Tippet Venture Partners, a venture capital firm. Mr. Sheehan was a Partner of Sutter Hill Ventures, a venture capital firm, from 2007 until February 2021. Mr. Sheehan has served on the Board of Directors of Quinstreet, a publicly held marketing technology company, since February 2017. Mr. Sheehan also serves on the boards of directors of a number of private companies in the technology industry. Mr. Sheehan holds a B.A. in English from Dartmouth College and an MBA from the University of Pennsylvania Wharton School. Our Board of Directors has determined that Mr. Sheehan’s leadership experience, expertise as a venture capital investor and knowledge regarding the technology industry make him a qualified member of our Board of Directors.
Hillary Smith has served as a director since October 2020. Ms. Smith has served as an operating partner at Craft Ventures since September 2019 and also serves as a consultant to various technology companies. Previously, Ms. Smith served as general counsel at a number of public and private technologies companies most recently Square, Inc., from December 2016 to March 2018. From July 2015 to October 2016, Ms. Smith served as general counsel and corporate secretary for Zenefits, and from May 2010 to June 2015, she served as general counsel to SuccessFactors, Inc. Ms. Smith has served on the Board of Directors at Elevate Services, Inc., a private company that offers consulting, technology, and services to law departments and law firms, since November 2018 and also serves on the advisory boards of other technology companies and non-profits. Ms. Smith holds a B.A. in History from Montana State University-Bozeman and a J.D. from Cornell Law School. Our Board of Directors has determined that Ms. Smith’s experience advising technology companies on legal and regulatory matters makes her a qualified member of our Board of Directors.
Michael Walrath has served as the Chairman of our Board of Directors since March 2011 and has served as a director since November 2009. Mr. Walrath was the Founder and Chief Executive Officer of Right Media, an online advertising company, from January 2003 until its acquisition by Yahoo! in 2007. Mr. Walrath has served on the Board of Directors of a publicly traded corporation, Lerer Hippeau Acquisition Corp. since March 2021, and also sits on the boards of directors of a number of private software and media companies. Mr. Walrath holds a B.A. in English from the University of Richmond. Our Board of Directors has determined that Mr. Walrath’s extensive experience as an entrepreneur in the technology and advertising industries, as well as his experience leading and advising high‑growth companies, makes him a qualified member of our Board of Directors.
Seth Waugh has served as a director since March 2020. Mr. Waugh has been the Chief Executive Officer of The PGA of America since 2018 and a Senior Advisor at Silver Lake since 2017. Since 2015 Mr. Waugh has served on the board of directors of Franklin Resources, Inc. He has also served on the advisory board of Workday, Inc. since June 2014 and as the non-executive chairman of Alex Brown, a division of Raymond James, since September 2016. Previously, he was a
Managing Director at Silver Lake, in 2018 and Vice Chairman of Florida East Coast Industries, LLC, the parent company of several commercial real estate, transportation and infrastructure companies based in Florida, from 2013 to 2017. He served on the FINRA Board of Governors from 2009 to 2015. From 2000 to 2013, Mr. Waugh served in various roles at Deutsche Bank Americas, including Chief Executive Officer and Chairman of the Board of Directors of Deutsche Bank Securities Inc. Earlier in his career, he served as Chief Executive Officer of Quantitative Financial Strategies, a hedge fund. Mr. Waugh also served in various capacities at Merrill Lynch over eleven years, including Co-head of Global Debt Markets. Our Board of Directors has determined that Mr. Waugh’s financial skills and investment management and financial services experience make him a qualified member of our Board of Directors.
Tamar Yehoshua has served as a director since October 2017. Ms. Yehoshua has served as chief product officer of Slack since January 2019. From 2013 to January 2019, Ms. Yehoshua served as vice president of product management at Google, Inc., and as a director of product management from 2010 to 2013. Prior to joining Google, Tamar served as vice president for advertising technology at A9, an Amazon company, from 2005 to 2010, and director of engineering from 2004 to 2005. She previously served in senior engineering leadership roles at Reasoning, Inc., a privately held application service provider specializing in software quality and modernization, from 2002 to 2004, and Noosh, Inc., a privately-held marketing services platform provider, from 1999 to 2002. Ms. Yehoshua served on the board of directors of ServiceNow, Inc., a publicly held enterprise cloud computing software company, from March 2019 to December 2020, and RetailMeNot, Inc., an online provider of coupon services formerly listed on the NASDAQ Global Select Market, from December 2015 until its sale in May 2017 to Harland Clarke Holdings Corp. Ms. Yehoshua holds a Bachelor of Arts degree in Mathematics from the University of Pennsylvania and a Master’s degree in Computer Science from The Hebrew University of Jerusalem. Our Board of Directors has determined that Ms. Yehoshua’s extensive experience developing and managing products in the technology industry make her a qualified member of our Board of Directors.
Director Independence
Our common stock is listed on the New York Stock Exchange, or NYSE. Under the rules of the NYSE, independent directors must comprise a majority of a listed company’s board of directors. In addition, the rules of the NYSE require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees be independent. Audit committee members must also satisfy the independence criteria set forth in Rule 10A‑3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Under the rules of the NYSE, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Our Board of Directors has undertaken a review of its composition, the composition of its committees and the independence of each director. Our Board of Directors has determined that Messrs. Lipson, Sheehan, Walrath and Waugh and Mses. Richardson, Smith and Yehoshua do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each is “independent” as that term is defined under the applicable rules and regulations of the SEC and the NYSE. Accordingly, a majority of our directors are independent, as required under applicable NYSE rules. Our audit committee, compensation committee and nominating and governance committee are each entirely comprised of independent directors. In making these determinations, our Board of Directors considered the current and prior relationships that each non‑employee director has with our Company, relationships between our Company and the companies where our independent directors serve on the board of directors, on advisory bodies, or as executive officers or have a significant ownership interest and all other facts and circumstances our Board of Directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non‑employee director.
Board Leadership
Our Board of Directors has adopted corporate governance guidelines that provide that if the Board of Directors does not have an independent chairman, a lead independent director will be appointed by the Board of Directors. The lead independent director will be responsible for calling separate meetings of the independent directors, determining the agenda and serving as chair of meetings of independent directors, reporting to the Chief Executive Officer and Chairman of our Board of Directors regarding feedback from executive sessions, serving as spokesperson for the Company as requested, and performing such other responsibilities as may be designated by a majority of the independent directors from time to time.
Currently, the roles of Chief Executive Officer and Chairman are separate and Mr. Walrath, an independent director, serves as the Chairman of the Board of Directors. Our Board of Directors believes that having an independent director serve as the non-executive Chairman of the Board is the appropriate leadership structure for our Company at this time because it allows our Chief Executive Officer to focus on executing our Company’s business, strategic plan and managing our Company’s operations and performance, while allowing the Chairman of the Board to focus on the effectiveness of the Board of Directors and independent oversight of our senior management team and the Board.
Board Committees and Meetings
Our Board of Directors has established an audit committee, a compensation committee and a nominating and corporate governance committee. The composition and responsibilities of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by our Board of Directors. Each of the audit, compensation, and nominating and corporate governance committees is a standing committee and operates pursuant to a separate written charter adopted by our Board of Directors that is available on the Investor Relations section of the Company’s website at investors.yext.com. The inclusion of our website address in this proxy statement does not include or incorporate by reference into this proxy statement the information on or accessible through our website. In accordance with our corporate governance guidelines and listing standards of the NYSE, during the fiscal year 2021 each committee reviewed and in certain cases proposed changes to their respective charters and in addition, each committee as well as the Board of Directors conducted an annual self-evaluation.
The Board met seven times during fiscal year 2021. During fiscal year 2021, each of our directors attended 75% or more of the aggregate of (a) the total number of meetings of the Board held (during the period in which the director served on the Board) and (b) the total number of meetings held by all committees on which the director served (during the period in which the director served on such committees). In addition to its regular schedule of quarterly meetings, our directors have been engaged with management through informational calls open to all Board members about the impact of COVID-19, the Company’s COVID-19 response, and related risk mitigation measures. See "—Risk Oversight." Pursuant to our corporate governance guidelines, each director is encouraged to attend each annual meeting of stockholders. At the time of the 2020 annual meeting of stockholders, our Board consisted of eight directors, of which three attended the meeting.
Audit Committee
As of January 31, 2021, our audit committee consisted of Ms. Richardson and Messrs. Sheehan and Waugh with Ms. Richardson serving as chairman. Mr. Walrath served on the audit committee until March 3, 2020, when Mr. Waugh joined the committee. We believe that each of our audit committee members meets the requirements for financial literacy under the current requirements of the Sarbanes‑Oxley Act of 2002, the NYSE listing standards and SEC rules and regulations. In addition, our Board of Directors has determined that each of our audit committee members is an audit committee financial expert within the meaning of SEC regulations. We have made these determinations based on information received by our Board of Directors, including questionnaires provided by the members of our audit committee.
In order to be considered to be independent for purposes of Rule 10A‑3(b)(1) under the Exchange Act, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (1) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person of the listed company or any of its subsidiaries. Each member of our audit committee satisfies the independence requirements under the NYSE listing standards and Rule 10A‑3(b)(1) of the Exchange Act.
