Growth and Cash Flow Strategies for 2024

Megan - 00:00:18: Today, my guest is Megan Torini. Megan is the Chief Financial Officer at OneTrust, where he oversees all finance operations for the fast-growing, category-defining, trust intelligence platform. Megan has over 20 years of experience leading financial teams for technology companies. Megan, thank you very much for being my guest on today's episode of CFO Weekly.

Guido - 00:01:12: Thank you, Megan. Lovely to be here.

Megan - 00:01:14: Today, our discussion focuses on interest rates, market volatility, and key priorities for the months ahead. These days, CFOs are delicately balancing building and executing on 2024 plans while prioritizing growth and cash flow in a high interest rate environment. Megan, I'm looking forward to hearing your perspective on this topic and learning from your experience. So let's get started.

Guido - 00:01:38: For sure. Let's do it.

Megan - 00:01:39: All right. So first, let's start with you, a little bit about yourself and how it is that you got to where you are today.

Guido - 00:01:46: Oh, okay. I've always walked in technology, always been fascinated with technology. I've been around a bit. I started my life and career in Europe, in Italy, and I worked in London, I worked in the Netherlands, and in France, across all of emerging markets. I spent time living in Paris, living in Madrid, and the last 12 years I moved to the States. And I spent about equal amount of time between Chicago and New York. And the last six years were in New York. Professionally, I've been in large corporations at the beginning of my career, as I tend to normally be, and progressively work my way through different wave of technology from the hardware business of Cisco and Dell into marketplaces. When I was at Groupon and Gympass and more squarely into software and the wave of data and cloud as we enter into the later part of 2020 and going into 2030, I think that's going to be a massive piece of our technology landscape. I've got two kids, eight and 12, and a lovely wife from Spain.

Megan - 00:02:46: And today you're the CFO of OneTrust. Correct?

Guido - 00:02:50: That's right.

Megan - 00:02:51: So can you tell us a little bit about OneTrust?

Guido - 00:02:54: Yeah, OneTrust is a software platform that has been evolved over time to deliver for our customer a suite of solutions around privacy, security, third-party risk, as well as compliance and ethics. So you can go more from there, but foundationally, it is a platform to play in the software space.

Megan - 00:03:12: So who is the ideal customer for you guys?

Guido - 00:03:15: The beauty of this company and the software is that it's a multi-persona activity, right? We touch from legal to security to IT infrastructure to HR and ultimately the CFO office, right? With ESG programs. And we've been evolving in our journey from earlier days where it was more of a high velocity play around point solutions, around legal compliance into this idea of a trust intelligent platform that can pass all matters around data, privacy and security. And that has allowed us to evolve our buyers into an IT persona, mostly a CIO or a CISO.

Megan - 00:03:53: And just a little bit about trust. I would argue like 20 years ago that there was very little expectation for companies to be socially responsible or really even trustworthy. So what's driving the need for trust these days?

Guido - 00:04:09: Yeah, thank you. That's a fantastic question, by the way. I think there's been a lot of evolution. And I think you need to think about this as a societal shift, first and foremost, that drove regulatory changes that then drove technology needs and technology shifts. And what I mean by that is that fundamentally, it's not just enough to create great, great technology or generate revenue and generate profit for a company to be great. The how matters and that how is trust. And it's a concept that is continuously evolving and expanding and encompassing our life more broadly. It started with some of the aspects that are more related to privacy and to the way data are managed, right, which is almost an aftermath of the digital transformation, right? We digitize everything. We created the best amount of data. That data has a greater degree of mobility and accessibility, right, that it has ever had. And how is that protected? How is that managed using the most appropriate way. Our question that started to appear in society before everywhere else. And then those questions translated into regulatory changes, where you know admittedly, Europe was probably driving a lot of that agenda. And slowly, but surely propagated across the entire world. And started to hit dimension that when well beyond the initial pure data privacy core persona and privacy intact.

Megan - 00:05:30: And turning to you personally, would you say that you thrive in uncertainty and enjoy having to make decisions based on the changing landscape around you? Or do you just really long for stability and to be able to push ahead with your long-term plans?

