Additional Proxy Soliciting Materials (definitive) (defa14a)
June 07 2022 - 8:31AM
Edgar (US Regulatory)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant x
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Check the appropriate box:
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Preliminary Proxy Statement |
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Definitive Proxy Statement |
x | Definitive Additional Materials |
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Soliciting Material under §240.14a-12 |
Splunk Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x | No fee required. |
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Fee paid previously with preliminary materials. |
¨ |
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a6(i)(1) and 0-11. |
| © 2022 SPLUNK INC.
Stockholder
Engagement
Spring 2022 |
| © 2022 SPLUNK INC.
This presentation contains forward-looking statements
regarding future events, plans or the expected financial
performance of our company including statements about
our expectations regarding our products, technology,
customers, markets, ESG initiatives, and Splunk’s other
plans, objectives, goals and strategies. These statements
reflect management’s current expectations, estimates and
assumptions based on the information currently available to
us. These forward-looking statements are not guarantees of
future performance and involve significant risks,
uncertainties and other factors that may cause our actual
results, performance or achievements to be materially
different from results, performance or achievements
expressed or implied by the forward-looking statements
contained in this presentation.
Forward-Looking
Statements
Splunk, Splunk>, and Turn Data Into Doing are trademarks and registered trademarks of Splunk Inc. in the United States and other countries. All other
brand names, product names, or trademarks belong to their respective owners. © 2022 Splunk Inc. All rights reserved.
A discussion of factors that may affect future results is
contained in our most recent SEC Form 10-Q filing
available at www.sec.gov, including descriptions of the risk
factors that may impact us and the forward-looking
statements made in this presentation. The forward-looking
statements made in this presentation are made as of June
7, 2022. If this presentation is reviewed after June 7, 2022,
even if made available by us, on our website or otherwise,
it may not contain current or accurate information. We
disclaim any obligation to update or revise any forward-
looking statement based on new information, future events
or otherwise, except as required by applicable law.
2 |
| © 2022 SPLUNK INC.
Splunk Provides Unified Security and
Observability Across Hybrid
Environments
Splunk by the Numbers1
690
Customers
>$1M Total Annual
Recurring Revenue
>90
Fortune 100
Customers
7,000+
Worldwide
Employees
$3.21B
Total Annual
Recurring Revenue
3 1 All numbers in graphic are as of Q1 FY23.
Logs | Metrics | Traces
On-Prem
Data Centers Public Clouds Edge
Third-Party
Tools
Apps /
Services
Splunk-Built
Observability Security
Splunkbase
2,400+ apps
Custom Apps
Build for your
unique needs |
| © 2022 SPLUNK INC.
Our Growth Strategy
Splunk continues to evolve and grow in line with our business strategy, which is
designed to create long-term, sustainable value
Cloud-First Platform and Solutions
• Cloud services represents the majority of our total software bookings
• Investment in cloud services offerings to deliver a cloud-optimized go-to-market and support model
• Investing in license offerings to enable both standalone consumption and hybrid Splunk deployments
Expand the Splunk Value Proposition
• Product strategy and go-to-market approaches focused on Security and Observability users, and expansion of offerings that serve these users
• Delivering new and enhanced capabilities and services that provide faster time-to-value and easier adoption and expansion
• New features tailored to meet user needs, including more comprehensive data reach, more powerful analytics, and AI/ML and automation
capabilities
Global Expansion
• Continued investment in go-to-market, operations and infrastructure to deliver our services to customers in targeted countries across public and
private sectors
4 |
| © 2022 SPLUNK INC.
Strong Leaders to Fuel the Next Chapter
of Our Growth
Our new President and CEO Gary Steele and our Chair Graham Smith are highly
experienced leaders who both have proven track records of successfully scaling
businesses in our industry
Our new CEO and our Chair’s proven track records of growing multi-billion-dollar global enterprises position
Splunk for continued growth and long-term success
5
Gary Steele
President and CEO
• Committed to scaling the business and
extending our value, driving innovation
and customer success
• Over 30 years of experience, with a
proven track record of successfully
scaling SaaS operations and growing
multi-billion dollar global enterprises
• Held CEO roles at Proofpoint and
Portera, as well as senior leadership
roles at Sybase, Sun Microsystems and
Hewlett-Packard Graham V. Smith
Chair
• Industry track record of successfully
scaling several cloud businesses
• Deep knowledge of Splunk's business
gained through service as a director
since 2011, Chair since 2019, and interim
CEO from November 2021 to April 2022
• Strong financial expertise and software
executive experience gained via CFO
roles at Salesforce and Advent Software
• Broad governance and industry expertise
via current and former director roles,
including at Slack and Citrix |
| © 2022 SPLUNK INC.