Our audit committee’s duties and responsibilities are to, among other things:
•appoint and oversee an independent registered public accounting firm and approve audit and non‑audit services;
•evaluate the independence and qualifications of the independent registered public accounting firm at least annually;
•review our annual audited consolidated financial statements and quarterly consolidated financial statements;
•discuss with management the Company’s procedures with respect to earnings press releases and review financial information included in press releases and earnings guidance provided to analysts and rating agencies;
•review the responsibilities, functions, qualifications and performance of our internal audit function, including our internal audit function’s charter, plans, budget, objectivity and the scope and results of internal audits;
•approve the hiring, promotion, demotion or termination of the person in charge of our internal audit function;
•review the results of the internal audit program, including significant issues in internal audit reports and responses by management;
•review the hiring of employees or former employees of our independent registered public accounting firm if such employee will be in an accounting role or financial reporting oversight role;
•review, approve and monitor related party transactions involving directors or executive officers and review and monitor conflicts of interest situations involving such individuals where appropriate;
•periodically, meet separately with management, the internal auditors and our independent registered public accounting firm, both with and without management present, in each case to discuss any matters that the audit committee or others believe should be discussed privately;
•address complaints we receive regarding accounting, internal accounting controls or auditing matters and procedures for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters;
•review and discuss with management and our independent registered public accounting firm, on at least an annual basis, the overall adequacy and effectiveness of our legal, regulatory and ethical compliance programs, as well as reports regarding compliance with applicable laws, regulations and internal compliance programs;
•discuss with management and our independent registered public accounting firm any correspondence with regulators or governmental agencies and any published reports that raise material issues regarding our financial statements or policies and discuss with our chief financial officer or senior legal officer any legal matters that may have a material impact on the financial statements or our compliance procedures;
•discuss with management and, as appropriate, our independent registered public accounting firm, the adequacy and effectiveness of our policies and practices regarding information technology risk management and the internal controls related to cybersecurity;
•oversee management’s process for identifying, monitoring and addressing enterprise risks and evaluate and discuss its assessment of such enterprise risks with management, as well as oversee and monitor management’s plans to address such risks;
•engage independent legal, accounting and other advisors as it determines necessary or appropriate to carry out its duties;
•report regularly to the Board of Directors about issues including, but not limited to, any issues that arise with respect to the quality or integrity of our financial statements, our compliance with legal or regulatory requirements, the performance and independence of the independent registered public accounting firm and the performance of the internal audit function;
•review at least annually the adequacy of the committee’s charter and recommend any proposed changes to the Board of Directors for approval; and
•conduct and present to the Board of Directors an annual self‑performance evaluation of the committee.
Our audit committee operates under a written charter that satisfies the applicable rules of the SEC and the listing standards of the NYSE. Our audit committee held twelve meetings during the fiscal year 2021.
Compensation Committee
As of January 31, 2021, our compensation committee consisted of Messrs. Lipson and Walrath and Mses. Smith and Yehoshua, with Mr. Lipson serving as chairman. Ms. Smith joined the compensation committee on October 21, 2020. Each member of the compensation committee meets the requirements for independence under, and the functioning of our compensation committee complies with, any applicable requirements of the Sarbanes‑Oxley Act, the NYSE listing standards and SEC rules and regulations. Additionally, each member of the compensation committee is a “non‑employee director” as defined in Rule 16b‑3 promulgated under the Exchange Act. Our compensation committee’s duties and responsibilities are to, among other things:
•establish, and periodically review, a general compensation strategy for our Company, and oversee the development and implementation of our compensation plans to ensure that these plans are consistent with this general compensation strategy;
•administer all of our equity‑based plans and such other plans as shall be designated from time to time by the Board of Directors;
•review, approve and determine, or make recommendations to our Board of Directors regarding, the compensation of our executive officers;
•oversee management's proposals to stockholders on executive compensation matters and management's response to proposals received from stockholders on executive compensation matters;
•review and discuss compensation risk and risk management with respect to the Company's compensation policies and practices;
•review and recommend to the Board of Directors the form and amount of compensation, including perquisites and other benefits, and any additional compensation to be paid, for service on the Board and Board committees and for service as a chairperson of a Board committee;
•oversee regulatory compliance with respect to compensation matters affecting us;
•review and discuss with management the Compensation Discussion and Analysis and related executive compensation information included in this proxy statement;
•retain or obtain the advice of compensation consultants, independent legal counsel and other advisers;
•review and discuss with management the compensation discussion and analysis that we may be required to include in SEC filings from time to time;
•prepare the compensation committee report on executive compensation that may be required by the SEC from time to time to be included in our annual proxy statements or annual reports on Form 10‑K filed with the SEC;
•conduct and present to the Board of Directors an annual self‑performance evaluation of the committee; and
•review at least annually the adequacy of the committee’s charter and recommend any proposed changes to the Board of Directors for approval.
The compensation committee may delegate its authority to subcommittees or the chair of the compensation committee. Although the compensation committee does not currently do so, it may delegate to officers of the Company the authority to make equity grants to employees or consultants of the Company who are not directors of the Company or executive officers
of the Company under the Company’s equity plans. The compensation committee has the right, in its sole discretion, to retain or obtain the advice of compensation consultants, independent legal counsel and other advisers. The compensation committee periodically engages Compensia, an outside consultant to advise on compensation-related matters. For a discussion regarding the role of management and compensation consultants in the compensation-setting process, refer to "Compensation Discussion and Analysis — Compensation-Setting Process."
Our compensation committee operates under a written charter that satisfies the applicable rules of the SEC and the listing standards of the NYSE. Our compensation committee held seven meetings during the fiscal year 2021.
Nominating and Corporate Governance Committee
As of January 31, 2021, our nominating and corporate governance committee consists of Messrs. Sheehan and Walrath and Ms. Richardson, with Mr. Sheehan serving as chairman. Each member of the nominating and corporate governance committee meets the requirements for independence under, and the functioning of our nominating and corporate governance committee complies with, any applicable requirements of the Sarbanes‑Oxley Act, the NYSE listing standards and SEC rules and regulations. Our nominating and governance committee’s duties and responsibilities are to, among other things:
•make recommendations to the Board of Directors regarding the size and structure of the board, the composition of the board, the criteria for board membership and the process for filling vacancies on the board;
•identify individuals qualified to become board members, after taking into consideration, if applicable, the criteria for board membership and recommend to the Board of Directors nominees to fill vacancies and newly created directorships and the nominees to stand for election as directors;
•oversee management's proposals to stockholders and management's response to proposals received from stockholders, performing such duties in conjunction with the compensation committee in matters concerning executive compensation;
•review the duties, composition and charters of the committees of the Board of Directors;
•review and recommend to the Board of Directors our corporate governance principles and any proposed changes to such principles;
•conduct and present to the Board of Directors an annual self‑performance evaluation of the committee;
•oversee the evaluation of the Board of Directors, its committees and management and report such evaluation to the Board of Directors;
•review and approve our Code of Business Conduct and Ethics, consider questions of possible conflicts of interest of board members and other corporate officers, review actual and potential conflicts of interest of board members and corporate officers, other than related party transactions reviewed by the audit committee, and approve or prohibit any involvement of such persons in matters that may involve a conflict of interest or taking of a corporate opportunity;
•review and discuss with management the disclosure of the Company's corporate governance practices;
•review at least annually the adequacy of the committee’s charter and recommend any proposed changes to the Board of Directors for approval; and
•oversee succession planning for the Board of Directors and identifying and recommending qualified individuals to become members of the Board of Directors.
Our nominating and governance committee operates under a written charter that satisfies the applicable listing requirements and rules of the NYSE. Our nominating and governance committee held four meetings during the fiscal year 2021.
Identifying and Evaluating Director Nominees
Our Board of Directors has delegated to the nominating and governance committee the responsibility of identifying individuals qualified to become board members and recommending to the Board of Directors nominees to fill vacancies and newly created directorships and the nominees to stand for election as directors. If the nominating and governance committee determines that an additional or replacement director is required, it may take such measures that it considers appropriate in connection with its evaluation of a director candidate, including candidate interviews, inquiry of the person or persons making the recommendation or nomination, engagement of an outside search firm to gather additional information, or reliance on the knowledge of the members of the committee, the Board of Directors or management.
In its evaluation of director candidates, including the members of the Board of Directors eligible for reelection, the nominating and governance committee will consider the current size and composition of the Board of Directors and the needs of the Board of Directors and its committees. Some of the factors that our nominating and governance committee considers include, without limitation, character, integrity, judgment, diversity, including diversity in terms of gender, race, ethnicity and experience, independence, area of expertise, corporate experience, length of service, potential conflicts of interest, other commitments and similar factors.
Nominees must also have the highest personal and professional ethics and integrity, proven achievement and competence in the nominee’s field and the ability to exercise sound business judgment, skills that are complementary to those of the existing Board of Directors, the ability to assist and support management and make significant contributions to the Company’s success, and an understanding of the fiduciary responsibilities that are required of a member of the Board of Directors and the commitment of time and energy necessary to diligently carry out those responsibilities.
