1228: The New Economics of SolarWinds | with Samuel Monti, CFO, SolarWinds

0:00Support for CFO Thought Leader comes from OneStream, Trusted Data, Faster Decisions, and Salesforce. Explore new research on the future of finance and AI at Salesforce.com slash CFO Report. Hello, this is Alistair Gurney, CFO of Lucanets, and you are listening to the CFO Thought Leader podcast. This is episode 1228. where i would challenge anybody out there and that's why um like i said i like history i know

0:34Samuel Monti: what the cfo used to be decades ago and they were the number one strategic strategy partner of the ceo start stop they there were giants in uh corporate america people never hear of they hear of the ceo but the magic was actually the combination of the two and then we lost our way I think, in corporate America. And it came a period where they became glorified accountants and then they became prior audit partners from the big six. You know, I'm going to age you and I, Jack, the big six. I know it's the big four now, but back when we were young, it was the big six. And then they evolved into kind of complicators.

1:13Samuel Monti: And now you're coming out because of technology. we're getting back to the fundamentals of the CFO needs to be the strategy partner. So it gets to your question of, yes, AI is doing that, but the postmodern CFO, the architect and builder, they were already doing it. Hi, it's Jack. On today's show, we speak with Sam Monte, CFO of SolarWinds. There's a popular narrative in business that portrays the CFO's emergence as a strategic leader as a relatively recent development. But consider General Motors a century ago. Alfred Sloan, its legendary CEO, worked closely with Donaldson Brown, the company's financial chief.

2:06Brown wasn't simply reporting the numbers. he helped develop the financial disciplines and capital allocation practices that supported Sloan's strategy and GM's rise during the first half of the 20th century. Which brings us to Sam Monte, who reminds us that finance leaders were once among the CEO's most important strategic partners, and that somewhere along the way, CFOs lost some of that standing. Now, there's little question that technology has helped certain CFOs reclaim that standing. But Monty keeps returning to something more fundamental. Operations. Understanding how a business actually works, where its economics can change, and how capital can be deployed more effectively.

2:56It raises an interesting question. Has finance been looking for its strategic future in the wrong place? Our talk with CFO Sam Monte begins after this.

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4:43Hello, CFO Sam Monti is with us. Sam's career has taken him from the industrial world of Rockwell Automation to leading software companies through major transformation. Along the way, he's helped reshape Epicor's business model, led a turnaround as CEO of Crown Peak, and guided finance and operations at WP Engine. Now, as CFO of SolarWinds, he's bringing that experience to a new chapter where investment, priorities, and operational performance and technology innovation are all intersecting. Hey, Sam, welcome.

5:23Samuel Monti: Thank you, Jack. Really appreciate being a guest today and excited about the conversation. Yeah, I have to say, I like to begin by looking for that early inflection point. And I saw in your bio, you spent 14 years at Rockwell, like I mentioned in your bio. What experience maybe turned you on to finance there? What changed how you viewed finance maybe? Did it happen there? Fill us in. No, really, I appreciate that. I was fortunate prior to there, I had really good operational exposure at Sherwin-Williams Paint Company, which I still hold as one of the most efficient operational machines I've ever seen.

6:04Samuel Monti: And there's a lot of history behind. They're the only U.S. company in the history of the stock exchange to never lower their quarterly dividend. So they knew who they were. They were very operationally efficient. And it led in as I went into Rockwell Automation. This was Rockwell International divesting into separate businesses. And one of them was automation, which multi-billion dollar business that was responsible for the automation of almost every major manufacturing plant in America. and it attracted me for several reasons. There was a really good financial job I joined there. Obviously a very industrial operationally focused company that was kind of around interests I had about the manufacturing of whether it was cars or aircraft parts, clothes, et cetera.

6:52Samuel Monti: It naturally led into a real combination of finance and operations. And I really view myself today, Jack, as what people define the postmodern CFO, which is an architect and builder. And I think I was fortunate because of my experience at Rockwell, which took me to roles in the US, Asia, extended time in Europe. It really gave me what I think is the difference maker in modern American corporations. If you want to win, there's an old saying like wars are won by logistics. Businesses won by operations. So whoever is operationally efficient naturally deploys capital more effectively, especially when it's focused on a lean strategy.

7:42Samuel Monti: So Rockwell gave me that chance to, I crossed over multiple roles across multiple functions and businesses that were most times more operations than finance. Finance was a nice tool to have to be more operationally effective. And that's, it just naturally organically happened as an analyst within one of their big corporate businesses. I was introduced to a very talented lady named Patricia Babington. and her and I set out on the journey to establish the first revenue generating customer service organization in Rockwell's history. And I tripped across subscriptions. We created, I take pride in it.

8:25Samuel Monti: It's going to sound like an eye moment. I created subscription revenue in sort of in 1999, 2000 with Patricia Bavington by selling subscriptions for the customers of Rockwell for decades and decades to buy our service. They could call in our service. So they basically bought maintenance, they bought service subscriptions through us. And I'm thinking that was like 10 years ahead of this whole SaaS dynamic. And we went from zero to$150 million in revenue generation in less than three years where nothing had existed, but opened up the aperture of customers got healthier, better, bought more, and we were driving a natural revenue stream.