Patricia Morrison,
Former EVP and CIO,
Cardinal Health
Committees: Audit,
Cybersecurity & Data Responsibility
Mark Carges
Former CTO, Ebay
Committee: Cybersecurity & Data
Responsibility
Sara Baack
Former Chief Product Officer,
Equinix
Committee: Governance &
Sustainability (Chair)
Sean Boyle
COO and CFO, Wildlife Studios
Committee: Audit (Chair)
Kenneth Hao
Chairman and Managing Partner,
Silver Lake
Committees: None
Stephen Newberry
Former Chairman,
Lam Research
Committee: Talent & Compensation
(Chair)
Graham Smith
Independent Chair, Splunk
Committee: Talent & Compensation
Elisa Steele
Independent Board Member
Committees: Governance &
Sustainability, Talent &
Compensation
General Dennis Via
EVP, Booz Allen Hamilton
and Retired Four-Star
U.S. Army General
Committee: Cybersecurity & Data
Responsibility (Chair)
Luis Visoso
CFO, Unity Software
Committees: Audit,
Governance & Sustainability
Gary Steele
President and Chief Executive
Officer, Splunk
Committees: None
Joined in
2021
Skilled and Experienced Board
Joined in
2022
Joined in
2022
Proposal 1: Election of Class I Directors
= Class I Directors 6 |
| © 2022 SPLUNK INC.
1 For the purposes of this information, a member of an underrepresented community is defined as an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific
Islander, Native American, Native Hawaiian, or Alaska Native, or who self-identifies as gay, lesbian, bisexual or transgender.
Capability Number of Directors with the Capability
Technology and security
infrastructure 4 4 4
Scaling a SaaS business 4 4 4 4
Investment 4 4 4 4 4
CEO experience 4 4 4 4 4
Modern cloud technologist 4 4 4 4 4 4
Sales 4 4
Marketing 4 4
Key customer segment insight 4 4 4 4
Finance 4 4 4
People and compensation 4 4 4 4
Governance, risk and
compliance 4 4 4 4 4 4 4 4
Directors Have Diverse Backgrounds and
Expertise
Underrepresented
Community1
Diverse Board with Strong Independence and Thoughtful Refreshment
Tenure
5 years
Average Tenure
1
10-13 Yrs
3
6-9 Yrs
5
0-2 Yrs
2
3-5 Yrs
Gender Diversity
Independence
91%
Independent
10
Independent
1
Non-Independent
27%
Women
3
Women
8
Men
36%
Underrepresented
Community
Members 7
Other
4
Under-
represented
Community
Proposal 1: Election of Class I Directors
7
4 Strong capability Moderate capability |
| © 2022 SPLUNK INC.
Robust Board Oversight of ESG
Our Board works closely with management to oversee ESG as we leverage our
technology, expertise and talent to advance lasting solutions to important issues
Climate Resilience and Innovation
• Governance and strategy
• Risks and opportunities
• TCFD disclosures
and metrics
• Scenario planning
and targets
ESG Business Integration
• Governance and standards
• Risk, audit and compliance
• Reporting and metrics
Global Impact Strategy
• Social impact
• Ethical and inclusive growth
• Data responsibility
• Environmental sustainability
For more information, please refer to our 2021 Global Impact Report, pages 10-11.
ESG High-Level Objectives
Proposal 1: Election of Class I Directors
Governance & Sustainability
Committee
• General oversight of ESG activities,
programs and public disclosure
• Factors in any feedback received
from stockholders
Audit
Committee
• Oversight of enterprise risk
management framework
• Oversight of disclosure of ESG
metrics and key performance
indicators
Talent & Compensation
Committee
• Oversight of human capital
management
• Includes talent acquisition, talent
management and development,
employee engagement, and DEI
Cybersecurity & Data Responsibility
Committee
• Oversight of cybersecurity and data
responsibility objectives, strategies,
capabilities, initiatives, risks and
mitigation protocols
Board Oversight
8 |
| © 2022 SPLUNK INC.
