October 18, 2021 – Today’s podcast features special guest, ServiceMax CEO Neil Barua. ServiceMax is a leader in asset-centric field service management software.

On the podcast, Neil discusses:

  • Private equity firm Silver Lake’s role in the evolution of ServiceMax
  • Why the company’s SaaS business model may be attractive for investors
  • Details regarding its $1.4 billion merger with SPAC Pathfinder Acquisition
  • Key opportunities in its future growth plan
  • And more

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Transcript:

Welcome investors to the Absolute Return Podcast. Your source for stock market analysis, global macro musings and hedge fund investment strategies. Your hosts Julian Klymochko and Michael Kesslering aim to bring you the knowledge and analysis you need to become a more intelligent and wealthier investor. This episode is brought to you by Accelerate Financial Technologies. Accelerate, because performance matters. Find out more at www.Accelerateshares.Com.

Julian Klymochko: I am pleased to have Neil. The CEO of Servicemax on The Absolute Return Podcast today. So, Neil, welcome to the show. I did want to kick things off, just doing a quick overview of your career history. Looks like you are pretty involved with private equity firm, Silver Lake. Could you kind of walk us through your career trajectory and what you’ve been up to over the past kind of decade or two?

Neil Barua: Yeah, for sure. I’ll try to be as quick as possible. So, we could talk about ServiceMax. It’s super excited guys to be here and talk about the company and what’s going on. It’s an exciting time to be at ServiceMax, but if I could spend a few minutes on just back for myself, I’m Canadian by the way. So Canadian, but lived in the U.S. for many years now. And so, feel good about, you know, where you guys came from. But, you know, I actually cut my teeth. I came out of NYU and I became investment banker and I just didn’t like being an investment banker. It just wasn’t for me. So, I actually went to a client that was building a telecom cable across Asia, moved from New York City to Beverly Hills. And I should have known at that point that having a telecom company at Beverly Hills was probably not a good idea, but long story short. Kind of moved out there and did an IPO for company called Asia Global Crossing, was a financial analyst and got the real good pleasure at the time to be connected to John Legere, who you guys might know.

Julian Klymochko: Yep, T-Mobile.

Neil Barua: Ultimately ran T-Mobile, but he was at Global Crossing for 10 years, unbeknownst a lot of people. And that’s when, you know, he became a great mentor of mine and spent 10 plus years with them, but he sent me out to Asia to go cut my teeth on real stuff and go strike business deals in China and Japan, et cetera, and get out of the finance world. So that was where I first went into the operational world. And subsequent to that, I kind of spent 10 years with John and the leadership team at Global Crossing. We took it out of bankruptcy and actually grew the business ultimately sold as a company called Level Three, now rename Lumen Technology and post that. I ran the whole enterprises for Global Crossing. So that’s where I got the operational kind of experience that I’ve now leveraged over the last number of roles that I’ve had.

But to your question, it kind of got very intrigued by private equity at the time at the ripe age of 34. I’m like, who are these guys that have been coming in, looking at Global Crossing, right before we sold to Level Three. And I was intrigued by it and found my way to being part of a company called Francisco Partners, a great technology, private equity firm here in the bay area and was one of the four guys that started the operating advisory group that helps portfolio companies. Did that, and subsequently after we had our first-born Layla, you know, my parents and my wife’s parents lived on the east coast and in the midwest, we decided to move back east and I joined Silver Lake in the same sort of concept as an operating partner. And then, you know, really went through a very good experience with Silver Lake. Running and being CEO of a portfolio company of theirs called IPC out in New York City, Jersey City. Actually, to be clear and sold that to another private equity firm and then continued to be the CEO of that company for three more years and then came back to Silver Lake as an operating partner. And now, hopefully we’ll get to the conversation on ServiceMax. So was able to be the CEO of ServiceMax after Silver Lake was able to buy the company from GE a number of years back. So that’s the a very long way. Thanks for bearing me kind of the career history.

Julian Klymochko: No, it’s interesting for sure to see how you came to become a CEO of ServiceMax. It’s always welcome to have a reformed investment banker turn CEO on the podcast. There’s a long list of them it seems, but transitioning from ownership, transferring GE to Silver Lake, what was appealing about ServiceMax when Silver Lake acquired it? And how has the company changed under private equity ownership outside of GE?

Neil Barua: Yeah, as way of history, ServiceMax has been around for 14 or so years, super-hot startup in the beginning when it was founded. Company was built predominantly on Salesforce since the beginnings, right? So, we’ll talk about our relationship there and then really did a nice job folks on field service technicians, engineers, and giving them digital tools that were necessary for these folks, even back then and at an awesome job growing the business, building the business, creating great product for those types of folks and a great reputation, and then was sold to GE for close to a billion dollars, a number of years back, was put part of GE as part of the whole GE digital kind of framework of really how they were thinking about being a digital company. And it was key component of their strategy around that.