The nominating and governance committee will consider candidates recommended by stockholders in the same manner as candidates recommended to the committee from other sources. Stockholders should submit recommendations for director candidates to our General Counsel or the Legal Department, at 61 Ninth Avenue, New York, New York 10011. The recommendation must include the candidate’s name, home and business contact information, detailed biographical data, relevant qualifications, a signed letter from the candidate confirming willingness to serve, information regarding any relationships between the candidate and the Company and evidence of the recommending stockholder’s ownership of Company stock. Such recommendations must also include a statement from the recommending stockholder in support of the candidate, particularly within the context of the criteria for Board membership. A stockholder that wants to nominate a candidate for election to the Board should direct the nomination by written notice to the Corporate Secretary and must meet the deadlines and other requirements set forth in the Company's bylaws and the rules and regulations of the SEC. See “Requirements, Including Deadlines, For Submission of Proxy Proposals, Nomination of Directors and Other Business of Stockholders” for more information.
Governance Structure
We have developed a corporate governance framework to provide our Board of Directors with the authority and practices to review and evaluate our business operations and to make decisions independent of management. The Board of Directors has adopted corporate governance guidelines, committee charters and a Code of Business Conduct and Ethics which, together with our certificate of incorporation and bylaws, form the governance framework for the Board of Directors and its committees.
Our Code of Business Conduct and Ethics establishes the standards of ethical conduct applicable to all directors, officers and employees of our Company, including our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer. The code addresses, among other things, conflicts of interest, compliance with disclosure controls and procedures and internal controls over financial reporting, corporate opportunities and confidentiality requirements. We intend to disclose any amendments to the code, or any waivers of its requirements, on our website to the extent required by SEC applicable rules and regulations.
These documents are available on the Investor Relations section of the Company’s website at investors.yext.com. The inclusion of our website address in this proxy statement does not include or incorporate by reference into this proxy statement the information on or accessible through our website.
Communications with Directors
Any communication from a stockholder or other interested party to the Board of Directors generally, the non-management directors or a particular director regarding bona fide concerns or questions should be in writing and should be delivered to the care of the General Counsel by registered or overnight mail at the principal executive office of the Company at 61 Ninth Avenue, New York, New York 10011. Each communication should indicate that it contains a stockholder or interested party communication.
The General Counsel will, in consultation with appropriate directors as necessary, generally review communications from stockholders and interested parties and forward such communications or a summary thereof to the Board of Directors or the applicable director or directors. Communications that the General Counsel, in consultation with appropriate directors as necessary, deems are improper or irrelevant to the functioning of the Board of Directors or the Company will not be forwarded.
This procedure does not apply to communications to independent directors from officers or directors of the Company who are stockholders or stockholder proposals submitted pursuant to Rule 14a-8 under the Exchange Act.
Risk Oversight
Risk is inherent with every business, and we face a number of risks, including strategic, financial, business and operational, legal and compliance, and reputational. Management is responsible for the day-to-day management of risks the Company faces, while, our Board of Directors, as a whole and assisted by its committees, has responsibility for the oversight of risk management.
Oversight is conducted primarily through committees of the Board of Directors, as disclosed in the descriptions of each of the committees above and in the charters of each of the committees. The audit committee primarily oversees management’s process for identifying, monitoring and addressing enterprise risks and the adequacy and effectiveness of the Company’s policies and practices regarding information technology risk management and internal controls related to cybersecurity. The compensation committee considers the risks associated with our compensation policies and practices, with respect to all employees. All committees receive regular reports from officers responsible for oversight of particular risks within the Company. The Board periodically receives reports by each committee chair regarding the committee’s considerations and actions. The Board's allocation of risk oversight responsibility may change from time to time based on the evolving needs of the Company.
The Board and its committees have been engaged with management about the impact of COVID-19, the Company’s COVID-19 response, and related risk mitigation measures. In particular, the Board and its committees held informational calls and other communications with management about employee health and safety, business continuity and operations, financial impact, cybersecurity, and related legal and regulatory matters related to COVID-19. The audit committee has also discussed COVID-19 topics in its meetings, such as the Company's financial position, including cash management.
Compensation Risk Assessment
The compensation committee periodically reviews the Company’s general compensation strategy and reviews the risks arising from the Company’s compensation policies and practices for all employees that are reasonably likely to have a material adverse effect on the Company and to evaluate compensation policies and practices that could mitigate such risks. In addition, our compensation committee has engaged Compensia to independently review our executive compensation program. Based on these reviews, our compensation committee structures our executive compensation program to encourage our named executive officers focus on both short-term and long-term success. We therefore do not believe that our executive compensation program creates risks that are reasonably likely to have a material adverse effect on us.
Compensation Committee Interlocks
None of the members of our compensation committee is an executive officer or employee of our Company. None of our executive officers serves as a member of the compensation committee of any entity that has one or more executive officers serving on our compensation committee.
Compensation of Non-Employee Directors
The following table sets forth information concerning compensation earned by the non‑employee members of our Board of Directors in fiscal 2021. Howard Lerman, our Chief Executive Officer, and Brian Distelburger, our President, are also directors but do not receive any additional compensation for their services as a director. Information concerning the compensation earned by Mr. Lerman and Mr. Distelburger is set forth in the section titled “Executive Compensation.”
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Name
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Fees Earned or
Paid in Cash
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Stock Awards
($)(1)(2)
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Total ($)
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Michael Walrath(3)
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$
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62,164
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$
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180,960
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$
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243,124
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Jesse Lipson
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45,000
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180,960
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225,960
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Julie Richardson
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53,750
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180,960
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234,710
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Andrew Sheehan
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47,500
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180,960
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228,460
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Hillary Smith(4)
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10,405
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323,586
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333,991
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Seth Waugh(5)
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36,344
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282,272
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318,616
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Tamar Yehoshua
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37,500
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180,960
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218,460
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(1)Represents the aggregate grant-date fair value of the awards as computed in accordance with FASB ASC Topic 718. Such grant-date fair value does not take into account any estimated forfeitures related to service-based vesting conditions. The assumptions used in calculating the grant-date fair value are set forth in the notes to our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021. These amounts may not correspond to the actual value that may be received by the independent directors.
(2)All non-employee directors other than Mr. Waugh and Ms. Smith, each of whom joined the Company during fiscal 2021, were granted 11,600 restricted stock units or restricted stock awards on June 9, 2020. All of the shares subject to the awards shall vest on June 9, 2021, subject to the director's continued service to the Company on such date.
(3)Fees earned reflect a pro-rated portion of the annual retainer for service as a member of the audit committee.
(4)Ms. Smith joined the Board of Directors on October 21, 2020 and fees earned reflect a pro-rated portion for service on the Board and compensation committee. The value of Ms. Smith's stock awards consists of the aggregate grant-date fair value of 18,007 restricted stock units granted in connection with Ms. Smith joining the Board of Directors. One-third of the shares subject to award shall vest on October 21, 2021, and then annually thereafter on each October 21, subject to Ms. Smith's continued service to the Company on such date until the award is fully vested on October 21, 2023.
(5)Mr. Waugh joined the Board of Directors on March 3, 2020 and fees earned reflect a pro-rated portion for service on the Board and audit committee. The value of Mr. Waugh's stock awards consists of the aggregate grant-date fair value of 19,467 shares of restricted stock granted in connection with Mr. Waugh joining the Board of Directors. One-third of the shares subject to award shall vest on March 3, 2021, and then annually thereafter on each March 3, subject to Mr. Waugh's continued service to the Company on such date until the award is fully vested on March 3, 2023.
We also reimburse our non‑employee directors for their reasonable out‑of‑pocket costs and travel expenses in connection with their attendance at Board of Directors and committee meetings.
The following table lists all outstanding options, restricted stock and restricted stock unit awards held by our non‑employee directors and former non-employee director as of January 31, 2021:
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Name
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Option Awards (#)
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Stock Awards (#)
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Michael Walrath
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606,758
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15,688
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(1)
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Jesse Lipson
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—
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33,434
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(2)
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Julie Richardson
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150,000
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33,434
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(2)
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Andrew Sheehan
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—
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11,600
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Hillary Smith
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—
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18,007
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Seth Waugh
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—
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21,609
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(3)
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Tamar Yehoshua
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—
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14,033
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(4)
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(1) The amount includes 4,088 restricted stock awards received in lieu of cash compensation.
(2) The amount includes 21,834 vested but deferred restricted stock units.
(3) The amount includes 2,142 restricted stock awards received in lieu of cash compensation.
(4) The amount includes 2,433 restricted stock units received in lieu of cash compensation.
Outside Director Compensation Policy
Members of our Board of Directors who are not employees are eligible for awards pursuant to our Outside Director Compensation Policy in the form of cash and/or equity, as described below:
Cash Compensation
Each non‑employee director is eligible to receive the following annual cash retainers for certain board and/or committee service:
• $30,000 per year for service as a member of our Board of Directors;
• $20,000 per year additionally for service as chair of our Board of Directors;
• $20,000 per year additionally for service as chair of the audit committee;
• $10,000 per year additionally for service as a member of the audit committee (other than chair);
• $15,000 per year additionally for service as chair of the compensation committee;
• $7,500 per year additionally for service as a member of the compensation committee (other than chair);
• $7,500 per year additionally for service as chair of the nominating and corporate governance committee; and
• $3,750 per year additionally for service as a member of the nominating and corporate governance committee (other than chair).
Cash retainers will be paid quarterly in arrears on a pro‑rated basis. Our non‑employee directors can elect to receive cash compensation in the form of equity awards for the upcoming calendar year. Messrs. Waugh and Walrath and Ms. Yehoshua have elected that payment of cash retainers for the calendar year ended December 31, 2020 be made in the form of equity awards under our 2016 Plan and therefore received restricted stock or restricted stock units in lieu cash for their service.
