2019 Senior Management Compensation Survey

Attached are the results of the 2019 River Cities Capital Funds Senior Management Compensation Survey. Twenty- five private-growth companies from the IT and healthcare sectors participated in this year’s survey. Companies provided data on compensation components – cash and stock – for senior management and independent directors, as well as data with respect to D&O insurance and audit expenses. Data was collected from RCCF and TripleTree portfolio companies for 2019 compensation and company head count; TTM revenue are noted as close to December 2018 as possible. The survey data is illustrated in the exhibits attached.

Key Findings

CEO

The average base salary of CEOs is $326k, with a target bonus of $163k and 4.3% in options (or 25% of all options granted). Average salary increased by 7% over last year; target bonuses saw a 6% increase on average; option percentages on average stayed steady, while percentages of all options granted increased by 5%.

While typically larger companies (measured by revenue and head count) generally pay higher salaries, head count did not correlate strongly with compensation in our dataset and higher revenue companies showed only a slight correlation with higher cash compensation. Likely factors contributing to this dynamic are industry focus and geographic location.

In terms of ownership, CEOs of larger companies with higher revenue and head count receive fewer options given the mpany and higher value of the options.

Senior Management

Similarly to the CEO compensation data, this analysis suggests that the total compensation of senior management teams has little correlation with head count and only a slightly higher correlation with revenue. On average, target bonuses and commissions provided 42% more compensation leverage over base salaries. VP Sales and CEOs had the most variable compensation over base with 63% and 41%, respectively, followed closely by VP Business Development and CFOs each

D&O Insurance

D&O plans range from $1M – $5M in coverage, the most common plans being $3M and $5M. Not surprising, the higher the coverage, the higher the premium paid.

Independent Director

According to the analysis, larger companies tend to offer a smaller percentage of option ownership given the higher value of the options. Out of 14 companies with independent directors, eight compensate with options only, one compensates with cash only and five compensate with both cash and options. The average option and cash compensation were 0.81% (options on a fully diluted basis) and $34k per director per year, respectively.

Audit Fees

Companies with greater TTM revenue pay substantially higher audit fees. Head count has an insignificant effect upon audit fees. Fees range from $20k to $60k; the average amount paid for audit fees is $41k.

For further information about this report, please contact Britney Hamberg (bh@rccf.com).