This podcast is for informational purposes only. Views expressed are those of the individuals and not necessarily the views of Thoma Bravo or its affiliates. Thoma Bravo Funds generally hold interest in the company's discussed. This podcast should not be construed as an offer to solicit the purchase of any interest in any Thoma Bravo Fund.
Transcript
SCOTT CRABILL, HOST:
Bill, given we, uh, uh, focus our efforts here in the fitness industry, I'm, I'm curious, what was your workout routine, uh, during COVID?
Guest
BILL DAVIS, GUEST:
(laughs). Stress, I'll tell you, stress kept my weight off (laughs). Um, but, um, we witnessed in less than 30 days, ABC's revenues going from 100% to less than 10%. And yet the mindset of everyone was, we're not playing for the next 30 days or three months. You know, we've gotta do the right thing. And the support in the manner at which Thoma Bravo, you know, just stood right behind us, it was phenomenal. And, you know, by the time we exited 2020, you know, our revenues had returned to just below 90% of where we were going into the pandemic.
ORLANDO BRAVO, HOST:
Welcome to Thoma Bravo's Behind The Deal. I'm Orlando Bravo, founder and managing partner of Thoma Bravo, one of the largest software investors in the world. And you just heard from Bill Davis, president and CEO of ABC Fitness. In conversation with Scott Crabill, one of our managing partners at Thoma Bravo. Back in 2018, we acquired ABC Fitness and partnered with him to make it the leading software provider of some of the largest gyms in the United States and beyond.
ABC Fitness was acquired in November 2018, led by my partner Scott Crabill. And at the time, our investment thesis was to continue to build the leading vertical market software in gyms and healthcare facilities. The deal was going well through its trajectory. We partnered with a great CEO Bill Davis, who I actually had met in the year 2000 when I was just starting out in private equity when I was an associate. It's kind of really fun how you meet somebody and you meet a great executive, and so many years later you end up partnering with a high quality company that they're leading. And throughout the course of our investment, things were going well. 2019 was a good year, and all of a sudden in Q1 of 2020, COVID hit and think about what happens to gyms when COVID hit, they all closed down. And ABC gets paid by the members.
They have a unique business model that in a way you think about gyms, a membership is growing, people are hopefully becoming healthier, and therefore you participate in that growth together with your customers. So how could you keep the company together during a time when you were receiving very little to no revenue? It's like you had to put together a completely new business plan, throw away the deal model, and come up with a creative way to once again, keep the company together. And I remember so many conversations between Scott, the investment team, Bill Davis and his management team, and I participated in some of them where we were trying to predict, "When does it come back Q3 of 2020, Q4 of 2020, Q1? How much runway do we need? And when it comes back, what is the ramp of revenue that we're gonna get? How long will we have to be in this environment?"
And as Marcel Bernard, my operating mentor, always said, "In times of crisis, it's better to be overly conservative than overly optimistic." So we kept pushing the timeline that we expected of when gyms were gonna be able to function further and further and further out in the horizon. And in the process, it was so interesting. The company was able to use the most difficult time for the business in order to come out of it so much stronger that they would've been without it. When gyms finally started opening and revenue started flowing back in, having kept our product investment intact with a really powerful technology team that was very committed and was willing to put up some sacrifices to make it happen. And that's a big value of culture and leadership. We, as an investment firm, were doing our part and backing them with more capital to invest in acquisitions and continue the product.
And this is, for me, in 20 years, one of the most impressive case studies on dealing with adversity. So today you'll hear the story behind the deal of this acquisition from Scott Crabill, the deal lead at Thoma Bravo who brought it all together, followed by a conversation between Scott and Bill Davis, president and CEO of ABC Fitness.
CRABILL:
I'm Scott Crabill, I'm one of the managing partners of Thoma Bravo. I've had a 30-year career in private equity, 20 years of which I've been at Thoma Bravo. There's a lot I love about my job. I like the analytical nature of the job. I've always been a numbers' person, um, and it satisfies my analytical curiosity. But I also like how my responsibilities are pretty diverse. It's not just about analytics. You know, you really have to be an all around business person, all around athlete. And at any moment you could be dealing with questions of strategy, sales, marketing, development, law, legal, um, and you really have to enjoy dealing with people 'cause it's a very social job. And we are, uh, very active and very social and dealing with people who are super smart, super intelligent, highly motivated, and I think that's really hard to, to match.
