Sonja K. McClelland
About Sonja K. McClelland
Executive Vice President, Treasurer, and Chief Financial Officer of Hurco Companies, Inc.; age 53; at Hurco since 1996; CFO since 2014; Executive Vice President since March 2017; previously with Arthur Andersen LLP . Company performance under her finance leadership reflects cyclical industry pressures: revenues declined from $250.8M (FY2022) to $227.8M (FY2023) to $186.6M (FY2024), with net income moving from $8.2M (FY2022) to $4.4M (FY2023) to a $16.6M net loss in FY2024 (including an $8.6M non‑cash deferred tax valuation allowance) . For the 2022–2024 PSU cycle, Hurco’s TSR was −32.5% vs peers, yielding a 71.79% TSR payout and 0% ROIC payout, evidencing tight pay-for-performance calibration in a down cycle . Say‑on‑Pay support remained strong at ~99% in 2024, consistent with 3‑ and 5‑year averages of 93%/92% .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| Hurco Companies, Inc. | Corporate Controller; Principal Accounting Officer; Assistant Secretary | 2004 onward | Senior finance leadership and controllership responsibilities |
| Hurco Companies, Inc. | Corporate finance and accounting roles | 1996–2004 | Progressive finance/accounting roles building institutional knowledge |
| Hurco Companies, Inc. | CFO; Corporate Secretary | 2014–2021 (Secretary through Mar 2021) | Oversight of treasury, accounting, reporting; corporate secretary duties |
| Hurco Companies, Inc. | Executive Vice President, Treasurer & CFO | Mar 2017–present | Enterprise finance leadership; capital allocation; risk and audit liaison |
| Arthur Andersen LLP | Auditor/finance professional | pre‑1996 | Public accounting foundation |
Fixed Compensation
| Component | FY2022 | FY2023 | FY2024 |
|---|---|---|---|
| Salary ($) | 387,793 | 399,450 | 393,790 (reflects temporary pay cut Apr–Oct 2024) |
| All Other Compensation ($) | 23,447 | 23,074 | 28,556 (supplemental disability $7,856; 401(k) match $20,700) |
| Total Cash ($) | 411,240 | 422,524 | 422,346 |
Additional fixed pay detail:
- 2024 base salary set at $417,768 before a voluntary 10% reduction from Apr 22 to Oct 20, 2024 as part of cost actions .
- 2025 base salary set at $430,301 (+3% YoY) .
Performance Compensation
| Element | Design | Targets/Weighting | 2024 Actual/Payout | Vesting |
|---|---|---|---|---|
| Annual cash incentive (STIP) | Operating income margin + CFO strategic objectives | 70% OI margin; 30% strategic objectives; target bonus = 75% of base salary | OI margin negative; payout = 0% (no payment even if some strategic goals met) | Paid after fiscal year-end if earned |
| PSUs – Net Income (NI) | 3‑year performance (FY2024–FY2026) | 50% threshold; 100% target; 200% max of target shares | In-flight; earned at end of cycle | Cliff at end of period; payout per achieved level |
| PSUs – Free Cash Flow (FCF) | 3‑year performance (FY2024–FY2026); FCF=Cash from Ops minus Capex (incl. software cap) | 50% threshold; 100% target; 200% max of target shares | In-flight; earned at end of cycle | Cliff at end of period; payout per achieved level |
| Restricted shares | Time-based retention | 1/3 annual tranches over 3 years | Vests per schedule | Time-based vesting |
| PSU cycle FY2022–FY2024 – TSR | Relative TSR vs peer group | 30th/55th/90th percentiles → 50%/100%/200% payout; interpolated | TSR (−32.5%) → 71.79% payout; Sonja earned 6,461 PSUs | Vested Jan 7, 2025 (committee certification) |
| PSU cycle FY2022–FY2024 – ROIC | Avg ROIC | 4%/6%/12% → 50%/100%/200% payout | Avg ROIC (−0.3%) → 0% payout | — |
Grants (FY2024 LTI awarded Jan 4, 2024):
- Restricted shares: 8,706 .
- PSUs – NI (target): 13,934 .
- PSUs – FCF (target): 12,192 .
- 2024 grant date fair values: RS $187,483; PSU–NI $299,999; PSU–FCF $262,494 .
