W. Steinfort0:00
It's ironic because we just talked earlier about my whole career being in challenged industries. Telecom during the Telecom meltdown, then selling into a VC-backed company in 2008 when the financial crisis hit. Sequoia sent out its famous presentation saying VCs should close down half of their portfolio companies and tell the other half to cut half their expenses right now. So I've always lived and worked in constrained environments. Constraints are like you don't have everything you need, you have to figure out how to get by, you have to scrape by. So my finance insight was how powerful having a constraint can be in the strategic planning process. I learned it the hard way. It wasn't a big mistake, but it wasted some time for sure.
Right after we went private, I'd been a CFO for only three years and a private company CFO for a year. We had just changed most of the leadership team, as often happens with a take-private. I was the only C-level executive left. We brought on a new CEO, that CEO brought on new executives. We were all fired up and excited about all the things we could do with this great platform. We had two large private equity firms that owned us 50-50 each, and they were really excited about all the things we could do. So we went through the strategic planning process for the annual plan, and I was a participant. We even hired one of the big three consulting firms to help us think through reinventing our operating model. They kind of blew up the structure. Let's just say we had a lot of people with a lot of ideas and a lot of fresh capital that had just come into the company. So we went through the budget planning process. I was steering the process, and I was very supportive of their energy, saying, 'Well, that's an interesting idea, yeah we could do this, we could do that.' When we put the initial plan together, I hadn't given them any constraints. I basically said, 'I don't want to be the person saying no, you can't do it.' I was open to all their ideas. When we rolled up what they wanted to do, it was a nonsensical and ridiculous plan. It was like double the company and people, and the payback would have been forever. I looked at it and thought, 'Well, that was a waste of a planning cycle.' It was a complete waste because the plans we got back, since they weren't constrained in any way, were nonsensical. My first reaction was, 'Why wouldn't they just be reasonable?' Then my second reaction was, 'Dummy, that's your job. Your job is to put constraints on them and give them guidelines so they know the realm of the envelope they're working in.' People make better decisions when they're constrained because they have to make trade-offs. If they don't have constraints, every idea is a good idea, so they don't work as hard, they're not as creative, and they're not as thoughtful. People tend to do their best and most innovative work when they have limited time and money and have to get it done. We're going to be audacious, but we're constrained. That's something that has stuck with me. Now the people in my world understand that I appreciate constraints because I give them a lot.
Yeah, they're very clear. We need to get growth back. We're growing in the low teens. We need to get growth up into the high teens or into the 20s. The market is growing 23%, we should be growing that fast. How we're going to do that is by improving NDR, getting our existing customers to spend more with us. The finance organization plays a big role in understanding what's going on with those customers and identifying those with a higher propensity to buy. We're doing a lot of analytics work with the go-to-market organization. We're also spending on this new AI business. As I said, we grew ARR 200% in the second quarter, and there's a lot of investment that needs to go into that. So we're very focused on what's the right capital allocation strategy. We're sitting on a ton of cash and we generate a ton of cash. What's the best use of that cash across buying back shares, repurchasing our debt, or investing in AI capacity? It's really about enabling the company to grow and doing it in a cash flow optimized way, driving free cash flow per share, which is our anchor metric.
