Investment firm Baird looked at management compensation and incentives across the entire cloud software sector and found that they are increasingly incorporating key performance indicators (KPIs) tied to revenue, "with an increasing focus on profitability and cash flow over the past few years."
Baird researched Akamai (AKAM.US), Confluent (CFLT.US), Datadog (DDOG.US), Dynatrace (DT.US), Fastly (FSLY.US), Informatica (INFA.US), MongoDB (MDB.US), Snowflake (SNOW.US), Bandwidth (BAND.US), DocuSign (DOCU.US), Amdocs (DOX.US), 8x8 (EGHT.US), Five9 (FIVN.US), RingCentral (RNG.US), Twilio (TWLO.US), Zoom Video Communications (ZM.US), Apple (AAPL.US) and Axon Enterprise (AXON.US) and found that many of the companies have both short-term and long-term incentives. Notably, Snowflake's short-term incentive KPI is fully tied to revenue, which is the highest in the industry.
Other companies with revenue weighting over 50% include Confluent (75%), Fastly (67%), Five9 (75%) and Zoom (80%). Akamai, RingCentral and Apple have a weighting of 50%.
MongoDB is the only company that has 100% of its long-term incentive KPI's weighting focused on revenue, while Apple and Five9's long-term incentive KPIs are fully focused on total shareholder return. 8x8's long-term incentive KPI is 100% focused on market cap and stock price.