And as you guys know, in the fall of GE, went through, you know, a number of corporate iterations over the last number of years. And, you know, we were able to at Silver Lake and now obviously as the CEO at ServiceMax be very opportunistic around helping GE out from what they were dealing with on the financial side and being able to take what they would even still indicate. And there’s still a small shareholder of ours, the diamond of that whole portfolio, which is ServiceMax. And so ServiceMax as you said, Silver Lake was able to take a majority ownership of that from GE. We split out the company and what got me super fired up and it’s keeps me driving every single morning. I wake up on behalf of ServiceMax and all the great people that work here is that same energy focus on giving the right and correct and valuable Digital Tool.

So those field service technicians, engineers, those folks that we all globally rely on to keep the world running. Like we say, on the front lines, that’s still the mission, that is still what we’re executing on. And that, like, when you think about a company that’s doing that stuff, that’s so meaningful for those end users, it’s just inspiring. And I got fired up. I was sitting in New York City. I had my house there, two kids, my wife, and plenty happy being in Manhattan. And we said, this is too good of an opportunity to pass because what we could do, what we could serve these people with and all the things that we could do collectively was so great and now the company, just a lot, a lot of stuff we could get done and it’s very different than any other enterprise software company given the mission and who we serve. So that got me fired up guys. I mean, it was a real clicking for me and I said, pack up the bags. We’re out of New York. Let’s go, to California. So here we are for the last few years.

Julian Klymochko: That’s great. We love to see that a passion from, in terms of operating the company and the company’s mission. I was wondering if you could really clarify for investors and our listeners, what exactly ServiceMax provides and to which client, you mentioned, Digital Tool, it’s an asset centric field service management software. Can you give us some specific examples just to kind of make it crystal clear for listeners?

Neil Barua: Absolutely. So, a hundred percent cloud native mobile first company built in the cloud, which is actually a real differentiator by the way, for our customers, unique, we’re the only pure play field service management SaaS Company in the marketplace, which also really great for our customers, which I’ll give some examples around. We live, breathe, and eat field service, we got nothing else, this is what we do. And we do it really well. And we’re going to continue to do it even better. In terms of like visualizing what we do. It’s actually [Inaudible 00:07:47]. So, we’re really good in healthcare, med device, life sciences, right? Our customers, we have important customers there. And many of us go to hospitals for ourselves, our loved ones. We go to a clinic and we actually utilize a lot of the products that are our customers, right. And one of the ones that we disclosed in our analyst day is one that is focused on women’s healthcare med device, right?

And so, you go in and have these MRI machines or mammography machines or blood diagnostic machine. That’s sitting in a clinic, that is our customer, the customers that actually produce those are our customers, but these customers need their technicians for all of us to be safe, to actually go fix that MRI machine when it’s not working or parts, not working in the right manner or fix the mammogram machine before our wife goes and gets her appointment done. And in order for that technician to actually fix that and maintain and install that equipment, you need a digital tool. That’s what ServiceMax is. It’s the software that a technician uses. And that company that produces that equipment to understand where do we actually install that equipment? How quickly do we need to maintain it?

What parts are actually under warranty and what’s not? And our software facilitates that so that all of us could actually go to that clinic and have the machine actually working in the way that we all deserve and need, right? For like, we call it to keep the world running. So that’s in essence what we do Julian. Now we do it across many industries. Give another example of a company that we announce in our great Q-2 earnings that we just disclose a few weeks back. Massive equipment and rental company, right. In Canada and the United States, seven figure ACV deal for us. So, a very meaningful deal with a new product that we just introduced with Salesforce called A360. This customer actually provides all the equipment for construction sites or big like project that are occurring in the marketplace, which obviously, as we’re seeing, there’s a lot of demand going on with construction and equipment needed for that.

And they rent their equipment to those construction sites as an example, what they realize is their business is booming. There’s a backlog to get more equipment to these sites, because you could see the building all around us happening across the board, across this country. When they actually get that equipment rental back though, they had no way of prioritizing what to fix and when and how, what spare parts to use? What do we actually fix before we fix the three other things that have come into our factory, right? Our digital tools and the reason why they procured ServiceMax is, our tool allows all the visibility of what is that piece of equipment rental? Where is it? When is it returned? What’s actually the parts that are needed to fix it? What’s now aligned with the customer demand? What’s the customer demand for that equipment? Because if there’s a lot of demand, let’s fix that first before the three other pieces of equipment rental equipment that might not have as much demand in a certain market. So, companies are all accelerating guys to having digital tools, to run their business in a far more efficient manner. And that’s what we’re doing. Hopefully that gives you a couple examples of what we do at a high level

Michael Kesslering: And then as well. So, if I’m the customer, are the benefits to me mainly on the cost and efficiency metrics, that those are the results that I’m going to see or is there also top line revenue benefits to using the product?

