Lumentum Announces Inducement Grants to President and CEO Under Listing Rule 5635(c)(4) of The Nasdaq Stock Market

Rhea-AI Summary

Lumentum Holdings, a leading designer of optical and photonic products, has announced equity awards granted to its new President and CEO Michael Hurlston on February 7, 2025. The grants include:

- 103,684 restricted stock units (RSUs) vesting over three years
- Performance-based RSUs (PSUs) covering 11,520 shares (at target level) for FY2025-2027
- Performance Stock Units (rTSR PSUs) of 161,287 shares tied to total shareholder return versus the S&P 500 IT Index

The awards were granted under Lumentum's 2025 Inducement Equity Incentive Plan as part of Hurlston's employment agreement. The PSUs can pay out between 0% and 200% based on performance achievement. All grants are subject to continued employment and specific vesting conditions.

Positive

• New CEO compensation package aligned with shareholder interests through performance-based equity awards
• Significant portion of compensation tied to company's stock performance relative to S&P 500 IT Index
• Structured vesting schedule promotes long-term retention of new CEO

Negative

• Potential shareholder dilution from issuance of up to 276,491 new shares (at maximum performance achievement)
• Substantial equity compensation package increases company expenses

Insights

Executive Compensation Analyst

The newly announced equity compensation package for CEO Michael Hurlston represents a sophisticated approach to executive compensation with strong alignment to shareholder interests. The package consists of three strategic components:

• Initial Time-Based RSUs (103,684 shares): The three-year vesting schedule with quarterly installments after the first year serves as a robust retention mechanism while providing regular value realization opportunities.
• Performance and Time-Based PSUs (23,040 shares at target): This component ties directly to the company's FY2025-2027 performance metrics, with potential payout ranging from 0% to 200% of target, demonstrating strong pay-for-performance alignment.
• TSR-linked PSUs (161,287 shares at target): This substantial portion benchmarked against the S&P 500 IT Index creates direct alignment with shareholder value creation and industry performance.

The structure is particularly noteworthy for its emphasis on performance-based compensation, with approximately 60% of the total grant tied to performance metrics. The use of the S&P 500 IT Index as a benchmark for the rTSR PSUs indicates a commitment to measuring performance against broader market standards rather than just internal metrics.

The vesting schedules are strategically designed to balance immediate retention needs with long-term value creation. The quarterly vesting after initial cliffs helps maintain consistent retention pressure while reducing the risk of point-in-time decision-making that could occur with single vesting dates.

For shareholders, this package structure signals strong governance practices through its mix of time-based retention elements and performance-linked components. The potential for zero payout on performance elements demonstrates real downside risk for underperformance, while the upside opportunity to 200% of target provides meaningful incentive for exceptional results.

SAN JOSE, Calif.--(BUSINESS WIRE)-- Lumentum Holdings Inc. (“Lumentum” or the “Company”), a market-leading designer and manufacturer of innovative optical and photonic products for cloud/AI, networking, and industrial applications, today announced that on February 7, 2025, it granted to Michael Hurlston, Lumentum’s recently appointed President and Chief Executive Officer, the following equity awards: (i) restricted stock units (“RSUs”) covering 103,684 shares of Lumentum’s common stock that will vest as to 1/3 of the award on the one year anniversary of the grant date and as to the remaining 2/3 of the award in substantially equal quarterly installments over the subsequent eight calendar quarters, subject to Mr. Hurlston remaining employed with the Company through the relevant vesting date (the “Initial Time Based RSUs”), (ii) time and performance based RSUs (“PSUs”) covering 11,520 shares of Lumentum’s common stock and 11,520 shares of Lumentum’s common stock (assuming target level of performance achievement, provided that actual achievement could result in a payout of 0% or between 50% and 200% of this amount), respectively, on the same terms as the grants made to the Company’s executive officers for the fiscal year 2025 to 2027 performance period, that will vest with respect to the time-based RSUs beginning on the one year anniversary of the grant date and quarterly thereafter, provided that all unvested time-based RSUs will vest at the same time as the date on which the time-based RSUs granted to the management team under the same fiscal year 2025 to 2027 program vest, and will vest with respect to the PSUs subject to achievement to specified goals for the performance period, and subject to Mr. Hurlston’s continued employment with Lumentum through the applicable determination date, and (iii) PSUs (“rTSR PSUs”) covering 161,287 shares of Lumentum’s common stock (assuming target level of performance achievement) that are eligible to vest subject to Lumentum’s total shareholder return (“TSR”) performance as compared to the S&P 500 Information Technology (Sector) Index (the “Index”) over the period beginning on the first trading day on or following the grant; with vesting of any earned award, and subject to Mr. Hurlston’s continued employment with Lumentum through the applicable determination date.

The awards were granted to Mr. Hurlston pursuant to the terms of his employment letter, which was summarized by the company on a Form 8-K filed with the Securities and Exchange Commission on February 3, 2025, and furnished as an exhibit to the Form 8-K, and are subject to accelerated vesting as described therein. The awards were granted pursuant to Lumentum’s 2025 Inducement Equity Incentive Plan. However, such awards will be subject to substantially the same terms and conditions that apply to awards granted under Lumentum’s 2015 Equity Incentive Plan, as amended.

About Lumentum

Lumentum (NASDAQ: LITE) is a market-leading designer and manufacturer of innovative optical and photonic products enabling cloud, optical networking, and laser applications worldwide. Lumentum optical components and subsystems are part of virtually every type of data center, telecom, and enterprise network. Lumentum lasers enable advanced manufacturing techniques and diverse applications including next-generation 3D sensing capabilities. Lumentum is headquartered in San Jose, California with R&D, manufacturing, and sales offices worldwide. For more information, visit www.lumentum.com and follow Lumentum on LinkedIn, Twitter, Facebook, Instagram, and YouTube.

Category: Financial

View source version on businesswire.com: https://www.businesswire.com/news/home/20250213077525/en/

Investors: Kathy Ta, 408-750-3853; investor.relations@lumentum.com

Media: Noël Bilodeau, 408-439-2140; noel.bilodeau@lumentum.com

Source: Lumentum

FAQ

What equity awards did Lumentum (LITE) grant to new CEO Michael Hurlston in February 2025?

Lumentum granted three types of equity awards: 103,684 RSUs vesting over three years, 23,040 PSUs for FY2025-2027 (at target), and 161,287 rTSR PSUs tied to stock performance versus the S&P 500 IT Index.

How do the performance-based stock units (PSUs) work for LITE's new CEO compensation?

The PSUs can pay out between 0% and 200% of the target amount based on achievement of specified performance goals during the FY2025-2027 period, subject to continued employment.

What is the vesting schedule for Lumentum's (LITE) CEO initial RSU grant?

The initial 103,684 RSUs vest 1/3 after one year, with the remaining 2/3 vesting in equal quarterly installments over the following eight quarters.

How is LITE's new CEO compensation tied to shareholder returns?

A significant portion of the compensation (161,287 rTSR PSUs) is tied to Lumentum's total shareholder return performance compared to the S&P 500 Information Technology Index.