9:09Samuel Monti: So it was like that came out of nowhere. I was an analyst in a corporate division and I started doing some controllership work for Patricia Bavington. And she asked, do you want to be my head finance guy over in this customer service business I've been told to set up? And I, you know, young and dumb, that sounds great. And there I was. Amazing. I mean, were there, within that industry, were others doing subscription businesses for certain revenue streams? Nothing? No. Well, I don't know how you did your research on that. What other industry, did you borrow a page from others, or how did you come up with that concept?

9:50Samuel Monti: The early days when we were thinking about it, and we were thinking about, well, we're providing a service here, and we've got this call center. with all these talented engineers and they've got all this hardware on these boards that's kind of simulating how a factory would work. Even to the point of we had machines because Rockwell does not retire the servicing of any machine it made. So we had machines that were 60 years old that were operating Werner Ladder Factory. The machines were so old, we had retirees that would come in twice a week. I mean, 67 year old gentlemen that would come in twice a week because they were the only ones that still knew how that controller worked.

10:32Samuel Monti: They didn't change those controllers because they worked like machines. And we were thinking, we've got this call center and we want to drive out this exposure to improve the customer experience. And I remember we were at a meeting and one of the sales individuals said, you know, we could make a sale on it. And I was asking, what do you mean by sale? They go, hey, you know, we could just say you have access to the call center, but you know pay this invoice and and he left it there and i said well isn't this like being a member of a country club and everybody paused i go don't you have to pay monthly and they all said and the sales guy stopped and he goes that i go this should be a membership and that's how it started that he wanted to make the sale and i started thinking well this feels like kind of a membership fee.

11:25Samuel Monti: And that, that honestly, that's how it, it happened. And it, we didn't know at the time. And then when we sold it, I was like, well, can't we lock them into like a fitness club? Like, you know, this is the old days. We could probably remember the friends episode where Ross couldn't get out of the gym. You couldn't get out of the membership. I was like, why wouldn't we sell them a multi-year membership? And that that's it. That's where it took off. And I don't, we We didn't know at the time we had tripped over subscription and it took off. Every deal we sold was one year or more. And the customers we had were, you know, lifelong customers.

12:02Samuel Monti: They were so intent on it. They quickly signed up for like, they started pushing us. We want 10 year. Like they wanted really long because they knew the factory is going to be there forever. And they're always going to be using Rockwell controllers, motors, machines. so they wanted to start locking into some guaranteed no economics. And that is literally how it happened. Sales guy wanted to make money, not surprising. That's what they're there for. And the rest of us at the table, when I brought up the country club and that's where Patricia Pat was like, she laughed and she just said, I know I brought you over for a reason.

12:34Samuel Monti: So, hey, I don't know, sometimes, what is it, Jack? It's better to be lucky than good. I guess I got lucky. when you do leave rockwell are you are you looking for a top slot are you looking to join a c-suite what are you what are you what are you looking at no it was a it was actually uh and i had you know obviously a lot of friends that thought i was making a mistake in that i was fortunate i was effectively a division controller rockwell for their software division and it was you know 700 million plus division. It was serious. And I still, for a different time, Rockwell should be a software company right now, honestly, in hardware.

13:13Samuel Monti: It should be like an Apple ecosystem. But there was a moment in time where that was missed, but still generating a lot of revenue. And one of the companies we had acquired, there was a really talented individual named Dave Cooper, and we'd been working together for about a year. And this was an entrepreneurial guy. I think he created his first company when he he was 18. And he goes, Hey, you know, Sam, you really belong in private equity. And I'll be honest, Jack, I didn't even know what private equity was. I was like 20 years into public fortune 500 learning like operational best practices. And he introduced me to an organization, Vista Equity Partners.

13:50Samuel Monti: And I had an opportunity, they interviewed me, we had a lot of discussions and they, they basically introduced and said, we'd really like to bring you over, hire you as a CFO into a company called Mitrotech, which was legal enterprise management,$23 million. And my initial pause is, so I want to leave division controller CFO of$700 million for$23 million. But when I started talking to some really talented people at Vista, Betty Hung, Rob Rogers, Alan Klein, I understood the economics quickly, how it works, equity, the investment thesis. We got a really download of the whole journey of how Vista was created and Robert Smith's vision.

14:40Samuel Monti: And I was hooked. And the reason I think what really hooked me is I loved my time at Rockwell and Sherwin-Williams, but change is too slow. Meritocracy is not always true. the ability to do better for your family is limited to a point um politics is everywhere but politics can get very rich at the fortune 500 and private equity struck me as more pure meritocracy you could be a change agent you could establish ideas fast you could move with best practices so i took it i had a lot of friends that they honestly told me they thought i was making a mistake and i don't know why i said it at the time but maybe i did it because it was defensive.

