Today, Scottsdale-based Axon, the global leader in connected public safety technologies, announced the participation of its employees in the eXponential Stock Performance Plan (XSPP) announced last month. The XSPP is a unique compensation plan that gives employees a new opportunity to align their pay directly with value creation for shareholders.
All U.S. employees have received awards of 60 performance-vesting stock units under the plan, and more than 300 employees elected to allocate a portion of their on-target earnings (OTE) into the plan over the next nine years. In total, employees chose to allocate approximately $75 million of guaranteed compensation over the next nine years into at-risk performance-based restricted stock units.
The XSPP vesting schedule uses the same milestones as those set for the CEO Performance Award granted in February 2018 and approved by Axon shareholders in May, which ties significant increases in revenue and adjusted EBITDA to $1 billion increments in market cap.
“I’m thrilled at this unparalleled level of commitment and alignment. I believe it will be a game changer, adding rocket fuel to our mission to protect life,” says Axon CEO and founder, Rick Smith. “I would especially like to thank our larger shareholders for their thoughtful input into the plan design, yielding improvements such as the 3% annual dilution guardrail, which we included to ensure the incentives were aligned to drive outsize growth while keeping dilution at or below industry norms — even including the effects of the XSPP itself.”
“One of the biggest challenges in tech is attracting and retaining top talent,” says Hadi Partovi, chairman of the compensation committee for Axon’s board of directors, and also CEO and founder of Code.org. “The new plan at Axon is unlike any I’ve seen at another tech company, because it gives employees the combined stability of working at a public company with the long-term reward profile of a startup.”
How it Works
Under the XSPP, all U.S. employees automatically receive a grant of 60 eXponential Stock Units (XSUs). Additionally, certain employees have elected to allocate a portion of their future on-target earnings to be granted in the form of additional XSUs. The number of XSUs an employee receives is based on a 3x risk multiplier, which is then further multiplied by the nine year length of the program. The total number of XSUs received by an employee is then divided evenly into 12 tranches that vest at the same market and performance criteria as the 2018 CEO Performance Award. If Axon hits its targets outlined in the plan, employees will receive rewards that are aligned with exceptional returns for shareholders. To learn more about the XSPP, please visit www.axon.com/xspp-faq.
Upcoming Shareholder Vote
Although the Axon board of directors has approved the Axon Enterprise, Inc. 2019 Stock Incentive Plan (the 2019 Plan) and the XSPP, the 2019 Plan and the XSU awards are subject to the approval of Axon’s shareholders at a special meeting of shareholders (the Special Meeting) to be held on February 12, 2019. Anyone who is a shareholder of record or beneficial owner of Axon shares as of the record date of December 27, 2018 will be entitled to vote their shares at the Special Meeting and the 2019 Plan will only become effective if a majority of the votes cast are in favor of the 2019 Plan. If shareholder approval is not obtained at the Special Meeting, all XSU awards will automatically terminate and be forfeited and employees will be returned their proportionate on-target earnings. Axon has posted on its website and filed with the SEC a proxy statement (https://investor.axon.com/financials/sec-filings) providing details of the 2019 Plan and the XSPP along with additional materials for Axon shareholders.