Shawn Nelson
About Shawn Nelson
Shawn D. Nelson, age 48, is the Founder (1998) and Chief Executive Officer of The Lovesac Company, and has served on its Board since 2017; he holds a master’s degree in Strategic Design and Management and a B.A. in Mandarin, and is a former graduate-level instructor at Parsons, The New School for Design . Fiscal 2025 performance metrics relevant to his pay programs include net sales of $680.6M, adjusted EBITDA of $47.8M, gross margin of 58.5%, and net income of $11.6M; the Company’s pay-versus-performance table shows a FY25 TSR index value of 45 (based on a $100 initial investment) alongside adjusted EBITDA as the selected performance measure .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| The Lovesac Company | Founder | 1998 | Founded Lovesac; lead designer of patented products; oversees design, product development, PR, and IR . |
| The Lovesac Company | Chief Executive Officer | Currently serving | Leads sourcing, creative, design, public relations, investor relations and culture . |
| The Lovesac Company | Director | Director since 2017 | Non-independent; Board member; contributes founder/CEO perspective . |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Parsons, The New School for Design | Graduate-level instructor | Not disclosed | Academic engagement; strengthens design leadership credentials . |
| “The Rebel Billionaire” (Fox) | Winner | 2005 | Elevated public profile and brand visibility . |
Fixed Compensation
| Component | FY2025 Terms |
|---|---|
| Base Salary | $550,000 as of May 1, 2024 . |
| Target Annual Incentive (AIP) | 75% of base salary ($412,500 target) with max 150% of salary . |
| Actual AIP Paid (FY2025) | $165,000 (committee adjusted payout to 40% despite formula yielding 0%) . |
| Discretionary Bonus (FY2025) | $123,750 (strategic achievements and market share gains) . |
Multi-year compensation (Summary Compensation Table):
| Metric | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
| Salary ($) | 440,229 | 476,996 | 528,225 |
| Bonus ($) | — | — | 123,750 |
| Stock Awards ($) | 2,472,858 | 8,526,949 | 3,840,346 |
| Non-Equity Incentive ($) | 267,060 | 74,990 | 165,000 |
| All Other Comp ($) | 24,536 | 14,000 | 14,090 |
| Total ($) | 3,204,682 | 9,092,935 | 4,671,414 |
Performance Compensation
Annual Incentive Plan (AIP) metrics and results:
| Metric | Weight | Target | Actual | Formula Payout | Committee Adjusted Payout | CSAT Gate |
|---|---|---|---|---|---|---|
| Net Sales | 50% | $735M | $680.6M | 0% | 40% total AIP payout after committee discretion | CSAT target 85.6% achieved at 86.1% (only gates maximum) . |
| Adjusted EBITDA | 50% | $58.9M | $47.8M | 0% | 40% total AIP payout after committee discretion . |
Performance Stock Units (PSUs) — FY2025 tranche outcome:
| Item | Detail |
|---|---|
| Metrics/Weights | Net Sales (50%), Adjusted EBITDA (50%) . |
| Threshold/Target | Threshold 80% of targets for payout eligibility; target at 100% . |
| Results | Net sales achievement 72.3% (below 80% threshold), EBITDA payout 29.2%; overall payout 50.8% of FY2025 tranche via program mechanics across metrics . |
| Shares Earned (Nelson) | 4,884 shares earned for FY2025 tranche; remainder of unearned shares forfeited or carried forward per plan rules . |
Restricted Stock Units (RSUs) — grant and vesting:
| Grant | Shares | Vesting Schedule |
|---|---|---|
| 06/11/2024 RSU grant | 28,847 | Vests in three equal annual installments over three years, subject to continued employment . |
Long-Term Performance Awards (LTPAs) — structure:
| Award | Target Shares (Nelson) | Performance Period | Vesting Conditions |
|---|---|---|---|
| LTPA1 (FY2025) | 59,616 | Through FY2027 | 100% vest upon achievement of both stretch net sales and adjusted EBITDA; 50% vest in FY2027 if one of the two is met; otherwise forfeited . |
| LTPA2 (FY2025) | 37,981 | Through FY2027 | Same structure with higher targets; 100% if both met; 50% in FY2027 if one met; otherwise forfeited . |
Notes:
- Prior FY2023 and FY2024 LTPAs were canceled and forfeited to replenish the share pool given forecasted performance and macro factors .
