00:31:11 · CJ Gustafson, Brian Neider
[00:31:11] S1: Anything else on EBITDA that just makes the the hair on your arm stand up? [00:31:15] S0: A lot of it just has to do with the recurrence versus non recurrence. Like, don't actually mind... If if there's some Bootstrap CEO that put their boat expenses in there, it's probably not the right place to put it, but the reality of situation is when we take over the business or when we invest into the business, that's not gonna happen anymore. So it's actually somewhat legitimate. If you have expenses for... You know, there's a frivolous lawsuit that you had and it happened one time and you had to deal with a bunch of legal fees. Like, sure. That type of stuff feels like very, very reasonable and no problem. It's just things that are recurring, nonrecurring. It's not the same exact thing that happens every year, but it's roughly like it rhymes with each other, and you just see it over and over and over again. That's where it's just like, guys, there's... This just makes no sense.
00:31:56 · CJ Gustafson
[00:31:56] S1: When somebody asks, how is business? What they're really asking is, how are your finances? Because every single decision a company makes is inherently a financial one. I've said it a thousand times, finance isn't just keeping a tally of what went down. You are not the person piecing together what happened the morning after in the hangover. You're the person deciding whether bringing Mike Tyson's tiger back to the hotel is a good capital allocation decision, which means your team can't afford to be living in the past, policing a $30 software charge or slogging through a close that drags on for weeks. Remember, there's a tiger in the living room. That's why you need Brex. Brex built an intelligent finance platform that combines global corporate cards, expense management, banking, bill pay, and travel into one system with real time controls. AI handles the grunt work, enforcing policy at the point of sale and reconciling continuously so your best people can chase growth instead of chasing paper receipts. Defense handled. Terry Tate office linebacker style. So go play offense. Throw the ball deep. Thousands of top companies including Anthropic, DoorDash, and Coinbase already run on Brex. Join them and take back your team's momentum at brex.com/metrics. That's brex.com/metrics or just tell them CJ saying. Still in budget season? My condolences. If you're only on v 40 of the plan, you're doing better than I ever did. Keep it up. Here's what I'd want in the trenches right now. Something I can hand a question to that already knows the context of my business. Not a chatbot that's never seen my p and l and not a bunch of AI features that are hiding in five side panels that I really don't know what to put. That's what Abacum just launched. It's called Abra, like Abra cadabra. I hope they let me keep that in. And it's one agent for your whole finance team. Ask it something like, what happens to runway if we push ad spend 25%? Or what changes has my marketing leader requested to their 2027 budget? Abra pulls together your actuals, your models, and your business context, calls in the right agent to model, analyze, or draft the board pack, and comes back with the answer, plus the trade offs in the next move. That's incredible. And for the control freaks, which is all of us, if we're being honest and you listen to my podcast, it shows its work.
00:34:11 · CJ Gustafson
Abacum's engine does the math, not the AI. Abracadabra only sees what you're allowed to see, and nothing saves until you approve it. Here's the best part. It's included in Abacum as is. There's no extra charge, no add on. And I have known Abacum's founder and CEO, Julio Martinez, for more than three years. He and his cofounder, Jorge, came out of finance, and this thing shows their work. Most AI makes one person faster. Abra makes your whole team AI native. I could read you a short code to go type in, but honestly, just tell Jorge and Julio CJ sent you. They'll hook you up. Remember when pricing was simple? One product, one subscription, one invoice every month. Those days are over. The AI economy is changing how everything gets bought and sold. We're seeing usage based pricing, hybrid contracts, and something called a credit. The finance systems built for vanilla subscriptions weren't designed for this. This isn't just a RevRec problem anymore because outdated revenue architecture can kill a great pricing idea before it ever reaches the market. RightRev lets you recognize revenue in whatever shape it comes in. Whether you're launching consumption credits or testing entirely new commercial models, RightRev gives finance the flexibility to support whatever pricing model comes next. So product teams can keep on innovating and finance teams can keep pace. If you're architecting revenue for the AI economy, learn how RightRev can help. Visit rightrev.com/cj. That's me. That's right rev.com/cj. For a sec, I wanna move back up to the top of the p and l, and and this is another thing that can totally be bullshit, especially if you're trading off a revenue multiple. What's your take on services revenue, and and what should be looked at as accretive to the company versus not?