Guido - 00:05:45: Look, I love change. I think ultimately it has been some sort of the only probably continued variable throughout my life and career. I think with that comes opportunity, right. And I think the idea that this evolution in the market, in society and in the world overall is allowing us to create new opportunity, new category, new technology. And ultimately, not for the sake of creating something new, but I would say with the idea and the focus of creating forward momentum and progress. And so that's how I like to embrace change. And that's how I like to think about it, not just as a simple wedge to create personal opportunity, but also as a way to think about the broader progress that can be made.

Megan - 00:06:32: And you've performed the role of CFO for three different companies now. How have you seen the role of CFO evolve?

Guido - 00:06:40: Look, I think the role has been evolving, not just in the time span in which I've done my three roles, but even much prior to that. And there is the usual classic place where it's like, oh, it's not an accountant. It's not just bookkeeping. It's not just compliance. It's not just reporting. CFO ultimately has a unique position at the company, such pivotal role, and a lot of data and flow and information goes through the CFO office or the CFO organization. And so it is a very natural place to step up and start to embrace first the operational area and then the strategic area of a company. I like to simplify this in a way where you could say that a modern CFO is the architect of the enterprise and is also the drummer of the business. So there's two foundational value add activity that a CFO can perform to drive a company forward. One, is really architecting how a company operates in terms of what is the design infrastructure, where the unit economics, how is the capital allocated, and how do we think about short and long term trajectory strategy and avenue for growth? And the other one is to make sure that there is maniacal discipline in the execution quarter after quarter of what the longer path and the longer plan is, right? And so I think you would notice that there is more and more successful CFO that come with that, with those kind of chops and those kind of angle that has to do with strategy and operations well beyond the core foundational skills that are like planning or accounting or treasury and so on. The ability to not just talk about numbers, but be storytellers and connect the vision of the company with the story and with the trajectory. And ultimately reflect that into financial results, which are just an output of what is happening at the operational or strategic level, right?

Megan - 00:08:32: And as the role of CFO evolves, how has the makeup of what a successful finance team looks like shifted?

Guido - 00:08:39: Yeah, very similarly, right? You need people that, first and foremost, I think you need people that are curious and people that want to continue to develop and evolve themselves. And what I mean by that is like people that think very operationally about the business, have a need for going after processes and automation very quickly and substitute and remove the mundane task and create leverage and space and time for themselves to dive in into the business. Understand the business, understand the product, understand the market they're in, and be true value add to their counterparts. And it's really a job that cannot just happen at the CFO level, needs to be across the entire CFO organization because there's multiple touch point at different level in different layers of the company to make a team successful, right? And ultimately to make the company successful. And when you think about those skills, there is that aspect that I mentioned about curiosity. There is the aspect and the aptitude about that kind of growth mindset. And being able to continuously reinvent yourself and build on your strength. And on top of that, there just needs to be talent that is a lot more connected with technology and data, right? Those two things, you need to be very prone to embracing those two aspects, which is the only way you could do your job properly. A lot of it is removing emotion and bringing data to conversation, bringing rational and discipline that allow people to make the right trade-off on the decision making. I would add the last point is really, developing greater and greater influences and skills across the organization as well, right? So from a soft skill standpoint, people that know how to listen, but also know when to step in and be heard.

Megan - 00:10:16: And shifting gears a bit, but markets, as we all know, have been incredibly volatile in the last few years. So how does this change the way that you make plans? How do you forecast for an unknown future?

Guido - 00:10:31: Yeah, that's fantastic. So one of the things that it's my one of my biggest motto is like in my team or at the company where we don't do budgets, we do plans, right? Because at the different, it seems like semantics, but it's very important from a conceptual standpoint and now, and mental approach. I like to think about plans and things that are a lot more flexible and allow us to continually shift, right? And think about what is the best ROI? What is the best allocation of our capital on a continued basis? And the way you approach uncertainty is two ways. First of all, you need to separate controllable from non-controllable, right? And what is really impacting you or not in the non-controllable aspect of macro that is happening out there. And secondly, I think you need to maintain the agility of saying I'm going to start to invest in certain area, being product lines, being geographies or being specific function or project changes. And being able to quickly on a, let's say, quarterly basis, shift that focus based on what are you accomplishing in across time in those initiatives. And so take that toll gate approach to everything that we do. I think annual planning is just not something that you can rely on anymore on that kind of a periodic basis. You need to have a more frequent approach to adjusting your capital allocation strategy. And second to that, I think is this idea that the greatest part of your capital is not your incremental amount of money that you put into a plan every year is your entire cost base. I'am being able to get your executive team around that idea that every quarter, your entire cost base is under, I would say, discussion for lack of a better term, meaning that all of that capital can be redistributed in a way or another within a function or outside of function or within region. And of course, certain things like payroll have less flexibility and when you need to be more thoughtful about it. But there is normally a company. There is at least 20% to 25% of your total cost basis that is not payroll and has a lot more fungibility. That's how I think about it in terms of approach, right? Just to wrap it up is controllable versus non-controllable. Which part of the controllable hits you? And then think about plan versus budget. Don't end over people, envelopes of spend, but work together as a team to morph that allocation of capital in the most effective way and in an agile way with a quarterly cycle.