15:20Samuel Monti: I said, you know, I know I think the mistake is one day you're going to be later in your career. You're going to be viewed as an overpaid director or VP and then the hammer is going to come and you're not going to have that interesting of a resume. I said, I actually am not intentionally, but I'm probably de-conflicting risk in my own career because look, I've been international. I've done all this and now I've gone public and private. I'm learning things that I didn't know about. So maybe it was a defensive debate, but I took it. It was the best decision I ever made and it was like it allowed me to take almost 20 years of public experience that I was fortunate I had been promoted 16 times in 20 years across the globe and it allowed me to place it at one point in time in a very focused effort on this investment called Mitra Tech and I the scoreboard will tell itself like Jason Parkman who was a CEO I was made CEO about three months after joining we took that on a four and a half year journey and we sold it twice for an equivalent of 28 times cash on cash.

16:22Samuel Monti: So I would say the scoreboard speaks for itself. I think I made the right decision. That was, and that was a chapter where you really sort of earned your turnaround stripes. I mean, is it, did you know all of what you were getting into? Did the waters get a little? you know it was an interesting time meet for tech had just been bought 80 employees was now seven they had been relocated from southern cow to austin back when austin was economical um and so i started day one and we were seven people and had to rebuild 80 um and the ceo that was there uh was severed about a week after i joined so yeah there was a moment at my desk i was like what have I done?

17:07Samuel Monti: What am I here? And my controller resigned my third day. But it's funny how you either adapt or die. And I trusted in Vista's approach to operations. And there was a very talented young individual that had worked at Vista that was now my financial analyst. His name was and Taylor. And I had just let go of the general counsel my fifth day there. And there was this really talented legal intern, 25 years old, Jared Duke, and I promoted him to general counsel. And it's funny that I made a lot of battlefield decisions right there. And we just ran. It just worked. We just went after it. And it's funny how necessity, it's all right, right?

18:00Samuel Monti: Necessities the energy of invention. And at times, yeah, I went home, two young daughters, a wife, a little scary, not going to lie, a little scary, but you can either fight or flight. And I think I'm a fighter. So we solved it. Jason Parkman, brilliant individual, my age. And we were just like, we'll figure this out together. And some of it was, I told my wife, look all i know is raw at that time robert smith sold 100 software companies sam monty has sold zero so i'm gonna trust and we went after it and uh yeah so it was different it was definitely different from being at a 25 000 person fortune 500 where cash is limitless customers are there forever the machine just goes and just to emphasize for the listener i mean again i mentioned the 14 years at Rockwell, but you were five years at Sherwood Williams.

18:57So you had nearly 20 years in these large sort of enterprise environments before you do this. That's why I think it's interesting to just concentrate on. You must have, you know, you're a fish out of water in a lot of people's eyes, but it seems like you were sort of a natural, as you described us with the private equity folks, you seemed like, hey, I don't know what took me so long to get here, but you know, you're my people.

19:21Samuel Monti: Yeah. It's never like what it could have, should have, but if anything, I wish I would have started private equity 10 years earlier because it is irreplaceable what I learned at the big companies. The best practices, they're successful for a reason. I mean, they're really good at very focused areas. And I was fortunate that there were some really good people I worked for, whether it was Patricia Babington, a Juergen Weinhofer, a Marty Thomas. I saw some really good stuff. But fortunately, I was able to deploy. I think I was able to deploy a lot of it. And I think what I'd recommend is if you could make the perfect mix, let somebody go into a very good, let's just say a successful public or large company and make them have a lot of rotations and then displace them to private equity.

20:08And I think you could have magic there.

20:11Samuel Monti: Again, I took a lot of lateral moves. I raised my hand a lot. So I don't believe in the rule of, oh, you were lucky. No, you create your own luck. And I look back at it. I raised my hand a lot of times. I was at the right place, right time because I was always there. So I got to give myself some credit about creating the opportunities. But then, yeah, it was a little fish out of water. It was a little nerve wracking in that when you first start, it's, you know, you don't feel like you've got that security network that you maybe have at a big company. But some of that's kind of just false confidence at those big companies too.

20:46Samuel Monti: And you realize that you get older. What you think was really secure isn't as secure as you think. So I was fortunate. Like I said, it was almost, was it 20 years and it was 13 or 14 different jobs. So I think I started day one with definitely an opinion and a preview of what works and what doesn't. When you enter the CFO office at Epicor, this is a larger company than the one behind. So, I mean, what is the weight class of company, or is there a weight class of company that Sam Monte now considers, you know, this is the size enterprise I'd like to be part of? I do look at I I do like being at scale um and and it's I don't want to sound like I have too much hubris but Rockwell was nothing compared to scale I had seen 10 years earlier I mean not Rockwell I'm sorry um Epicor that it was big it was a fraction of the operational division I helped run with Marty Thomas so when I when they said oh it's scale I would always remind the interviewee skip back 10 years.

21:53Samuel Monti: I was 34 years old, standardizing a$2 billion operational budget for an$8 billion company. I go, okay, I've seen this giant, I'm ready. I know. But to your point, there is a scale and it all depends on the acceleration or the velocity of the company, meaning that 500 million can be a lot bigger than 3 billion if the 500 million is on jet fuel. Like it's different. You can get the scale to where it's slow moving, it's whatever, it's really not that challenging. But I do prefer at this stage of my career scale that I guess I would define of near in private equity, I would define a closer to a billion dollars rule of 40, 50 with opportunities to grow and acquire or inorganically as well.

