Frank Pelzer

About Frank Pelzer

Frank Pelzer served as Executive Vice President and Chief Financial Officer of F5 (FFIV) from May 21, 2018 until his retirement effective upon the filing of F5’s FY2024 Form 10-K on November 18, 2024; he transitioned to a six‑month senior advisory consulting role thereafter . He holds a B.A. from Dartmouth College and an M.B.A. from the Tuck School of Business at Dartmouth College; prior roles include President/COO of SAP’s Cloud Business Group and CFO of Concur Technologies, with earlier leadership positions at Deutsche Bank and Credit Suisse . As context for pay‑for‑performance alignment in FY2024, F5 delivered $2.816 billion in revenue, $567 million in GAAP net income and $792 million in cash from operations; a $100 investment in F5 as measured under SEC pay‑versus‑performance rules was valued at $179.36 at FY2024 year‑end, versus $222.15 for the peer group . In FY2024, 58% of product revenue came from software and SaaS, reflecting the company’s transformation toward higher‑recurring, software‑led economics under the current leadership team .

Past Roles

External Roles

Fixed Compensation

• Base salary: $562,000 (FY2024); no change from FY2023; FY2022 salary $540,000 .
• Target annual bonus opportunity (FY2024): 90% of base salary; actual payout was capped at 75% of target by the Compensation Committee (Pelzer received $379,350) despite corporate attainment of 99.1% of target under the plan formula .

Performance Compensation

Short‑Term Incentive (STI) – FY2024

• Structure and weights: Revenue 45%; Non‑GAAP Operating Income 45%; Diversity & Inclusion (D&I) 10% .
• Targets and results: Revenue target $2,770.0M (actual $2,816.1M, 101.7%); Operating Income target $929.0M (actual $945.6M, 101.8%); D&I attainment 75.4%; corporate formula payout 99.1% of target (but capped as noted) .

Notes: FY2024 STI design replaced EBITDA with Non‑GAAP Operating Income and rebalanced weights (45%/45%/10%) to emphasize profitability alongside growth; payout capped to maintain cost discipline in a volatile macro backdrop .

Long‑Term Incentive (LTI) – FY2024 Grants and Vesting Design

• FY2024 grant components for Pelzer: 10,532 service‑based RSUs; 12,290 performance‑based RSUs; target grant value $3,467,000 .
• Service‑based RSUs vest over three years in equal quarterly installments .
• Performance‑based RSUs (2024 Performance Award) metrics/weights: Revenue 42.9%; Non‑GAAP EPS 21.4%; relative TSR vs S&P 500 35.7%; one‑third of 2024 award earned/vested on Nov 1, 2024 on 1‑year metrics; remaining financial‑metric shares vest in equal 1/3 installments in years 2 and 3 (based on FY2024 achievement and continued service); rTSR portion vests annually thereafter based on 2‑ and 3‑year rTSR performance as FFIV transitions to 3‑year rTSR cliff vesting by FY2027 .

Additional realized values in FY2024: Pelzer had 16,638 shares vest with $2,745,307 in value realized on vesting; there were no stock option exercises (FFIV does not grant options) .

Equity Ownership & Alignment

• Beneficial ownership: 37,995 FFIV shares as of January 7, 2025 (less than 1% of outstanding; 58,015,127 shares outstanding on record date) .
• Outstanding equity (as of 9/30/2024): 30,315 unvested service‑based RSUs (market value $6,675,363); 6,521 unearned performance‑based RSUs (market/payout value $1,435,924, assuming target) .
• Hedging/pledging: FFIV prohibits executive officers and directors from hedging, short sales, holding shares in margin accounts or pledging Company stock, subject to narrow exceptions not applicable to executive officers; the Company highlights a post‑vesting one‑year holding requirement on net shares for executive RSU grants beginning in FY2022 .
• Ownership guidelines: Executives are subject to stock ownership requirements (specific multiples not disclosed in the excerpt); policy exists to encourage alignment .

