00:01hi this is a Scott Cooper from injuries
00:04and Horowitz and I'm here with pretty
00:06casa ready and Jamie Mukherjee from our
00:07corporate development teams and we want
00:11to talk today a little bit about sass
00:12evaluation so I'm gonna kind of start it
00:14off you know for me if your watch any of
00:18these you know news programs you know in
00:21the morning on all of our favorite cable
00:23news channels it's pretty easy to hear
00:26the constant refrain which is holy cow
00:28these sass companies are overvalued you
00:31know what is going on here are we back
00:33in 99 mm just like we were you know kind
00:35of 14 years ago and I think you know
00:39what people need to understand is you
00:41know you know a framework for how to
00:42even evaluate if that's actually a true
00:44statement so you know that's what I'm
00:45hoping we can cover today and I thought
00:47we'd maybe kick it off with Jamie you
00:49know give us kind of you know a
00:50perspective on you know what do you
00:52think is going on so what is kind of
00:54causing all this bubble talk and you
00:57know what what would do people need to
00:58understand to actually figure out look
01:00is it in fact the case that we're in the
01:02bubble or is this all just normal
01:03behavior so I think there's two things
01:05that people look at and point to 20
01:09point to the bubble and and one is
01:11revenue multiples that a lot of these
01:14sales companies are trading at and I
01:15think it's both current and future
01:17expected losses so lack of profits of a
01:21lot of the current public SAS companies
01:25that that people look at those two
01:27things and they say holy cow you know
01:29work day is trading it at one point
01:3120-plus times revenue and expected
01:34losses for years to come and they say
01:36this has to be a bubble I think those
01:38are the two metrics that that people
01:40tend to focus on that leads them to
01:42conclude that it's we're in a bubble
01:43yeah I think that's right so we've kind
01:45of trained the world to say the way you
01:47evaluate companies is you look at the
01:48income statement right and you say okay
01:50how much revenue does this thing
01:51generate and how much earnings per share
01:53does it generate and if those are good
01:55then we all clap and applaud and go buy
01:57the stock and if they're not you know we
01:58all run for the hills so you know what's
02:01the problem then and maybe pretty you
02:02can you know kick us off here so why why
02:05is that wrong so what's what's the
02:06problem with actually just looking at
02:08revenue and EPS for these SAS companies
02:09yeah um well SAS it's a little bit
02:12different right from from perpetual
02:13models and SAS you getting the revenue
02:15from the customer over an extended
02:17period of time and so it wears
02:19professional model models you can look
02:21at think and state statement because you
02:22get get the revenue for the license in
02:25the period that they pay for it and then
02:28you get maintenance fees over time so
02:29you're covering your costs and right
02:32away from the perpetual license but in a
02:33SAS you get it over time and so that
02:36profitability doesn't happen until a
02:38certain period in the customers lifetime
02:40but once they become profitable you have
02:42this huge existing base of customers
02:44that are paying a recurring revenue over
02:46time and your margins are actually
02:47higher than a perpetual model yeah so
02:49maybe we just maybe we should unpack it
02:50a little bit because you know for
02:52everybody so maybe just a simple example
02:54the way I think about it right so if
02:55your Oracle right in the traditional
02:57model you know I go sell you a license
02:59for 10 million dollars I get that 10
03:01million dollars from you and then right
03:03you know in the quarter in which I sold
03:04you that business I got 10 million
03:05dollars it throws flows right through to
03:07my income statement right so all is good
03:08and I can pay my sales guy I can pay all
03:10my other folks and so I think unless you
03:12guys disagree that for a company like
03:14that the income statement is actually
03:15pretty good that's a pretty relevant
03:16indication of what's happening the
03:18business right it is and importantly the
03:20cost to acquire that company was
03:21incurred in that period before or during
03:24and as they paid for it so that cost is
03:26realized upfront that's right so we can
03:28actually see the profitability of that
03:30customer right away right we know that
03:32customer paid us 10 million bucks we
03:33know we paid a sales guy a commission we
03:35paid some engineering guys to develop
03:36the software and so we know like right
03:38you know in that quarter you know
03:40whether that was a good purchase or not
03:41you know for us as a company and so I
03:43think and then you know if we kind of