22:48Samuel Monti: I think that's what I'm suited for at this point in my career. The other intriguing chapter, at least through my eyes, is, of course, you step into the CEO office in one chapter in your career. Tell us a little bit about that. Can you reflect on it? What convinced you to take that lead? you know it was a it was the challenge of uh cfo has been my title for a lot of the last 15 years but honestly i haven't been the cfo in a lot of those roles uh that might have been the title that's not what was occurring um so you know i wanted to put my foot in the water it was a challenging case in that it was a distressed asset um and it was known to be distressed but it was even more distressed than to be known and that was quickly discovered within a couple weeks of me arriving.

23:37Samuel Monti: So where I'm very proud of the team and what we did is we took something that was getting ready to default and stabilize 18 months of liquidity, which allowed the sponsor K1 to be stable enough that about a year after I moved on, we're able to exit. But they were only able to exit because the team we had there took something that, true story, AWS was seven days away from turning off our hosted environment. If that would have been turned off for one hour, company's over. And I'm on a plane to Atlanta with my CFO, who fortunately had had a good relationship with our representative for AWS. And we convinced her to keep us on for another seven days as I rallied liquidity to catch up on significantly past due invoice situation with our hosted and hosted vendor.

24:31So it's a, yeah, it's test by fire.

24:36Samuel Monti: And I'm very proud of what the team did. Sometimes I think you see this a lot in life or there's just things you celebrate because they're obvious. And it looks like, well, of course he celebrates. He's got the gold medal, but some of your best wins, like I tell my daughters, they play a lot of tennis. And I think they're finally understanding. I don't care if you win or lose and don't get me wrong, Jack, I'm a competitive guy. Of course I want to win, but I don't care if you win or lose I care how you win and lose and I've told them like some of the best tennis I've ever seen you play and watch you lost and at what I think that's true in life and the corporate experience too is is on paper is crown peak my biggest success no but in some ways it is because when you have nothing and the whole all the odds are it's going to fail and time's not your friend and a team finds a way to stabilize the organization, make it liquid and keep it going and thriving to where the sponsor can move on to another investment, even though your bank account and other things won't show like what a Mitra Tech would show, what an Epicor would show, maybe sometimes I look back, maybe that was a better accomplishment.

25:48Samuel Monti: It'll never read that way on the scoreboard. Well, Sam, we could spend another 20 minutes discussing your career. We will have a few additional questions for you a little later, but I do want to get to find out about SolarWinds and maybe I'll back into what brought you there. But first, can you just tell us what is SolarWinds today? Tell us about this company. What does it do for those of us who might not be familiar with it? So SolarWinds is another one of those mission critical companies that a lot of us, we go through life and we don't realize how much of our life is impacted by these incredible companies because they're kind of behind the scenes.

26:26Samuel Monti: You know, example is we automated a company and another when we were at Epicor called Springs. They're like the number one provider of springs in garage doors. You and I never hear of them, but if they go out of business, like our door doesn't operate. SolarWinds is a mission critical business that provides significant observability, database, IT service management and tools to a lot of the great companies you and I depend on daily about how do they observe and manage their IT infrastructure, the cybersecurity of it, the stability of it, everything that's incorporated in it. And we are a cutting-edge company that provides that ability for an Amazon, a Walmart, et cetera, to observe their IT infrastructure and make sure it's secure, it's stable, it's efficient, It's reacting and it's executing in the way the IT professionals at that company need it to be.

27:30Samuel Monti: That's effectively, in an elevator speech, what we provide. But within that, and I'm very proud about this, I love mechanical things. I love how things work. I am not a software engineer, would never pretend to be, could not get into that level of intellect that they have. but we have best-in-class technology and it is recently being complimented the last week or so with our launch of a agentic ai that we call avior and i i am telling you at a very high level that you and i would probably understand ai there's a lot of ai thrown out there a lot of it is honestly just bots you know just think about the annoying chat down in your window when you're on a site and half the time you type in something, you're like, are we talking the same language?

28:19Samuel Monti: Because that's not what I ask. We have literally launched to complement our observability, to complement our database, our tools, a true agentic AI that is a system and process. Effectively, the IT professional customers of ours have these agents out of the box that can do things we already know that are expected. They can also do what's called Jack Orchestrate. They literally can take our agent and create it into anything they want to significantly magnify their productivity, improve their observability, improve their management of their database, give them better over-the-horizon predictability.

28:59Samuel Monti: and so in a long answer to your short question we are a critical provider of observability database tools and IT service management for some of the most important companies you and I deal with daily and we've complemented that now with the horsepower of agentic AI and that that's what solar winds does and we look at 20 20 plus year old company within the Austin area and I said it earlier in a conversation we have the energy and the forward advancement of a startup with the advantage of the financials of a mature company so it's and to me that is a hard that's like the old football analogy you can't coach size and speed and when you see those rare athletes that have both size and speed well they usually end up with a gold jacket at the hall of fame and that and i think that's an analogy to solar winds and that's that's what we do that's who we are But where I digressed, that's why I'm even more excited about where we're headed.