Megan - 00:12:56: And when you think about unpredictability, what is the one thing that you find that you cannot bend on, your essential priority, if you will?

Guido - 00:13:07: Yeah, look, I think that the other way is you got to stray through to your North Star, right? Especially in our circumstances, you're building a category, you're creating a market, right? Part of which exists, part of which does not exist. And so it's important to stray through to that approach, right? And also think about that you don't want to swim against the current. So the most important thing is you have to be in a space where you know that the tailwinds are big. And those are some of the things that are true for our market and for our category. What I mentioned at the beginning about trust as a movement and the fact that this is a massive societal shift where people really care about how business is run and not just how profit is generated. That is a tremendous tailwind for the business we're in and creates advantages for our go-to-market strategy and creates demand in a way that is not impacted by or not so severely impacted by macro circumstances. And the second part is like three technology shifts, right? AI is coming into play and is going to be a very significant catalyst for a lot of the transformation that will happen in the technology space in the coming years. And so we are fortunate to be in what I would call a perfect storm, right, that is generating gigantic tailwind, gigantic waves. And our job is to stay on that wave and surf it as long as you can. So positioning yourself well in the market and being smart about where the macro is going, not just the financial macro, but like the broader world on an economic level is going. It's critical to make sure that you're trying to be as insulated as possible from the end of it.

Megan - 00:14:49: And speaking of headwinds, but how did high interest rates affect your goals for last year?

Guido - 00:14:54: So look, I think we're in a unique privileged position. We have a good amount of capital in the balance sheet. We've raised over a billion dollars. We're at scale, almost past 400 million, going into 500 million of revenue this year. And I think we're not so affected directly by high or low interest rate. We have no debt to serve. We have none of those things. But if anything, part of our money market investment is yielding more income than it was before. But I do think that it's important to know it's a factor that is out there that is a symptom of broader macro instability, being geopolitical, right, or being monetary driven. Your role as a CFO, it's really critical in terms of being able to maintain the right balance and taking the smart risk between defense and offense. And so when I think about how interest rates are not so much impacting, but being an input in the way we think about the market and our strategy, it goes back to this idea of what are the parts of our market and our business that we're insulated by no matter what? And how can we double down, making sure that we generate the right returns from things that are not affected by interest rates? There is always like, whenever there is a shift in the economy, there are like pockets of it that benefit from the shift and pockets of it that are impacted by it. And as a CFO, you want to try to put your assets and your company squarely on the place where you're not impacted, but you're benefited by it. And so watching those trends is a way for you to use as an input in your decision making, in your capital allocation process, and in your strategy. And it goes back to why and how the role of the CFO has evolved, what we were talking about before, and the idea that we want to do this work proactively, right? Effective CFOs look at interest rate as an input to what's happening in the market, in their business, how it's affecting the market their company plays in. And how can you put yourself on the right side of that equation?

Megan - 00:16:53: And when you think about technology, when money's tight and you have not as much to invest, but what areas can a growing organization like OneTrust not afford to underinvest in when it comes to technology?