So generally at Thoma Bravo, we have a very collaborative relationship with the management teams of the companies that we buy and that we work with. And it's, it's really a true one-to-one partnership between Thoma Bravo and Management. And that relationship, uh, at Thoma Bravo is, is both our investment team and our investment partners, of which I'm the investment partner on the ABC deal and also our operating partner team. And we have two or three operating partners on the board of, of each company. And the investment partner who leads the deal really has a strong relationship with the CEO of the company, a regular dialogue and basically is there to help that CEO in whatever strategic, operational or growth effort is required. You know, we really believe you want to tackle the most important initiatives, if you try to do too much, you know, you'll lose the forest through the trees. Um, so stay very close to the CEO on those value creation initiatives and be a sounding board and also, you know, someone who can kind of bring the right resources to bear to help drive those initiatives.
The first time I actually had heard of ABC Fitness was in the spring of, of that year, the spring of 2017. And, you know, sometimes we know a business for 10, 20 years before we buy it. This one we knew for about nine months. And the way it came about is we have a deal team led by Pete Stefanski and Eric Doolittle that identified the fitness market as a big opportunity. So they spent some time in the spring of 2017 investigating the market, looking for technology providers that sell into that vertical. And they started by looking at a public company. There was only one company in that market that had gone public that had gotten the scale and was big enough to, to become a public company. It was a company called Mind Body. And they provided technology in the market, but more into the boutique part of the market, uh, meaning small mom and pop studios.
So think about Yoga studios, Pilate Studios, maybe bar method studios, small facilities that would have classes and, and, and folks would come in and pay by the class. Um, and it was an interesting market. There were some good growth trends around that market, but that part of the market didn't have the fundamentals that we'd look for in a Thoma Bravo investment, um, because those businesses went out of business a lot. So a few would pop up, they'd operate for a while, go out of business, some others would pop up. So there was high churn in the customer base. So we quickly pivoted from that part of the market to the big box gym market. And these are folks like Planet Fitness, Anytime Fitness, Crunch Fitness, 24 Hour Fitness, Gold's Gym, those types of customers.
These are facilities that are really big from a square footage perspective, have all the cardio equipment, strength training equipment and are generally affordable. So anywhere from $20 a month to $40 a month, that part of the market was really growing and it was, was much more stable. And we really liked that part of the market. So we said, who's the leading provider in the market? We started calling around, talking to the customers, "Who do you use for your technology provider?" And the name ABC Fitness just kept coming up and coming up and coming up and it was clear that they were the market leader in the space. And we really drilled down on ABC as the, the number one platform opportunity for us in the market.
So after we conducted that research in the spring of 2017 and determined that ABC was the platform that we were really interested in buying in the space, our team reached out to the company directly and began a dialogue with the CEO and the CFO of the business. Paul Schaller was the CEO, Bob Whisnant was the CFO. Um, expressed our interest in acquiring the company, as we often do when we find platform companies that we'd like to own over time. Um, whether it be, you know, quickly or at some point down the road. And there was a, a, a dialogue that we had and, and we understood from Paul and Bob that there was a potential transaction coming down the pike, coming down the road. And the reason the company was gonna be for sale is the business was started in 1981 by a, uh, a gentleman by the name of Jim Butin.
And Jim owned, uh, a couple of fitness facilities in Little Rock, Arkansas. And as part of those businesses, he was trying to figure out how to bill his customers and how to accept payments. Um, there wasn't an established solution. So he built his own solution and started billing and handling payments through his own software for his fitness facilities. He quickly determined that the software business was a better business than the, the gym business. And so he started selling that system to his competitors in Arkansas and in, in other states. And, and eventually that became his, his business. He divested the fitness facilities and focused on the billing and, and payments engine and the, the software platform. And he'd run the business for 40 years. Um, and it became time for him to transition leadership to Paul and Bob and the rest of the team. And also became time for him to monetize, you know, that 40 years of, of effort in, in building a business.
And he had other interests. He was a professional pickleball player and, um, wanted to do other other things. So he was looking to pass down the business to his executive team, uh, to Paul Schaller and Bob Whisnant and, and the rest of the team. And he gave them a lot of leeway in terms of picking the right partner for them. Price wasn't necessarily the number one factor in the deal. But it was important, but more important was the partner that Paul and Bob wanted to build the business with. And so it was all about relationship building and we just clicked with the management team from the very beginning, um, really just an A plus group of people that wanted to do right by their customer and also wanted a partner to help them really professionalize the business and grow the business and scale it to the next level.