30:00And just, again, you arrive really this summer. And SolarWinds, I know, recently returned to private ownership. We wonder how that is shaping the company's investment priorities going forward.

30:18Samuel Monti: It is the best thing that could have happened at this point in time to this company. And it's funny, I have a really, you know, I've walked in, there's a lot of talented people here, which you would expect it to scale. And having the conversations early as, you know, you're changing from the life of public to private, here's why you should be excited. Now you're not prisoner to the artificiality of quarter. Now you're not prisoner to everything being measured or mismeasured wrong. You have the ability to interject change quickly because all that really matters in the end. does the company have an investment thesis that allows you to grow your recurring revenue are you doing it profitably and are you staying relevant within the ecosystem you are and you can move with such speed and such agility and where we have the fortune of like you said i i joined about a year after turn river capital acquired solar winds and took it public to private and very talented sponsor i've been fortunate i've worked with a lot of sponsors and i've worked with.

31:19Samuel Monti: A lot of the names people know, very talented organizations. Turn River Capital is a very talented sponsor. They're active and that's a positive word, meaning they are inquisitive. They're in the investment. They understand it. They have a good operating discipline and perspective of go-to-market. And another thing that excited me about them is if you look at what they've done, I want to be a part of that. Kind of reminds me at times of like, maybe what a Vista Equity Partners was like in 2011. But I love where they've done. If you look at their batting average, incredible success. And we're their largest investment ever of a scale that is different than what they've done in the past.

32:02Samuel Monti: And I'll be honest, I love being a part of a talented bank that's now stepping into an investment scale that's bigger. And we're learning from them and they're learning from us and they're active. So you couldn't have asked for the investors, you couldn't have asked for anything better to happen to SolarWinds than to be acquired by Turn River and taken private. We always like to sort of spotlight the revenue model. You know, how does this company make money? And to me, it's the more important story. Is it subscriptions? Is it customer expansion? Or is it something else? No, that's a, so now you're weaving into a world where I do, I do have ego about this.

32:49Samuel Monti: I do believe I've become an annual recurring revenue expert and I've written simple algorithms. I've built a optical theory called the ARR triad or triangle of how you build that revenue that plays into what we call net revenue retention effectively at the beginning of a 12 month period. the customers you started with how much were they spending how much are they spending at the end of the 12 months so you look into it turn river acquiring solar winds it's another thing that excited me how many times am i going to have an opportunity to join within the c-suite of a company of scale that is has the opportunity to take advantage of in year one a switch from a license maintenance dynamic to a subscription, which we've just completed.

33:36Samuel Monti: So like it was there at Epicor and we'll go to that later, but you know, Epicor, I arrived and three years later when I left, the enterprise value was more than 3X on a 409A. Well, first year we went into that license to subscription dynamic. So we've gone through that and we're into that ARR triad. And how do you grow that revenue? It's the most, to me, I'm biased. If I could have one critical performance indicator, it's net revenue retention. So what is happening in the dynamic of your annual recurring revenue? Are you growing it? And it's made up of three components, gross retention, annual price increase, and expansion.

34:18Samuel Monti: And you think about it as a balanced triangle. The equation of those three gives you a percentage. great companies have a net revenue retention when they start hitting greatness of 110 percent or more and it's it's kind of logical math if most of your revenue is recurring revenue and it measures 110 percent then that means the company is growing it with not one new customer they're growing 10 percent every year for perpetuity so we deconstruct that we are growing as a business because of all three. Gross retention, that is the basic measure of customers at the beginning of 12 months are spending, say 100 of them are spending$100.

35:05Samuel Monti: At the end of 12 months, you have 90 of those customers left spending$90. Your gross retention is 90%. And then to the right of it, you have your inflation dynamic. What are you doing within a price increase dynamic? How are you making sure you keep up with inflation, et cetera? That adds that percentage. So I'll just make it up and just say, what if that's 5 %? Well, now 90 % is plus 5, you have 95%. And then the critical part of the top, the expansion. Do those customers buy more licenses, more products, et cetera? If, for example, those 90 customers with 90 % or$90 of revenue buy 15 % increase in expansion, well, then you have 15 % up there.

35:50Samuel Monti: So you have 90 plus 5 plus 15, that's 110. solar winds is growing its annual recurring revenue by all three sides of the triangle i will say it's early days of the conversion so you go through this big upheaval of all the customers going from a licensed maintenance to a subscription now that we're there we did that in our annual recurring revenue did not only did not stay flat or shrink it shrunk it actually grew and our net revenue retention has gotten healthier and we're marching towards 110 10%. So we are on kind of the tipping point of we will be a double digit growing business for perpetuity in the near future, defined of like call it a year or so.

36:36Samuel Monti: And then you add on top of that because of Avior and AI and the continual improvements within our product offerings, of course, we're adding a ton of new customers every year, which builds the triangle or the annual recurring revenue snowball. It's the physics of as a snowball goes down the hill, it picks up more snow, gets bigger. So then by physics, it gets faster because of mass. That's exactly what's happening here. So we are growing annual recurring revenue and we're hitting all three sides of the triangle. Coming into SolarWinds, was there an investment or an operating decision? Maybe this is going on right now.