Guido - 00:17:09: Oh, fantastic question. I think there are two areas and it's very into our DNA. Number one is customer and customer experience, right? Everything starts with a customer, right? And if the customers are not receiving the right level of value from you, they'll progressively look somewhere else and move away. And so you've got to continue to be obsessed and investing in that experience. And then conversely is in the product and innovation in the product. And that's what I'm like when I talked before about plans, right? So we did a lot of work and a lot of effort to not just look at the incremental investment they were making this year into customer experience and product innovation, but also how can we shift the total pool of capital that has been historically allocated to the company so that the disproportionate amount in a time when there is tightness around capital overall, you just change the mix and put more of that towards those two priority, because you know that those are going to be the long-term factor for success. If you have customers that are receiving the right value and the right experience from you, and you have a product that is ever evolving and delivering better and better, the promise to your customer, that is the flywheel of success. And if on top of that, you're a company that is solid and sound and well-positioned from a capital standpoint, and you're generating cashflow, you're like, you have the ultimate freedom of choice around your investment level and around your aggressiveness on the investment that you want to make despite the short-term economic environment being what it is. A lot of those investments also don't translate into immediate result in the P&L of the year, but those are the investments that generate durable growth.

Megan - 00:18:53: And how much have you made plans with a view to the Federal Reserve cutting rates at some point soon? Do you think that's going to happen?

Guido - 00:19:00: I think, yeah, if I knew the answer to that, it would be different. Look, I think that the reality is that, right, this is the perfect example of a non-control, right? And we don't work in investment. We don't work in capital markets. We're also lucky that we're still a private company. We have no needs to raise capital immediately. Whatever the Fed does is whatever they need to do to maintain their objective, right, and their role in the economy and in society overall. And so I think that we're just going to watch what happens and that the fact that it could go down two or three times in the year is going to be half a point, a quarter of a point or a point. That's to me, it's just a factor that it's determining what is actually happening in the economy, right? If the Fed will go more down or less down in their rates, it's going to be just, because the economy is recovering faster because the inflation is cooling and because ultimately there's going to be an equilibrium between our unemployment rate and our interest rates, right? And our inflation. And whatever happens is just going to be like, hey, it's going to go down by 1% versus one and a half or so percent and just be a reflection of all the economy's performance and how quickly it's recovered. I think what is great about it is that the fact that we're talking about how much is going to go down, it implies that everything is going to start to improve and continues to move up into the right, which I think is the real silver lining in in this entire conversation. Let's not forget that 2023 started with very low prediction and actually turned out to be a very solid year for the markets. And all of the prediction around inflation and GDP growth in the United States and unemployment were better than whatever the forecasts were from any institution. So I think that we're now in a position where there's a lot more momentum. There's a lot more positive outlook. And it's just a matter of how positive is going to get in 24 versus 25. And that's the way I think about it, to be honest.

Megan - 00:20:57: And in an unpredictable world, how important is networking for a CFO? Do you find that you are relying on peers more often for advice or what's your view on networking?

Guido - 00:21:11: Oh, yeah, I'm big on networking. And I think that's something that should happen regardless if the world is unpredictable or not. The reality is that we're living in a new reality and it's always going to be more less predictable than it was 10 or 20 years ago. And the same goes for everything, the way you build your career in finance, the way you build your life in general, right? There is no thing anymore where you're staying in your own city where you were born. You live there 40 years and you grow your kids in the same place and so on. So that's moved on us. And in that kind of level of macro change that is going to persist, no matter the short term volatility, your anchors are going to be people that have gone through a journey similar or different than yours. And you can exchange not just technical information with, but also just life approach information. And I think what I like about connecting with other CFOs is two things or three things, actually. One is we're a community of very straight shooter in general. By design, we're people that we're not going to beat around the bush. And so we can very quickly give each other a lot of valuable feedback and perspective. We're also very honest with, yeah, look, I have a point of view here or I can't give you help on this, but talk to this other person. That's what I've seen that is very unique about the community of CFOs, like the network compounds, right? Very quickly. And we're very open to connecting each other to other people that we don't know. So second, third degrees connection happen very naturally and very fast. And that's why you want to be active in there. And third, I think that that is very valuable is not just the part of receiving mentorship. That is great. And I've been very fortunate, especially in New York. There are like many great CFOs and some of them, especially in software and especially in technology, where I've been very fortunate to receive a lot of support and a lot of guidance, but also paying it forward the other way around and talking to people that are coming through the ranks or have their first CFO job. Because that's actually the opportunity to learn as a listener in an environment that you're not familiar with. When you're asking somebody for help, you're still asking for help within your reality, within your dimension of reality. When you're starting to talk to somebody else that needs support, all of a sudden you're open up to a completely different landscape and you learn a lot about another industry or another situation and not just how to deal with your own situation or your own industry. So I think doing it both ways is going to, to me, is like what makes a big difference and making sure that you're very balanced on your time in term of the give and receive. Because in reality there is no giving and receiving. It's you're always receiving even when you're giving. And I think it's a unique experience. It's very for me. And ultimately, when you're helping someone or supporting someone in their journey, it forces you to refracts, it forces you to be crisp about what you're talking about and ultimately those are moments where you connect the dots, looking backward and you're learning about yourself as well.