So we bonded with the team from the very beginning and the moment, you know, of course it was stressful. Um, you know, in terms of winning the deal, it was a competitive process and it's always, always stressful. But there was a moment when I felt really good about our chances here, and it was when Paul Schaller invited me to Little Rock, Arkansas to have lunch with the founder, Mr. Butin, as they as they called him. And we hadn't had an opportunity to meet him up to this point, but I knew, you know, having, having that lunch set up that that was a good signal, that we were the, the preferred partner, you know, to move forward and win the deal. There were a few moments where we felt like the deal might not happen even after having lunch with Mr. Butin and feeling like we were the, the selected partner.
And in fact, one, we had gotten to the point where we'd signed a, a term sheet and an agreement and had a handshake agreement on evaluation and a deal that we were moving forward with. And we were getting the paperwork all put together, the definitive merger agreement and the financing a agreements and, and all that. And I got a call from the investment bankers telling me that one of our competitors, a private equity firm that had an asset in the space, um, and really wanted to buy the company, had lobbed in a topping bid. So knowing that we had signed a, a letter of intent and were moving forward to, to complete a deal, they threw in a bid that was 20, $25 million in purchase price higher than, than our bid. And I, I definitely had one of those freak out moments.
And in fact, I, I remember I was lan- I had landed in Little Rock, Arkansas to work on the, the paperwork and finalize everything and I was coming off the plane and going down the escalator when I got that call. And I had a, a, a freak-out moment for sure. Got in a taxi, went to the hotel and got up the courage to call Paul the CEO and tell him, "Hey, I just talked to the banker. They told me so this group put in a topping bid. I'm kind of nervous about it. What do you think?" And Paul reassured me that, "Hey, a deal is a deal. We have a handshake agreement. We're working with you. A deal is a deal. We had to tell you that they put in a topping bid because it's part of the letter of intent that says if somebody puts in another bid, we've gotta tell you, but we have no intention of moving away from you. You're our partner, we're gonna do this together and build the business." And so he reassured me pretty quickly.
So Thoma Bravo announced the acquisition of ABC Fitness in early December of 2017, and we closed the, the acquisition right at the end of the year. So that was December 31st or, or January 1st, 2018. I can't remember, uh, exactly. But basically it was a, a year-end close and about a year into our investment horizon with ABC fitness, Paul Schaller really realized that we needed to bring on a new management team who really understood how to scale a go-to-market effort and had done it before at, at another software company. So we met Bill Davis in 2018 as we were recruiting operating partners. And an operating partner at Thoma Bravo is an individual that has operating experience with software and technology companies. And that comes to Thoma Bravo to mentor the next generation of, of management.
We brought Bill on in, in 2018. Bill had been the CFO of three or four software companies, all of which we had tried to buy at one point in time. And Bill was kind of looking for his next opportunity, excited about the operating partner role at, at, at Thoma Bravo. We put him on the board of ABC Fitness, uh, we had owned for probably six months by the time Bill came on board. And quickly after becoming an operating partner, Bill had the itch to get back into true operations and really wanted to be a CEO. You know, he'd been a CFO a number of times and he was ready to take that step into becoming a, a, a CEO And he thought he wanted to be an operating partner, but I think he just got that itch to, to be a CEO.
And it was really Paul's idea. And Paul was the one that recruited Bill off the board to come join as, as CEO. And we were obviously very supportive of that and, and, and recruited Bill with Paul, alongside Paul. And so Bill joined and early 2019 and Paul moved up to the board and he's been a valuable board member for the last three or four years. Uh, and Bill set about, uh, you know, really, um, expand the management team with folks in each functional area that had, that had done it before, that had gone through a technology transformation, that had scaled to go to market, you know, that had professional product management expertise, marketing expertise. Um, and so over the next couple of years, Bill r- really enhanced the management team, built it out, you know, to kind of a, a, a, a real A plus group that could kind of take us to the next level.
So after we brought on Bill as CEO, the business performed incredibly well and it really had, from the time we bought the business, when we put our underwriting model together for our four to five year investment hold, for the first two years, 2018 and 2019, everything went exactly to plan. Not only from a financial perspective, but from a customer acquisition perspective, from a strategic perspective, the technology transition and the development was, was going great. And this looked like we were just on a trajectory that was up and to the right. And even 2020 started off really, really strong.