Equity Compensation
Non‑employee directors are eligible to receive all types of equity awards (except incentive stock options) under our 2016 Equity Incentive Plan, or the 2016 Plan, including discretionary awards not covered under our Outside Director
Compensation Policy. All grants of awards under our Outside Director Compensation Policy will be automatic and non‑discretionary.
Upon joining our Board of Directors, each newly‑elected non‑employee director will receive an initial equity award, or the initial award, under our 2016 Plan with a value of approximately $300,000. This initial award will vest in approximately equal installments annually over a three‑year period, subject to continued service through each vesting date. The initial award will be in the form of restricted stock or restricted stock units.
On the date of each annual meeting of stockholders following the effectiveness of our Outside Director Compensation Policy, each non‑employee director who is continuing as a director following the applicable meeting will be granted an annual equity award, or the annual award, under our 2016 Plan with a value of approximately $150,000, provided the non‑employee director has served on our Board of Directors for at least the preceding six months. This annual award will vest as to 100% of the shares on the one‑year anniversary of the date of grant. A non‑employee director may defer the settlement of vested equity awards until his or her separation from our Board of Directors.
Notwithstanding the vesting schedules described above, the vesting of all equity awards granted to a non‑employee director, including any award granted outside of our Outside Director Compensation Policy, will vest in full upon a “change in control” (as defined in our 2016 Plan).
Our 2016 Plan contains maximum limits, which were approved by our stockholders, on the size of the equity awards that can be granted to each of our non‑employee directors in any fiscal year, but those maximum limits do not reflect the intended size of any potential grants or a commitment to make any equity award grants to our non‑employee directors in the future.
Indemnification
We have entered into an indemnification agreement with each of our directors and executive officers. The indemnification agreements and our certificate of incorporation and bylaws require us to indemnify our directors and executive officers to the fullest extent permitted by Delaware law. See “Certain Relationships and Related Person Transactions – Transactions and Relationships with Directors, Officers and 5% Stockholders – Indemnification of Officers and Directors.”
EXECUTIVE OFFICERS
The following table provides information concerning our named executive officers as of March 31, 2021:
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Name
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Position(s)
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Age
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Howard Lerman
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Chief Executive Officer, Class I Director
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41
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Brian Distelburger
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President & Chief Operating Officer, Class I Director
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42
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Steven Cakebread
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Chief Financial Officer
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69
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David Rudnitsky
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President and Chief Revenue Officer
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60
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Marc Ferrentino
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Chief Strategy Officer
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46
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Ho Shin
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EVP & General Counsel
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52
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Information regarding Howard Lerman and Brian Distelburger, each of whom also serves as a director, is set forth above under “Directors and Corporate Governance.”
Steven Cakebread has served as our Chief Financial Officer since October 2014. Prior to joining Yext, Mr. Cakebread served in various senior executive roles, including as Chief Financial Officer and Chief Accounting Officer of D‑Wave Systems, a quantum computing company, from March 2013 to September 2014 and as Chief Financial Officer of Pandora Media Inc., a provider of personalized internet radio and music discovery service, from March 2010 to December 2012. From 2009 to March 2010, Mr. Cakebread was a Principal with J. Stevens & Co. LLC, a consulting company. From February 2009 to December 2009, Mr. Cakebread served as Senior Vice President, Chief Accounting Officer and Chief Financial Officer of Xactly Corporation, a provider of on‑demand sales performance management software. Mr. Cakebread also served as President and Chief Strategy Officer of Salesforce, a customer relationship management service provider, from March 2008 to February 2009, and as Chief Financial Officer of Salesforce from May 2002 to March 2008. He has served on the board of directors of Bill.com Holdings, Inc. since May 2019 and previously served on the boards of directors of ServiceSource International, Inc. from 2010 to October 2017, Solar Winds from January 2008 to February 2016, Care.com from December 2013 to November 2014 and eHealth from June 2006 to June 2012. Mr. Cakebread holds a B.S. in Business from the University of California, Berkeley, and a M.B.A. from Indiana University.
David Rudnitsky has served as Yext’s President and Chief Revenue Officer since February 2021 and is responsible for leading the Company’s global sales organization. Mr. Rudnitsky joined Yext in January 2017 as EVP, North American Enterprise Sales. He brings decades of technology sales experience to his role, previously serving as SVP Enterprise Sales at InsideSales.com, a privately held provider of sales acceleration platforms, from March 2015 to February 2017. From October 2002 to February 2015 he held various senior executive sales roles at Salesforce, a customer relationship management service provider. He is the author of “The Sales Playbook”, which is featured in Salesforce founder & CEO Marc Benioff’s best-selling book Behind the Cloud. Mr. Rudnitsky holds a B.S. in Finance from the University of Connecticut, and an M.B.A. in Finance from Fairleigh Dickinson University.
Marc Ferrentino has served as Yext’s Chief Strategy Officer since February 2016 where he responsible for the Company’s product management, UX, product marketing, partnerships and corporate development, corporate strategy, platform admin program, verticals, and strategic initiatives. Prior to joining Yext, Mr. Ferrentino served as the chief marketing officer of Brickstream Corporation from October 2014 to September 2015 and as Founder and CEO of Nomi Technologies from September 2012 until its acquisition by Brickstream Corporation in October 2014. Mr. Ferrentino has worked as a senior executive for high growth tech companies throughout his career, including serving as the Chief Technical Officer of SaaS at BMC Software and Chief Technical Architect for Salesforce.com. Mr. Ferrentino has been active with early stage New York technology companies and currently advises several startups. Mr. Ferrentino holds a B.S. in Electrical Engineering from the University of Michigan and has participated in the M.A. of Statistics program at Columbia University.
Ho Shin has served as Yext’s EVP and General Counsel since 2016, responsible for the Company’s global legal matters. Prior to Yext, Mr. Shin was General Counsel and Chief Privacy Officer of Millennial Media from 2011 to 2015 where he helped guide the company through its international expansion, initial public offering and follow-on offering, through the company’s sale to Verizon/Aol. Mr. Shin has also served as a member of the Department of Homeland Security’s Data Privacy and Integrity Advisory on matters involving data privacy and integrity. Prior to that role, he held senior legal positions with various companies, and was also a trial attorney with the United States Department of Justice. Mr. Shin received his J.D., magna cum laude, from Georgetown University, and his B.S. from the University of Maryland.
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis provides an overview of the material components of our executive compensation program during fiscal year 2021 for:
•Howard Lerman, our Chief Executive Officer and Director;
•Brian Distelburger, our President and Director;
•Steven Cakebread, our Chief Financial Officer;
•Marc Ferrentino, our Chief Strategy Officer; and
•Ho Shin, our EVP & General Counsel.
In addition, in accordance with SEC rules, information is also included with respect to James Steele, who stepped down as President and Chief Revenue Officer of the Company effective September 30, 2020 and transitioned to a new role as an advisor to the Company effective October 1, 2020. We refer to these executive officers and Mr. Steele collectively in this Compensation Discussion and Analysis and the accompanying compensation tables as our "named executive officers". Information regarding the compensation of David Rudnitsky, who was appointed as an executive officer after fiscal 2021, is not included.
The Compensation Discussion and Analysis describes our executive compensation philosophy, objectives and design, and the material terms of compensation provided to our named executive officers for fiscal 2021. This section also discusses how and why the compensation committee of the Board of Directors, or the compensation committee, arrived at specific compensation decisions involving our named executive officers, during fiscal 2021.
Summary
Fiscal 2021 Financial and Business Highlights
Yext organizes a business's facts so it can provide official answers to consumer questions starting with the business's own website and then extending across search engines and voice assistants. Our platform lets businesses structure the facts about their brands in a database called a Knowledge Graph. Our platform is built to leverage the structured data stored in the Knowledge Graph to deliver a modern search experience on a business's or organization's own website, as well as across approximately 200 service and application providers, which we refer to as our Knowledge Network, and includes Amazon Alexa, Apple Maps, Bing, Cortana, Facebook, Google, Google Assistant, Google Maps, Siri and Yelp. Our platform powers all of the Company's key features, including Listings, Pages, and Answers, along with its other features and capabilities.
Fiscal year 2021 and COVID-19 brought unprecedented global challenges. The COVID-19 pandemic significantly impacted our operating environment, disrupting business operations for us and our customers, suppliers, and other parties with whom we do business. At the same time, in fiscal 2021 our employees rapidly adapted to these challenges showcasing their flexibility and maintaining a high level of service and commitment to our customers around the world. We continue to be fully dedicated to the health and safety of our employees so we can drive the long term overall health of our business, the strength of our platform, and our ability to continue to execute on our strategy. As a result of the COVID-19 pandemic, we temporarily closed our offices in fiscal 2021 requiring all of our employees globally to work remotely. We restricted non-essential business travel, and canceled in-person marketing events, including our annual industry and customer event, ONWARD20. We continue to monitor regional developments relating to the COVID-19 pandemic to inform decisions on our continued phased office re-openings and lifting of travel restrictions.
This year also saw activism, protests, and discussions about racism and inequality here in New York City and throughout the United States. In response, Yext conducted a town hall with our employees to discuss and solicit feedback. In fiscal 2021, we also made a greater commitment to diversity and inclusion hiring a senior diversity and inclusion manager to develop and implement diversity and inclusion strategies to improve our recruitment process, performance management, leadership development, employee engagement and retention.
