The Exchanges

Q Okay, five zero, uh, fifty million bucks there. And then you sold in 26, or 2017. So take us through that story. Why, why sell?

A Well, so the company had gotten to a point where we had, we had grown a decent amount, um, and we had started to bake the track towards profitability in 2017, and it just made sense for us to get new investors that were more aligned to kind of how we intended to grow in the future. Uh, a lot of our earlier investors were venture investors, uh, and as you probably know when you're talking to a lot of VC-oriented companies, those companies are about grow, grow, grow, grow, grow, um, up into a certain point. It's more of a roulette wheel type model. Uh, we were at the point now we had grown to a certain amount. Our growth had frankly slowed down a little bit, and we were oriented to profitability, and we wanted to just start growing in a different path. Also, we saw an opportunity to potentially do M&A in the future to grow faster, and new investors made sense for us at that point.

AI assessment note: “it just made sense for us to get new investors that were more aligned”

Q Yeah. Okay. Very good. And then, um, and then walk us through, I mean, you mentioned lifetime value. Some people live and die by it. Some people ignore it because it doesn't help them drive the business at all. Do you use that at all? And if so, how do you use it?

A Um, so, so we look at it. Um, you know, I, I think, It's challenging because you have to build in assumptions around expansion and upsell and things along those lines. And the reality is our expansion and upsell, um, has really taken off in the last year or two. Um, we started to introduce new modules and new capabilities. Um, and that's given us an opportunity to go back to the customer base and add additional value. And so we're getting more of that. Um, so, so truthfully, we probably do need to go back and, and reassess our metrics and how we look at that. But, you know, we haven't today. We, we, again, look at it as how much are we spending in sales and marketing and what kind of ACV do we get as a result of that? Um, and, and that's typically how we look at it.

AI assessment note: “we look at it. Um, you know, I, I think, It's challenging”

Q Okay. So the people that are churning, are those typical old license that are, that are stopping their maintenance contracts, or is it people that are on your SAS model, but are maybe downgrading or seats or something?

A Yeah, so we measure that, and we have a monthly meeting where we literally categorize why people churn. Um, roughly about 60% of our churn is the product is discontinued. Okay, so keep in mind, we, what we offer gets embedded in a product that they then go sell. And we work with a lot of companies that are fifty-percent companies, a hundred-percent companies. Sometimes the product they sell gets discontinued, or they no longer are in business. Um, and that's about 60% of our reasons for churn. The other 40% is they don't ever actually get into production. Um, and, and that's something we do a lot to try and help them get into production. Um, but the reality is, you know, sometimes priorities change in organizations, sometimes people leave, sometimes projects get killed. Um, and so those are the typical reasons.

AI assessment note: “roughly about 60% of our churn is the product is discontinued”

Q Okay. So, you know, I'm asking this and you'll laugh, but I mean, so why are you still there? It's hard to motivate someone once they're, once they're wealthy.

A Uh, well, so, so first off, um, uh, you know, I come to work every day and not necessarily for that reason. I come to work to build things and grow things and, and like any other, like a private equity firm coming in is really just another investor. Right? So, so when you talk to a private equity firm, You establish what is the story? What is your growth path? How are you going to grow the company? And we firmly believe here at Lodging and I believe that there's this new evolution of a product stack emerging. If you think about 10 years ago, we sold, uh, marketing was, uh, maybe 15 years ago, marketing was, uh, trade shows and collateral. Now there's a whole industry that sells to marketing around marketing automation and marketing technology and lead optimization. Uh, I believe that product managers, which frankly didn't exist 20 years ago, is a new industry that's emerging. And people nowadays aren't going to build products completely from scratch. They're going to go out and get best of breed components to get to market faster and assemble those, those things into a modern product stack that they deliver. You saw it happen in infrastructure.

AI assessment note: “I come to work to build things and grow things”

Q to the top of the funnel. We were just kind of at the bottom. Let's go back to the top. Um, how aggressive are you being in terms of acquiring these customers? So when you look at your fully weighted CAC, right? And let's say your first year ACV, you said is about a hundred grand right now. What are you willing to spend to acquire that kind of account?

A Well, so we look at it in terms of payback. That's how we kind of think about it. Um, uh, you know, I, CAC and LTV. I I've seen five different calculations and I've talked to multiple different investors on that. And we tend to find that metric is confusing and requires allocation of marketing spend and all that sort of stuff that, that is subjective. So, so we look at it as how much do you spend in sales and marketing and how much ACV do we get? And what's our kind of rate of return on that? Um, if I look on new ACV that we get versus, versus how much we spend in sales and marketing, it's about a one-to-one ratio.

AI assessment note: “versus how much we spend in sales and marketing, it's about a one-to-one ratio”

Q Yeah. Last complicated question before we wrap up with some easy ones. When you look at bookings growth, like in a quarter, um, do you have a target for that? And if so, what is that target?

A Um, well, so, so we do have our targets, right? Um, and, and we have our targets in terms of ACV from new AC from expansion, all that sort of stuff. Um, you know, again, our plans are built around this growth plus margin concept. So I'm sorry. It will be high twenties. Yeah. This year will be high twenties. Next year we'll be in the thirties. Year before that we were in the teens and the year before that we were negative. So we were on this kind of path to profitability, right? Um, and so we think about how are we going to grow our bookings, but we also think about it relative to how much we want to spend to grow our bookings.

AI assessment note: “This year will be high twenties. Next year we'll be in the thirties.”