970: Growing in Good Company | Dennis Johnson, CFO, Qlik

Thank you, Jack. It's great to be here today.

Sure. Well, let me start with what I did first coming out of school. I began my career in public accounting with a regional firm here in the Philadelphia area, and I actually focused on construction and real estate clients. So even though I've ended up in technology, I started in a very different industry. But I think everybody knows public accounting is a great training ground. I was given exposure to different industries, mainly construction and real estate, but I got to see a lot of different transactions, not just traditional audits but other engagements, due diligence on M&A, financings. And really, I was fortunate not just to get stuck on any one large client where I was just doing auditing throughout the year, so that made me versatile. When it was time for me to leave public and go work on the client side, I had a diverse set of experiences across engagement types and different industries that translate well to the client side. And really, in public, I learned to be a professional. There were great training opportunities there, really developed a work ethic, and understood what happens on the client side by auditing those companies. So it really was a great way to set me up and really understand the numbers, have an appreciation for detail, and that really has served me well as a private equity-backed CFO.

Yeah, you're exactly right. So I left public. I had spent, as I mentioned, a couple years at a regional firm focused on construction and real estate, and then went to Arthur Andersen around, you know, in the late '90s, and spent a couple of years there. And it was the dot-com boom. And so I was not ready to leave public. I was enjoying my time there, learning a lot. And most people had counseled me that you want to stay in public for at least five or six years, get to manager level. I wasn't quite there, I was a year or two away. And a former colleague of mine had gone to work for, I wouldn't call it a dot-com, but it was a newly public company, a tech company in the Philly area. And they were, their valuation was soaring and they were getting a lot of attention. And I went over and met with the CFO, who was a former Andersen person as well. And he basically said, 'Hey look, this is a unique period of time. You're going to learn as much here as in public. There's a lot of interesting transactions, we're doing financing M&A.' And he was just trying to build a really talented team of folks with public accounting background. So I decided to make the jump, and that was January of 2000. And the company was growing very quickly. It had been public for about a year or so, so it was still, from a governance standpoint, accounting standpoint, putting its control system in place and really trying to get stood up as a public company. And almost as quickly as things in terms of valuation and that environment back then, as soon as things took off, they started to unravel, not just for the company but more broadly in the market. Valuations came back down and companies started to contract. And it actually, as hard as it was, it became a driver for me in terms of advancing my career because we had to do more with less. And it's difficult when companies are contracting and going through all that, but I was able to pick up a lot more opportunity, get promoted a couple times in a short period of time. And it really set me up in two ways. Number one, it was my entrance into technology, where I've now spent the last 20-plus years of my career. And it really made me ready to go be a controller somewhere as well. And so I ended up being there about two and a half years. It did not play out the way I expected when I made the jump, but it really was a defining moment in my career in terms of preparing me for what lied ahead.

So I think every company is a bit different. I was fortunate in that at my first company, a company by the name of Verticalnet that I referred to earlier, that was my first stop out of public. And then I went to work for a company called MedDecisions, another Philly area tech company. And it was pretty small, about $10 million in sales when I joined. I was the number two to the CFO, the first full-time controller they hired. So even though my title was controller, I did a little bit of everything. And it really, that's another experience I point to in terms of what got me ready for what I was going to do later on in my career, because I had to roll the sleeves up, which not everybody likes to do, particularly when you get to the controller level, you're thinking it's a little more high level. This was an opportunity for me to get to understand all areas of the finance organization: treasury, tax, accounting, getting the books closed, paying vendors. And it really taught me a lot about how a finance organization operates. And then as we grew, I was able to build out a team. But I knew things inside and out because I'd been there so long. Probably most importantly, though, I got experience on the sales side of things from a commercial standpoint, a go-to-market standpoint, again just given how small we were. So I was involved with P&L items like designing compensation plans every year, looking at territory coverage. In an organization of that size, they don't have the resources to build out really experienced sales operations teams, so they sort of look to the finance people to do a little bit of everything. And so that really rounded me out. I had the accounting knowledge from my time in public and my time at Verticalnet. Folks knew I was a subject matter expert around software accounting and revenue recognition, all topics that are very important. But I had to demonstrate that I could be commercial and knew how to provide flexibility to sales teams so they could achieve targets and still do that within the accounting boundaries. And so that opportunity at MedDecisions really gave me a chance to demonstrate that I wasn't just a bean counter and a CPA who had spent time in public accounting, but I really was a true business person that could work with the business in order to help us achieve our goals.