37:13That's required on your part, or you've decided you want to give it greater evaluation, greater concentration of your evaluation?

37:25Samuel Monti: No, there is. And that's part of another reason it attracted me. So I grew up a military brat. My dad was a 35-year military officer. So I'm sometimes a little biased. I love history. I love military history. I love all kinds of history. but what really like kind of attracted me to it is my remember my dad telling me a long time ago that what makes the U.S. military great when you have administrations that under invest or over invest etc the one thing he's always seen constant in his career is they're smart enough not to ignore R &D and he said look been under presidents that don't really build the right kind of defense posture but even under them our r &d was always healthy so when you got somebody in you saw stuff deployed quickly because we were always inventing and building and what i give a lot of credit to the team here is through the history of all the dynamics here the intentful investment in the product has never slowed down jack so when i joined i knew about 80 i knew they told me they brought me and I knew how close they were to launching this game-changing Igentic AI.

38:41So that got me very excited about, all right, you guys are doing the license and subscription flip

38:46Samuel Monti: check, good operating practice. You've got the investment in this product. We've got to make sure that gets more and more gasoline because that fire is starting. So I want to just, that's one. I want to pour a bucket of gasoline on that. The other one is, it's the boring part to go back the military analogies again, wars are won by logistics. Business is won by operations. We have an ability and a chance here to continue to professionalize our operations. So how we look at lead to cash, how we look at all the stuff that you normally don't think about that makes you more agile, faster, allows sales to sell quicker, allows product engineering to invest time on the right things.

39:29Samuel Monti: I am intently leaning into that very hard with my team and the Turn River team of how we professionalize our operational efficiency so that when we go past a billion and we look at two billion, that we can keep pace with the company's size and speed. So those two areas to me are critical that we have the right focus on life to the AI investment and we have the right focus in life to the internal operational efficiency. So just regarding sort of the AI opportunity, it sounds like you really see something related to operations, but I'm sure it's the opportunities also in products. It's also in customer experience.

40:09Can you just reflect a little on where you see the most, I don't know, most meaningful AI opportunity? Is it operations?

40:19Samuel Monti: I think it's across, you know, Now, this is going to sound like a politician, right? It's all of the above in that I'm a big believer. I'm a big believer as we establish an AI advisory council here, how we ingest the AI. So one is you have security and you don't, if you don't, you'll turn around, you'll have 30 AI, you'll have 300 AI vendors. And right now we have the right AI partners. it's now letting the technical people provide vulnerability to the non-technical people about hey um in people i i want to be able to recruit faster they'll know by the way this vendor provides this agent that can go in there and sit in there and help sift through 10 000 candidates in like a one hour period that then pulls out what you're looking for in the prompt you gave.

41:16Samuel Monti: So the biggest impact is right in early days is always in product engineering because you can displace the development of product. You can accelerate the development of product so much faster. So obviously from like a dollar CFO perspective, we've got to make sure that we have all the right cutting edge tools on how we develop our product. But you cannot lose sight of everything else in the company. How are we ingesting candidates that could be recruited? how are we like we're getting ready to deploy a full steam fpna system that's ai complemented that'll literally build decks that we build 80 90 of the deck it'll build in five minutes so that the analysts and the financial people can actually start making the decks more thoughtful more predictive more informative so it's all the above real dollar cost impact if you can accelerate the sales cycle and you can make the product better, faster, less expensive, that's the biggest economic period.

42:17Samuel Monti: But we're going after everything. But those two areas will give us probably the biggest dollar recall. Now, in your past, you've built AI-ready finance infrastructure before. But we wonder, we've been asking finance leaders lately anyway, You know, do they see it impacting decision making? You know, yes, automation, yes, efficiency. Is AI helping finance leadership make decisions? so simple answer yes but where i would challenge anybody out there and that's why um like i said i like history i know what the cfo used to be decades ago and they were the number one strategic strategy partner of the ceo start stop they there were giants in corporate america people never hear of they hear the ceo but the magic was actually the combination of the two.

43:15Samuel Monti: And then we lost our way, I think, in corporate America. And it came a period where they became glorified accountants, and then they became prior audit partners from the big six. I'm going to age you and I, Jack, the big six. I know it's the big four now, but back when we were young, it was the big six. And then they evolved into kind of complicators. And now Well, you're coming out because of technology. We're getting back to the fundamentals of the CFO needs to be the strategy partner. So it gets to your question of, yes, AI is doing that. But the postmodern CFO, the architect and builder, they were already doing it.

43:56Samuel Monti: Prior life before AI was really the buzzword at Coros, a very talented team of mine, we set up cutting edge business intelligence. There was no AI, but there was very good business intelligence and technology. We had really good best-in-class predictive analytics on pipeline, on cash flow patterns, etc. We were already doing what will become like table stakes in AI. So it does give you better decisions. If we do it right here, we'll have 8 to 10 business cards that have drillable levels in them that basically answer everything that really matters in the company, but more importantly, starts providing us predictive analytics with MAPE errors and other kind of initiatives that allow you to like kind of over the horizon radar.