03:45just use that same example on the SAS
03:46side right if you know your workday for
03:49example right and you sell a 10 million
03:50dollar deal to a customer that deal
03:53could be over what 12 months 24 months
03:5536 months you know depending upon kind
03:57of you know what the contracts are and
03:59so you know pretty to your point you've
04:01got this weird imbalance which is you
04:03know I've signed a contract that says
04:05I'm getting 10 million dollars for the
04:06customer there's no way that customers
04:08actually paying me 10 million dollars
04:10today they're gonna pay me you know
04:12month by month as they use the service
04:14and so I've got this weird thing which
04:16is I've got to go still pay the sales
04:17guy I got to pay all the engineers I got
04:19to pay all the support folks immediately
04:21for that thing but that 10 million
04:23dollars now is not coming in in one
04:25quarter it's coming in in you know
04:26either four quarters eight quarters
04:28twelve quarters right two
04:29upon how it works so is that is that the
04:31right way to frame it is that kind of
04:32the fundamental kind of thing that you
04:33think is missing when people look at
04:35simple revenue and EPS yes exactly and
04:38that's why we we tend to look at
04:39Billings as well which is the kind of
04:42contracted revenue that you have coming
04:44in from customers and that really is
04:46like a leading indicator of revenue
04:48growth and that's why you see a lot of
04:49investors focusing on Billings more so
04:52because if workday for example signs it
04:55to be a contract with the customer and
04:56they have that unearned revenue on the
04:58on the balance sheet you know that that
04:59revenue is gonna be coming in over the
05:01next three years so there's
05:02predictability in the cash flow there's
05:04visibility into the future and so what's
05:06different about SAS is a lot of
05:08financial analysts like it because you
05:10can really predict the cash flows over
05:12time whereas in a perpetual license like
05:15you said you it's really every every
05:18every quarter every year you have to go
05:20out and acquire new customers it says
05:21you have an existing customer base and
05:23so you know that you're gonna get
05:24revenue from that yeah let's come back
05:26to that one I want to actually pick up
05:28on the Billings comment you made cuz you
05:30know you know my like spidey senses
05:32start going off every time we say hey
05:34forget about metrics that are actually
05:35in the financial statements let's go
05:36make up some new metrics to actually
05:38measure the business and you know again
05:39for those of us who are old enough to
05:41remember in 99 2000 you know we used to
05:43talk about things like eyeballs and
05:45stuff like that and you know you
05:46couldn't find those things anywhere on
05:47the financial statements and so you know
05:49I think people always get nervous right
05:50in this maybe some of the skittishness
05:52you have in the market where people say
05:53you know once you have to actually
05:55invent metrics to explain why a business
05:57is valued a certain way that's scary so
05:59maybe you can just to unpack Billings
06:02right and maybe Jamie you can kind of
06:03you know jump in here you know give
06:05people a sense of what that means and
06:07also like how they actually see that in
06:09the financial statements as opposed to
06:10the three of us just saying hey just
06:11trust us like you know the Billings are
06:13actually a really you know really big
06:14sure I think a great example of that is
06:17cast lights recent IPO where you know if
06:19you look at what the revenue was you
06:21know on the income statement on a
06:22trailing basis or even on a forward to
06:24projected basis it was it was a fairly
06:26modest and certainly didn't didn't
06:29justify the the valuation the castle I
06:32did chief post post IPO what investors
06:34were really looking at was the Billings
06:36and I think that all comes down to
06:37predictability with a big bookings
06:39Billings backlog that that helps
06:42investors predict what next year's
06:44revenue is going to be and even the
06:46following year's revenue is going to be
06:47so if you think of Billings as as a
06:50backlog of future revenue that really
06:52gives comfort that the growth rate is
06:55there and that they will achieve that
06:57those revenue milestones right and I
07:00know it's not always the case but often
07:02times you can get a good proxy for
07:03Billings by looking at the balance sheet
07:05right so you can look at things like
07:06deferred revenue and you know there's
07:08all kinds of of course you know funky
07:10accounting rules why sometimes some of
07:11it may be in there some but maybe not
07:13but my understanding at least is you
07:15know when the Wall Street analysts look
07:16at these things they're looking at kind