Equity Ownership & Alignment
| Item | Value |
|---|---|
| Total Beneficial Ownership | 557,596 shares; 3.67% of outstanding . |
| Outstanding Shares Owned | 218,274 . |
| Options and RSUs counted within 60 days | 339,322 . |
| Shares Pledged (RED FLAG) | 91,000 shares pledged as loan collateral with Board approval . |
| Stock Options | 330,244 options exercisable at $38.10 expiring 06/05/2029 . |
| Option Moneyness on 01/28/2025 | Out-of-the-money, given closing price $25.58 < $38.10 strike . |
| Unvested RSUs at FY-end | 28,847 shares from 06/11/2024 grant . |
| PSUs Earned FY2025 Tranche | 4,884 shares . |
| Ownership Guidelines | CEO must hold shares = 5x base salary; all NEOs in compliance or on track . |
| Anti-Hedging/Pledging Policy | Hedging and pledging prohibited without Board approval; Rule 10b5-1 plan controls updated in FY2024 . |
| Clawback Policies | Company misconduct-based clawback; Dodd-Frank compliant clawback adopted in 2023 . |
Employment Terms
| Provision | Key Terms |
|---|---|
| Employment Agreement | Effective 10/26/2017; amended 10/02/2019, 03/24/2022, and 03/23/2023 . |
| Base/AIP/LTI Framework (as of 05/01/2024) | Salary $550,000; AIP target 75% of salary ($412,500; max 150%); LTI targets: RSU $750,000; PSU $750,000; LTPA1 $1,550,000; LTPA2 $987,500 . |
| Restrictive Covenants | Non-compete and non-solicit extended to 24 months post-termination per 2023 amendment . |
| Termination without Cause / Good Reason | 24 months salary continuation; 24 months health/life benefits; pro-rata AIP; full vesting of unvested RSUs and PSUs; LTPAs forfeited . |
| Change in Control / Existing Investor Asset Disposal | Same cash benefits; RSUs and PSUs vest in full; LTPAs vest pro-rata by months of service . |
Potential payments upon termination (illustrative, assuming events on 02/02/2025 and target performance):
| Scenario | Cash Severance | AIP | Health/Life Benefits | Equity | Total |
|---|---|---|---|---|---|
| Disability | $183,333 | — | — | — | $183,333 |
| Without Cause / Good Reason | $1,100,000 | $412,500 | $62,618 | $8,319,895 | $9,895,013 |
| Without Cause / Good Reason following CIC/EIAD | $1,100,000 | $412,500 | $62,618 | $10,816,426 | $12,391,544 |
Board Governance
- Board Service and Roles: Director since 2017; non-independent; no committee assignments in FY2025 .
- Leadership structure: Separate Chair (Andrew R. Heyer) and CEO; independent directors meet in executive session regularly; mitigates CEO dual-role concerns .
- Attendance and refreshment: Board held eight meetings in FY2025 with all directors attending ≥75%; all directors attended the 2024 Annual Meeting .
- Independence: 6 of 8 directors, and 100% of Audit, Compensation, and Nominating Committees, are independent; Nelson is not independent .
- Director compensation: Nelson receives no additional compensation for director service .
Director Compensation (For context; Nelson receives none)
| Item | Terms |
|---|---|
| Annual Cash Retainer | $75,000 for directors; Chair receives additional $50,000 . |
| Equity to Directors | $125,000 RSUs granted annually; 12-month vest; deferral permitted . |
| Stock Ownership Guidelines | Directors must hold 3x annual cash retainer within five years . |
Performance & Track Record (selected metrics)
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Adjusted EBITDA ($M) | 28.3 | 55.5 | 60.4 | 54.0 | 47.8 |
| Net Income ($M) | 14.7 | 45.9 | 28.2 | 23.9 | 11.6 |
| TSR Index (Company, $100 base) | 498 | 445 | 229 | 41 | 45 |
FY2025 operating highlights include net sales $680.6M, gross margin 58.5%, adjusted EBITDA $47.8M, cash and equivalents $83.7M, and product/omnichannel initiatives (Investor Day, Reclining Seat launch, EverCouch roadmap); adjusted EBITDA and net sales are key compensation plan metrics .
Compensation Committee Analysis
- Committee/Consultant: Compensation Committee composed of independent directors; engages FW Cook as independent consultant; five meetings in FY2025 .
- Peer group (FY2025): 17 companies across consumer goods and related sectors used for benchmarking (e.g., Boot Barn, Sonos, Purple Innovation, e.l.f. Beauty) .
- Risk assessment: Committee concluded compensation programs are not reasonably likely to have a material adverse effect; mitigants include vesting, ownership guidelines, clawbacks, and trading restrictions .
Related Party Transactions and Governance Red Flags
- Related party transactions: None with directors and officers disclosed; independence and governance highlights affirmed .
- Equity award modifications: FY2023–FY2024 LTPAs canceled and forfeited to replenish share pool, which can be viewed cautiously from a governance standpoint, though done to align grants with performance outlook and share availability .
- Pledging: 91,000 shares pledged by Nelson with Board approval (alignment concern; risk indicator) .
- Clawbacks: Company misconduct-based clawback and Dodd-Frank compliant clawback policy in place .
- Anti-hedging/pledging: Prohibited without Board approval; Rule 10b5-1 controls enhanced in FY2024 .
Investment Implications
- Alignment: Nelson owns 3.67% of shares outstanding and meets/targets robust CEO ownership guidelines (5x salary), supporting alignment; however, share pledging introduces potential forced-sale risk under stress .
- Pay-for-performance: FY2025 formulaic AIP metrics paid 0% on net sales/EBITDA, but Committee applied 40% discretionary payout and granted meaningful LTPAs; investors should monitor consistency of discretion with performance and the future earn-out of large LTPA awards .
- Selling pressure: 2019 options are out-of-the-money at the FY-end price, reducing near-term option-exercise selling pressure; RSU and PSU vesting schedules imply periodic supply, but PSU earnouts in FY2025 were partial (50.8% tranche), moderating near-term flow .
- Retention and severance economics: Strong retention via RSUs/LTPAs and 24-month non-compete; generous equity vesting on termination without cause/good reason and significant CIC equity values add potential transaction costs; weigh these in event-risk scenarios .
- Governance structure: Separate Chair and independent committees mitigate CEO-director dual-role risks; no director compensation to CEO, strong trading controls, and clawbacks are positives; watch future equity plan changes and any further award cancellations/reallocations .