That's exactly right. That business grew to about $50 million in sales. We took it public back in 2006. It was public for about a year and a half, and then it sold to a larger organization. And so yeah, it was a great way for me to grow in the role and watch the company grow over time, and then set me up for my next stop, which was joining Qlik.

Well, they had aspirations of going public. And so when I joined Verticalnet, we were newly public, the company had been public for about a year or so, so I came in after that process. And so I was really interested in going through it and leading it in my role as controller, eventually VP of Finance at that company. So that was really the driver. Certainly, being able to learn from an experienced CFO who was looking to bring somebody on and really be the right-hand person to the CFO, that was attractive as well about that opportunity. But it really was, here's a company that can grow. It's in a good space. It has good products. It had great customers, large healthcare payers. And that was really part of the draw. It had all the components. I think when you look for any opportunity, you're looking for good people, good products, and a good market. And if those components are there, then chances are it's going to work out and you're going to have a pretty good experience.

Yeah, there were a few things. Number one, I wanted to do another IPO, because for anybody who's gone through one of those and led that from a finance leader point of view, it's a challenging process. There's a lot of things to be on top of. It's a real grind. And there's a lot of work that goes into it, but also a lot of things outside of your control in terms of market dynamics. And when we did the IPO at MedDecisions, it was an elongated process. Had to wait for the right timing to launch. A lot of work, historically, on financial and IT audits and a lot of complexities. And I felt like I learned a lot that I wanted to apply again and take those experiences and really leverage them. And so I really was looking for a company that wanted to go public, and I just thought I had a lot to offer given the experience I had doing it before. The other thing that was important to me was finding a company that was larger than MedDecisions. So I had good experience in a smaller setting, but now wanted to scale with an organization that was a little bit bigger. And Qlik at the time I joined was about $150 million in sales, so it sort of checked that box as well. And then the international aspect of it was important to me as well. So MedDecisions was a domestic company. We only had U.S. customers, at least at the time I was there. And Qlik was a U.S. business that was founded in Sweden back in the early '90s and had really started to grow in Europe before coming over to the U.S. and expanding there. And then it ultimately reincorporated in the U.S. in anticipation of eventually going public. And so that was not experience that I had, international and dealing with accounting rules outside of the U.S. and different cultures and learning how to work with folks in different countries. And honestly, it was something I had to overcome during the screening and the interview process because I didn't have that experience. I had very limited experience in public accounting, but really nothing that translated too much. So I eventually was able to convince the CFO that, despite not having that international experience, I had a lot of other qualities that sort of lent themselves to me being able to jump in and learn that, and that it was going to be a good opportunity for me to do that. So those were the key things. And then the products, again, as I mentioned before, you always look for good people, good products, and a good market. And Qlik at the time was really disrupting the traditional BI space, displacing a lot of the older legacy stack vendors, and getting a lot of press in terms of what they were doing and growing the top line significantly. So it just seemed like a great opportunity. And it really was, for me, it changed the course of my career. Obviously I'm here years later, so it ended up being a really great move for me.

Sure. So I joined Qlik in September of 2009, and the company was already on the path for an IPO. They were planning to do that in 2010. And so it was great when I joined, I dove in head first, working with the CFO to get us through the IPO process. And we IPO'd in July of 2010. The markets were still quite choppy, with the financial crisis not that far in the rearview mirror. But given the business and the strength of the business and how it was growing, we were able to go public in July of 2010. Then we were public for about six years. The take-private happened in August of 2016. We were taken private by Thoma Bravo for about $3 billion. And another great opportunity. It was an important chapter in the company's history, but allowed us to address some things in the business that would have been pretty difficult to do as a public company. Including, not just strengthening our margin profile, but looking at the business model. We were a perpetual licensed software company, so a bit of an outdated model. And in the private space, we've been able to take that business model and transition it to a recurring revenue model, so subscription, and now a cloud business model that allows for much more predictability. It's a much better financial model for the company and for our customers as well, and more in line with what you see software vendors in how they go to market today and how they license their products.