07:18of changes in deferred revenue kind of
07:20quarter over 1/4 as kind of a proxy for
07:22this concept of Billings is that pretty
07:23right yeah exactly different revenue is
07:25a liability that's on your balance sheet
07:27and it definitely it usually represents
07:29like new buildings that you acquired in
07:30a quarter that you haven't serviced or
07:33renewal Billings that you're getting
07:34from existing customers that you haven't
07:36serviced yet and so any change in that
07:38will kind of indicate whether your
07:39buildings are growing or shrinking and
07:41that's a really good leading indicator
07:42into like revenue growth right well
07:44that's good to know so right when we're
07:45talking about Billings we're not
07:46literally inventing kind of new
07:47financial beauty metrics we're actually
07:49talking about things that people can
07:50look to the GAAP financial statements
07:52and get you know a good sense of how
07:53they are I want to come back to
07:54something Priya said earlier either
07:55which is this whole concept of acquiring
07:58a customer with the idea that that
08:00customer is profitable but potentially
08:02over a longer period of time than we're
08:04used to thinking about right so again if
08:06we kind of go back to maybe the simple
08:07example we started with you know that
08:08Oracle customer you know that customers
08:11gonna give us a bunch of license revenue
08:12upfront so they're immediately
08:13profitable which is a great you know
08:15great and wonderful thing and then
08:17they'll typically pay us a maintenance
08:18you know an annual maintenance contract
08:20right maybe fifteen or twenty percent of
08:21the software license revenue and that's
08:23all good and that's actually quite
08:24profitable revenue but you know pretty
08:26you kind of mention which is I think
08:28people don't quite you know have a firm
08:29grasp on is in a SAS company because
08:33what we're doing is we're saying hey
08:35we're gonna spend a bunch of money
08:36upfront to acquire this customer on our
08:38income statement it's gonna look bad
08:40right so it's gonna look like we're
08:41crazy and we're burning cash in the
08:43parking lot right because because of
08:45that but the whole theory is that
08:47customer probably is gonna be with us
08:49for a long time they're gonna be sticky
08:51or maybe able to sell more stuff to that
08:53customer over time so maybe just you
08:55know give a perspective on
08:56what is it about sass why should people
08:59believe that that sass customer is gonna
09:00stick around for 3 5 10 years any more
09:03so than you know that Oracle perpetual
09:05license customer and and how does that
09:07kind of Phaedo play into how people
09:08think about long-term profitability yeah
09:11well in SAS visit says it's two
09:13different sales right first you're
09:14acquiring the customer and then you're
09:15retaining the customer and so we look at
09:17a lot of metrics around that or on churn
09:19and so forth which give us that
09:20conviction that a customer is gonna stay
09:22with you a long time and so if your
09:24churn is low then you know that you're
09:25gonna keep that customer for let's say
09:27three years or so you have a idea of how
09:30much that that customer is gonna provide
09:32value for you over their lifetime and so
09:35if you can sort of compare that to how
09:36much it cost you to acquire them and see
09:39whether you're becoming profitable on a
09:40company that that's a good indicator of
09:42whether you can you can sort of like
09:45sustain and continue to spend money to
09:48acquire customers and what happens is
09:50that the more you sort of spend money to
09:53acquire customers in the beginning the
09:55more negative you go in cash flow and a
09:57lot of investors have trouble sort of
09:58understanding this you know for example
10:00a customer a company will spend a ton of
10:02money and acquire customers and they're
10:04just trying to reach profitability but
10:06when they actually accelerate that
10:07growth they'll go into an even deeper
10:09negative cash flow and then when they
10:11come back up to reach profitability
10:13they'll start growing faster and that's
10:15that like that balance that a lot of
10:17investors and sort of board partners
10:18don't understand and right when you're
10:20about to press the accelerator a lot of
10:22people will tell you to stop no slowdown
10:23growth but that's in fact not the case
10:25for SAS and SAS it's more of a sort of a
10:28land grab kind of market where you have
10:29to acquire a lot of customers early on
10:31and become the market leader and then
10:34that's what investors are paying up for
10:35and so that idea of negative cash flow
10:39in the beginning versus a perpetual
10:40license where your cash flows are
10:42generally pretty not as negative is is
10:45something that investors struggle with