44:46Samuel Monti: So it starts becoming like, again, my military experience through my father starts becoming that F-15, that F-16, it sees the enemy over the horizon before the enemy sees it. I think AI is going to take the early days I saw of that in business intelligence it's on steroids now yes it can do all the busy work very fast but it also can start complimenting us as humans about the predictive analytics tell you to look here and there um i think the very intelligent humans and the people that are watching it still make the better choices but now now you're going now you're going to the decision with more clarity and it's so timely so yes i think it's i think it's a difference maker and i'm excited about my team here we're getting ready to deploy it over the next quarter or two and what it'll be it'll be like the cavalry uh arriving for the talented finance team that was already here i keep telling them the things that you're working on now and what you're going to be able to work on in two quarters is going to be invigorating and it's also going to be resume building and it's also going to be it's going to be working smarter not harder yeah wonderful a great uh great insight there for us We are up to what we like to recall, like to refer to as our finance strategic moment.

46:05You've already shared quite a few of these along the way, but we're going to just ask for one more. What would you share with us as a finance strategic moment?

46:14Samuel Monti: Well, if you indulge me, I've got you said that earlier. I've got two that really made an impact on me. One is earlier at Rockwell. So I came over to Rockwell constituted an operations division. Never had had one. So you think about a manufacturing automation company never had official operations division. They hired an incredibly talented individual from General Electric named Marty Thomas, who could write a Bible about operational practices. I was able to join that and it was hard. SAP had just gone live. And my responsibility was standardize the reporting of all 20 global factories for Rockwell.

46:52Samuel Monti: We need it done in a quarter to where we can understand what labor arbitrage is, material variances, every down to the, excuse the French, Nat's ass, what's going on in the plant in a standardized view. So we did, we grinded really hard. We got it. And then I got to sit in with Marty every month for one and a half hours with each plant. We went through this standardization with rigor and discipline. And I was part of a team that drove out almost$500 million of cost savings in 12 months through better purchasing of raw materials, less shrinkage in manufacturing, better deployment of labor so that there wasn't dead time, and better integration with the sales pipeline so we were building actually what the customer was asking for.

47:46and why that matters.

47:50Samuel Monti: 2008-2009 happens, the financial collapse. Rockwell Automation is the only company in its peer group that did not have a net income loss in that 12-month period because the$500 million that we had driven out of the operationals department saved Rockwell Automation from having an operating loss, which we had reductions like everybody did, but it allowed our layoffs to be a fraction of what our competitors did. So it saved jobs and it saved the cashflow. It was an eye-opening moment about this stuff does matter. And then I fast forward to Mitra Tech. Very proud of this moment. Our first exit was just a little under three years of Jason Parkman and I joining as CEO, COO.

48:36Samuel Monti: And we sold, I don't know if it's still the record, but I'm going to claim it's the record. I still think we have the highest cash on cash, multiple exit in Vista's history. And it was the first exit. And the way it happened is Jason Parkman and I were able to look at what was happening within our customer base that we sold to large general counsel offices of all the companies you can think about, Deutsche Bank, Barclays, et cetera. And we did all their legal management. And so within that, all their lawyers had been using that system for 25 years to funnel all their invoices and attach it to all the stuff they were doing for that company for free.

49:15Samuel Monti: Jason and I had been leadership of the company at that point, two and a half years maybe. We saw it and like, who doesn't like to bring pain to a lawyer, right? Who can say on a straight face, hey, if I can make a lawyer's life painful, then I'm gonna go to bed a happy man or woman. And we were there and we were like, all this activity and nothing's being charged for it. And we came up with vendor pay. and what was good about it is then we learned quickly we were one of the late adopters others had done it so they had done the pain so we were kind of like toyota that toyota never introduces anything first they just always introduce it best um we monetized vendor pay and in 12 and it and it was the company was scared the leadership was scared everybody at the leadership table wanted us to tap out except jason and myself and i was his safety valve i told him i go look i know the line of when this becomes a loss and we need to just cut bait and surrender.

50:16Samuel Monti: And this, the very pro-aggressive is like, we believe in it, do it. So we went after it and it was myself, my controller, and my general counsel, Jared Duke, the young guy. We literally were on the phone. We went after the big law firms. So for 30 days, you can imagine the threats and the conversations that, hey, we're going to charge you now. And we had done our homework. There's not really a move in this. We're allowed to charge you. And by the way, you raise your rates every year to our customers and you're doing this for free. So you're going to pay in the economics of this so that we can invest in our product more and actually help our customers.

50:54Samuel Monti: We did it. We turned it on. It drove$20 million, smaller company. This is not SolarWinds or Epicor. It drove$20 million of annual recurring revenue in less than 30 days with a pure$20 million fall through through the bottom line. We sold the company 30 days later because of that. And it was amazing. We turned on the rest of it 13 months later and sold the company again because of Vendor Pay Part 2. And they always say sequels are never better than the original except for Godfather and Empire Strikes Back. but I'll say vendor pay part two was just as good as the original because we sold in 13 months.