Yeah, so as I mentioned, as a public company and where the company's roots were, we were a self-service business intelligence company. And so what we've been able to do since the take-private is a number of acquisitions. I think we're up to about 11 acquisitions since we went private, including two really transformational ones in terms of the size of those companies. So today, we're an industry leader in data integration, data quality, and analytics solutions. Our technology helps our customers identify opportunities, it helps make them more efficient, better decision-making, and really helps our customers thrive in markets today that are quite dynamic. And the technology is underpinned by AI, which really ensures seamless integration, quality, and really insightful analysis that helps drive tangible business results. And so what makes us unique is our focus on transforming AI into more practical, scalable applications for real-world challenges. That's really what we do best, help our customers solve their most complex business challenges. In terms of what makes us unique against some of the other players in the space, if we think about the larger competitors, we like to think of ourselves as we provide independent, flexible solutions that aren't confined to a specific tech ecosystem. And then when we look at the smaller players in the market, obviously we have an advantage given the length of time that we've been doing this, so extensive expertise and proven success that really exceeds the capabilities of some of those smaller new firms in really helping our customers effectively scale AI for the enterprise.

Yeah, we certainly, when you're looking at acquisition targets, both of those things are important, as well as the financial profile of the company. The way I would break down those 11 acquisitions, two were financially material relative to the size of Qlik. We acquired Attunity, which was a public company. They were close to about a $50 million ARR business at the time we acquired them. We've grown that business considerably since that time. Attunity is a data management technology, and so it really helped Qlik move from just traditional data analytics and now really expand the offering into the data management space and help our customers move data around from different sources and targets. And then our most recent acquisition, which is the other really large one, was a company called Talend. It was a fellow Thoma Bravo portfolio company. Thoma Bravo had taken them private back in 2021. Talend really focuses on data quality and data fabric, and so again really helped us build out our offering in the data management space combined with our analytics. And then as you mentioned, AI, we had done an acquisition in the AI space, smaller in terms of the size of the business at the time, but a business that was focused on machine learning. And so that technology for several years we've been incorporating into our own offerings, combined along with our own organic R&D innovation agenda. So all these companies that I'm talking about, they obviously had great teams, and so that is part of it, picking up great talent. There's technology that is there when you acquire it, but obviously technology changes very rapidly, and so you need to make sure that you have the right team in place and that those folks, as they join the company and get ingrained in the culture, that those individuals are going to be the right fit. So that's part of any screening process when we look at M&A targets.

There is an on-prem component. We lead with our cloud offering. We're seeing more and more of our sales shift to the cloud, but we really do want to offer our customers flexibility. So for those customers that have use cases that are more suited for an on-prem offering, then we provide that flexibility to our customers. So we found that that is a friendly way to work with our customers. Our customers appreciate that, and we would expect that more and more will continue to move to the cloud, but at this point we do offer that flexibility for customers that want to deploy on-prem.

Yeah, so where I would start is that we actually have been talking about AI for quite a while. An acquisition we had done several years ago of a company called Big Squid gave us capabilities around machine learning that we've incorporated into our offering. And so we have customers today with use cases where they're using our product for analytics to be able to identify insights and then building in automation that allows them to automate certain actions based on those insights that they're finding in the data and ultimately drive better outcomes for their organization. So we really have been talking to our customers about it. So with all the focus on AI recently, we feel like we've been out there for a couple years in this regard and talking to our customers about it and making investments in our product and acquisitions as well in the AI and machine learning space. Where it really over the last several months the conversations have sort of gone with customers is around the governance and control of data. That's going to be so important for businesses as they build these AI models, and that's where it really seems to be the main thing that we're discussing with customers. Everybody's talking about AI, and that includes businesses trying to figure out how they're going to use it internally and all vendors in terms of how they position themselves as an AI vendor to their customers. And what we're finding is that many customers are stalling in terms of trying to be able to deploy AI at scale because they don't have the right control around their data. And so that is really where we have a lot to offer our customers given the space that we're in, the value prop for our products and what we can help customers with in terms of data management, data quality, and governance. And so we sit right there in a perfect spot and a very unique spot to be able to offer these products and services to our customers.

So we do have a CorpDev team that reports up to our strategy office. We partner very closely with them, my role as CFO along with our Chief Strategy Officer. But yeah, we plug our FP&A team in right away anytime that we're looking at M&A. And not just FP&A, but our tax folks, our accounting folks as well, depending on the size of the acquisition. Some are smaller companies that we're looking at, and there might not be too much in the way of tax assets or liabilities or situations to consider. But certainly FP&A in terms of working with our CorpDev team to model out the business, think about how it fits within our plan for the year. On the more material acquisitions, making sure we're modeling out what that means to the business in terms of revenue that's additive or EBITDA, the cash flow impact, and then what the multi-year plan is. So there's a big role that FP&A plays. They get plugged into just about any acquisition that gets sort of beyond the discussion phase. They're one of the first parties that is brought in, and again it's a very close partnership with our CorpDev team as we evaluate M&A opportunities.

