How Astea CEO David Giannetto grew to $29M revenue and 400 customers in 2019.

hello everyone my guest today is david gionetto he is the ceo of a company called astia international leading sales marketing service for the global leader in field service management mobility software industry as an author of three books a former columnist for us business review and for uh and former emba professor he's a well recognized thought leader on how organizations utilize enterprise level technology and methodologies to drive performance david you ready to take us to the top yeah all right it's nice to see a teacher get out of the get out of the classroom and and into actual execution so this is great tell us about the company what's the stya do and how do you guys make money uh stia is uh in the little talked about multi-billion dollar field service management industry so any company that puts technicians or workers out in the field to fix assets that are in place somewhere you know think of this building i'm sitting in it's the building itself fire life safety all the computer equipment air conditioning heating every single thing around me or around whoever's watching this has to be maintained by somebody and it gets more complex from there it's uh think of your supermarket all the refrigeration all the chillers the front end systems all that has to be maintained that's a multi-billion dollar industry and we make the software that connects that technician to customer service to the warehouse and logistics so that the right person with the right skills shows up at the right place the right time and gives a a really good customer experience and david is your model a sas model as a piece of software it is mostly sas today we still do on-premise uh there are certain regions like japan that still seem to prefer on-premise what's the percent breakdown over the last 12 months if you look at total revenue what percent was pure sas well of new customers i would say 80 85 percent come into us new on sas but the caliber of organizations we work with are large global complex so it takes a number of years for them to convert over to savage well that's that's actually specifically why i asked the question that way so not looking at new but looking at your historical revenues as well what percent is sas versus still on prem uh probably about 50 50 between maintenance and sas okay very good and um are you finding the number one uh kind of leading indicator on if you can get someone to go from on-prem to sas is actually it is location location now what we find is really uh it's really just the culture of that organization have they gotten to a place yet where they're ready to outsource put things in the cloud because it's a fundamental infrastructure change inside of that company but that's what i'm saying are you seeing japanese clients that you have are less likely and less comfortable with cloud versus canadian companies is it location is it really geography dependent at that regional level yes certainly the us and europe are well ahead of japan yeah interesting okay and you mentioned working with kind of enterprise folks here i'm sure you have loads of different codes you're analyzing we don't have time to go down to all of them on average what are one of these customers going to pay you per year for access to your tech well they're going to probably pay a per user per month and that could you know let's say that's 50 to 75 dollars per user per month um and it could scale all the way up to thousands and thousands of users around the planet yeah again so i don't that's actually what i'm asking really is the average size of the account you're working with are we talking a thousand seats usually or 10 000 or million seats usually sure yeah we do break it up into two categories so there's a group of clients that are about 2 000 and then there's a smaller group of clients that probably average in the neighborhood of 500. okay interesting so i mean can i we'll just assume kind of minimum here right so can i assume a 500 kind of person organization with these technicians or whatever going out in the field multiplied by that that you call it 75 bucks per month that's like what a 30 grand month account for you guys yeah something like that you could do that sure okay and just be clear that 75 a month per kind of on field rep they're managing with your software that's monthly not annually well right it's going to be a range yeah it is per user per month rolls up to a three-year contract for us i see what's the cheapest someone can get that seat level down to if they do big volumes with you is like 20 50 something sure uh you're you're gonna drop maybe below 50 if you get thousands of thousands of users now we do have an smb technology that's a little bit different okay very good and put this on a timeline for me when did you guys launch the company wow this is actually a stia's 40th year in business 40. holy now were you there from day one or you brought in more recently no 40 years ago i wasn't even out of school i was about there's no way uh our ceo or founder is still with us um uh i've been with the company three and a half years okay yeah that would have been launched or been 1979 or 1980 right 79 and we we started the sas conversion though about five to six years ago interesting okay and how many customers have you scaled to today well there's probably over 700 license on on the two products yep yep that makes a lot of sense now if i take if i even take the minimum you just gave me the 700 times uh 500 accounts right times 50 a pop there you know so each company basically said could be have 500 seats at 50 bucks a pop that's 25 grand a month times 700 accounts i mean you can do the math or that makes i mean that puts you guys like 17 million bucks a month is that right no no no no 700 customers licensed in the 40 years so you'd have to go back and say what are active customers and we also well of course i mean over 40 years i mean you're counting someone that signed up in 1980 and then churned in 1980 as well yeah so no no somewhere in the in the ballpark of i would think 400 active organizations i see okay so even still though i'm trying to get a sense generally speaking i don't want to pin you down but healthy company right 400 folks paying 25 grand a month that's the 10 million a month business oh yeah obviously we're not there we're about roughly speaking a 29 million company okay fair enough we have two products as well so we have the smb product called field centrics and then we have our enterprise platform yeah okay so 29 million bucks in ar that's about 2.4 million bucks a month and if you have that across 400 customers i mean what is that per customer something like what six grand a month yeah i haven't broken it down that way but so you said two different product lines um is one focused on the on-prem stuff and the other is sas or these are two different things and they each have on-prem and sas components well they're both field service technologies but so the breakdown