00:07:33 · CJ Gustafson
It was negative if we're being pathetic here, it was 200... Negative 200 k, down from 89,000,000 in 2024 and 161,000,000 in 2023. Those were positive numbers. So adjusted net income, f y twenty twenty five, three hundred and seventy six million. So that is up from 229,000,000 and 96,000,000 in the prior two years. And please hold that big old gap in your noggin for a second here. Cash on hand, 741,000,000. Total debt, 4,400,000,000. Net debt's around 3,600,000,000. They got a lot of debt. Interest expense on that debt, f y 2025, 143,000,000. That crew, 337% year over year. So q one alone, they paid interest expense of 93,000,000. Okay. Here's something that's great. Revenue per employee or Spooner, 2,570,000 per employee in 2025, up from 1,120,000 in 2023. This is one of those incredible numbers that you'll see in software when you do it right that you have leverage in your operating model, and it's core to honestly this company's entire thesis. Target valuation, big number. Well, I guess it's not as big as SpaceX and OpenAI and Anthropic who are also crowning up IPO airwaves. 20,000,000,000 and raising a reported 1,500,000,000 to do more acquisitions. The growth here is mostly bought. So revenue grew 95% in 2025, and like I said, pump the brakes before you tattoo that on your forum because organic growth was 13%. They define organic the honest way, which I respect. They said this year's revenue over what the same business did last year pre acquisition revenue included was 13%. So of the 95, roughly 82 came from wiring money to sellers, and 13% came from the businesses they already had in house when they started. 13% on a portfolio this size, it... It's okay. Yeah. Buying growth is their entire model, so I'm not going to clutch pearls about acquired revenue at an acquisition company. Gives me more pause is what's living inside that 13 because Brightcove revenue went down last year as subscribers left. Splice shrank the year before, and Evernote grew revenue while losing subscribers in some years because they raised revenue per user faster than the users walked out the door.
00:09:39 · CJ Gustafson
[00:09:39] S1: Hey, thanks for listening. We'll be right back after a word from our sponsors.
00:09:44 · CJ Gustafson
[00:09:44] S0: Here's a growth tax that nobody talks about. Every new pricing model you ship creates a nightmare for your finance team. Usage based pricing, now you're tracking usage against commitments. Product bundles, now you're untangling what to recognize and when for every line item. Mid cycle upgrades? Good luck manually reallocating revenue. The pricing strategies that drive growth are the same ones that break your finance process. Alright, Rev turns that irony into a competitive advantage. Your product team can ship new pricing without asking finance for permission, and your sales team can close deals without worrying about downstream chaos. But I've seen too many companies where sales are celebrating a huge quarter while finance is still trying to figure out how to recognize half of it. It's actually me. So here's a good place to start. RightRev built a free tool at calculator.rightrev.com. It scores your rev rec process, shows what's exposing you to risk, and tells you exactly where to focus before it bites you in the rear. Probably explains why your last close took so long. Check it out at calculator.rightrev.com. Alright without the Boston accent calculator.rightrev.com. I got news for you. The ERP category is finally getting disrupted. And if you haven't heard of Rilla yet, please pay attention. It's the AI native ERP built specifically to replace NetSuite, and it's already won over hundreds of finance teams. Their mission is to make these zero day close a reality, and they're actually doing it. We're talking teams closing the books at 01:35PM on the first day of the month. Companies like Wind Surf, Mercor, and hundreds of others run their entire finance stack on Rilla. Revenue recognition, closed management, multi entity, native Stripe, and Salesforce integrations. Whoo. Everything a scaling company needs. They've got 5.0 star... Five zero. Wow. Five zero stars on g two. They're backed by a 16 z and Sequoia, heard of them, and CPA led implementations that get you live in forty five days. That is simply unheard of in the ERP space. If your books aren't running as fast as your business, check out Rillet. Book a demo at rillet.com/cj. That is rillet.com/cj. That's me. Maybe the first thought you had when you started a tech company wasn't about scenario modeling or runway management or the fine print of an s one. I love a good s one.