Neil Barua: Yeah, so, I’ll use specific example. It’s all of the above is, the summarized point, but let me give you an actually real number. So that equipment rental company, as an example, the ROI on this is pretty amazing, right? Number one is, a 1% higher utilization on their fleet of 500,000 plus equipment, right? Which you think about the example to turn over that equipment and have it higher utilization, meaning put it back in the field and have someone rent it, creates 70 to 80 million of top line and then very accretive bottom line kind of numbers to their company. That’s just size of company, that’s a material number for that size of company. Number one. Number two is, they have a competitor in the marketplace. That’s actually also looking at digital tools, including service effects, but they have a competitor in the marketplace that if the company can’t turn that equipment fast enough, the other company will get called by the customer and say, hey, you send that piece of a cherry picker, whatever equipment to the construction site.

So, the value of this is it actually creates a stick loyalty with the customer by which they’re not diversifying go to a competitor, find whatever equipment’s out there. And they’re getting hired loyalty in terms of repeat up, sell to their existing customer base. So that’s point number two, and number three is, something that’s happening at pace guys. We all see in our own consumer lives, that end customer previously in service organizations, there was not a care of the experience of that end customer, that clinic, right? That’s waiting to get someone to fix that MRI machine. It was usually like something’s broken, come fix it multiple times. Have the equipment go down. Patients are told, reschedule your appointment, right? What’s accelerating now is, those patients can’t wait, there’s a backlog of them. So, you can’t keep pushing out the fact that like you have so much downtime. So, the click or in this case, the equipment rental end user needs a better experience, right? They absolutely need a better experience, cause there’s alternatives out there. And so, the companies that we serve, they are recognizing that and they know only a digital tool allows for a better customer experience. Then ultimately gives them higher revenue, profitability, and loyalty over time. So that’s the other piece, Michael, that we see very often on the ROI calculations and outcomes of our customers.

Julian Klymochko: Certainly, the value proposition to customers is there. Now I did want to touch on the revenue model. You mentioned SaaS, so software as a service. Can you discuss why that revenue model is appealing to ServiceMax investors?

Neil Barua: Yeah, I mean, it’s hard to ignore what’s happening in the SaaS marketplace. So, it’s investors are all recognizing that the cloud is here to stay and the SaaS business model is the only way for technology companies and all the other old dinosaurs that have on premise business. You could see what they’re doing on these shows like yours and with investors are saying, how do we convert it to a SaaS like model, right? Fortunately, we grew up, no credit to me. I give all the credit to my predecessors. We built this company as a SaaS company from the very beginning. The benefit of that, by the way, as we all have heard is, you have scalability in a SaaS model, right? In terms of innovation, we could add features functionalities at such a pace to our customers far quicker than an on-premise software company, right?

And so, from working through the dynamics of how the world’s changing and being able to innovate, having a SaaS platform is the only way to go to be competitive that’s point number one, number two is from a, just a visibility. So, from an investor standpoint, the visibility we have around our revenue and what we see is coming in to the business from all parts of the P&L and cash flow, it’s just an ideal business, right? Cause we could see ahead on what we’ve actually signed right now and how much is actually going to be revenue over the course of the implementation period. So, it’s highly beneficial, highly visible. It’s part of the reason why, you know, you’re getting such amazing valuation for SaaS companies, because it’s a very predictable investor model, that’s a well understood right now out. But from a customer perspective, the number one reason why it’s such a great home run is, it’s a per user, per license, per month kind of subscription model, right. And that’s just easier to understand than like go give me a big pile of money and figure out how, you know, that kind of bleeds out in an on-premise model. So, there’s just huge value. I mean, it’s the way the world’s going and it already is at a pace that’s pretty fascinating right now.

Michael Kesslering: Absolutely. And so, something that you mentioned earlier was your relationship with Salesforce. Can you talk a little bit about the history with Salesforce and the strategic partnership that you have with them?