Performance-Based Pay Aligned with
Strategy
In line with our pay-for-performance philosophy, the majority of our NEOs’ FY22
compensation, other than our interim CEO’s1, was performance-based and in the form of
long-term equity
Proposal 3: Advisory Vote to Approve Executive Compensation
9
Element Objective FY22 Design Features
Base
Salary
Recognize ongoing performance
of job responsibilities
• Reviewed on an annual basis
• Salaries determined after considering several factors, including compensation data from our peer group
Annual Cash
Bonus
Align compensation with rigorous
performance goals
• Earned solely based on achievement against corporate financial performance
• Based on ARR growth achievement aligned with increasing stockholder value and our growth strategy
Long-Term
Equity
Compensation3
Emphasize long-term performance
objectives
Align NEO and stockholder
interests
Motivate and retain key executives
through performance and time-
based vesting periods
Performance-based RSUs (“PSUs”) (60%)
• Based on ARR (60%) and operating cash flow (40%) achievement
• One-year performance period, given the Company’s rapid growth and ongoing business model transition (see slide 13
for information on go-forward change to three-year performance period and elimination of overlapping metrics with
annual cash bonus plan)
• Additional portion of the PSUs eligible to vest quarterly beginning June 2023 if stock price hurdles are achieved
• Earned portions time vest over three years (1/3 vesting after approximately one year; 2/3 quarterly over remaining two
years)
Time-based RSUs (40%)
• Based on continued service through vesting date
• Time vests over three years (1/3 vesting after approximately one year; 2/3 quarterly over remaining two years)
1 Per the offer letter between the Company and Graham Smith, the interim CEO compensation did not include annual cash bonus or long-term compensation components, and his salary of $12,000,000
was on an annualized basis.
2 Excludes sign-on bonuses awarded to new hire NEOs and interim CEO compensation.
3 Ms. Carlson received 69% of her long-term equity compensation in RSUs, a portion of which had a 4-year vesting schedule.
FY22 Normal Course NEO Compensation Program2 |
| © 2022 SPLUNK INC.
Thoughtfully Designed Interim CEO
Compensation
Interim CEO compensation was structured to be simple and less than the median CEO
total direct compensation for CEOs in our compensation peer group
Proposal 3: Advisory Vote to Approve Executive Compensation
1 Per the offer letter between the Company and Graham Smith, the interim CEO compensation was awarded on an annualized basis (i.e., salary of $1,000,000 per month of service).
2 Mr. Smith’s annual total compensation, as reported in the Summary Compensation Table, was $3,010,388, which includes director fees paid to Mr. Smith in FY22 and the aggregate grant date fair
value of RSUs granted to Mr. Smith in FY22, in both cases for his service as a member of our Board.
• Structured as cash given the temporary and transitional nature
of Mr. Smith’s role as interim CEO, and his existing meaningful
equity stake in Splunk
• As interim CEO, Mr. Smith was not eligible for an annual cash
bonus opportunity or equity awards, considering that more than
three-quarters of the one-year performance periods within our
FY22 annual and long-term performance-based incentive
programs had elapsed at time of appointment
• Equity awards previously granted to Mr. Smith in connection with
his services as a member of our Board continued to vest, and he
did not receive any other compensation for his services as a
member of our Board during his term as interim CEO
10
Interim CEO Compensation1 Program
Base Salary $12,000,000 annually
Cash Bonus Not eligible
Long-Term Equity
Compensation Not eligible
Graham Smith’s prorated salary for serving as our interim CEO in FY22 was ~$2.6 million(2) |
| © 2022 SPLUNK INC.
FY22 Incentive Pay Outcomes Aligned
with Long Term Value Creation
Our FY22 Annual Cash Bonus and PSU Plan payouts reflect strong performance in
our business, which will drive stockholder value over time
Incentive Plan Results Payout
Cash
Bonus
• ARR: Achieved $3.12B vs. $3.027B
target
– $3.12B in ARR represented a
~32% increase from FY21 ARR
– Target ARR represented 28%
YoY growth, demonstrating rigor
• 167.72% of each eligible
NEO’s target bonus
opportunity
Performance
Share Units
(PSUs)
(60% of total
LTI)
• ARR (60%): Achieved $3.12B vs.
$3.027B target
• Operating Cash Flow (40%):
Achieved $128.0M vs. $80M target
– Compared to FY21 OCF of
$(191M)
• 167.97% of each eligible
NEO’s target PSU award
1/3 of earned Corporate PSUs
vested in March 2022. The
remaining Corporate PSUs vest
over remaining 2 years; up to
50% of earned corporate PSUs
eligible to be earned based on
aggressive stock price growth
goals
As discussed further on slide 13, beginning with FY23, we eliminated overlapping
performance metrics in our annual bonus plan and PSU program
Continued Strong ARR Growth
Will Drive Stockholder Value
Broad-Based Strong Performance Provides
Building Blocks for Growth(1)
Total Revenues Cash Flow Customers with
ARR > $1 million
$2.67 billion
Up 20%
year-over-year
Operating Cash Flow
of
$128 million
Free Cash Flow of
$117 million(2)
675
Customers
Up 32%
year-over-year
($ in millions) – FYE January 31
50%
54%
41%
32%
Proposal 3: Advisory Vote to Approve Executive Compensation
11 1 As of FY22.