In the fitness space, members generally sign up in, in January and February, they sign up throughout the year, but everyone has their New Year's resolution and you get a big, uh, sign up in, in January. And we had a great 2020 January, February sign up and then all of a sudden in March of 2020, COVID hit and everything changed. Stick around for my conversation with Bill Davis, president and CEO of ABC Fitness. Thoma Bravo's Behind The Deal will be right back. Welcome back to Thoma Bravo's Behind The Deal. Here's my conversation with Bill Davis, president and CEO of ABC Fitness. Hello?
DAVIS:
Hey.
CRABILL:
Hello. There he is. What's up Bill?
DAVIS:
How you doing Scott?
CRABILL:
I'm good.
DAVIS:
I was gonna say, you look like you're a radio DJ Scott.
CRABILL:
Oh, yeah? Yeah.
DAVIS:
(laughs).
CRABILL:
I got the big microphone, got the headphones in. We're all set here. So Bill, do you remember the first time we met?
DAVIS:
I actually believe Scott, the first time you and I met was when AJ brought me in to interview for the operating partner. 'Cause I went through the paces with all of you guys. But, um, we, I remember vividly making the initial connection of Ohio, the Buckeyes and us having that in common.
CRABILL:
Yeah.
DAVIS:
So we have, uh, some occasion to be in the, in Columbus, written on our, our favorite Buckeyes, so.
CRABILL:
Well, and Cincinnati Bengals fans as well.
DAVIS:
That's right. And then I think I might have shared with you my experience of meeting Orlando literally 20 years prior when it was Thoma Cressey. And, uh, he was thinking about doing a rollup of all these IT consulting firms for which I was part of. And he had such a really interesting perspective. And what what was fascinating was, and we didn't, I'm not sure he even knew it at the time, but he was in the early stages of pivoting Thoma Cressey to become what Thoma Bravo is today in terms of, you know, focusing on, uh, technology companies exclusively. 'Cause at that time they were like many other private equity firms, more diversified in the industries that they were, you know, focused on from an investment perspective.
So just a really thoughtful, really bright mind in terms of just thinking about, you know, how you capitalize on dislocation in the marketplace. Because if you recall 2000, you know, in the dotcom bus, there was a lot of dislocation and he was really trying to seize the opportunities that he saw best to benefit Thoma Cressey, which ultimately became Thoma Bravo. So I remember, I, I, I remember that conversation in that room. And then when, when it was suggested that I would first be associated with a ABC, what was it at the time ABC Financial-
CRABILL:
Yeah.
DAVIS:
... having conversation with you and Jim Lyons.
CRABILL:
Well, it's, it's funny that we didn't meet before that because you were the CFO of three companies, three software companies and verticals that I cover, right? Allscripts in the healthcare IT space-
DAVIS:
Yeah.
CRABILL:
... Blackboard in the educational technology space and, and Pay, Pay-
DAVIS:
Pay-
CRABILL:
... Paycor.
DAVIS:
Paycor. Paycor.
CRABILL:
Paycor.
DAVIS:
Yeah.
CRABILL:
In the, uh, in the HR software-
DAVIS:
Yeah.
CRABILL:
... space. And-
DAVIS:
Right.
CRABILL:
... we, we, we got to know each of those companies, but I think we got to know them either before or after you had already moved on to the next opportunity.
DAVIS:
Yeah.
CRABILL:
So we never-
DAVIS:
I think that that's definitely true on Paycor, I'm sorry, on Allscripts and on Blackboard. Uh, Paycor, you guys, you guys made an early decision, you know, not to, not to proceed in that process. I, I think again, the profitability was, was, uh, a bit, a bit low. So yeah, you're right.
CRABILL:
Yeah.
DAVIS:
It's kind of interesting that we have that overlap or commonality at different times.
CRABILL:
And I, one distinct thing that I remember from, from us meeting was we were recruiting you to become an operating partner at Thoma Bravo.
DAVIS:
Right.
CRABILL:
And you'd had CFO experience and COO experience-
DAVIS:
Right.
CRABILL:
... but not yet been the, the CEO.
DAVIS:
Right.
CRABILL:
And we talked about the different operating partner types we have here at Thoma Bravo. And the, and the two main ones are CEO operating partners who really mentor the CEO typically are chairman of the board and CFO operating partners who are responsible for onboarding, working with the CFO, getting our metrics and processes in place. And, and I think we talked about, "Oh yeah, t- this CFO type operating partner makes a ton of sense for you. You got all this experience." And you said, "No, no, no, no, no-"
DAVIS:
Yeah.