To support our employees in fiscal 2021 and to promote their health and safety, we temporarily closed our offices requiring all of our employees globally to work remotely. We invested resources in supporting our employees in a shift to
remote work, including offering every employee a stipend for supplemental home office equipment and supplies. We also provided two weeks of emergency family leave for the care of a child or parent due to COVID-19 disruptions. To help mitigate the financial impact of COVID-19 on certain employees in our sales organization, we also offered to advance a portion of the employee’s target commission during the fiscal year ended January 31, 2021 and modified certain quota targets.
Despite the impact of the COVID-19 pandemic, Yext had strong financial performance for fiscal 2021. Revenue increased to $354.7 million for the fiscal year ended January 31, 2021 as compared to $298.8 million in fiscal year ended January 31, 2020. We continued to be thoughtful with respect to our operating expenses while making investments to deliver products that expand our total addressable market, generate revenue growth and drive sales efficiency. Net loss of $94.7 million for the fiscal year ended January 31, 2021 compared to net loss of $121.5 million in the fiscal year ended January 31, 2020. Non-GAAP net loss of $22.4 million for the fiscal year ended January 31, 2021 compared to non-GAAP net loss of $53.8 million in the fiscal year ended January 31, 2020. Readers are encouraged to review Appendix A for additional information regarding non-GAAP net loss and a reconciliation of non-GAAP net loss to net loss. We believe we have maintained a strong balance sheet in fiscal 2021 that positions us well in the current economic environment ending fiscal 2021 with cash and cash equivalents of $230.4 million.
We also continued to execute on our strategy. Highlights of Yext's operational results for fiscal 2021 include:
•Announced the availability of Yext Answers to select partners in our Channel Partner Program.
•Announced the general availability of "Hitchhikers," a comprehensive training program and community for professionals to develops to develop skills to build custom search solutions for their business using our platform.
•Announced the expansion of Yext Answers into five new languages. Businesses and organizations are now able to deliver official answers on their websites in French, German, Italian, Spanish and Japanese.
•Announced a global technology partnership with Adobe. Yext joined the Adobe Exchange program at the premier level, the top tier of Adobe’s technology partner program. Adobe content management system clients can choose to upgrade their search experience with Yext’s innovative site search product, Answers.
•Announced collaborations with the WHO and other government agencies to launch comprehensive information hubs powered by Yext Answers.
•Launched No Wrong Answers integrated marketing campaign to help more organizations across industries transform their websites with Yext Answers and provide consumers with official answers.
•Being named to Fortune's 2020 list of Best Workplaces in New York and 2021 list of Best Workplaces in the Bay Area, Mogul's 2020 list of Top 100 Workplaces with the Most Innovative Cultures, Great Places to Work's 2020 list of the UK's Best Workplaces for Women and receiving a score of 100% on the Human Rights Campaign Foundation’s 2020 Corporate Equality Index (CEI) for a second year in a row.
Executive Compensation Philosophy, Objectives and Design
We strive to maintain sound corporate governance standards in our executive compensation policies and practices. The compensation committee reviewed our fiscal 2021 executive compensation program to evaluate its consistency with our short- and long-term goals given the rapidly evolving and dynamic nature of our business and the market in which we compete for executive talent.
In addition, in fiscal 2021, we maintained the following sound corporate governance policies and practices with respect to our executive compensation program:
What we do
•We link pay to performance by structuring a substantial amount of total compensation for our named executive officers in the form of variable compensation that aligns the interests of our named executive officers and shareholders in maximizing the shareholder value.
•Our compensation committee is made up solely of independent directors and makes all executive compensation decisions.
•Our compensation committee reviews our executive and broad-based compensation strategy annually to align incentives with principles of prudent risk management.
•Our compensation committee directly engages an independent compensation consultant, Compensia, to provide analysis for the annual executive compensation review and guidance on other executive compensation matters independent of management.
•Our compensation committee reviews external market data when making compensation decisions and annually reviews our peer groups with its independent compensation consultant.
What we do not do
•We do not provide guaranteed minimum annual cash incentive compensation.
•We do not provide for single trigger acceleration benefits upon a change of control.
•We do not provide excessive severance or change of control related benefits.
•We do not offer golden parachute tax gross-ups to any of our named executive officers or other executive officers.
•We prohibit our named executive officers, the members of our Board of Directors and other employees from hedging or similar transactions designed to decrease risks associated with holding our equity securities.
Executive Compensation Philosophy and Objectives
We operate in a highly competitive business environment, which is characterized by frequent technological advances and rapidly changing market requirements. To successfully grow our business in this dynamic environment, we must continually develop and refine our products and services to support our customers’ needs. To achieve these objectives, we require a highly talented and seasoned team of technical, sales, marketing, operations, and other business professionals.
The market for skilled personnel in the software industry is very competitive. We compete with other companies in our industry globally and other companies in the major metropolitan areas in the United States to attract and retain a skilled management team. To attract and retain qualified executive candidates, our compensation committee seeks to develop competitive compensation packages while rewarding named executive officers for performance. At the same time, our compensation committee is sensitive to the need to balance both market competitive and internal equity considerations. We believe compensation should serve to align the interests of named executive officers with the interests of shareholders in maximizing shareholder value. To meet this challenge, we have embraced a compensation philosophy of offering our named executive officers competitive total direct compensation, which is comprised of base salary, short-term cash incentive compensation and long-term equity awards, in addition to employee benefits and severance and change of control protections. We believe this philosophy allows us to attract, retain, and motivate talented executives who have the skills and abilities needed to drive our desired business results while aligning the incentives of our named executive officers with our stockholders’ interests.
The specific objectives of our executive compensation program are to:
•Drive the development of a growing business and the achievement of growth objectives;
•Attract, motivate, reward, and retain highly qualified executives who are critical to our success;
•Recognize strong individual achievement; and
•Align incentives of our executives to create long-term value for our stockholders.
Executive Compensation Program Design
Our executive compensation program reflects our stage of development as a growing publicly-traded company. To support our growth objectives and reinforce a strong pay-for-performance culture, the majority of total direct compensation
for our named executive officers is variable compensation in the form of cash incentive compensation tied to the achievement of our short-term financial objectives and equity awards tied to the long-term performance of our common stock. We believe these incentives in turn align the interests of our named executive officers with those of our stockholders. Within this overall framework, our compensation committee reviews each component of executive compensation separately and relative to the overall compensation package to determine whether such amounts and mix of components further the objectives of our executive compensation program. Additionally, we designed our executive compensation program to provide competitive total direct compensation. To assess the competitiveness of our total direct compensation, the compensation committee considers the total direct compensation at companies in our compensation peer group at the 50th and 75th percentile; however, the compensation committee does not specifically benchmark the compensation of any individual to a precise percentile within this general percentile range. In establishing target total direct compensation for each of our named executive officers, the compensation committee may also take into account each named executive officer's prior experience, in terms of former employers and roles at such employers, the prevalence of executives with a comparable level of skill and experience and potential competitors for such executive's talent. We believe our executive compensation program is appropriate for a company of our size, in our industry, and in our stage of growth. As the Company matures, we will continue to evaluate our executive compensation program and governance practices.
We offer cash compensation in the form of base salaries and annual cash incentive compensation opportunities. Cash incentive compensation is used to create meaningful variation in actual total cash compensation based on differences in business results in a given year. In recent years, we have structured our annual cash incentive compensation opportunities to focus on the achievement of specific annual financial objectives that we believe will further our longer-term growth objectives. While discretion may be exercised to increase a named executive officer's cash incentive compensation based on individual results, cash incentive compensation is largely based on the Company's financial performance.
Additionally, equity awards serve as a key component of our executive compensation program. Currently, we grant restricted stock units to deliver market competitive levels of compensation and to provide executives with value realized over time based on the long-term performance of our common stock. We believe that by providing equity awards with multi-year vesting provisions, we incentivize and reward our named executive officers for long-term corporate performance based on the value of our common stock and, thereby, align the interests of our named executive officers with those of our stockholders. In addition, the compensation committee believes that offering meaningful equity ownership with multi-year vesting provisions assists us in retaining our named executive officers.
Finally, we offer executives standard health and welfare benefits that are generally available to our other employees, including medical, dental, vision, life and disability insurance and 401(k) plans. We pay all of the premiums of health and welfare benefit plans for our named executive officers, but do not fully pay premiums for all employees.
Our compensation committee evaluates our compensation philosophy and executive compensation program as circumstances require, and reviews compensation for our named executive officers annually, generally in the second quarter of the fiscal year. As part of this review, we expect that our compensation committee will apply our philosophy and the objectives outlined above, together with consideration for the levels of compensation that we would be willing to pay to ensure that our executive compensation remains competitive and that we meet our retention objectives, as well as the cost to the Company if we were required to find a replacement for a named executive officer. Adjustments to a named executive officer's compensation made in connection with this review generally occur in the second quarter of the fiscal year with adjustments to cash compensation generally effective as of May 1 of the fiscal year and, unless further adjusted by the compensation committee, remaining in effect for the remainder of that fiscal year until May 1 of the subsequent fiscal year.