10:46yeah that's that's definitely
10:47interesting point and I do want to come
10:48back to that one but Jamie looks like
10:51kind of dig a little bit deeper on this
10:53concept of customer acquisition cost and
10:55then you know Preeti mentioned I think
10:57kind of lifetime value right and so you
10:59just maybe help people understand how to
11:01think of those because you know again
11:03the way I at least I think without
11:05people kind of understand the details
11:06there's always this fear that hey we're
11:09spending a bunch of money to acquire
11:10this customer we have no idea if that's
11:12actually a good thing or not right so
11:14how do you know kind of investors should
11:15think about kind of you know how much
11:17money should I be willing to pay for a
11:19customer relative to like how much value
11:21I think I can get out of that customer
11:22over a period of time
11:23sure so so in previous the the previous
11:28perpetual license model you know that
11:31you go out and you acquire our customer
11:32and you can you can base that against
11:34what that what that sale was worth at
11:37one time so that's fairly
11:38straightforward over in a SAS model as
11:41as Brede mentioned it's the customer
11:45lifetime is is uncertain
11:47so it's hopefully in perpetuity as well
11:50but but you know you really don't know
11:52so you have to the stickiness of your
11:55customer is really dictated by in part
11:58by the product really because in a you
12:01have constant updates if you're a sales
12:04force customer if you're a any any SAS
12:06model customer your you're constantly
12:09getting updates to the product even on a
12:10daily weekly monthly basis versus you
12:13have a product that you buy and you and
12:15you buy maintenance for a three-year
12:17period you're making another purchase
12:19decision at the end of that three-year
12:21period so you almost have to spend to
12:23reacquire that customer if if you're the
12:26company selling than the product versus
12:27in a SAS model the purchase decision is
12:30made one time upfront and of course your
12:32the relationship with that with that
12:34customer dictates how long they stay
12:37onboard but you have the opportunity to
12:39to keep that customer and make them
12:41sticky yeah I think those are the two
12:42two things that you kind of do yeah I
12:45think that's interesting to me like I
12:46think there's a very good argument for
12:48why a SAS customers a lot more sticky
12:50and I think a lot of it has to do with
12:51that I think the other thing is you know
12:53and we see this a lot in companies which
12:54is as purchasing decisions have moved
12:57away from kind of the CIO as the central
12:59you know kind of purchasing control of
13:01all these things and now you've got
13:02department level purchases and you see a
13:04bunch of SAS companies you know Marketo
13:06would be a great example right of a
13:07company that's you know selling to the
13:09marketing department right whereas kind
13:11of in the old world you had to always
13:13sell to the CIO and so to me part of the
13:15stickiness argument I think in favor of
13:17SAS is you've got decentralized budgets
13:20now right so you don't have a single
13:21throat to choke anymore in the company
13:24get to go sell to the marketing
13:25department which i think as a vendor is
13:27actually a good thing and then at the
13:29same time because SAS is so easy to use
13:31in many cases and you know user
13:33interface is a really big you know
13:34component of this stuff there are
13:36probably many more users in each
13:37department of these SAS products than we
13:39actually ever had before so again if you
13:41go back to old ERP products right they
13:43were probably like you know 5 to 10 to
13:4520 power users and these organizations
13:47whoever touch these things and knew
13:48about them now you go to salesforce.com
13:50right you know literally every inside
13:52sales person every customer account
13:54person has a license for this stuff and
13:57so I think to me those are arguments why
13:59these this kind of software is even more
14:01sticky than traditional software because
14:03it's just kind of permeated the
14:04enterprise in a different way then
14:06traditional products you guys think
14:07that's true or no I do think it's true
14:09and I think there's one other component
14:10to which is there's a lot more
14:12cross-functional collaboration so
14:14marketing to engineering or marketing to
14:18the direct sales or to the front to the
14:21to the corporate office I think a lot of
14:23that collaboration has allowed these
14:25systems to peripherally so as they kind
14:28of use the same systems they're on
14:30communicating across the same the same
14:33systems that has we've seen a lot of
14:37these systems proliferate throughout an
14:38organization that way as well great so I