CRABILL:
"... I wanna be the CEO operating partner."
DAVIS:
(laughs).
CRABILL:
And that should have been my first sign, my first signal that this operating partner thing wasn't gonna last for you. That-
DAVIS:
Yeah.
CRABILL:
... you really wanted to sit in that chair and be a CEO.
DAVIS:
Yeah. I, you're spot on. That was, that was, uh, I was probably a bit, a bit bullish, uh, more so than I should have been, but, uh, that certainly the, that was where my interest lied. I joke all the time, I don't know if you and I have talked about this extensively as to whether or not the, the notion of interviewing me for as an operating partner was just a front, a front to ultimately get me into ABC 'cause it (laughs) happened so, it happened so quickly and it was like, "Wait a minute, I didn't even get the, I didn't even get my business cards as an operating partner before we were talking about going in there on a full-time basis."
CRABILL:
Well, we're not smart enough to actually execute on that devious of a plan (laughs). Um, it did work out great, I think for, for, for both of us.
DAVIS:
Oh, that's, that's right.
CRABILL:
Um, but, uh, but no, AJ brought you in under the, the, the complete and true, uh, context of being an operating partner and, and we wanted you in that regard. And we, and we need talented operating partners. It's a, a, a huge need for us was at that time and continues to be. So we need to recruit really, really good talent into that role.
DAVIS:
Yeah.
CRABILL:
And and we did and we put you on that ABC board. And I think it was clear that, you know, really Paul Schaller who said, "Hey, we need to, you know, we need a, a different take and we need to professionalize this team."
DAVIS:
Yeah.
CRABILL:
"We need a team that can come in and lead this technology transition and build a go-to-market effort and take us to the next level." And I think it was fortuitous that you kind of figured out, "Hey, I really, this operating partner thing is great, but I wanna-"
DAVIS:
Yeah.
CRABILL:
"... run a company. Let's go, let's go do this." And it's been an awesome ride.
DAVIS:
Yeah.
CRABILL:
And I can't remember the timeline, but I think we, I think you joined as a board member in 2018 and then you became a CEO-
DAVIS:
It was December.
CRABILL:
Yeah, December 2018, became CEO in February, right? Oh.
DAVIS:
No, it was, it literally yesterday, it was my four year, uh, four year anniversary. So, uh-
CRABILL:
Right.
DAVIS:
... it was that, uh, it was that quick. So, yeah.
CRABILL:
But as soon as you joined, we started looking at an acquisition that would've doubled the size of the business, right?
DAVIS:
That, yeah.
CRABILL:
Um, and I think you said, "Hey, you know, we got some things that we gotta work on here. We gotta, we gotta work on the platform a little bit before we-"
DAVIS:
Yeah.
CRABILL:
"... go do this."
DAVIS:
That, that acquisition and you, again, your support, 'cause it would've been all too easy to just say, "Hey, this makes a lot of sense on the, you know, on the spreadsheet if you will, in terms of one plus one being something greater than two." But our, our willingness and ability to recognize the business wasn't prepared for it and probably would've, you know, caused it to be, um, an unsuccessful transaction, you know, was, uh, a true testament to, to time horizon and perspective that you guys were, you guys were thinking about this investment along. And the great news is that we, we got to where we needed to, to where we now are capable of doing transformative acquisitions and having a lot of fun doing it.
CRABILL:
Yeah. But when you started, Bill, you know, we were about a year into the investment.
DAVIS:
Yeah.
CRABILL:
And things had gone very well in 2018. We'd kind of hit our budget, hit our plan, hit our underwriting case. We were on the way to, to doing that again in 2019. And the big initiatives that we had, and partially what led to bringing you on board as CEO of the business and then you building on a management team was to help the company get through a technology transition, right? They had built their platform in the '80s and '90s, it was built on mainframe technology. They'd realized the need to re-platform essentially and build the product again from scratch in modern technology to make it scalable and efficient and extensible. And they'd spent a year and probably $10 million and, and, but needed direction from a team that really understood how to do that.
And the second thing was they'd never really built a go-to-market function. I think the company had 15 sales and marketing professionals out of a 850 person company and they built $130 million business with 1200 customers with almost no sales and marketing resources. So those were sort of the two, you know, initiatives that you stepped into and then just accelerated in a, in a big way.