Employment Terms

• Retirement and transition economics: On November 18, 2024 (10‑K filing date), Pelzer’s employment ended; he received a lump‑sum Transition Payment of $315,125 and accelerated vesting of 6,740 time‑vesting RSUs in 2024, and he entered a six‑month consulting agreement at $46,833.33 per month (approximately Dec 1, 2024 – May 31, 2025) to advise his successor .
• Change‑of‑control protections: FFIV executive change‑of‑control agreements are double‑trigger (benefits require qualifying termination within two years post‑CoC); severance equals 1x salary plus 1x target bonus for NEOs other than the CEO (CEO at 2x), with RSU acceleration upon change of control (performance RSUs at target for periods not yet measured) .
• Illustrative CoC payout (as of 9/30/2024): For Pelzer — severance $1,067,800; accelerated RSUs $8,111,287; benefits $34,778; outplacement $25,000; total $9,238,865 (assumes termination within two years post‑CoC) .
• Clawback and excise‑tax policy: FFIV has a compensation clawback policy for restatements of financial measures used in determining performance pay; no golden‑parachute excise tax gross‑ups .
• Pension/deferred comp: FFIV does not have a pension or nonqualified deferred compensation plan; perquisites are modest (401(k) contributions, communications stipend, and tax‑grossed recognition trip) .

Multi‑Year Compensation (Summary)

Performance & Track Record

• Corporate performance: FY2024 revenue $2.816B (+23rd consecutive year of growth), GAAP net income $567M, cash from operations $792M; $500M returned via buybacks (66% of FY2024 FCF) .
• TSR context: Pay‑versus‑performance disclosure shows FFIV’s FY2024 TSR value of $179.36 vs peer group $222.15; net income $566.8M; revenue $2,816.1M .
• Strategy execution: FFIV reports 58% of product revenues from software/SaaS in FY2024; Compensation Committee increased the use of performance‑based equity and shifted long‑term metrics to emphasize EPS and multi‑year rTSR .
• Say‑on‑pay: 92% approval in the prior year’s advisory vote, indicating shareholder support for pay practices .

Compensation Structure Analysis

• Mix and risk: Pelzer’s FY2024 total pay was tilted toward equity (LTI grant value $4.28M vs salary $0.56M and capped STI $0.38M), consistent with FFIV’s intent to align with long‑term value creation .
• Metric quality: FY2024 STI re‑weighted toward Non‑GAAP Operating Income (replacing EBITDA) and evenly balanced revenue/profit with D&I; FY2024 LTI used revenue, EPS and multi‑year rTSR — collectively addressing growth, profitability and market‑relative returns .
• Governance protections: Double‑trigger CoC, clawback, one‑year post‑vesting hold on executive RSUs (from FY2022 grants), prohibition on hedging/pledging, and capped incentive plans reduce risk of misalignment or excessive risk‑taking .
• Consultant and peer benchmarking: Compensia advises the Compensation Committee; target pay generally set near 50th percentile with adjustments for role scope and performance .

Risk Indicators & Red Flags

• Hedging/pledging: Prohibited for executives and directors .
• Option repricing: Prohibited absent shareholder approval .
• Golden parachute tax gross‑ups: Not provided .
• Related‑party transactions: Subject to Audit Committee review/approval; no Pelzer‑specific related‑party item disclosed in the cited sections .
• Section 16: Company indicates timely filings for FY2024 with one late CEO report due to administrative error; no Pelzer delinquency noted .

Investment Implications

• Near‑term supply/vesting overhang: Pelzer’s 6,740 time‑based RSUs were accelerated in 2024 and delivered, modestly increasing available shares; he is no longer an executive as of November 18, 2024 and served as a paid consultant through May 2025, which can reduce retention‑related sale pressure but may allow greater trading flexibility versus insider constraints (hedging/pledging still restricted by policy) .
• Alignment and discipline: Capping the FY2024 cash bonus (75% of target for NEOs) despite near‑target corporate attainment underscores cost discipline; heavy LTI weighting, one‑year post‑vest holding, and multi‑year rTSR metrics support long‑term alignment .
• CoC economics: Standard 1x cash severance plus equity acceleration could be dilutive in a sale scenario but is customary; the double‑trigger structure and absence of excise tax gross‑ups temper governance risk .
• Track record: FY2024 performance and sustained software/SaaS mix shift indicate execution progress during Pelzer’s tenure; TSR underperformed the peer group in FY2024 under the PVP construct, but absolute value creation improved alongside earnings and cash flow .