Case Study

$5bn Software Company with a Lagging Multiple

Jason Gold
February 1, 2023
10 min read

The problem the client identified

The CEO of Resurge, Jason Gold, knew this company (under NDA) from his time as an investor. Their stock had just gotten hit because people thought they would be bought out, but instead, they were going through a challenging business model transition as an independent public company.

Their valuation was below that of their peers. Management had lost their credibility following a series of missed quarters, and they were now entering a period of turbulence due to a business model transition where investors were unprepared.

The problem we identified

Management had a history of over-promising and under-delivering, which we needed to correct. Also, the business model transition created a layer of opacity that only increased disclosure, and new KPIs could solve.

Management needed to go on an “apology tour,” explaining WHAT the poor results were, WHY they had misexecuted, and HOW they would change things going forward - this would help to re-establish credibility. Additionally, the business model transition necessitated a new KPI to demonstrate the progress of the business.

The work we did

In the four years we worked with this client, we first coached the CEO on how to conduct his apology tour, from scripting his prepared remarks to simulating investor Q&A sessions, and practicing his answers until they were perfect to tell the e story he NEEDED to regain investor confidence. We then worked with the CFO and IR team to craft a “guidance cadence” that would enable the company to beat-and-raise their guidance every quarter with “wiggle room” in case there were any execution missteps. We also worked with the CEO and CFO to tell the story in a way that refocused investors on a new KPI and away from the old “billings” KPI since that wouldn’t be relevant or indicative of the business’s progress during the transition period.

The solution

This company needed to empathize with what investors were feeling since so many of them had been burned following a series of execution missteps. The management team had made so many promises that never came to fruition, which only disappointed and frustrated investors, nearly all of whom had lost money while owning the stock. Hence, investors “rewarded” the company with a bottom-of-the-barrel multiple of forward revenue. We needed to fix the perception that management was “out of touch” and that they were “serial over-promisers.” So we wrote scripts that apologized, took responsibility, and outlined a multi-part plan to address the issues that brought the company to its current place. We also gave investors new KPIs to help them understand the company’s progress throughout the business model transition.

The result

The change in the story led to a changeover in the shareholder base from a very “fast money” group to a more stable group of long-term holders who understood the strategic, long-term value of the company.  

Investors regained confidence in management after a long string of underpromise and overdeliver quarters as they started a more predictable cadence of beating and raising estimates. The new KPIs allowed investors to properly analyze the company and measure their progress through the transition.

When we were first engaged, the company’s stock was ~$35, and their multiple was in the bottom decile of their peers. It was ultimately sold for $58 at a multiple consistent with their peers.

The feedback from the client

CEO: “We brought Jason on as our company was entering a business model transition and our stock just wasn’t reflecting the underlying value of our fundamentals. Our whole executive team found Jason's insights and understanding of investors extremely helpful. He gave us new KPIs to focus the Street on, and was instrumental in adjusting how we told the story. I found his coaching invaluable - particularly as he changed my key talk tracks so that I explained to investors how we got where we are and why things will be different going forward.”
CFO: “I’m an experienced public company CFO, but Jason’s understanding of how investors think and act has been incredibly helpful. We had a traditional IR outsourcing firm before Jason came on board, but they just perpetuated more of the same IR messaging we’d had for years. Jason really shook things up and with enormous success.”
IR: “I heard a lot of complaints from our CEO about how we were undervalued relative to our peers and how people were focused on the wrong thing. I’d spent my career in IR and didn’t quite know how to address these issues. Having Jason on board to help was a huge advantage to me. He really showed us what we were missing and why we were undervalued and helped us fix all those things.”
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Jason Gold
February 1, 2023