Megan - 00:24:06: And I know we've touched on this throughout the conversation, but the growth that OneTrust has experienced over the past few years and the money that you guys have been able to raise has been incredible. So what do you credit that to? And do you think it's sustainable?

Guido - 00:24:22: Oh, yeah. This is the thing that attracted me first and foremost to this company, right? When I met our founder, Kabir, it took me 30 minutes to basically commit and say, yes to a 30 minutes conversation over a video call. And it was clear to me that this was like a gigantic market, a big opportunity, a vision that would stand the test of time. And as I mentioned, would serve big waves in terms of tailwinds for long term and durable growth. This company, as I mentioned, went extremely fast to 100 million of revenue. Think about it. There are three major milestones in software, hitting 100 million of recurring revenue, hitting a billion of recurring revenue, and going all the way to 10 billion and beyond. And the average company takes to get to 100 million is five to six. And this company did it in three and a half. And so the market was there and the demand pool was mass. So that's the first signal and the traction. The second one is that, Kabir had a fantastic vision for this being well beyond a single point use case around privacy and thought about it was something much bigger. The societal shift and the trust movement that I talk about that will encompass a variety of discipline and will start to aggregate multiple ladies and markets. And so that is actually the key that attracted a lot of incredible investors from inside to code to TCB to Franklin and most recently other investors in a public space like Sands Capital and Generation to really put in over a billion of capital and push this company through the second wave of change now squarely into our second chapter. And the 500 million revenue mark. And ultimately with a positioning in the market that is very unique. We have 14,000 customers. We have super high level of penetration. Our platform is ubiquitous in the sense that it's an horizontal play across all industry and all geography. So well diversified across industry and geographies as well. And that guarantees the long-term momentum for growth. And if you compound on that, the catalyst of artificial intelligence, I think that's going to drive even further our progress and our progression. Because we live in a world where every company is a data company. And for anyone to innovate, there is a need to have data, and need to use data responsibly. And if data is the coin of this new economy, this coin of two faces is privacy and security. And we're there to help our customer build that infrastructure and be ultimately the enabler of that innovation that is going to continue to happen in the coming years.

Megan - 00:26:55: You're obviously in a great position for the future, but as you think about the future, is there anything that keeps you up at night?

Guido - 00:27:03: Yeah, what keeps me up at night is that, first of all, I would say we have to execute, right? We have to go get this opportunity. As I mentioned before, it's a perfect storm. All the pieces are lined up for us. We need to go do it, right? And 2024 is probably the first year where the complexity for a CFO for a company is that you want to do both growth and profitability together, right? And so how you make sure you achieve that, how you make sure you executing that through balancing act between the two. Prior to 2021, it was all about growth. Then we had a couple of years where people would forego growth to get into shape from a unit economic standpoint and profitability. And now the great assets are demanded to do both. And so I think the ability to do that and release control and operate with context and making sure that we're placing the capital into smart bets and executing well, that's really what keeps me up at night. But what wakes me in the morning and makes me jump out of bed is really the opportunity that we have. And it's just for us to lose. And I think going in with all the energy we have to go get this market and deliver our promise to our customer and ultimately be the true enabler for innovation in this change in technology landscape is a true north. And it's something that creates a lot of excitement and enthusiasm across the company.

Megan - 00:28:22: Guido, thank you so much for being my guest today.

Guido - 00:28:24: No, thank you. It was lovely to talk through a variety of topics and I really enjoyed our time.

Megan - 00:28:29: Yeah, I really enjoyed speaking with you too. And thanks for finding the time to be here with us today to share your experience and knowledge. And I wish you and OneTrust all the best.

Guido - 00:28:38: Fantastic. Thank you so much.

Megan - 00:28:40: And to all of our listeners, please tune in next week. And until then, take care.