DAVIS:
Well, thanks for that. I, yeah, t- the, I, I often talk about it in the terms of, you know, ABC was for 37 some odd years, a tech enabled service company. And that unto itself has a certain mindset, a certain skillset, uh, associated with it. And as we were all acknowledging to capitalize on the market opportunity before it, it really needed to become a true technology company. And we were very fortunate in what ended up being about four or five months attracting some really, really, you know, capable, uh, folks.
In fact, a funny side story, Scott, you'll recall, one such individual, uh, who is, um, you know, one of my right-hand people today, Cal Rye. You know, Cal was coming out of another Thoma Bravo portfolio company. There was clear expectation that he was gonna go into an operating partner role. And I actually had a bet with Paul Zuber that I could convince him to join me in the, in the ABC ride. And, uh, I won that bet.
CRABILL:
(laughs).
DAVIS:
So, which was, which proved to be candidly, you know, one of the best hires I made 'cause he, he brought, uh, just an unbelievable, not just technical skillset, but change, you know, change management cultural kind of transformation aptitude that was, is just proven to be really, really, you know, beneficial. So that pivot to becoming truly technology driven with competent product management leadership and thinking about roadmap and how we were gonna execute against that roadmap, but our maturity or capacity to, to really scale, you know, highly repeatable go-to market organization. Um, in many respects we started at ground zero.
And, uh, there again, we were very fortunate attracting really skilled leadership in our leader ended up deciding to join us, if you recall, right in the midst of the pandemic. And which was risky for her and it was risky for us. But over the last, uh, three years, you know, we've witnessed a hundred plus percent growth, you know, year-on-year because of what we've been able to do both on the technology side, but also on go-to-market execution.
CRABILL:
Oh, yeah. And on the go-to-market side, you have an organization that looks nothing like it did-
DAVIS:
Nothing.
CRABILL:
... back in, in, in February of 2019. I mean, from a scale perspective, from a segmentation perspective, from a capabilities' perspective, it's a, it's a whole new world and, and bookings have, you know, tripled or quadrupled since that, that time. So the proof-
DAVIS:
That's right.
CRABILL:
... is in the pudding.
DAVIS:
That's right. And the exciting thing is there's just a tremendous amount of market opportunity for us still to still to pursue.
CRABILL:
So we're into 2020, the budget looks great, lots of signups at the, at all of our gyms in January of 2020. And then March of 2020 comes and COVID hits and the world changes (laughs) in the blink of an eye. Uh, maybe we can can talk a little bit about what that felt like-
DAVIS:
Yeah.
CRABILL:
... when it happened, the impact and how, you know, how you all reacted and, and uh, and really changed, um, the dynamics of the business to make sure that we stayed on the straight and narrow.
DAVIS:
Yeah. Well I think you and I spoke every single day, week of March 17th. I remember it vividly in that, uh, I was in Dallas and we were actually slated to roll out to the market our new name, moving from a ABC Financial to ABC Fitness, our new branding. All of that was happening or expected to happen that week.
CRABILL:
Mm-hmm.
DAVIS:
And we, uh, because of what was unraveling as rapidly as it was, we canceled, uh, that announcement. Um, I had to fly to Washington DC because we were given one day to get my son outta Georgetown, uh, University out of the dorms.
CRABILL:
(laughs).
DAVIS:
So you, but you and I were, we were talking, uh, I remember walking at the hotel lobby, you and I talking extensively and I think we both, you know, were concerned about how bad it could be. But what I remember vividly was there was clear alignment that, you know, we've got to take a customer and member, uh, centric approach to kind of how we were gonna respond to this and preserve as much optionality or flexibility as we possibly could. And, uh, I, I, I remember Thursday of that week, uh, we had our initial conversation with, if you recall, Orlando was kind of making his rounds, you know, with the different portfolio companies asking how we were planted to respond.
And we were, we, we shared with him, we were in the midst of, you know, our action plan and we would be ready to not only present it back to you guys on Saturday, but you know, we'd be prepared to execute it come that following Monday. So, you know, within five days time we were, we were mobilizing, you know, kind of our response, which was a compliment of a fairly large furlough, you know, executives doing the right thing from a compensation perspective. Us really, you know, trying to, uh, right size our cost as much as humanly possible to, for lack of a better term, weather the storm.
