We Discuss Why SoundThinking, Inc.'s (NASDAQ:SSTI) CEO Compensation May Be Closely Reviewed

Key Insights

• SoundThinking's Annual General Meeting to take place on 4th of June
• CEO Ralph Clark's total compensation includes salary of US$468.8k
• The total compensation is 39% higher than the average for the industry
• SoundThinking's three-year loss to shareholders was 51% while its EPS was down 64% over the past three years

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Shareholders will probably not be too impressed with the underwhelming results at SoundThinking, Inc. (NASDAQ:SSTI) recently. At the upcoming AGM on 4th of June, shareholders can hear from the board including their plans for turning around performance. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. From our analysis, we think CEO compensation may need a review in light of the recent performance.

View our latest analysis for SoundThinking

Comparing SoundThinking, Inc.'s CEO Compensation With The Industry

Our data indicates that SoundThinking, Inc. has a market capitalization of US$189m, and total annual CEO compensation was reported as US$5.0m for the year to December 2024. That's just a smallish increase of 5.9% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$469k.

On examining similar-sized companies in the American Software industry with market capitalizations between US$100m and US$400m, we discovered that the median CEO total compensation of that group was US$3.6m. This suggests that Ralph Clark is paid more than the median for the industry. Moreover, Ralph Clark also holds US$7.2m worth of SoundThinking stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

On an industry level, around 10% of total compensation represents salary and 90% is other remuneration. SoundThinking pays a modest slice of remuneration through salary, as compared to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

SoundThinking, Inc.'s Growth

SoundThinking, Inc. has reduced its earnings per share by 64% a year over the last three years. Its revenue is up 7.7% over the last year.

The decline in EPS is a bit concerning. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has SoundThinking, Inc. Been A Good Investment?

With a total shareholder return of -51% over three years, SoundThinking, Inc. shareholders would by and large be disappointed. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 2 warning signs for SoundThinking that you should be aware of before investing.

Important note: SoundThinking is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.