The Exchanges

Q Interesting. Okay. Now explain how you, you know, we talk about founder product fit, right? How do you end up inside of ServiceMax? Now it sounds like you were at Silver Lake first.

A Yeah, so I, I've spent, uh, a small amount of time at Silver Lake as an operating partner. I ran, IPC actually was owned by Silver Lake, um, initially, and I became the CEO of that company when Silver Lake was the majority owner of that company. We then transformed that business, was able to transact and sell the business to, uh, another buyer, and I then came back to, you know, the homestead in, uh, at Silver Lake and ultimately got involved in another number of deals and, uh, I raised my hand and said, put me in coach. I see you guys were able to strike this deal with service max. You need a new executive team. I want in the game. I like running teams, Nathan. I don't like, you know, uh, being in anything other than the environment that I'm in. And I said, look, if the opportunity exists, put me in and let me run the company. Cause it's something very unique that I hadn't seen previously in my career. So, um, I really wanted in to make a difference in the company. And for the last three and a half years, this team's done a remarkable job so far. You know, running service max. I'm pretty proud of the progress.

AI assessment note: “I raised my hand and said, put me in coach. I see you guys”

Q products. That's plural forward slash valuations. Again, both plural founderpath.com forward slash products forward slash valuations. So moving forward, let's say you let's just for the sake of a demonstration here, you add no new customers, but you want to keep growing. And so you need to build product to upsell and add more value to your current base. What products would you go build? What are you thinking about?

A So one that we just released that we're, you know, is not seeing the material revenue upside yet, but we will, and we're seeing the current bookings occur. We created, so that example I gave to you around the technician going to Phillips healthcare's hospital where they install the equipment, right? We provide the software by which the technician sees on their mobile app and knows what to fix, when to fix, and how to fix it, right? We now created and released a product called Engage where that same functionality, Nathan, it was born out of the pandemic where technicians couldn't safely go to the end site. We are now given the clinic the same utilization and the same UI to do a self-help and self-fix the asset versus a technician going out there Or route using our collaboration tool to the experts that are remote at Philips to actually do a remote fixing of the actual asset. So one of the things we're doing, and again, Philips is actually deploying this now to their end customer. So Philips is the customer record. They'll procure licenses to give to those clinic clinic or hospital staff that could do some of the self-help. We see that as a big impetus for the company in an area that, again, like you said, We're creating larger wallet share of real need for our customers by developing very innovative solutions, which the R&D team's done a great job doing.

AI assessment note: “We now created and released a product called Engage”

Q a billion, whatever you want to call the number. But then it's just two years later, right? They're now selling a major truck majority stake back to Silver Lake. So did G just decide, you know what, this is a sort of a A distraction. We want to sort of get rid of it. It's still valuable. I mean, what, why buy it and then sell it two years later?

A Yeah. They continue to be an investor in our company, right? A minority investor, but GE, as you probably followed, went through a lot of stuff. They continue to go to a lot of stuff, right? Three, four CEOs went through, uh, that gamut during that timeframe and they were divesting significant portion of their company to generate and gather cash, right? And focus back into their niche of what actually created GE, what, what was a hundred, 150 years ago. So, um, Service Max was a very, uh, tip of the spear for them to be a digital software company, and, you know, as we've seen, they've reverted back to their industrial roots. Having a software company of our scale, of our expertise, made sense to be at another company, and that's why they engage with our current owners to figure out how could they get cash on their balance sheet and also let us do the things that we are, uh, currently doing. Quite frankly, we're a big Provider of many GE kind of business units, their ultimate utilization of our software for their field techs as well, Nathan. So a real win-win at the time and a great deal struck by our investors, quite frankly.

AI assessment note: “they were divesting significant portion of their company to generate and gather cash”

Q And that makes sense considering your pedigree coming in a silver league, which we'll get to more in a second, but first let's like jam out on product here for a minute. What is service max doing? Who are you selling to and what are they getting?

A This is the best part of the conversation, in my opinion. So, the company was formed 15 years ago by much smarter people than me. Founders Athani and Hari built the company, actually, and was one of the hottest startups, which ultimately got sold to GE, I think in 2016, Nathan, for close to a billion dollars. So, did a phenomenal job with answering your question, which is what we still do. Hundred percent focused within the field service management marketplace, where In essence, a product, so I'll give you a real example. I think this will kind of resonate with all your viewers and yourself. Philips Healthcare, which basically does most of the medical equipment. When you and I are parents go to the hospital, a lot of the equipment is actually built by Philips Healthcare, right? So Philips Healthcare is a great customer of ours. They procured our SaaS offering by which they have their technicians that fix those products and those medical equipment in those clinics or hospitals. Our software allows the technician to actually get scheduled, route the right technician to the actual appropriate hospital that needs fixing, get to the equipment, and within the equipment, Nathan, we within ServiceMax allow the technician to see what part to fix, what's actually covered by warranty, when do you actually close out the job by which the customer gets notified, when do you actually then com…

AI assessment note: “Philips Healthcare is a great customer of ours. They procured our SaaS offering”

Q In the press release when, uh, Silverlight came in, it also said 400 customers. That was several years ago. So you've either, you've sort of maybe churned lower ARPU and added higher sort of AC folks or you've expanded in the accounts to grow revenue. Sort of which one was it?