51:33Samuel Monti: Those two lessons stick with me about why I get back to what I said. Be Roy Disney. People don't know who that is. I love Walt Disney. Everybody celebrates him what he did. Genius. There is no Disneyland without Roy Disney. He figured out how to make his brother's dream financeable. and he did it. The wide world of Disney TV program was Roy Disney. He financed Disneyland. So be that person. In my role, be that person. Be the best strategic partner the CEO has ever seen. Get outside of the trial balance and the T accounts and understand how does business win? How does it work? What really happens?

52:11Samuel Monti: And it's not the numbers, it's the operations. And then how do you bring that to bring maximum force multiplication to your leadership team and your most important partner, your CEO.

52:28AI is changing the finance function, but how much business value is it actually delivering? According to new research from Salesforce, 90 % of finance leaders using AI report a positive return on investment. And as AI agents enter the picture, Finance leaders are seeing opportunities to improve productivity, reduce costs, and strengthen forecasting But there's another side to the story CFOs are also confronting growing revenue complexity With more subscription, consumption-based, and hybrid business models to manage And that raises an important question How can finance leaders gain the visibility they need to make better decisions while putting AI to work?

53:19Salesforce explores these challenges and the opportunities ahead in its latest CFO research. Discover what finance leaders are saying about AI, revenue complexity, and the evolving CFO role. Visit salesforce.com slash CFO report. That's salesforce.com slash CFO report.

53:44we always like to ask our guests to reflect a little on the personal side we'd like to do the same with you yeah and you haven't been all that long uh at at uh solar wind so we get to say what is one thing your your colleagues might not know about you something from your past something uh a chapter that uh a feat of yours

54:07Samuel Monti: um i played a lot of sports growing up and in my mind i'm a great athlete right jack but i'm probably but i'm probably an okay athlete with a lot of um initiative i the sport that i love the most and i think i was the best at is i was a boxer and uh i was a good boxer um i was a really good boxer so what they probably don't know about it is i almost won a national championship my junior year in college. But being a poor college student, my parents didn't know this. They would have been really upset. I fought and won multiple Toughman contests in Ross, Ohio, which is between Miami, Ohio and Cincinnati down at the VFW.

54:47Samuel Monti: And I would go down there and fraternity brothers would join me. And I went down there and I entered in three different Toughman contests and won each one of them, which gave me money to live off of. So they probably don't know that about me. I have to ask this because we have a listening audience largely and we get a lot of CFOs and they frequently will have, you'll see a guitar in the background somewhere on the wall or what have you. I see a baby grand piano or a grand piano behind you. Is this yours or? No, I wish I could claim it. My wife is classically trained and she's very good at it. used to compete in it so and it's her her mom unfortunately who passed away it's her great it's her grandparents um Steinway that her grandfather immigrated from Italy decades and decades ago worked really hard in a mill and you can think about you think about the late 40s bought his wife a Steinway in Syracuse you know in Syracuse New York and it's that it's their grandparents that her mom gave to her before she died that we had renovated and she plays it every day.

55:59Oh, it's gorgeous. Well, thank you for sharing that.

56:02Samuel Monti: Well, hey, I will say the other thing, what they don't know about me and they'll laugh is I was almost a double major in creative drawing in college, but I couldn't get done in four years because the classes didn't overlap well with finance and accounting, but I love to draw. So yes, if people wouldn't guess that is I tried to double major in creative drawing. I just couldn't get enough hours in a day to take enough classes to get it both done in four years. Amazing. Great chapters. We could spend another hour with you. I want to just honor our pledge of 60 minutes with you. So we're up to our final question.

56:38And we'd love to have you look forward and share your priorities as a CFO for the coming 12 months. What would those be?

56:49Samuel Monti: You know, there's, so I'm a big believer in a phenomenal CEO from the past, Henry Singleton, that created a company called Teledyne. And he was the first, he programmed the first computer on MIT's campus. And he's really the godfather of how companies are successful. They do two things exceptionally well, start, stop. They operate efficiently and they deploy capital effectively. And the deployment of capital is accomplished because you have a very focused strategy not to exceed the rule of three. So what I think I owe to the company is to drive continual operational efficiency improvement and to bring clarity to what success looks like X.

57:43Samuel Monti: So the strategy needs to be built around, if it's not adding to X, then we have to ask why we're not doing it. So I think by bringing the operational efficiency, I will allow for the easier sales cycle for our sales professionals, and I will allow for the faster development and the funds necessary to invest in the product. But it starts and stops with, I need to be a strong voice and success is defined by X so that we know how to land on the right strategy. Sam Monte, thank you for joining us on CFO Thought Leader. Thank you, Jack. You have a good day.

58:39Hello, we're benchmarking the CFO path. Join 500 finance leaders helping define how today's CFOs rise and lead. If you're a CFO or senior finance executive, contribute your experience. It takes just a few minutes and you'll receive early access to the findings. Visit cfothoughtleader.com slash benchmarking. mmm