00:35:54 · Brian Neider
[00:35:54] S0: I think that oftentimes we would look at it as two separate line items. So you're gonna look at what is the multiple of recurring revenue on a software business or an AI business? What does that look like? And then you're gonna look at the services business, and you're gonna say, are they losing money here? Is it sort of breakeven? And if they're losing money, it's almost like that's part of your your sales and marketing expense. Right? It just really depends. So as a shorthand, you're gonna look at the overall revenue multiples. And if it's a situation where the services revenue is so remarkably high relative to the software revenue, you have to take both into account. If the services revenue is 10% of the overall software revenue in terms of size, we get your shorthand, and then you could sort of dig in more granularly down the line. At the end of the day, there's usually some type of services that are necessary. We've actually done pretty well, and there's a little bit of aside from the question, but it's worth mentioning, which is a lot of software companies try to offload their services because they're worried that people are gonna look at it and say, gosh, you've got this sort of weight around your ankle in the form of a services business. You shouldn't have that. So companies like Accenture and Deloitte and a lot of the, you know, IT outsourcers in India have built enormous consulting practices around, like, implementation of software, ongoing training and integrations and change management, you know, and the like. In the past, we've actually looked at a lot of services businesses who are helping to create the ecosystems for the really rapidly growing software vendors, and that's actually a theme that we that we really like. And so years ago, Salesforce and Workday, like, really, really take off. We're like, gosh. You know, even the big consulting firms that are trying to help with this can't keep up. There must be a couple of businesses that are services oriented companies that are drafting off of the growth in these ecosystems. And so we ended up making investment into a company called Aperio, which we eventually sold to Wipro. And Aperio sort of helped a partner of Workday, a partner of Salesforce, do the implementations and help do the training and, you know, everything that was necessary to get the client...
00:38:04 · Brian Neider
The Workday and Salesforce clients up and running. And then we sort of took that theme, and we invested in a company called Hakkoda, which provided services within Snowflake ecosystem. And that business was acquired by IBM. Same sort of thought process, which was the big consulting firms are gonna have a hard time keeping up with this. There's probably some very specific newer age businesses that can do this. And most recently, we made our third play in a similar thematic element, which is business called Advancing Analytics, which provides services for the Databricks ecosystem, same type of thing. You know? There's just so much work to do within the Databricks ecosystem, and there's that. So we like investing in services businesses if they're tethered to the right tailwind, and they could be very, very attractive. And usually, the bigger consulting firms are excited to make acquisitions there. And as it relates to the software companies or AI companies themselves, usually they're willing to tolerate and do some level of, you know, services engagement, but more often than not, they wanna they wanna push it off because it's not really their exact business.
00:39:10 · CJ Gustafson, Brian Neider
[00:39:10] S1: Oh, totally. So one of our friends of the show, Rillet, they have an agentic ERP, and I was at their conference doing a panel, and I met two different people from two different services companies who said, oh, no. We specialize in implementing Rillet now. So I'm like, oh, wow. There's a cottage industry for this. I can see how that would make you really successful if the platform is really successful and vice versa. [00:39:31] S0: A 100%. And I think that it's a great way to be investing. It's a great way to be understanding. And with every great software platform, depending upon the complexity, of course, there's usually some type of services engagement, services ecosystem that ends up falling behind it, and there's a lot of precedent for really exciting outcomes in that regard. [00:39:53] S1: So, Brian, you break software into three buckets, horizontal, vertical, and infrastructure. Can you just explain the difference between those three and why AI affects each one so differently?