in service if you really understand service is the complexity of the business do you follow multiple workflows or one workflow and how many additional outside groups of functionality you do you need beside besides the technician just going into the field so our smb product really can scale to thousands and thousands of users but you're following a very simple workflow whereas the enterprise level you have a lot of ability to use low code toolkit to customize it it's very nuanced it's everything from full-blown customer service centers that are outsourced project depot warehouse management it's uh it's an erp level technology i see and if you're at kind of a 29 million dollar ar run rate today obviously including your your on that includes your on prem right one third of that is sas yeah that's total that's total revenue yeah but sorry you said earlier though if it's kind of 50 50 sas versus on-prem right so there's sure so there's three ways we are in revenue yeah uh it would be license sales maintenance that's on-premise model yep and you have sas per user per month and then you have services oh i see okay so of the 29 million in terms of last 12 months revenue you're saying that that those three lines are split about a third a third a third 10 million in each services is a little bit over a third okay but yes roughly do you find good when companies like us everyone from sap down to us we're still in that mode of counting recurrent revenue as a combination of maintenance and sas yeah yeah which but there's nothing wrong with that but question i was going to ask you though do you do you analyze stickiness of the accounts that you've that have spent money with you on professional services and how much more likely you retain someone who also spends money with you to do services work for them well when a when an enterprise adopts our business we run their business we are the mission critical application they have so the lifespan of retention is is over 10 years for our customers they stay with us a very long time it is a it's a very impactful event if they were to switch to a different technology yep and there is a constant feat of services because the platform is really driving change in the organization yeah if it's if it's our smb it's a different relationship they get up and live maybe 60 days there's very little services after that they're just in a pure multi-tenant sas model and and there's not a lot of services have you guys bootstrapped the company or raised uh well it's a long history 40 years yeah we've gone through the conversion of uh of on-premises sas which is a tough conversion to make um really just bootstrapped no no real outside investment we are out active in the investment community now so uh the cfo and i will do why is now wine is now the right moment well if you looked at the finance you know we turned started turning a good corner we uh reached that point of profitability three years of double-digit growth the stock price has performed really really well um and it's at a point now where if you can get the stock price a little bit up you can go out for are you are you guys public we are oh got it so you would issue more shares essentially raise additional extra capital right and if your stock price is too low it's too dilutive and yep it's not really advantageous so where were you you're at 30 million run right today where were you a year ago uh well our growth is going to be roughly in the ballpark of 12 we haven't released our actual earnings for 2018 yet so oh i see well no no well take me back oh oh so you're saying you were doing 29 million bucks and run right back in january of 2018. i know well we will close somewhere in the ballpark of 29 million oh i see last year if you look at through three quarters right yeah you project yeah our fourth quarter's not released but the two years or two or three years prior to that it's double-digit growth anywhere 11 12 so that's what i'm asking right is so the 12 months prior to january of last year 2018 so this would have been most of 2017's revenue right because it's january february march april through 27th you're saying there you would have done something like 27 26 million which then 10 to 12 percent growth would put you at 30 today yeah we're somewhere off the top i don't know but we're somewhere close to 27. okay interesting that's great um okay good and then um walk me through where most of the growth is coming from is it upselling or expanding is it upselling current customers or adding new ones well to get us through this turnaround it was mostly coming from um the stability of the long-term clients we've had getting them to a place where they could purchase more so that's the first place we looked as we tried to get uh into a better position that allowed us to make this conversion to sas and the accounting rules that that impacts you with more easily um once we started getting the existing customers in good shape generating a pretty good amount of service revenue from that we started focusing in on marketing and sales revamping different regions and kind of modernizing our approach because in our industry it's it's become super competitive so there was a time when it was data warehousing then it was crm then it was bi well field service is that new highly competitive area all the big software companies are in service right now a lot of emerging technologies being deployed here uh and i think as a traditionally engineering or product oriented company we had to kind of rethink sales and marketing yeah finally at the point where that's making an impact are you um when you look at churn just re annual revenue churn on a gross basis what are you at today would you be saying charity you mean loss of loss of existing customers not cut even if it's a downgrade you may keep the customer but they might downgrade so revenue churn grows so it's very rare for us to lose customers i mean not losing customer there's that that would be customer turn i'm talking revenue churn so that would include downgrades even if you keep the customer no it's very rare it's it's going to happen but only um if they are transitioning off of our platform for some reason and we only lose i mean i've been here three and a half years i cannot count the customers on one hand that we've lost what about down what about downgrades though you keep using the word lost customers that's that's customer churn have you had any how do people ever downgrade for any reason but still keep paying you the only the only time they're going to downgrade is if they know they're coming off our platform at some point in the future i see they're in that final stages so they're lowering the number of users and that is the way they would exit a platform like ours yep but it's very rare yeah um yeah no that makes sense and then what about expansion do you know that an account in year one is going to be worth x amount of money and you're gonna expand them to x amount in year two so what is that expansion you plan on typically well probably