Covid-19 Considerations
In light of the ongoing global COVID-19 pandemic, and in order to thoughtfully manage our business in light of a changing market environment, we sought to control expenses and maintain liquidity while committing to conduct no COVID-19-related layoffs during fiscal 2021. In order to achieve these goals, we decided that our employees, including our named executive officers, would not receive base salary increases in fiscal 2021.
The compensation committee reviewed the compensation for our named executive officers in the second quarter of fiscal 2021 and considered the impact of COVID-19 on our executive compensation program. However, given the
uncertainties presented by the COVID-19 pandemic, we made no changes to compensation for our named executive officers at such time, and conducted a further review of the compensation for our named executive officers in the third quarter of the fiscal year. In its subsequent review, the compensation committee considered the continued uncertainties presented by the COVID-19 pandemic and the Company’s goals of managing costs and maintaining liquidity while committing to conduct no COVID-19-related layoffs during fiscal 2021. As a result, the compensation committee decided to keep fiscal 2021 base salaries and target cash incentive compensation opportunities of our named executive officers at the rates established for fiscal 2020. Furthermore, despite the impact of COVID-19 on our business, we did not adjust the performance goals for our Fiscal 2021 Executive Bonus Plan, which were established in March 2020. In support of the Company's response to the COVID-19 pandemic and given our employees would not receive base salary increases in fiscal 2021, Mr. Lerman voluntarily requested to forego any cash incentive compensation under the Fiscal 2021 Executive Bonus Plan.
Compensation-Setting Process
Role of our Compensation Committee
Compensation decisions for our named executive officers are made by our compensation committee. Currently, our compensation committee is responsible for reviewing, approving and determining the compensation of our named executive officers and making recommendations to our Board of Directors and for administering all cash-based and equity-based compensation plans.
Our compensation committee, after consulting with our management team and Compensia, approves our corporate performance objectives, and makes decisions with respect to any base salary and cash incentive compensation adjustments and equity awards for our named executive officers. With respect to our executive bonus plan, our compensation committee determines the applicable performance targets for each corporate performance objective used for the applicable year. Near the end of the fiscal year, our compensation committee establishes the list of peer companies to develop the relevant market for determining executive pay levels and practices in the following fiscal year.
Role of Management
In carrying out its responsibilities, our compensation committee works with members of our management team, including our Chief Executive Officer, Chief People Officer and General Counsel. Given our other named executive officers report to him, our Chief Executive Officer is able to advise on the performance of all our other named executive officers; accordingly he is an actively involved observer of compensation committee meetings. Our Chief People Officer typically coordinates the agenda and leads management’s presentations to the compensation committee. Overall, our management team (together with Compensia) assists our compensation committee by providing information on corporate and individual performance, market data, and management’s perspective and recommendations on compensation matters as well as information on tax, accounting, legal and regulatory matters relating to executive compensation.
Except with respect to his own compensation, our Chief Executive Officer will make recommendations to our compensation committee regarding compensation matters, including the compensation of our named executive officers. Our Chief Executive Officer also participates in meetings of our compensation committee, except with respect to discussions involving his own compensation.
While our compensation committee solicits the recommendations and proposals of our Chief Executive Officer with respect to compensation-related matters, these recommendations and proposals are only one factor in our compensation committee’s decision-making process.
Role of Compensation Consultant
Our compensation committee has the authority to retain the services of external advisors, including compensation consultants, legal counsel and other advisors, from time to time, as it sees fit, in connection with carrying out its duties.
In fiscal 2021, our compensation committee continued to engage Compensia, a national compensation consulting firm, to advise on our executive and non-employee director compensation strategy and guiding principles, our current
executive total compensation levels relative to competitive market practices, our compensation peer group, and potential executive compensation decisions.
Compensia reports directly to our compensation committee and attends meetings of our compensation committee, as requested. Although our compensation committee considers the recommendations of Compensia as to our executive and non-employee director compensation programs, these recommendations are only one factor in our compensation committee’s decision-making process.
In fiscal 2021, Compensia did not provide any services to us other than the services provided to our compensation committee. Our compensation committee has assessed the independence of Compensia in fiscal 2021 taking into account, among other things, the factors set forth in Exchange Act Rule 10C-1 and the listing standards of the NYSE, and has concluded that no conflict of interest exists with respect to the work that Compensia performs for our compensation committee.
Role of Stockholder Input
At our 2020 Annual Meeting, we conducted our initial stockholder advisory vote on the compensation of our named executive officers. Our stockholders approved the fiscal 2020 compensation of our named executive officers, with approximately 81% support. The compensation committee reviews the voting results of the advisory vote on the compensation of our named executive officers and takes the results into consideration when reviewing and establishing the compensation of our named executive officers in the following fiscal year. Given stockholders' strong support for our fiscal 2020 compensation for our named executive officers, the compensation committee did not make material changes to our executive compensation program.
Use of Competitive Data
To assess the competitiveness of our executive compensation program and to assist in setting compensation levels, we refer to the pay practices of our peer companies as well as industry surveys, including the Radford Global Technology Survey, and where appropriate, a broader set of industry comparable practices.
Competitive Positioning
With the assistance of Compensia, our compensation committee reviews and considers the compensation levels and practices of a group of peer companies. The compensation committee reviews our compensation peer group at least annually and adjusts its composition, as necessary, based on changes in both our business and the businesses of the companies in the peer group. For fiscal 2021, the selection criteria for our compensation peer group targeted companies with comparable software as a service business models and business software applications, with annual revenues generally between $140 million and $565 million, and market capitalization generally between approximately $600 million and $5.5 billion. We also generally sought to include companies in a similar stage of development with year-over-year revenue growth of greater than 20% where possible.
Our compensation peer group for fiscal 2021 included the following companies:
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Alteryx
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AppFolio
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Avalara
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Blackline
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Cardlytics
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Everbridge
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Five9
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HubSpot
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Instructure
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Model N
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Paylocity Holding
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Q2 Holdings
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QAD
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SPS Commerce
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Upland Software
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Workiva
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Zuora
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In setting the various elements of compensation for our named executive officers, our compensation committee reviews target total direct compensation (which is comprised of base salary, short-term cash incentive compensation and long-term equity awards vesting in a given calendar year) and the elements thereof for our named executive officers and those of similarly situated executives of our compensation peer group. Compensia provided data at varying percentiles for such compensation, and our compensation committee used these data as market reference points. For certain named executive
officers, the data from the peer group may be supplemented with survey information where we believe the peer group alone does not provide sufficient information for similarly situated executives or when we believe the peer information is otherwise not comparable. While our compensation committee reviews compensation information of the peer group and survey information as elements in determining a competitive level of compensation, our compensation committee considers other factors in setting actual compensation, including prior experience, compensation history, potential competitors for such executive's talent, the overall competitive market for our executives, the alignment between the market-based positions and the actual responsibilities of our executives, each executive’s contributions and performance, internal parity, the scope of each executive’s responsibility, the value of each executive’s unvested equity holdings, our short- and long-term objectives, and prevailing market conditions.
Executive Compensation Program Components
Overview
In fiscal 2021, the key elements of our executive compensation program included base salary, cash incentive compensation, equity compensation, employee benefits, and severance and change of control protections.
In fiscal 2021, consistent with our compensation philosophy, the majority of total direct compensation for our named executive officers, was variable compensation in the form of cash incentive compensation tied to the achievement of our short-term financial objectives and equity awards tied to the long-term performance of our common stock. Specifically, our practice of granting restricted stock units, which generally vest over a three to five-year period, promotes multi-year executive retention and long-term enterprise value creation, while cash incentive compensation is directly tied to our annual performance and achievement of short-term objectives.
Base Salary
Base salary is the primary fixed component of our executive compensation program, which we use to compensate our named executive officers for the scope and impact of their job. Generally, we establish the initial base salaries of our named executive officers through arm’s-length negotiation at the time we hire the individual named executive officer, taking into account his position, qualifications, experience, salary expectations, compensation data from surveys of similarly-situated companies in our compensation peer group, and the base salaries of our other executives. Thereafter, our compensation committee reviews the base salaries of each named executive officer annually and makes adjustments as it determines to be reasonable and necessary to reflect the scope of a named executive officer’s performance, contributions, responsibilities, experience, prior salary level, position (in the case of a promotion), and market conditions, as appropriate.
Our compensation committee reviewed our executive compensation program, including the base salaries of our named executive officers in the second quarter of fiscal 2021. However, given the uncertainties presented by the COVID-19 pandemic, the compensation committee made no changes to the base salaries of our named executive officers at such time, and conducted a further review of the base salaries for our named executive officers in the third quarter of the fiscal year. Our compensation committee considered the peer group compensation data provided by Compensia, the recommendations of our CEO (except with respect to his own base salary), as well as other relevant factors, including, among others, the performance and contributions of each of our named executive officers and the heightened competition for experienced leadership in our industry. However, in light of the uncertainties related to the COVID-19 pandemic, the compensation committee decided to keep base salaries at the rates established for fiscal 2020. See “Executive Compensation Philosophy, Objectives and Design — Executive Compensation Program Design — Covid-19 Considerations.” The base salaries of our named executive officers were as follows:
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Named Executive Officer
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Fiscal 2021 Salary Rate
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Percentage Increase
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Howard Lerman
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$
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500,000
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—
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%
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Brian Distelburger
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365,000
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—
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%
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Steven Cakebread
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480,000
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—
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%
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Marc Ferrentino
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450,000
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—
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%
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Ho Shin
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400,000
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—
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%
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James Steele
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400,000
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—
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%
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The total base salaries earned by our named executive officers in fiscal 2021 are set forth in the "Summary Compensation Table" below.