Neil Barua: Yeah, so Salesforce has been a partner of ours since the very beginning of this company. In fact, little fun fact. ServiceMax was created because there was a app exchange competition that happened way back 14 years ago, and ServiceMax won that competition and was ultimately funded by Salesforce and a number of other VCs that came in, to fund now the growth of the company at the time. So, we’ve always built since day one. We used the SaaS cloud platform of Salesforce to build the functionality because we weren’t a platform company, meaning an infrastructure company. We wanted to build the feature functionality for those end users. So huge leverage that we got from all the things that I talked about a few minutes ago. An innovation, given the significance of their, you know, infrastructure using the force.com platform. So that was number one, what’s been really exciting over the last couple years, right? We announced February of last year, an investment by Salesforce ventures into the company. So, they’re a shareholder of ServiceMax at this current time, really importantly, in alignment and a recognition by them and a desire by customers that the asset centric, all the expertise that I just mentioned around our use cases to align that with Salesforce, with their great customer base, it’s a home run and it completes the end to end offering of field service for our joint customers. And so, we’ve now created, so we have number things. We are built on predominantly on their platform, right on force.com and now service cloud. We have an investment by them from Salesforce Ventures. And now we have a joint go to market product that we built for purpose built for Salesforce called asset 360 that we introduced in the marketplace November this past year that I referenced that we just closed our largest seven figure deal on with multiples more for Salesforce. We now have a go to market motion with them that leverages their install base and allows them to have a solution that is like best in class in terms of ServiceMax domain expertise in that. That’s a relationship Michael on those three fronts.

Julian Klymochko: So, it sounds like you are busier than ever with respect to the corporate development. And also, this recently announced merger with Pathfinder Acquisition, $1.4 billion transaction value. What’s the purpose in going public? And is there a new strategic roadmap? What do you seek to accomplish with this big move?

Neil Barua: Yeah, we’ve always had a desire to go public.

Julian Klymochko: Right.

Neil Barua: This process, when we first embarked on it. Created an efficient way to become public, right. An expedient way to get public. And we’re working through all those dynamics through this SPAC process, very importantly for the company. We’ve showed Q2 results, right? 22% revenue growth on the subscription side, we are showing real momentum in the business and we’re just getting started. Early innings of that trajectory, and its meaningful changes from even where the company was a number of years back. So, we’re now accelerating that. We have a new product that’s leveraging one of the largest enterprise software companies in the world in Salesforce and introducing asset 360, our existing customer base is growing at a very, very nice clip, right? We have 118% net dollar retention that we showed in Q2. Really meaningful step of our customers buying more and expanding their usage of ServiceMax.

We feel the momentum. We are also seeing, like I said, the market shifting now where there’s higher demand and need for the products that we actually have and having additional capital, having the public stage to really trumpet those end users. There really have been forgotten in enterprise software, in our opinion, other than the ServiceMax of the world, everyone talks about the desk workers, the knowledge workers. We’re going to give back the mojo and the tools to the field service, tech engineers on the technology that they deserve. And if anyone disputes what happened during this pandemic and how folks like myself, I like to joke, hid behind a Zoom call to get stuff done, watching workers out there with masks, putting their lives at risk, families at risk, making sure the water actually came here the right manner, making sure things got built, making sure the trains were still working, making sure the medical device ventilators were actually worked and installed right. If you remember that ventilator chaos that we had in this country a couple months ago or quarters ago, all those people deserve the tools you and I deserve and have already, if not more. And so that’s what we’re arming. Going public allows the prominence of it. We’re going to scream from the loudest rooftops around this customer segment and capital allows us to continue to grow the business and create innovation for these end users. And so that’s what we’re excited about Julian and Michael.

Julian Klymochko: And the other thing that going public allows you to do is, you will then have publicly traded equity in which to make acquisitions. So, I’m sure M&A is on the strategic roadmap with this going public transaction. You also have a deal to acquire Liquid Frameworks. What’s it pieces behind that?

Neil Barua: We’re doing everything as you guys could tell, you know, an old mentor of mine said, when you’re growing good things happen and that’s what’s happening here, right. Is our growth and the trajectory is causing a lot of great possibilities to the company. Obviously going public, a lot of work, excitement around that from the employee base, even our customers, super excited about that, as well as our partners, just as a side note. None of the shareholders are Silver Lake, Salesforce or are selling anything in this transaction, right? So, the belief that the best is yet to come is still like evident. As you could tell from that just point that they’ve made to the marketplace. On the last point on Liquid Frameworks, we’re going for it, this is the point, right. On part of the reason for why we were looking at capital here as being a great pouring of kerosene into already a really exciting spot. Liquid Frameworks has done really a nice job.