14:40want to come back to a point pretty you
14:41made earlier and I would kind of call it
14:43the growth Hertz problem which is these
14:46SAS businesses are weird in the sense
14:48that the more customers I acquire and
14:50the faster I try to acquire them you
14:53have this you know major kind of
14:54negative cash flow problem you almost
14:56exacerbate your financial statements and
14:57make them look worse even though you're
14:59actually trying to do a good thing which
15:01we think has grow the business faster so
15:03you know in the end does that all work
15:05out and is that a rational strategy for
15:07these companies to do or you know are we
15:08better off just saying hey look cut the
15:10losses don't grow so fast let's just
15:12kind of harvest what we have and kind of
15:14be happy with the business yeah sure
15:16to sort of answer that question I want
15:19to use NetSuite as an example so if you
15:21look back to 2010 to 2012 they spent a
15:24lot more on SNM and and they went into
15:27negative cash flow territory but that
15:29helped them accelerate revenue growth
15:30and although their bottom line was
15:32looked bad their top line looked great
15:34and and that's good but then how do you
15:37know over time that it's
15:38look better right and what you you gain
15:40conviction from that because by looking
15:42at like by understanding the fact that a
15:45customer an existing customer cost a lot
15:47less a service and keep then a new
15:50customer so there's stats out there that
15:53show that an existing customer costs
15:54one-third the cost of a new code the
15:57cost to acquire new customer and so as
16:00your if you look at this sort of
16:02breakdown of your revenue as the portion
16:04that's recurring versus the portion
16:06that's new increases so that means the
16:08more renewal revenue hat you have the
16:10higher the margins are on that renewal
16:12revenue because you're not spending as
16:13much money on their renewal customers
16:15and so you your profit margins grow up
16:17over time but it's hard to tell that in
16:19the early years of a SAS company all
16:21these SAS companies are six to seven
16:23years and they're a lifetime and this is
16:25gonna happen 10-15 years down the road
16:27and it's gonna take a while they have to
16:29kind of establish that big customer base
16:31and that large recurring customer base
16:32before you can really say they have
16:34really strong margins but but based on
16:37what they've sort of been tracking and
16:39their margin improvement over time so
16:40far I think I think we can say that
16:43they've they're on the right track right
16:44so we've so we've seen at least in the
16:46public companies that have been around
16:47for a little while we've actually seen
16:49you know demonstrable improvements in
16:50their margins over time right we're not
16:52you know we're not yet to Nirvana in the
16:53sense of you know they're not you know
16:55throwing off you know 30 40 percent you
16:57know operating margins yet probably for
16:58most of these companies but it sounds
17:00like at least there's enough traction to
17:02show that hey you know versus you know a
17:03couple years ago now that they've
17:05actually that growth is paying off in
17:06many respects in terms of market
17:08improvement is that that fair yeah
17:09exactly in SAS businesses generally have
17:11higher gross margins as well so it gives
17:13you more room to kind of pump money into
17:15sales and marketing in R&D and so forth
17:17to continue that product development
17:19that you need to do to have a sticky
17:20customer base yeah so you know Jamie
17:23maybe you can comment on this I think
17:24the other thing that maybe gets lost a
17:26little bit here it's a little bit
17:27nuanced and the technology is what other
17:29economies of scale are there for SAS
17:31companies over time so we've talked a
17:33lot right and Preeti just brought this
17:34up which is this concept of sales and
17:36marketing scale right which is hey it
17:38costs a lot of money to buy this guy up
17:40front but you know the cost of servicing
17:42that customer over time or low the other
17:44one that I think people don't pay as
17:46much attention to is on the R&D side
17:47right so this concept of you know we you
17:49hear people talk about this concept of
17:51and you know at least my personal view
17:54is that also means to me that over time
17:57you ought to actually have much more you
17:59know research and development kind of
18:01leverage in these companies than you do
18:02in a traditional perpetual license
18:04company so you know I don't know if you
18:05agree with that or not but maybe just
18:07you know give some perspectives on you
18:08know what that might look like and what
18:09that means sure and and I think that's
18:11it's particularly evident in models that
18:14involve hosting and storage and
18:15networking so the the multi tendency