2025 LTI mix change:
- Time-based restricted stock increased to ~45% of LTI; remainder PSUs (NI/FCF) to enhance retention and align with market practice .
- 2025 grants (effective Jan 7, 2025): RS 17,036; PSU–NI target 11,357; PSU–FCF target 9,465 .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Beneficial ownership | 100,457 shares; 1.5% of outstanding; includes 25,213 unvested restricted shares |
| Outstanding unearned PSUs | 2023 grants (NI/FCF) threshold: 10,661; 2024 grants (NI/FCF) target: 26,126 |
| 2024 vesting realized | 13,070 shares vested (RS + PSUs); value realized $273,452; shares withheld for taxes: 1,881 (RS) and 1,833 (PSUs) |
| Ownership guidelines | Executive officers: CFO must hold ≥2× annual base salary; retain net after-tax shares until compliant; pledged shares excluded from compliance |
| Hedging/pledging | Company policy prohibits hedging and pledging of company securities by executives and directors |
Employment Terms
| Provision | Key terms |
|---|---|
| Employment agreement | Effective through Oct 31, 2025; auto one‑year renewals unless 60‑day notice |
| Severance (no change-in-control) | 9 months base salary continuation + monthly average of prior 3 years’ annual cash bonus (1/12 per month) + 140% of monthly health insurance cost during severance period (9 months) |
| Severance (double trigger change-in-control) | Same components for 18 months if terminated without cause or for good reason within 12 months after a change-in-control; equity acceleration rules: RSUs vest; PSUs vest at target, pro‑rated for elapsed performance period if awards not continued/assumed/replaced, or upon qualifying termination post‑transaction |
| Estimated payouts (illustrative at 10/31/2024) | Termination without cause/good reason prior to CiC: $425,413 severance; health coverage $50,679; CiC qualifying termination or awards not assumed: $850,826 severance; RS $325,887; PSUs $617,028; health $76,018 |
| Restrictive covenants | Non‑compete, customer non‑solicit, employee non‑hire; IP/confidentiality protections (durations not specified in proxy summary) |
| Clawback policy | Nasdaq‑compliant recoupment for incentive‑based comp upon accounting restatements; 3‑year lookback; recovery of erroneously awarded compensation plus recovery costs |
| Insider trading | No trading while aware of MNPI; 10b5‑1 plans permitted; prohibitions on options, swaps, collars, margin accounts, prearranged limit orders (except same‑day) |
Compensation Structure Analysis
- Year-over-year mix: 2025 increases time-based RS to ~45% of LTI vs prior ~25%, reflecting a stronger retention tilt and market alignment; potential moderation of at-risk pay intensity vs prior cycles .
- Pay-for-performance enforcement: 2024 STIP paid 0% given negative operating income margin; 2022–2024 PSUs paid 71.79% for TSR and 0% for ROIC, indicating rigorous targets and downside sensitivity .
- Governance safeguards: strong clawback, stock ownership guidelines, and hedging/pledging prohibitions; independent compensation consultant (Pay Governance); no interlocks .
- Peer benchmarking: robust peer set with annual refresh; pay positioning reviews across base, bonus, LTI, and total direct compensation .
Say‑on‑Pay & Shareholder Feedback
- 2024 say‑on‑pay approval ~99%; multi‑year averages 93% (3‑yr) and 92% (5‑yr), indicating broad investor support for program design and outcomes .
Investment Implications
- Alignment: 1.5% ownership, significant unvested equity, and prohibition on hedging/pledging align CFO incentives with long‑term shareholder value and reduce misalignment risks .
- Retention vs incentive: 2025 shift toward time-based RS enhances retention in a cyclical downturn but may dilute pure performance sensitivity; watch future PSU calibration and outcomes (NI/FCF) to maintain pay-for-performance discipline .
- Execution risk: FY2024 operating loss and zero STIP payout highlight macro/operational pressures; 2024–2026 NI/FCF PSUs will signal effectiveness of cash and profitability priorities in recovery .
- Change‑in‑control economics: CFO severance equates to 9 months (no CiC) and 18 months (double trigger CiC) plus health benefits and equity treatment; moderate multiples with double‑trigger reduce windfall risk but still represent meaningful protection .
- Governance quality: strong clawback, ownership rules, and advisory support (99% say‑on‑pay) indicate high governance quality, which can support investor confidence through cycles .