the first six to nine months it's an implementation project so it's mostly professional services the new buyer behavior is to go in with a very low number of sas users initially so they might only buy 50 users for the launch project for six to nine months so your sas revenue is very very low that has a big impact on companies like ours because the buying behavior is so much different a big impact on your cash flow and then once they go live they're going to jump up to that couple thousand of users so then you get the license purchase for the the jump up and subscription services and the drop off in professional services so your revenue is going to go from 50 users up to you know probably somewhere in the uh you're going to at least go to 200 3 400 depending on how they roll out so you're like 100 year over year growth basically per account yeah well in the beginning because of the sas behavior first two years you're going to probably go something very very large like that yep then they're going to slow down they're going to go into an expansion phase which is driven driving services revenue because we're the change agent at that point our consultants are senior consultants um we're helping them understand how they digitize and do all those cool things and put in place emerging technology uh and then the user growth will be relatively low but you got services work then they'll do an upgrade probably in year three yep yep interesting okay very good and then um team size today how many folks you at we're at about 200 globally 200 okay and across how many headquarters would you say uh we got four major regions so tokyo sydney uh philadelphia is our global headquarters and then london we have development centers in irvine california and israel that's great very good all right and then last question here do you guys measure kind of dollar based cac how much you have to spend to get a new dollar of ar um i'm sure we do but it's not a metric that we live with and and use so it's not something that we would really manage with yeah very good all right david let's wrap up with the famous five number one what's your favorite business book well being the author of a couple of business books i'd hope uh i would say mine so that they'll be one of yours big social mobile is the last one that came out and uh it's been pretty well recently who did you use to publish it or did you self-publish no that's paul grave mcmillan okay paul and and can i ask how i did how many copies you sell it it did pretty well yeah we're 20 25 000 amongst specialists and what a lot of sas seos are thing about writing books which is why i'm diving here for a second um how did you drive those sales mostly through media just events speaking writing um getting out there getting out and about you still have to do that even with a publisher as great as paulgrave um you know you still have to drive it based on um appearing in the media yeah so this was like tv kind of appearances or what mostly what you'll find uh for business theory is a lot of print and a lot of radio not so much tv print and radio interesting okay very good uh number three what's your favorite online tool for building the company or sorry number two is there a ceo you're following or studying i study a lot of our competitive ceos um name one um well our big ones are you know look at the transition of ge buying service max you look at the results of uh ifs or microsoft for salesforce those are the those are the folks that we we battle against so we try to keep track of what we do would you ever you said you're out kind of on the market right now if someone came to you like a silver lake or a vista and said let's do a take private kind of deal here would you do that i mean especially you're only doing 30 million bucks as a public company you could really be more advantageous being private well a lot of folks have said that yeah there's a long history of the company being public um we would have probably a lot of folks would say would have been better off being private um but that's that's quite a big decision is it something though that you guys i mean would consider if the right offer came along or is that something that you've already eliminated there's no way you just want to raise and sell secondary shares well right now that's our immediate focus but if somebody comes in with the right numbers yeah yeah what are you 5.90 a share today somewhere around 590 yeah yeah yeah interesting all right there you go vista any of you guys listening coming off for seven eight bucks maybe you have a deal we'll see all right i mean i mean a share you went you wouldn't go at eight like eight seven eight bucks a share oh come on no why not that's above your current price that's above what the market's buying you buy a significant amount how many for that you know in our industry you're talking multiples of six to 12 times revenue or recurrent revenue that's look at what ge just did and some of the other recent purchases in our industry yeah yeah i mean we'll look at look what zap just did with like sap just did with qualtrics right but that was a pure play sas model yeah um yeah but if you look at our closest competitors that's what that's what service max is your closest service max probably is our one to one closest competitor yeah interesting all right um very good number uh number three what's your favorite online tool for building the company probably most of the stuff that i focus on is any of our online tools in the marketing area understanding um name one though what's your favorite we use we use um marketo or click yeah on the marketing side good marketo number four how many hours of sleep to get every night uh unbroken sleep is you know unbroken sleep is a very rare thing in my life uh probably sleeping four to five hours and what's your situation married single kids yeah married got married in june great congrats how many k any kids no kids okay um my wife's a professional dressage rider so we have 15 horses holy mackerel okay and how old are you 50. 50. last question what do you wish your 20 year old self knew i wish i knew that uh it's much more about relationships and how you build relationships than just powering through raw performance and driving good numbers guys relationships matter coming from david joynistea back in uh about three four years ago company was founded back in 1980 today doing about 27 28 million bucks in terms of run rate growing 12 ish percent year over year they are publicly traded so this is all out there you can go look it up they are they are kind of self-capitalized they are profitable a team of 200 across their major locations tokyo sydney philadelphia london uh caught 100 year over year growth on customer accounts from year one to year two and then obviously it goes down to call it 20 30 year over year ongoing after that as they have their upsell model dialed in customers stand with them in terms of lifetime value for over 10 years david thanks for taking us to the top it's great to be with you thank you