2 To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide investors with certain non-GAAP financial measures, including non-
GAAP free cash flow. For a full reconciliation between GAAP and net cash used in operating activities and free cash flow, please see Appendix A. |
| © 2022 SPLUNK INC.
We engaged extensively with stockholders to solicit feedback on our executive
compensation practices, approach to equity compensation and other topics of importance
to investors
2022 Stockholder Engagement
We reached out to
institutional stockholders
representing
62%
of shares outstanding
Scope of Outreach Responsive Actions to Address Stockholders’ Feedback
• Did not lower or otherwise adjust FY22 performance metrics
• Committed that, in the future, would only lower performance metrics for in-flight
incentives in extraordinary circumstances that could not have been foreseen
• In the event of such a circumstance, committed to capping any related
payout at its original target level
• Provided extensive disclosure of context and rationale for 2022 Equity Incentive
Plan
• Continued to thoughtfully consider the cost of equity compensation to investors
• Enhanced FY23 compensation program to better align with strategy and respond
to stockholder feedback and 2021 Say-on-Pay vote (see next slide for details)
Proposal 3: Advisory Vote to Approve Executive Compensation
Lead Independent Director
participated in calls with
institutional stockholders
representing
27%
of shares outstanding
We engaged with
institutional stockholders
that voted against 2021
Say-on-Pay representing
29%
of shares outstanding
We engaged with
institutional stockholders
representing
43%
of shares outstanding
12 |
| © 2022 SPLUNK INC.
Recent Responsive Compensation
Program Enhancements
Proposal 3: Advisory Vote to Approve Executive Compensation
Beginning with FY23, we are transitioning to longer performance periods for PSUs
and eliminating overlapping performance metrics between our annual and PSU
incentive programs
Elimination of overlapping metrics in our annual executive bonus plan and our PSU program
Transition to a three-year performance period for PSUs
13
• As a result of stockholder feedback and in line with best practices, we have eliminated overlapping metrics in our annual executive bonus plan and our PSU program
• FY23 annual executive bonus plan metrics: annual recurring revenue and operating cash flow – to motivate and incentivize executives to drive top-line growth and
operational discipline
• FY23 PSU program: relative total stockholder return metric, measured relative to companies in the SPDR S&P Software & Services ETF – to reward executives for
outperformance
• Our business has matured and our financial results have become more
predictable, enabling us to respond to stockholder feedback and transition to
a PSU program with a three-year performance period
• Relative total stockholder return (TSR) metric will be the sole metric to align
financial incentives with long-term stockholder value
• As we transition to this new structure, the FY23 PSUs include interim payout
opportunities after the end of the first and second year of the three-year
performance period to avoid a payout gap at the end of year one and year two
• Comparator Group: Companies in the SPDR S&P Software &
Services ETF, given its representation of our technology industry
peers and the fact that it is challenging relative to other potential
benchmark index companies
• Challenging Performance Hurdles: The minimum, target and
maximum relative TSR metrics for the FY23 program are the 25th,
55th and 75th percentile
• Negative TSR Cap: Payouts under the FY23 PSUs are capped at
the target level if the Company’s absolute total stockholder
return is negative
Key
Design
Features |
| © 2022 SPLUNK INC.
Competitive, Stockholder-Aligned
Compensation for New CEO
A competitive compensation package that is majority long-term equity with significant
performance conditions enabled us to attract and retain our new CEO
Proposal 3: Advisory Vote to Approve Executive Compensation
Go-Forward Compensation Structure
(Beginning with FY24)
CEO New Hire Compensation Package
Base
Salary
Annual Cash
Bonus Cash Signing Bonus RSUs PSUs
$900,000
Target of 125% of
annual base salary
(prorated for FY23)
$8,000,000
(subject to
reimbursement in certain
circumstances)
$12,000,000
Vests over four
years
$18,000,000 (target value)
Performance-based vesting
over three years
Mr. Steele’s forfeited long-term compensation opportunity at his
former employer was valued at more than 2x the target value of his
initial equity awards and cash signing bonus
Beginning in FY24, Mr. Steele’s compensation will have a
similar mix of performance-based and long-term
compensation that aligns with the Company’s pay-for-
performance compensation philosophy for its executives
New Hire RSUs and PSUs entirety of equity delivered
to Mr. Steele
• Notably, these are the only equity awards Mr. Steele
received in FY23 – he will not receive any additional
awards in FY23
14
The Talent & Compensation Committee determined Mr. Steele’s new hire compensation as follows:
• Analyzed CEO compensation within our compensation peer group, as well as recent new-hire CEO
compensation among 14 broader technology companies
• Set target total cash compensation (excluding signing bonus) to approximate median of both peer groups
• In determining target value of initial equity awards, considered values delivered to external CEO
appointments as a multiple of annual equity awards
• The cash + equity ultimately delivered was less than half of the long-term performance-based
compensation opportunity Mr. Steele forfeited when he separated from his prior employer |
| © 2022 SPLUNK INC.