A Yeah, we've done a great job, um, around our, our, uh, retention rates are in the mid to high nineties, right? So we do a phenomenal- Gross or net? Uh, gross. Uh, our, our, we actually put a press release up for our net retention. Our net retention is in the, in the 115, 121% range, right? So it's a, it's a very nice, and what we've done as a team extremely well is we went to the Phillips Health Cares of the World carrier, who predominantly fascinating, by the way, Nathan, is Those customers, many times, even those huge logos still are doing manual processes for the thing that I talked about as the workflow. So we've done a phenomenal job growing the wallet share of the existing customer base. And quite frankly, some of the customer count, right, as you've seen other companies, we look at the quality of the customer count. And of those 400 initially three and a half years ago, we've created a lot of new logo impetus to, to make up for the Kind of customers that we quite frankly didn't really address in the manner that we think we could grow into. So within that, underneath it is great retention, great upsell into the existing base, but we've done a really nice job on new logos as well to get the right customer set to grow into over the next three, five, 10 years.

AI assessment note: “We've done a phenomenal job growing the wallet share of the existing customer base.”

Q What, when was the last thing you guys discussed publicly in terms of revenue run rate?

A You know, we were, we were getting very close to going public at the tail end of last year in December. And fortunately we've got great investors. We're all, as I said, by Silver Lake, who owns about 80% or some, a large percentage of the company as well as GE and then Salesforce Ventures. And we had created a process to go public. Thank God we didn't go public because of what we're watching in the marketplace. And as a private company, we're able to still stay Focused on customers and our employees versus all the mayhem that's going on with public companies. But, uh, um, I think the last disclosure we made was we were approaching hundred and fifty million dollars plus of ARR. So, um, really well as getting operating profit and free cashflow positive as well. It's a big point of differentiation that we've done over the last three and a half years as a standalone company coming out of GE.

AI assessment note: “I think the last disclosure we made was we were approaching hundred and fifty million”

Q Um, and so like, you know, and they're sometimes even growing and they're growing at faster rates than 25 to 30%, you know, year over year. Right. So like, how do you How do you think about sort of that balance? And do you, I mean, do you think you would do well today? Would you trade at more than 1.4 billion valuation if you IPO today in your opinion?

A Yeah. You know, right now with what's going on in the world, the best thing I'm telling my team, myself, when we wake up, keep running this business, the progress that we've made over three and a half years, we continue that path. We're serving our customers really well. The options exist for the company, whether it's public, whether we continue on the journey privately, uh, whether we team up with another partner, just keep focusing on these customers and we're doing a bang up job. And if we, if we just think about A single moment of valuation metrics, you kind of think in a way that's very short term. And we have the luxury of thinking, uh, longer than that. So I believe that that focus is going to reward the shareholders extremely well. And I think we'll create a great company that will be a very one that we'll all be proud of.

AI assessment note: “if we just think about A single moment of valuation metrics, you kind of think”

Q Okay. Interesting. Now you're not a pushover and you're talented and you have a lot under your belt. So you're asking for equity coming into this deal. How's a guy like you, you know, trying to negotiate a position in a thing like service max? How much equity do you come in and ask for?

A Yeah, I'm not going to tell you the equity piece. It's actually something I've forgotten, quite frankly. It's, ah, I like the, I'm 40, as I said, I'm going to turn 45 in a month or so, and I'm at the position of my life where I've, I've been lucky to have been in very significant positions before ServiceMax. I kind of started a little early, and I'm now really focusing on how could I scale this team? How could I ensure that our team is actually getting all the things that I got for the last 20 years? And The mission of what we do, Nathan, for our customers, it's, it's really the thing that gets me up at night. So this isn't a go make money and figure out how to transact. This is for me. And this is why I said, put me in coach. This is a company that's going to make a difference for a long time. I don't want to leave for a long time. This is a company I want to quite frankly, if I can retire at, and you know, there's so much runway for the business that we're doing. So that's how I looked at it, Nathan, versus the dollars and cents behind it.

AI assessment note: “I'm not going to tell you the equity piece.”

Q That's, I mean, it sounds healthy to me. Interesting. Um, I love how you talk about economics and profitability and free cash flow. Rule of 40 is obviously a popular metric in publicly traded SaaS. I imagine you thought about this back end of last year. Where are you guys at right now? Or last, you disclosed it. Where are you in terms of Rule of 40?

A Yeah, we're, we balance the, since we're a private company and we're growing at the pace that I'm talking about, We've been, uh, fortunate enough as we've been scaling into free cashflow positive, the pinpointing for a wall street analyst to get at the end of Q two, a rule of four year rule of 50 rule of 60 is not the theme that we push on, right? It ultimately it's the progress of the business. We have very much in our line of sight. How do we get to 40, 50, 60? And if you look at those types of growth rates, it's just a small inflection of free cashflow margin that we got to create to Get to it. But right now you can hit that this year.

AI assessment note: “the pinpointing for a wall street analyst... is not the theme that we push on”