Yeah, I think there's, FP&A and really all areas of accounting, I think it's still relatively early in the game in terms of what some companies are doing. But I think there's a number of things that you can think about, whether it's automating some of the formulas that underly a financial model or forecast or a multi-year plan. Those are certainly areas. Even things if you think sort of outside the box in terms of documenting budget memos, things that get pushed out to the executive team as you start a budget process. More broadly within finance, I think about those fairly routine tasks that can be automated. That's the obvious use case. But now, as we really start to understand what the technologies are capable of, there's even consideration of some of the more complex tasks like tax calculations or transfer pricing calculations, interpretation of tax law or accounting standards, position papers. So there are huge productivity gains here. I think again it's still relatively early in terms of deploying some of those technologies, but I think we really are going to start to see that advance starting in 2024. And it is top of mind for my team as well.

Yeah, the first I'll start with is annualized recurring revenue, or ARR. That really has become the main metric that we look at in terms of measuring our sales performance, because it's indicative of what the revenue profile for the business is going to be going forward. As opposed to as a perpetual software company, one of the challenges is every quarter you're starting from scratch. That revenue you recognize at a point in time, and then that's it. You have some maintenance revenue on top of that. But so we've really shifted our focus from recognized revenue more to ARR. And then with that recurring revenue model, the renewal cycles are obviously critical to make sure that we maintain as much of that ARR as possible, so gross retention, net retention. So really measuring how much of our revenue dollars are we retaining from the prior year a year later. How much of that did we retain? And then from an expansion standpoint, how much are our customers adding on, which are really the two key drivers to maintaining and sustaining that ARR growth. And then obviously on top of that, you have new logo business. And so that's something that we monitor as well. So those are, I'd say from a revenue standpoint, along with billings growth, that's really what we focus on to measure the top-line performance of the business. In terms of bottom line, it's EBITDA. I think that's been pretty consistent over the time frame. We focus on our margins and think of ourselves as a Rule of 50 company. So taking that top-line growth and adding that to margin, so for example, if you're a 15% top-line grower and 35% margin, you're at that Rule of 50. And so we originally aspired to be Rule of 40, now we aspire to be Rule of 50, and we'll keep pushing that up. But those are the metrics that we really focus on. I would say the one at the end of the day, the metric that matters the most or at least tells the most complete story to me, is free cash flow. And that's the one metric that you can't really hide behind. It incorporates all these other things. It incorporates revenue growth and bookings growth and spend management, and also how quickly are you collecting receivables, how are you managing your working capital. And so that is really the metric that I focus on at the end of any given month or quarter or year-end. I'm looking at free cash flow generation. And for us as a private equity-backed company with debt on the balance sheet, that's always going to be a metric to me that tells the true story of how we performed in any given year.

Yeah, it's a really interesting question. And I think as I reflect on my career, I've had so many different experiences that have shaped who I am as a leader and how I approach the role as CFO. But what I really focus on, and this isn't necessarily a point-in-time kind of thing, but just something that becomes more clear to me as I develop in my own role and see our organization grow and how it's changed over the past few years, is that the most important thing for me to focus on every day is my ability to lead. It's absolutely the most critical aspect of my role, both in terms of leading my team but the company in general. And so there's a lot that goes into that. But I've always tried to lead by example for my team and to act with humility, because people are watching every move that you make. It's sort of like being a parent, knowing that your children are watching you every day whether you realize it or not. But over time, what I've realized is it's more than just showing your team that you work hard and that you're a subject matter expert. It's every day showing up, continuing to inspire them, mentor them, develop them, really take a vested interest in their development and their personal growth. And then being a leader means being with them in the difficult times. And all businesses go through challenging times. And so as a leader, it's important to be there, support them, be transparent, be direct, and have hard conversations when that's necessary as well. And so those are some of the things that I focus on as a leader. Once I embraced that role as a leader, it was very empowering, because I think number one, it helped me let go of some of the details and really focus on how I develop people and let them run their functions independently. We've grown from about a $100 million business to over a $1 billion company in my time here. So in order for me to help scale the company, I had to build the strongest team possible. And the best advice anybody ever gave me was build a great team and then get out of their way. And that's not always easy, but that's really what I try to do. And then it's really about how do I stay close to the team, how do I continue to develop them, be there for them for support, point them in the right direction. And to me, if I can do that, then there's really no problem. As a team, if my leaders are following my example, if they're cascading that down through their organizations and leading in that same way, there's really not much that we can't fight our way through. And when I reflect on this company, Qlik, and how much we've gone through in terms of change—public company, private company, business model shift, all the M&A, a lot of difficult things, all the events of the past several years and things that all businesses have had to battle through—we couldn't do it without having a team that could deal with that degree of change and great leaders throughout our company. And so that to me, in terms of driving change, it really all starts with the leadership that's set at the top of the company. And so that's sort of what I aspire to do, and I think that's been effective in helping empower me to drive change throughout our organization.