And we witnessed in less than 30 days, ABC's revenues going from 100% to less than 10%. And yet the mindset of everyone was, we're not playing for the next 30 or 30 days or three months, you know, we've gotta do the right thing. And recognizing that, you know, we ended up becoming the place that many of our customers members were calling because nobody was there to answer the phone at the clubs. You know, we had to make some difficult trade-offs in terms of how we resource that and the like.
But the support in the manner at which Thoma Bravo, you know, just stood right behind us and, and afforded us a opportunity to make the right decisions such that when things started to come back, literally in late April when, when it, uh, Georgia, you know, started to open back up, you know, it was, it was phenomenal. And, you know, by the time we exited 2020, you know, our revenues had returned to, I think we were just below 90% of where we were going into the pandemic. So it was that rapid of a decline and then that, uh, steady of an increase over what mounted to be about nine months, uh, you know, cumulatively.
CRABILL:
Well, you, you and your team did an absolutely amazing job during those tough times. And you had the full force of Thoma Bravo weighing on you because in our portfolio of 50 plus software companies, ABC was the most impacted by what was happening in, in in those times because the business started as a billings and payments engine and evolved over time into a club management, member management-
DAVIS:
Yeah.
CRABILL:
... member engagement software business on top of the billings and payments engine. But the revenue model was still based on a percentage of the member dues on a-
DAVIS:
That's right.
CRABILL:
... on a monthly basis. And so, uh, when the gyms closed, and it was the only company in our portfolio where the customers shut down.
DAVIS:
That's right.
CRABILL:
... in March of, of 2020 literally closed the doors, shuttered the doors, stopped charging their their members. And I remember when I had that realization, 'cause most of our companies didn't have that, that dynamic. And it was, it was scary (laughs).
DAVIS:
Yeah.
CRABILL:
It was-
DAVIS:
Yeah.
CRABILL:
... it was, because you didn't know again, how long it was gonna last. I mean, at first we thought it was only gonna be maybe a couple weeks we'll be back up and running no problem. But, you know, three or four weeks into it, it started to look pretty, pretty dire.
DAVIS:
Yeah.
CRABILL:
And you had the full weight of, of Thoma Bravo, um, kind of calling you up and saying, "All right, let's talk about how we're gonna, how we're gonna get through this."
DAVIS:
Yeah.
CRABILL:
And we've got lots of playbooks on how we, uh, how we do this, but we'd never seen anything like that, right?
DAVIS:
Yeah.
CRABILL:
So we, we were kind of creating it on the, on the fly. And you, you and your team just leapt into action and made some tough decisions, really tough decisions with the customer base and with the, you know, the, the employee base and the cost structure of the business, um, and liquidity of the business to, to make sure that we, you know, we live to fight another day.
DAVIS:
Yeah. But it is, you know... Thank you for that. But, and you and I have talked about this before, the way ABC behaved in the market during that difficult time is gonna pay dividends for us, literally for decades because many of our competitors took a very short term view and did not do what was right for their customers or the membership base, including continuing to bill when they shouldn't have billed or charging, you know, subscription fees when, when nothing was in essence being utilized.
And again, you, we were, we were locked step in terms of, you know, "We've gotta do what's right for our customers and members. It's gonna hurt, it's gonna necessitate more dramatic action in terms of managing our cost structure, but it's the right thing to do and it's ultimately, you know, going to be recognized, um, you know, with benefit of hindsight that it was the right thing to do." And, um, I can, I could tell you to this day, there are conversations I find myself in where that's recalled and, you know, I can, I can assure you we've won business by virtue of how we behaved in, in the pandemic. And, uh, it's a, it's a valuable lesson learned in terms of, you know, uh-
CRABILL:
Yeah.
DAVIS:
... dire, dire circumstances like that, how you choose to respond.
CRABILL:
And the other two courageous decisions that were made that you, you and your team drove were one, we didn't cut back $1 on the spending for the new platform, not-
DAVIS:
That's right.
CRABILL:
... $1 despite the, the what was happening on the, on the top line. And that's paid dividends as we're rolling out the new product today. If we had, if we had cut back development, it'd be another 12, 18 months, who knows-
DAVIS:
Exactly. Right.
CRABILL:
... how long it would've taken to spin it back up. And the second thing was to get aggressive about acquisitions, to build out the product portfolio at a time when, you know, y- you, it's hard to, hard to get financing, you had to have a lot of courage to make investments. And you drove four or five acquisitions, business intelligence, customer relationship management, mobile trainers, and we've come out the back end o- of, of that being the best decision that that, that we ever-
DAVIS:
Yeah.