Cash Incentive Compensation
We use cash incentive compensation to motivate our named executive officers to achieve our annual financial objectives while making progress towards our longer-term strategic and growth goals. Accordingly, cash incentive compensation is used to create meaningful differences in total cash compensation to reflect differences in business results in a given year. Our executive bonus plan allows our compensation committee to provide cash incentive compensation to employees selected by our compensation committee, including our named executive officers.
Our compensation committee administers our omnibus employee incentive plan (the "Employee Incentive Plan"). Generally in the first quarter of each fiscal year, following the Board of Director's approval of our annual operating plan, our compensation committee adopts an incentive compensation plan for executives for the applicable fiscal year under our Employee Incentive Plan, or the executive bonus plan. As a part of creating the executive bonus plan, the compensation committee establishes the plan participants, the size of the target cash incentive compensation pool, the performance goals to be used to determine whether to make payouts, the associated target levels for each performance goal, and the potential payouts based on actual performance for the fiscal year. The compensation committee in its sole discretion may determine the performance goals (if any) applicable to any award or portion of an award, which may include the attainment of one or more financial, operational, or business objectives. The performance goals may be consistent across all Employee Incentive Plan participants or differ from participant to participant and from award to award.
Generally, in the second quarter of each fiscal year, our compensation committee establishes target annual cash incentive compensation opportunities for each named executive officer. Adjustments to a named executive officer's compensation made in connection with this review is generally effective as of May 1 of the fiscal year and, unless further adjusted by the compensation committee, remains in effect for the remainder of that fiscal year until May 1 of the subsequent fiscal year. The target annual cash incentive compensation opportunities for each named executive officer for any fiscal year is subject to the terms of the executive bonus plan for that fiscal year as described in the paragraph above.
Achievement of performance goals and the amount of the cash incentive compensation to be awarded to each named executive officer are determined by our compensation committee after the end of the applicable performance period based on our actual performance relative to the performance goals. As the administrator of our Employee Incentive Plan, the compensation committee may, in its sole discretion and at any time, increase, reduce or eliminate a participant’s actual award, and/or increase, reduce or eliminate the amount allocated to the incentive pool for a particular performance period. The actual award may be below, at or above a participant’s target award, in the discretion of the administrator. The administrator may determine the amount of any increase, reduction or elimination on the basis of such factors as it deems relevant, and it is not required to establish any allocation or weighting with respect to the factors it considers. Our Board of Directors and our compensation committee in their sole discretion have the authority to amend, suspend or terminate our Employee Incentive Plan, provided such action does not impair the existing rights of any participant with respect to any earned awards.
Actual awards are paid in cash only after performance goals have been achieved and require continued employment through the last day of the performance period and the date the actual award is paid. Payment of awards occurs as soon as administratively practicable after they are earned, but no later than within the timeline set forth in our Employee Incentive Plan.
Our compensation committee reviewed our executive compensation program, including the target annual cash incentive compensation opportunities for our named executive officers in the second quarter of fiscal 2021. However, given the uncertainties presented by the COVID-19 pandemic, the compensation committee made no changes to the target annual cash incentive compensation opportunities for our named executive officers at such time, and conducted a further review of the target annual cash incentive compensation opportunities for our named executive officers in the third quarter of fiscal 2021. The compensation committee reviewed competitive market data and considered our desired competitive market positioning and preference to focus on variable, at-risk compensation for our named executive officers. However, in light of the uncertainties related to the COVID-19 pandemic, the compensation committee decided to keep fiscal 2021 target annual cash incentive compensation opportunities of our named executive officers at the rates established for fiscal 2020. See “Executive Compensation Philosophy, Objectives and Design — Executive Compensation Program Design — Covid-19 Considerations.” The target annual cash incentive compensation opportunities under our executive bonus plan for our named executive officers during the fiscal year ended January 31, 2021 were as follows:
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Named Executive Officer
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Fiscal 2021 Executive Bonus Plan Target Award Opportunity
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Fiscal 2021 Executive Bonus Plan Target as a Percent of Base Salary
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Howard Lerman
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$
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500,000
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100.0
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%
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Brian Distelburger
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265,000
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72.6
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%
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Steven Cakebread
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420,000
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87.5
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%
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Marc Ferrentino
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250,000
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55.6
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%
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Ho Shin
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185,000
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46.3
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%
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In support of the Company's response to the COVID-19 pandemic and given our employees would not receive base salary increases in fiscal 2021, Mr. Lerman voluntarily requested to forego any cash incentive compensation under the Fiscal 2021 Executive Bonus Plan. Mr. Steele, who stepped down as President and Chief Revenue Officer of the Company effective September 30, 2020, was not eligible for cash incentive compensation.
Fiscal 2021 Executive Bonus Plan
In considering the relevant performance goals for the named executive officers the compensation committee seeks to encourage an efficient level of revenue growth and profitability that are aligned with the interests of the Company's stockholders. The compensation committee determines the target levels for each of these performance goals in consultation with management after taking into consideration our performance for the current and immediately preceding fiscal year. To that end, with respect to the executive bonus plan for fiscal 2021 (the "Fiscal 2021 Executive Bonus Plan") the compensation committee established fiscal 2021 total revenue of $383 million and non-GAAP net loss of $53.8 million, as the relevant performance goals, which were weighted 67% and 33%, respectively. While the compensation committee regularly reviewed our executive compensation program in fiscal 2021 and the expected payouts under the program, the compensation committee did not adjust the performance goals for our Fiscal 2021 Executive Bonus Plan, despite the impact of COVID-19 on our business. Non-GAAP net loss is the GAAP loss attributable to common stockholders adjusted for stock-based compensation expense. These performance objectives should not be interpreted as a prediction of how the Company 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. You are cautioned not to rely on these performance goals as a prediction of our future performance
A named executive officer’s cash incentive compensation, if any, is computed using a payout percentage, based on the weighted average of the achievement percentages for each performance goal, applied to the named executive officer's target annual cash incentive compensation opportunity. First, an achievement percentage for each performance goal is computed based upon the Company's actual performance relative to the performance goals established by the compensation committee. Each achievement percentage is then subject to a multiplier.
If actual total revenues for the performance period exceeds or falls below the performance goal established by the compensation committee for such performance period, each 0.1% achievement above or below the performance goal increases or reduces the revenue achievement percentage by 1.0%, respectively. However, if actual total revenues does not
equal or exceed 90% of the revenue performance goal, then the achievement percentage for total revenue would be reduced to zero. If actual non-GAAP net loss exceeds or falls below the performance goal established by the compensation committee for such performance period, each 0.1% achievement above or below the performance goal increases or reduces the non-GAAP net loss achievement percentage by 0.2%, respectively. After the achievement percentage for each performance goal has been computed as described above, the percentages are weighted according to the weightings the compensation committee ascribed to each performance goal to determine the payout percentage. However, if the weighted average of the total revenue and non-GAAP net loss achievement percentages, without regard to the respective multipliers, is less than 50%, no cash incentive compensation will be paid. In addition, each named executive officers' cash incentive compensation is subject to a maximum payout equal to 150% of the named executive officer's target annual cash incentive compensation opportunity.
While the Fiscal 2021 Executive Bonus Plan allows for the discretion of the compensation committee to adjust a named executive officer’s cash incentive compensation based on individual results, performance and contributions during the performance period and other factors, actual cash incentive compensation paid to the named executive officers are predominantly based on the Company's performance relative to the performance goals established by the compensation committee.
For fiscal 2021, total revenue was $354.7 million and non-GAAP net loss was $22.4 million, and the payout percentage for the named executive officers was calculated as follows:
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Performance Goal
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Performance Goal Weighting
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Percentage of Target Achievement
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Percentage of Target Payout
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Total Revenue
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67%
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92.7%
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17.9%
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Non-GAAP Net Loss
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33%
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148.9%
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65.3%
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Payout Percentage
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83.2%
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Accordingly, the cash incentive compensation payable to the named executive officers under the Fiscal 2021 Executive Bonus Plan was:
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Named Executive Officer
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Fiscal 2021 Executive Bonus Plan Cash Incentive Compensation Payable
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Howard Lerman
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$
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—
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Brian Distelburger
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220,358
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Steven Cakebread
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349,247
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Marc Ferrentino
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207,885
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Ho Shin
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153,835
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In support of the Company's response to the COVID-19 pandemic and given our employees would not receive base salary increases in fiscal 2021, Mr. Lerman voluntarily requested to forego any cash incentive compensation under the Fiscal 2021 Executive Bonus Plan.
In addition, in connection with the adoption of the Fiscal 2021 Executive Bonus Plan, the compensation committee established a separate pool of discretionary cash incentive compensation. Senior executives that participate in the Fiscal 2021 Executive Bonus Plan including the named executive officers other than our Chief Executive Officer are eligible for discretionary cash incentive compensation upon the recommendation of our Chief Executive Officer and approval by our compensation committee. The discretionary cash incentive compensation pool would only be funded up to a maximum of ten percent of the total cash incentive compensation pool, if the weighted average of the total revenue and non-GAAP net loss achievement percentages, without regard to the respective multipliers, exceeded 50%. In fiscal 2021, our Chief Executive Officer made a recommendation to the compensation committee that no additional cash incentive compensation be granted.
