NETGEAR® Announces Inducement Grants Under Nasdaq Listing Rule 5635(c)(4)

Rhea-AI Summary

NETGEAR (Nasdaq: NTGR) has announced equity awards granted on October 15, 2024, to newly-hired employees, including Pramod Badjate, the new President and General Manager of NETGEAR for Business (NFB). These awards, granted under Nasdaq Listing Rule 5635(c)(4), serve as material inducements for their employment.

The inducement awards include:

• 165,000 time-based restricted stock units (RSUs) for Mr. Badjate
• 208,258 time-based RSUs for other newly-hired employees
• 55,000 target performance-based RSUs for Mr. Badjate

Mr. Badjate's RSUs will vest in installments, with one-third vesting on July 31, 2025, and the remainder vesting quarterly. The performance-based RSUs are tied to NETGEAR's total shareholder return compared to the Nasdaq Telecommunications Index from April 27, 2024, to December 31, 2026, with potential vesting on July 31, 2027.

Positive

• Hiring of new President and General Manager for NETGEAR for Business (NFB)
• Granting of equity awards to attract and retain key talent
• Implementation of performance-based RSUs tied to company's total shareholder return

Negative

• None.

Insights

Financial Analyst

The inducement grants to NETGEAR's new President and General Manager of NETGEAR for Business (NFB), Pramod Badjate and other new hires are significant but not uncommon in the tech industry. The 165,000 RSUs granted to Badjate represent a substantial equity stake, aligning his interests with shareholders. The vesting schedule, starting with 33% after nine months and quarterly thereafter, encourages long-term commitment.

The performance-based RSUs (PSUs) with a 55,000 share target tied to Total Shareholder Return (TSR) is particularly interesting. This structure incentivizes Badjate to focus on stock performance relative to the Nasdaq Telecommunications Index, potentially driving shareholder value. However, the long performance period (April 2024 to December 2026) and delayed vesting (July 2027) may impact short-term motivation.

For investors, these grants represent a dilution of approximately 1.3% based on NETGEAR's current market cap, which is relatively modest. The structure suggests a strong focus on long-term performance and retention, which could be positive for the company's future prospects in the competitive networking technology market.

Corporate Governance Expert

This equity compensation package for NETGEAR's new executive and employees aligns with best practices in corporate governance. The use of both time-based RSUs and performance-based PSUs for the new President and GM demonstrates a balanced approach to executive compensation. The time-based RSUs provide retention incentives, while the PSUs tie rewards to company performance relative to industry peers.

The extended vesting periods (up to 3 years for RSUs and nearly 4 years for PSUs) encourage long-term thinking and commitment. This structure helps mitigate short-termism and aligns with shareholder interests. The performance metric based on Total Shareholder Return (TSR) relative to the Nasdaq Telecommunications Index is a strong choice, as it directly links executive rewards to shareholder outcomes.

Transparency in disclosing these grants under Nasdaq Rule 5635(c)(4) is commendable, showing compliance with regulatory requirements and commitment to shareholder communication. However, investors should monitor the overall equity dilution and ensure that future performance justifies these grants. The board's compensation committee will need to carefully balance retention needs with shareholder value creation in the competitive tech talent market.

SAN JOSE, Calif.--(BUSINESS WIRE)-- NETGEAR, Inc. (Nasdaq: NTGR), the leader in advanced networking technologies for businesses, homes and service providers around the world, today announced that it granted equity awards on October 15, 2024 to newly-hired President and General Manager, NETGEAR for Business (NFB), Pramod Badjate as well as several newly-hired employees in multiple business units throughout the company. The awards were granted in accordance with Nasdaq Listing Rule 5635(c)(4) as a material inducement to their commencing employment with NETGEAR.

The inducement awards consist of (1) an award of time-based restricted stock units (“RSUs”) relating to 165,000 shares of NETGEAR’s common stock to Mr. Badjate, (2) awards of time-based RSUs covering 208,258 shares of NETGEAR’s common stock to the additional referenced newly-hired employees (each, an “RSU Award”), and (3) an award of performance-based RSUs with a target amount of 55,000 shares of NETGEAR’s common stock to Mr. Badjate (the “PSU Award”).

One-third (1/3rd) of the total number of shares subject to Mr. Badjate’s RSU Award will vest on July 31, 2025, and one-twelfth (1/12th) of the total number of shares subject to his RSU Award will vest in equal quarterly installments thereafter, in each case subject to Mr. Badjate providing continued service with NETGEAR through the applicable vesting dates.

The number of shares subject to the PSU Award that become eligible to vest (“Vesting Eligible PSUs”) will be determined based on how NETGEAR’s total shareholder return (“TSR”) from April 27, 2024 through December 31, 2026 compares to the TSRs of the companies in the Nasdaq Telecommunications Index (IXTC). The Vesting Eligible PSUs, if any, will vest on July 31, 2027, subject to Mr. Badjate’s continued service with NETGEAR through that date.

About NETGEAR, Inc.

Founded in 1996 and headquartered in the USA, NETGEAR® (NASDAQ: NTGR) is a global leader in innovative networking technologies for businesses, homes, and service providers. NETGEAR delivers a wide range of award-winning, intelligent solutions designed to unleash the full potential of connectivity. For businesses, NETGEAR offers reliable, easy-to-use, high-performance networking solutions, including switches, routers, access points, software, and AV over IP technologies, tailored to meet the diverse needs of organizations of all sizes. NETGEAR’s Connected Home products deliver advanced connectivity, powerful performance, and enhanced security features right out of the box, designed to keep families safe online, whether at home or on the go. More information is available from the NETGEAR Press Room or by calling (408) 907-8000. Connect with NETGEAR: Facebook, Instagram and the NETGEAR blog at NETGEAR.com.

© 2024 NETGEAR, Inc. NETGEAR and the NETGEAR logo are trademarks or registered trademarks of NETGEAR, Inc. and its affiliates in the United States and/or other countries. Other brand and product names are trademarks or registered trademarks of their respective holders. The information contained herein is subject to change without notice. NETGEAR shall not be liable for technical or editorial errors or omissions contained herein. All rights reserved.

Source: NETGEAR-F

View source version on businesswire.com: https://www.businesswire.com/news/home/20241022200799/en/

NETGEAR Investor Relations

Erik Bylin

investors@netgear.com

Source: NETGEAR, Inc.

FAQ

What equity awards did NETGEAR (NTGR) grant on October 15, 2024?

NETGEAR granted time-based RSUs of 165,000 shares to Pramod Badjate, 208,258 shares to other new hires, and performance-based RSUs with a target of 55,000 shares to Badjate.

Who is Pramod Badjate in relation to NETGEAR (NTGR)?

Pramod Badjate is the newly-hired President and General Manager of NETGEAR for Business (NFB).

How will Pramod Badjate's RSUs from NETGEAR (NTGR) vest?

One-third of Badjate's RSUs will vest on July 31, 2025, with the remaining vesting in equal quarterly installments thereafter, subject to continued service.

What determines the vesting of NETGEAR's (NTGR) performance-based RSUs granted to Pramod Badjate?

The vesting is based on NETGEAR's total shareholder return compared to companies in the Nasdaq Telecommunications Index from April 27, 2024, to December 31, 2026.