• Historically, we have used equity awards strategically and on a broad basis to successfully compete and grow in an extremely competitive
talent market
• Cloud services represents the majority of our total software bookings, and we reached significant milestones in our ongoing business
transformation as we lapped revenue and cash troughs due to previous accounting and billing changes, respectively
• Our transformation requires us to recruit, incentivize and retain the best available employees in the hyper-competitive cloud, security
and observability technology talent markets
• Equity awards align employee interests with stockholders’ by helping employees maintain continued focus and dedication, thus
maximizing stockholder value
2022 Equity Incentive Plan is Critical to
Our Growth Strategy
Equity-based pay ensures retention of top talent in an extremely competitive
environment, while aligning Splunk employees’ interests with those of long-term
stockholders
Proposal 4: Approval of 2022 Equity Incentive Plan
Key Component of Competitive Hiring Consistent with Our Strategic Transformation
The 2022 plan is critical to our growth and will allow us to recruit, incentivize and retain the best talent
15 |
| © 2022 SPLUNK INC.
2022 Equity Incentive Plan is Governed by
Best Practices
The 2022 plan includes compensation and governance best practices, protecting
Splunk stockholders’ interests
Proposal 4: Approval of 2022 Equity Incentive Plan
• No annual “evergreen” provision
• Certain shares are no longer returned to the share reserve
• No repricing without stockholder approval
• No single-trigger vesting acceleration upon a change in control for
employees and consultants
• Reasonable annual limits on non-employee director compensation
• Minimum vesting requirements
• No transferability without Talent & Compensation Committee
approval
• No tax gross-ups
• Clawback policy
• No dividends on unvested awards
• Minimum exercise price of 100% of fair market value
To exhibit our commitment to a disciplined approach to granting equity, we are asking for approximately one year’s
worth of shares under the 2022 plan as we transition to a new equity compensation program
16
Best Practice Plan Features / Governance |
| © 2022 SPLUNK INC.
RATIFICATION OF APPOINTMENT OF PRICEWATERHOUSECOOPERS – RECOMMEND FOR
✔The Board and the Audit Committee believe that the retention of PricewaterhouseCoopers LLP for the fiscal year ending
January 31, 2023 is in the best interests of the Company and its stockholders
We Request Your Support at the 2022
Annual Meeting of Stockholders
The Board asks that you vote FOR all proposals
ELECTION OF CLASS I DIRECTORS – RECOMMEND FOR
✔Our Board’s extensive, diverse experience enables robust, independent oversight through our ongoing business transformation
✔Demonstrated commitment to refreshment ensures our Board is equipped to create long-term value
SAY ON PAY – RECOMMEND FOR
✔We link incentive compensation for executive officers with achieving or exceeding our strategic and financial performance goals
✔Our executive compensation program demonstrates the continuing evolution of our “pay for performance” philosophy, and
reflects feedback received from extensive stockholder engagement
APPROVAL OF 2022 EQUITY INCENTIVE PLAN – RECOMMEND FOR
✔We use equity-based compensation thoughtfully to attract and retain top talent in an extremely competitive industry, which is
particularly critical as we continue our strategic transformation
✔The 2022 Plan includes compensation and governance best practices
17 |
| © 2022 SPLUNK INC.
Appendix A: Reconciliation of GAAP and
Non-GAAP Information
18
(in thousands) 2022 2021 2022 2021
Net cash provided by (used in) operating activities $ 132,689 $ (23,766) $ 128,048 $ (190,862)
Less purchases of property and equipment (841) (8,800) (10,671) (37,107)
Free cash flow (non-GAAP) $ 131,848 $ (32,566) $ 117,377 $ (227,969)
Net cash provided by (used in) investing activities $ 11,052 $ 195,234 $ (333,752) $ 797,190
Net cash provided by (used in) financing activities $ (19,431) $ (55,417) $ (136,669) $ 382,882
Reconciliation of Cash Provided By (Used In) Operating Activities to Free Cash Flow
Three Months Ended
January 31,
Fiscal Year Ended
January 31, |
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