Equity Awards
We grant equity awards with multi-year vesting provisions to incentivize and reward our named executive officers for long-term corporate performance based on the value of our common stock and, thereby, to align the interests of our named executive officers with those of our stockholders. Since the completion of our initial public offering, our equity awards have generally been made in the form of restricted stock units, or RSU, awards that are settled in shares of our common stock. Equity awards are generally subject to vesting over a three to five-year period based on continued employment, with awards subject to vesting in equal quarterly increments. We believe the time-based vesting requirement of our long-term equity incentive awards promotes retention by providing an incentive for our named executive officers to remain in our employment throughout the vesting period.
The size of the equity awards that we grant to our named executive officers in connection with their hire is determined through arm’s-length negotiation, taking into account such factors as the named executive officer’s prospective role and responsibilities, the named executive officer’s expected cash compensation, the equity award’s potential incentive and retention value, survey data on the size of new-hire awards provided by similar companies to similarly-situated employees, and prevailing market conditions. On a periodic basis, most often annually, we also grant equity awards to our named executive officers as additional incentive to continue service with us or to recognize exceptional corporate and individual performance.
In fiscal 2021 the compensation committee reviewed market data and analysis of the named executive officer’s unvested equity awards in the second quarter of the fiscal year. However, given the uncertainties presented by the COVID-19 pandemic, the compensation committee did not approve the grant of equity awards at such time, and decided to further review the named executive officers' proposed equity awards in the third quarter of the fiscal year. On September 29, 2020, our compensation committee approved the grant of time-based RSU awards to Messrs. Lerman, Distelburger, Ferrentino and Shin. These RSU awards vest in equal quarterly increments over sixteen quarters beginning on December 20, 2020, and thereafter on a quarterly basis, in each case, subject to the applicable named executive officer’s continued service to us on each such vesting date.
To determine the size of the fiscal 2021 RSU awards, the compensation committee considered many factors such as the competitiveness of the equity awards based on market data; the economic value of the named executive officer’s unvested equity awards and the ability of this equity to satisfy our retention objectives; the named executive officer’s performance, contributions, responsibilities, and experience; the equity award recommendations of our Chief Executive Officer (except with respect to his awards); and internal equity considerations. To assess the competitiveness of the proposed equity award, as one relevant factor in the analysis, the compensation committee reviewed each named executive officer's intended total direct compensation on an annual basis over a four year period, which includes the estimated value of the proposed equity award vesting in each year. The compensation committee then compared the intended total direct compensation of each named executive officer to the total direct compensation of the Company's relevant compensation peer group and market data provided by Compensia, including the total direct compensation from our compensation peer group at the 50th and 75th percentile.
In light of the equity awards granted to Mr. Cakebread during fiscal 2018, the compensation committee determined the value of the unvested equity for Mr. Cakebread achieved the retention objectives of the compensation committee with respect to him and the committee decided not to grant any additional equity awards to Mr. Cakebread in fiscal 2021.
Mr. Steele stepped down as President and Chief Revenue Officer of the Company effective September 30, 2020 and transitioned to a new role as an advisor to the Company effective October 1, 2020. As a result, he was not eligible to receive an equity award for fiscal 2021, but pursuant to the advisory agreement he was granted 50,000 RSU awards, which will fully vest on September 20, 2021 subject to his continued service as an advisor through such date.
The vesting of all equity awards granted to our named executive officers in fiscal 2021 may be accelerated upon the termination of their employment under certain circumstances, as described under "Executive Compensation—Named Executive Officer Employment Agreements" and "—Potential Payments upon Termination or Change in Control". See "Executive Compensation—Summary Compensation Table" and "—Grants of Plan-Based Awards" for further details about these awards.
Severance and Change of Control
Our Board of Directors has adopted a change of control and severance policy, which applies to our named executive officers. The material terms of this policy and the change of control provisions in our equity incentive plans are set forth in “Executive Compensation—Potential Payments upon Termination or Change in Control” below.
Other Compensation and Benefits
We maintain a tax‑qualified retirement plan, or the 401(k) plan, that provides eligible employees with an opportunity to save for retirement on a tax‑advantaged basis. See “Executive Compensation—401(k) Plan” below.
Participation in the 2017 Employee Stock Purchase Plan (“ESPP”) is available to all named executive officers on the same basis as our other U.S. employees. However, any named executive officers who would become 5% stockholders as a result of their participation in the ESPP or who hold rights to purchase shares of our common stock under all of our employee stock purchase plans that accrue at a rate that exceeds $25,000 worth of shares of our common stock for each calendar year that the offering cycle is in effect, are ineligible to participate in the ESPP in excess of such accrued amount. Under the ESPP, participants may purchase the Company’s common stock through payroll deductions, up to a maximum of 15% of their eligible compensation, subject to a maximum of 10,000 shares of common stock during a purchase period. A new offering period will commence on the first trading day on or after March 15th and September 15th each year, or on such other date as the administrator will determine and will end on the first trading day, approximately six months later, on or after September 15th and March 15th, respectively. The number of shares participants may purchase is variable, as participants may purchase as many shares as the full amount of their withholdings will permit, based on the purchase price. Unless changed by the administrator, the purchase price for each share of common stock purchased under the ESPP will be 85% of the lower of the fair market value per share on the first trading day of the applicable offering period or the fair market value per share on the last trading day of the applicable offering period.
Our named executive officers are also entitled to participate in the employee benefit plans that are available to our U.S.-based, full-time employees, on the same terms and conditions as such other employees participate, except that we pay 100% of the premiums on behalf of our named executive officers. These benefit plans include health, dental and vision insurance; medical and dependent care flexible spending accounts; short- and long-term disability insurance; and life insurance, which are generally consistent with those offered by companies that we compete with for employees.
In fiscal 2020 and 2021 we have provided risk-based, business-related and personal security services to Messrs. Lerman and Distelburger and their families. We do not consider the security measures provided to our named executive officers to be a personal benefit, but rather reasonable and necessary expenses for the benefit of the Company. However, in accordance with SEC disclosure rules, the aggregate cost of these services is reported in “Executive Compensation—Summary Compensation Table.” In addition as a result of an arm's length negotiation in connection with the employment agreements for Messrs. Shin and Steele, we have paid for corporate housing but have not provided any gross-ups or tax payments related to this benefit.
Prohibition on Hedging and Pledging Transactions
Our insider trading policy prohibits our named executive officers from engaging in the following activities with respect to our common stock: short sales, trading in derivative securities, hedging transactions, pledging stock as collateral, or holding stock in a margin account.
Tax and Accounting Considerations
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code (“Section 162(m)”) generally limits the amount of our federal income tax deductions for compensation paid to our Chief Executive Officer and certain of our most highly-compensated executive officers in any taxable year to $1 million per person. Beginning on or after January 1, 2027, the American Rescue Plan Act of 2021 will further expand the applicability of Section 162(m) to include the next five highest paid corporate officers.
Our compensation committee has not adopted a policy that requires that all compensation paid to our named executive officers be fully deductible. Our compensation committee is aware of the benefit of being able to fully deduct the compensation paid to our named executive officers, but our compensation committee intends to continue to compensate our named executive officers consistent with the best interests of our Company and our stockholders even if such compensation is not fully deductible because our compensation committee believes that we must retain the flexibility to compensate our named executive officers in a manner that best promotes our business objectives.
“Parachute Payments” and Deferred Compensation
Certain service providers may be subject to an excise tax under Section 4999 of the Internal Revenue Code if they receive payments or benefits in connection with a change in control that exceeds certain prescribed limits, and we, or a successor, may forfeit a deduction on the amounts subject to this excise tax under Section 280G of the Internal Revenue Code. Section 409A of the Internal Revenue Code (“Section 409A”) imposes significant additional taxes on a service provider if the service provider receives “deferred compensation” that does not meet the requirements of Section 409A.
We do not provide (and did not have any agreements or obligations to provide) any of our named executive officers with a “gross-up” payment or other reimbursement for any excise tax liability that he might owe under Section 4999 or for any additional tax that he might owe under Section 409A.
Accounting Considerations
Authoritative accounting guidance on stock compensation requires measurement of the compensation expense for all share-based awards made to employees (such as our named executive officers) and directors based on the grant date “fair value” of the awards. Even though our named executive officers and directors may never realize any value from their equity awards, these values have been calculated for accounting purposes and reported in the tables below. This guidance also requires us to recognize the compensation cost of share-based awards in our income statements over the period that the named executive officer or director is required to continue service with us in order to vest in the equity award.
Compensation Committee Report
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement with management and, based on such review and discussions, the compensation committee recommended to our Board of Directors that the Compensation Discussion and Analysis be incorporated by reference in the Company's Annual Report on Form 10-K for fiscal 2021 and included in this proxy statement.
Submitted by the compensation committee of our Board of Directors:
Jesse Lipson (Chairman)
Michael Walrath
Hillary Smith
Tamar Yehoshua
This report of the compensation committee shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A promulgated by the SEC or Section 18 of the Exchange Act, and shall not be deemed incorporated by reference into any prior or subsequent filing by Yext under the Securities Act of 1933, as amended, or the Securities Act, or the Exchange Act, except to the extent Yext specifically requests that the information be treated as “soliciting material” or specifically incorporates it by reference.