18:19that you point to is is often used
18:21that's a term that's used when talking
18:22about cloud type deployments and so if
18:25there's a shared infrastructure or a
18:27built infrastructure that you can
18:28amortize over a larger number of
18:30customers they're in essence sharing
18:33that cost right so you get you get a lot
18:35of leverage to the extent that you are
18:37fully utilizing that infrastructure and
18:39and and spreading it over a number of
18:41customers number of deployments and
18:42therefore a larger revenue base you do
18:45get the similar type of leverage that
18:47you've almost got again it's you know
18:49we've talked about kind of timing issues
18:51in SAS companies right which is timing
18:52of revenue and time expense this is
18:54almost a sec a second timing problem
18:56which is in order for me to go sell to
18:58my first customer I've got to go buy
19:00some storage equipment I've got to go
19:02buy some network equipment I got to
19:03build the software you know that's a big
19:05fixed cost that I have to undertake and
19:06you know my hope of course is that as I
19:09build more and more customers that that
19:11cost that gets to the marginal cost that
19:13get its assigned to each customer ought
19:14to be better and better right but again
19:16you've got this you know funny timing
19:18issue which is to go get those customers
19:19I have to actually incur this first big
19:22fixed cost and so again you know kind of
19:24when I look at my income statement I've
19:26got small revenue big expenses you know
19:29but I have to kind of wait over time to
19:30see how that works is that kind of the
19:32way to think about it yeah that's right
19:33it's not completely you don't incur the
19:36entire cost upfront and then amortize it
19:38over time it's you know they but it's
19:39also not modular so right you're not
19:41adding a fixed number or a fixed amount
19:44of incremental cost per customer right
19:46so of course your infrastructure can
19:48scale over time as you grow the business
19:49but you to your point you you will have
19:52to start with a fixed amount of
19:53infrastructure and to the extent that
19:54that your growth can support that it
19:57doesn't it doesn't go linearly it's it's
19:59you're getting some live right so
20:00certainly at a minimum from a cash
20:01perspective right I'm gonna have to go
20:02be out of cash on this stuff you're
20:03right the accounting laws may help me
20:05or ties and appreciate that expense over
20:07a period time you know I think the other
20:09part about this too which goes back to
20:10the core of multi-tenancy and you know a
20:13lot of us here came from the enterprise
20:14software world when you had enterprise
20:16software you were always maintaining
20:18multiple versions of the software all
20:20the time right so you had customers who
20:22are on version you know one taxi do you
20:24guys probably saw you know Microsoft
20:25just deprecated what was it XP or
20:27something the other day and you know
20:29there was this whole outcry it turns out
20:31that every ATM in world right is being
20:33run on XP and so you know now now we've
20:35got to go figure out if our money will
20:37actually come out the next time we go to
20:38the ATM but you know my point is that in
20:40an enterprise software world you always
20:42are maintaining different versions and
20:43you've always got customers on different
20:45versions and that has a real cost that I
20:46think you know people who haven't been
20:48in the business don't appreciate because
20:49now I've got you know engineering teams
20:51dedicated to it my support teams have to
20:53be kind of bifurcated the beauty I think
20:55at least a multi-tenancy and sought and
20:57SAS generally which I think also goes to
20:59our broader point about why these
21:00companies ought to be more profitable
21:02over time is every customer or at least
21:05in most cases most customers are running
21:07the same version of the software right
21:08and so I've got all kinds of economies
21:10of scale of my Rd organization not
21:13having to worry about that version that
21:15I released ten years ago and what legacy
21:17customers I have and so you know again
21:19preety I know we're not quite you know
21:20yet you know to maturity for most these
21:23companies but is it logical to think
21:24that R&D expense again as a percentage
21:27of revenue over time you know for these
21:29companies ought to be lower than they
21:30are in traditional companies and
21:32therefore again you know another reason
21:33why we think profitability is is better
21:35for SAS companies typically yes because
21:37you're not maintaining multiple versions
21:39from multiple customers as you said you
21:40have just one customer with SAS and
21:42that's the beauty of SAS really yeah
21:45it's interesting the other thing I was
