OnlyCFO

@Bouazizalex @deel 👀

Wednesday! 👀 The most ambitious launch in @deel's history. It's reshaped the company from the ground up and is the biggest internal breakthrough we've had. I can't wait for you to see it.

@EranBenHorin Debt will suffocate innovation Which will lead to a lot of churn in 2026 (people go to the AI winners) And then quick death spiral because of debt

@OnlyCFO Why many?

Thoma Bravo took $5B to $0 in just 5 years. That’s the power of debt…doubled-edged sword The PE playbook worked for a long time, but Medallia is the first of many more to come. And it’s bad news for all of us. onlycfo.io/p/thoma-bravos…

@PrivCreditGuy Hard to get principal back if FCF is 50% short of the interest payments and terminal value is spiraling to zero tho…

@OnlyCFO I was being sarcastic on the zero; They can definitely keep harvesting cash flows and paying down debt but EBITDA is $200MM vs $2.8Bn of loans

The thumbnail below is some of my best work… onlycfo.io/p/thoma-bravos…

Rising rates and PIK nearly doubled Medallia’s interest payments (see table below) Then taking on even more debt for acquisitions made it nearly 3x. Hard to rebuild for AI with that debt requirements…

@PrivCreditGuy I imagine they will get something right? Will drain it for FCF at least even if they can’t sell it for parts later

@OnlyCFO Likely going to zero for the lenders too

@ChairliftCap They should but I think most are thinking about it but using other metrics for it

@ChairliftCap Plenty of not very smart CFOs But in fairness, very very few talk about ROIC in software

I once had a meeting with an, at the time, mid cap software CFO. I mentioned ROIC once in the meeting and he looked at me all confused and said 'what's that?'

@jasonlk Just not quitting can get you surprisingly far

Startups are hard Personally: - My cofounder walked out the door - I spent all the money - I had to sign at $750k note - Our product failed at our top customer - My VPS told my board I was incompetent - My family didn't understand - I went through recessions Could have quit

Software in general might be risky at the moment, but highly leveraged software companies are very risky. Hard to accelerate/innovate when you got debt payments looming

@BradvanL Both were horizontal and AI pushed them more to nice to have. Don’t want to name names tho :)

@OnlyCFO Which SaaS did you churn from?

Have churned a couple of software vendors this month. Was interesting to watch how far they were willing to drop prices to retain us. Desperate times… Gross margins are going lower

@jasonlk For sure. Gross margin compression is just a side note that I think a lot of folks are thinking about on top of the bigger death spiral of churn and drop in win rates. there are many 2nd/3rd order impacts that will cause the death spiral to be faster then most are modeling

I hear you. I mean most of the crappy pre-AI software we use probably has effectively 95%+ gross margins. We get zero help or support, and it costs nothing to host it (e.g. Marketo). So Marketo should keep us at any costs. Captain Obvious but the general death spiral at the top line on renewals (net positive churn at renewal) to me is a much bigger deal than some gross margin compression We will leave Marketo for an agentic solution at 1/10th the price. And it will be so, so much better

@jasonlk Not immediately because of contract lengths. But it’s happening everywhere. And new business pricing pressure is already hitting too. 18 months I think a lot of gross margins will be 5-10%+ lower (without considering AI drag)

@OnlyCFO For sure, times are even more desperate than they look. Financials are backwards looking But does dropping prices on a >renewal< really lower gross margins all that much?

@CostCutPro One of them was around 50%…

@OnlyCFO How low did they go?

@nrmehta @Kellblog

@OnlyCFO @Kellblog We all have to hope today's rev multiples don't become tomorrows fcf multiples! 😂😂😂

FCF multiples are the new revenue multiples

ServiceNow at its lowest FCF multiple ever.