00:11:57 · CJ Gustafson
That's not where the magic happens. It's more fun to build something new, design your quarter zip, or network with VCs. What But if you got your financials right early, long before your investors started asking? There's no limit to how far you can go and how many headaches you could stave off. Now that's where comes in. Has been a part of Silicon Valley since, well, it was just a valley, and it's helped some of the most successful names in tech go from start up to exit to mega cap. You build the next big thing, and with the teams across strategy, tax, audit, and transactions, will help you build your next big thing Learn more at ey.com/techstartups. That's ey.com/techstartups. A good chunk of the organic line is price hikes and monetization squeezes pressed onto a base of customers who've been there for a while, that that is slowly leaking rather than this bustling turnstile of new humans who are showing up. And the net retention number that I mentioned validates that as well because their blended NRR sits in the low nineties, which means the existing base shrinks a bit every single year before new logos try to plug that hole. By business, the spread is wide. So Evernote is 99%, AOL is 95%, StreamYard is 91%, and Rimini is 87%. And keep in mind, many of these companies are consumer or prosumer facing with little expansion potential other than price hikes. Right? You can't like sell more Evernote licenses to one person, like you only need one. And the contracts are largely month to month subscriptions through app stores or on credit cards. So retention becomes even more important when it's structurally harder to upsell and cross sell. So you're buying a 13% organic growth company that touts a 95% inorganic growth headline, which it depends which number resonates with you. Right? Which person are you? It probably says more about you and the company. Okay? So this is truly a house of adjustments. Their net income went down three years in a row while revenue tripled. Yeah. And that's not a typo. So cap net income was 161,000,000 in 2023, 89,000,000 in 2024, negative point 2,000,000 or 200 k in 2025. So the company's preferred number is actually adjusted net income, and that went the other way. It always does. Right? It always adjusts the other way. 96,000,000, 229,000,000, 376,000,000 most recently. So you gotta really work out that quandary in your head.
00:14:12 · CJ Gustafson
Here's what they add back to get from a GAAP operating income of 278,000,000 to an adjusted operating income of 613,000,000 in 2025. How do you get there? Amortization impairment of acquired intangibles, zap out a 151,000,000. Transaction related expenses, kill 85,000,000. Reorganization related expenses kill another 79,000,000. Other items not indicative of core performance. What could be in there? Woah. 21,000,000. That is 335,000,000 of adjustments, which is more than the 278,000,000 of operating income they actually reported. So get this, the add backs are bigger than the profit. Love it when they do that. Now some of this is defensible. Amortization of acquired intangibles is truly a non cash accounting artifact of buying companies. And at a serial acquirer, it's permanently elevated. It's it's absolutely their favorite line item, can tell. It's the same like how adjusted EBITDA was every leveraged buyout's favorite line item in 2007. So if you're going to own a roll up, you have to be at peace with adding back amortization or you will never see the cash. The reorganization line is where I would slow down. So quote, reorganization related expenses is the cost of firing the people at the companies they buy. It was 79,000,000 in 2025, and more strikingly 76,000,000 in q one of twenty twenty six alone, which is about a quarter of that quarter's entire adjusted operating income. So remember the playbooks, the principles. Step two is the restructuring. Cutting Evernote from 341 people to 60 is less a one time event and what they do over and over and over and over again when they buy a company. It's the business model. Yes. It's one time, but it's what they do one time over and over again. So when the recurring cost of running your business is being treated as a nonrecurring add back, CFO's years should... Yeah. They should perk up. And then there's the tax, which is why GAAP net income is such a mess. In 2023, a 103,000,000 tax benefit flattened the bottom line. In 2025, the effective tax rate ran near 100% of pretax income of 111,000,000 because net income of basically nothing. The Danish founded Milan headquartered multi jurisdiction structure. I would hate to do taxes for this company. Makes the tax line jump around like a Rasheed Wallace technical foul. Get out. You're same. Ball don't lie, baby. Taxes don't lie either.
00:16:25 · CJ Gustafson
Sometimes they do, which is part of why they want you looking at the adjusted numbers in the first place. This is a house of adjustments, and whether you want to live in it depends on how much of the cost of buying and gutting companies you're willing to call non recurring. How do they make money? Well, once you get past the m and a, the operating model is clean and it's it's kind of beautiful. So revenue is overwhelmingly subscriptions and acquisition is overwhelmingly organic, and that is acquisition of customers. So customers acquired through organic channels, word-of-mouth, non paid search, accounted for 79% of revenue from new customers in 2025. They deliberately favor targets that don't lean on paid advertising. Why? Because ad driven acquisition is volatile, and they want revenue they can forecast. When you buy a brand like Evernote or AOL, the demand walks in the door for free out of two decades of habit. Cost of revenue is mostly three things. You got amortization of acquired intangibles, you got cloud infrastructure, which is AWS and Google Cloud, and the tolls they pay to get paid. This part's really important. This is the app store tax. So in q one of twenty twenty six, 75% of revenue came through electronic payments, and a third of that ran through the Apple App Store or Google Play, where Apple and Google retained 15 to 30% of the transaction. By contrast, Adyen, PayPal, and Stripe charged 5% or less, and a wire transfer costs them like nothing. The filing more or less shrugs and it admits that customers convert better when the app stores are the default. So, hey, we'll keep on paying that toll, which raises the question I'd want answered on the road show. So as Bending Spoons scales to a billion users, can it use that buying power to negotiate the App Store and processing fees down? That's real money if you can do it. A few points off a 15% to 30% take rate across a growing subscription base is its own profit lever, and it's not really talked about as loudly in the s one as I'd expect. Improve that gross margin, get past that mid 60. And the reason they can pull this off across 10 unrelated apps is the stack of proprietary technology they deploy into every business they buy. So fun names incoming here, folks. Pico, Lumen, and Abacus, the shared data infrastructure processing 3,800,000,000 data points a day.