Yeah, you're right. I had been here so long, there was plenty I knew what I was getting myself into when I stepped into the role. But I think the one thing that you can't emphasize enough is just making sure that as the CFO, you're managing the company, helping the board and the CEO manage the company in a way that you're nimble enough to manage through any change. And so it was late 2018 when I was appointed to CFO, and we were just a year or so away from a pandemic that was really going to turn everything on its side for some period of time. We had no idea what we were about to go through. That was sort of followed by geopolitical events, rising interest rates, currency volatility. There's been so many things we've had to go through, small banking or local bank crisis. And you just have to be prepared to manage the company through that and always have a plan, a contingency plan of what you're going to do if things don't play out the way you expect. Most companies have an annual planning cycle. They refresh that monthly or at least quarterly. We certainly do that here. But as I go through the annual planning cycle, I'm always thinking about what are the levers I can pull if things don't play out the way that I expect. And you tend to think about that in terms of what can go wrong, but then you also have to think about well, where would I redirect investment if things are tracking better than I would expect. And so it's important to have that sort of collaboration across the management team, obviously the CEO and CFO working very closely together with the board. But I don't think there's anybody who could have told me that in strong enough terms when I first took the job, given what we were about to go through over the next couple years. It's just been a really wild period of time here with all the different things that we've had to manage through. I think the other thing, in terms of growth and being able to manage in the role, would be building out my CFO network. I'm really fortunate in that I work in a private equity portfolio with some of the best CFO talent in the world. And there's 40 or 50 other companies, and I get to network with those CFOs and share best practices, share challenges. And we get together in person every other year in a formal conference, and then a lot of informal interaction in between. And it's always time well spent to hear what others are going through. And I think in my first probably 60 to 90 days in the role, I didn't have that. The CFO job can be kind of a lonely job, and you're trying to demonstrate value and show that you're capable of doing the role and prove yourself. And I think I probably would have benefited from chatting with some others and hearing about the challenges and realizing that hey, you're not the only one going through that problem. Others have gone through it as well. Others have solutions or similar problems that they've been able to solve. And so that's something that I counsel others who are new in their roles in CFO roles that I meet to continue to build out that network, because it can really be helpful as you manage through different situations.

Sure. So one of the things that I really like to do is spend time with young people. And I do that in a couple different ways. I do some volunteering and coaching, but also I do some mentoring of young people as well. It's something I've always liked to do, both formally through some of the schools I've attended over the years, but also informally through friends or children of friends. And really helping them understand what coming out to work really means when you come out of school, and helping give them opportunities and perspective from a leader in terms of what they're looking for. And that was something I feel as though I didn't necessarily have when I was in school and studying. And so it's a way for me to give back and really try to get close to people and help them as they think about starting their careers.

Sure. So the book Moneyball by Michael Lewis. I really enjoy it for a couple of reasons. I've read it a few times. I'm drawn to it because of the baseball aspect to it. And for those who aren't familiar with the story or the movie, it's about a low market, small market, low-budget team that has to work with constrained resources and put a winning team on the field. And so I take a lot of business lessons away from that book, in particular the use of data to really identify hidden insights and think about how you can use those insights to drive a better outcome for your organization, which actually translates really nicely to what our company here at Qlik does. So that's one I read periodically. People think about it as a sports book, but I think of it as a business book and a data book and an analytics book, and the messaging there really translates well to the corporate world.

Yeah, so we're finishing the largest integration in the company's history. It's been an intense year in 2023 doing that. We're at the tail end of that work, and our team's done a fantastic job getting through that and really positioning us for success in 2024. So we need to finish that off in the early part of the year. And then I'm really focused on how we accelerate growth and realize the revenue synergies from that acquisition. That's really what I'm looking forward to, seeing the company now in a normal state operating Qlik and Talend as one combined company, and really continuing to deliver to our customers in terms of the products and the offerings that we're bringing to market. And I'm also cautiously optimistic that the macro pressure we've seen will start to ease a little bit. We'll see deal making pick up, that'll present opportunities for us in terms of M&A and continuing to build out our product set. So yeah, there's a lot of exciting things ahead here in 2024, and we're looking forward to getting after it.

Thank you.