21:46going to take us like two completely
21:48different industry but I think has a lot
21:50of analogies to SAS which is you know
21:52the cable industry the telephone
21:54industry so what's interesting to me is
21:56none of this stuff is actually that new
21:58this concept that we're talking about
21:59here right so if you think about you
22:01know a company like Comcast right or you
22:02think about AT&T they've got this same
22:04problem which is you know it costs a lot
22:07of money to acquire customers right it's
22:08one reason why the marketing budgets
22:10right for these companies are so big but
22:11the reason they're willing to do that
22:13and spend hundred million dollars on
22:14marketing is because once they get you
22:16as a customer the likelihood of you stay
22:19is pretty good and then now they've got
22:21this again a same thing like SAS right
22:23it's a subscription business right so
22:24every month they're charging your credit
22:26card for a certain certain amount of
22:27money and then you know I think it also
22:29explains why you know every time you
22:31know you threatened to kind of you know
22:32switch from AT&T to Verizon you know
22:34they're very happy to accommodate you
22:36know accommodate things and try and kind
22:37of you know keep you as a customer and
22:39so you know I don't know Jamie if you
22:41look at it maybe there's other analogies
22:42in the market but you know what is it
22:45that's giving people so much you know
22:47kind of angst about SAS when you know in
22:49reality subscription business have been
22:50around for a long time and and there's
22:52really nothing new here is there is
22:53there something else you think that's
22:54you know making this harder for people
22:56to understand or is it just that because
22:58everyone's been trained on the perpetual
23:00license model that this is just kind of
23:02a natural thing that people have to go
23:03through which is a swish in their
23:04mindset from perpetual license to
23:06recurring revenue businesses I truly
23:08believe that it's more of a switch and a
23:09mindset because fundamentally the
23:12difference between you know whether it's
23:14an Oracle or or kind of one of the older
23:18perpetual license model fundamentally
23:20they're delivering the same end result
23:22to a customer they're just doing it in a
23:24so I think it's I do I do believe it's
23:26more of an understanding not just how
23:29the business model is shifted but how
23:31the impact on the financial statements
23:32is shifted and how you know the
23:34profitability of a new SAS company or a
23:37relatively young SAS company is going to
23:40look different than the profitability of
23:42you have that Oracle that's AP Microsoft
23:44etc so of course those are in different
23:46stages of their lifecycle but at the
23:48same time they're fundamentally
23:49realizing revenue and costs in a
23:52different timing period so I think it's
23:54a retraining it's not a total brand new
23:57thing it's just a new way of looking at
23:59at a similar type of product right okay
24:03so if we're kind of just to kind of net
24:04it out maybe I think we're where we kind
24:06of came out is we've got this
24:07fundamental problem which is everyone
24:09loves to look at the income statement
24:11right and that's you know we've trained
24:12the whole world to say look look at
24:13revenues look at EPS and then let's
24:15figure out you know what revenue
24:16multiple what p/e multiples we put on
24:18these businesses and that's how we
24:19ultimately value them and it sounds like
24:21at least based on what we've talked
24:22about you've got a you've got a
24:24fundamental challenge with that model
24:26versus the SAS model which is you've got
24:28all these timing problems that revenue
24:30doesn't all come in up front
24:31in perpetual license you know most the
24:34expenses do you've also got this other
24:36concept of you know I've got to incur
24:38lots of costs to incur a lifetime value
24:41that we think is gonna be very net
24:43positive certainly you know we'll kind
24:44of see over time and so you know it
24:46really is I think a function of helping
24:48people understand you know what are the
24:50proxies they can look for in the near
24:52term right so pretty you mentioned it
24:53kind of you know what is the customer
24:55acquisition cost relative to our
24:57projected lifetime value and these are
24:58all things that actually we can estimate
25:00based upon the financial statements so
25:01we have to kind of you know help people
25:03look towards those types of proxies as
25:05opposed to kind of you know going back
25:07to the traditional valuation you know
25:09parameter we've talked about well thanks
25:10I appreciate the time and I was joined
25:12here with pretty cats ready and with
25:14Jamie McGuirk from the team and we're
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