CRABILL:
... made together.
DAVIS:
Yeah. So again, Scott, you know, as I think about when I came into the business, you know, ABC was revered for 37 years as really being a, a member management and a billing company. And what we recognize strategically was there was an opportunity to, um, through a build by partner strategy, aggregate a bunch of different point solutions, you know, that were, um, kind of in the fitness market to really develop what is now ABC Ignite our new offering, which is a completely integrated, true end-to-end club management solution.
And it affords us an opportunity to help our, our customers from a member acquisition perspective all the way through that entire life cycle, you know, all the way through the, you know, the collection or the billing and collection of, you know, that membership due and everything that's in between. And again, just the opportunity to have the flexibility to think about that not purely organically or purely from an M&A perspective, but how we were capable of doing that through a compliment of both, including our commitment to invest through the uncertain times of the pandemic and kind of see that through the way that we did, I just think is a, is a just a phenomenal, phenomenal success story.
CRABILL:
Bill, given we, uh, uh, focus our efforts here in the fitness industry, I'm, I'm curious, what was your workout routine, uh, during COVID?
DAVIS:
(laughs). Stress, I'll tell you, stress kept my weight off (laughs). Um, but I'm an avid runner, so I really didn't feel like, you know, through the pandemic, my routine was materially, uh, disrupted in that I was afforded a chance to go out and run outside, you know, four or five days a week. So, you know, that's what I availed myself of, but it was, it was pretty, pretty stressful period. So those, uh, those opportunities to work out, you know, and it's, it's being talked about a lot in the fitness industry. The, the benefits from a health or mental health perspective proved to be as valuable as the physical benefits, and I was a testament to that truth, uh, personally, for sure.
CRABILL:
So my pandemic, uh, workout routine was definitely disrupted. I was a habitual gym user, both for strength training, using cardio equipment and a swimmer, my favorite form of exercise is swimming. So all my places that I went, my swimming, uh, facility was indoors here in the city. The gyms were obviously indoors, they all shut down. So I had to change my routine, uh, pretty dramatically. I found a place to swim up in Marin, so I would drive across the, the bridge at 5:30 in the morning. Outdoor facility where they had the space where you couldn't, couldn't swim in every lane. You had to space one lane, keep one lane open, and someone could be in the lane two over and you'd have to reserve a spot, uh, before you went to the facility.
And then second, um, I had a personal trainer at one of these gyms and I started doing it at home with him over Zoom. And so that was a bit of a precursor for our acquisition to Trainer Eyes, tools to enable, you know, the interaction between a, a, a client and a, and a, and a personal trainer. I could have used those, those tools back at the-
DAVIS:
Yeah.
CRABILL:
... beginning of the, of the pandemic. But that, that's how, that's how I dealt with it.
DAVIS:
What we've observed, you know, post pandemic is it hasn't been a pendulum that either has stayed 100% remote or 100% back in the club. What we're observing, and again, we're, we're benefiting from, just from an offering perspective, it's really proven to be a hybrid. And where, you know, people are returning to the gyms at record levels, but also availing themselves as some of the remote tools, um, in-home capabilities that, you know, became prevalent during the, during the pandemic. And, uh, it's exciting 'cause hopefully that means more people are prioritizing their health and, and overall, you know, fitness and wellness.
CRABILL:
Yeah. Well, Bill, look, thank you so much for taking the time to do this. I know you're busy, but we really appreciate it.
DAVIS:
Well, it's my, it's been my pleasure and I love talking about ABC Fitness. Uh, always enjoy catching up with you, Scott. And, uh, again, just really, really appreciate all the support that, uh, you know, you guys have afforded us here at ABC. And, uh, happy to do this anytime.
CRABILL:
Awesome, thank you. Thanks for listening to my conversation with Bill Davis. If you wanna learn more about the work he and ABC Fitness are doing to transform the way health and fitness clubs do business, you can head to abcfitness.com. Stay tuned for more stories behind the deal on our next episode. I'm Scott Crabill. Thanks again for listening.
BRAVO:
Thoma Bravo's Behind The Deal is produced by Thoma Bravo in partnership with Pod People. Stay tuned for more stories behind the deal. I'm Orlando Bravo. Thanks for listening.