They’ve always been historically built on force.com and Salesforce. So, like we have real technology alignment there, you know, founder Travis Parigi, he’s going to be joining the leadership team here at ServiceMax, CEO of Liquid Frameworks. They built an awesome business based out of Houston in Texas, that really does digital transformation for the energy segment. And as you guys know, well, being up in Canada, being close to energy companies, energy companies have to go through the same digital transformation to become more efficient, to think about how renewables impact their business to actually give safety to their technicians, with everything going on with the patterns that are out there. They’ve been doing that for a number of years, they’ve run a really good business and we saw way to lock arms with them and what we do for industry verticals, like I mentioned in med device and life sciences at ServiceMax is augmented now with what they could do with energy. We always had a bit of a toe hold, but it just blows the doors open in terms of our prominence domain expertise and momentum in that energy segment, using a really great digital tool aided by, you know, integration that we’re going to do with ServiceMax.

Julian Klymochko: Sounds like there’s a lot of synergies on that deal, which is something that you like to see. So, in terms of framing the story to investors, you’re preparing to close this merger with Pathfinder Acquisition in the fourth quarter, currently that’s trading under the symbol PFDR. Once it’s done, your ticker symbol will be SMAX, (SMAX), when you’re telling this story to investors. What do you think are some of the key insights that they should be aware of?

Neil Barua: Yeah, I mean. First and foremost, this is an opportunity to be part of something very unique. There’s not a lot of vertical industry specific SaaS players of this scale and leadership. That is a great opportunity to play with a pure play leader in this marketplace, right? And you know, that’s first and foremost. Number two, is the customer base and the reputation that we’ve built speaks to the leadership. This is not invested in us and revenue will come one day later, this is a company that working, please read our Q2 earnings release that came up number of years ago. It’s a company working at scale, great reputation, not a build it and they will come. We are now you’re stepping into accelerated momentum and that’s gives I think a lot of confidence around stability of the company. And also, the credibility of the company, point number two.

Number three is from just a excitement and upside and what we’re feeling here, given the market dynamic of all our predominance of a customer base, needing digital tools, the pandemic accelerating that and our ability now to have a real solid product, not only in our core offering that you’re seeing in our existing base continuum buy more of, but now another growth lever in asset 360. And you just think about the breadcrumbs from Salesforce, which is our feast, and that actually starts working. And that’s seven-figure deal to have Q2, which we’re working on many more right now, continue to come and get executed on, the sky is the limit, right? Just from a financial standpoint. The last thing I’ll say is that, all the ability for us to continue to do this, have this leadership position. Position us really well to continue to derive more value, meaning to our customers, give them more product sets that gives them value. We have now the inside view of these great customers at scale needing new solutions, and guess who they come too? Our NPS is the highest it’s been in in 14 years. Customers are buying more from us than they have in many years now, right? In terms of buying more, given the credibility we’ve built, they’re not coming to us saying, hey, three, four years out, we’re thinking our field techs are going to need this new technology. Let’s brainstorm ideas on how to do that. So that allows another growth lever to the business. And lastly, I think it’s very important to note, 550 or so employees in this company, we live, breathe and eat this. It’s a solid company with great employees that are kicking butt right now. And we’re really feeling the wind in our back. And we’re just going to continue to accelerate that. So, you know, I know that’s an intangible, but sometimes you want to pick people and companies that have momentum, and you’re starting to see that at ServiceMax. So come on in, join the winner’s group here. That’s kind of how I see it, at least when I wake up in the morning.

Julian Klymochko: Yeah, well, thanks so much, Neil, appreciate your passion for ServiceMax and wish you the best of luck as you pursue, you’re going public journey and all of the growth that’s planned for the company. So, it’s an exciting story and thank you for sharing with us today.

Neil Barua: Thanks for thanks for listening. Thanks for the question and appreciate the time guys.

Julian Klymochko: All right, great. Bye everybody.

Neil Barua: All right. See you guys. Thanks.

Thanks for tuning in to the Absolute Return Podcast. This episode was brought to you by Accelerate Financial Technologies. Accelerate, because performance matters. Find out more at www.AccelerateShares.com. The views expressed in this podcast to the personal views of the participants and do not reflect the views of Accelerate. No aspect of this podcast constitutes investment legal or tax advice. Opinions expressed in this podcast should not be viewed as a recommendation or solicitation of an offer to buy or sell any securities or investment strategies. The information and opinions in this podcast are based on current market conditions and may fluctuate and change in the future. No representation or warranty expressed or implied is made on behalf of Accelerate as to the accuracy or completeness of the information contained in this podcast. Accelerate does not accept any liability for any direct indirect or consequential loss or damage suffered by any person as a result relying on all or any part of this podcast and any liability is expressly disclaimed.

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