In this episode of Behind the Deal, Thoma Bravo’s A.J. Rohde and George Jaber sit down with HCSS President and CEO Steve McGough to explore the company’s journey—from its beginnings in the late ‘80s to creating HeavyBid, an industry-leading estimating software for heavy civil contractors.
AIR DATE:
February 13, 2025
LENGTH:
22:26
DISCLAIMER:
This podcast is for informational purposes only and does not constitute an advertisement. 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 companies discussed. This podcast should not be construed as an offer to solicit the purchase of any interest of any Thoma Bravo fund.
Transcript
ORLANDO BRAVO:
Welcome to Thoma Bravo’s Behind the Deal. I'm Orlando Bravo, Founder and Managing Partner at Thoma Bravo. And that was Steve McGough, CEO of HCSS, speaking with Thoma Bravo Senior Partner A.J. Rohde and Thoma Bravo Principal George Jaber.
HCSS, based in Sugar Land Texas, right outside of Houston, is among the largest heavy civil construction software companies in the world. The company's products has been used on many of the world's most famous infrastructure projects: the Tappan Zee bridge in New York, the Panama Canal, and the F1 Track in Vegas. The company’s software allows contractors to first bid and estimate projects and manage the entire project, all while keeping workers safe. HCSS does far more than roads, highways, and bridges. They are leaders in utilities, telecom, power & energy, airports, dams, and marine infrastructure.
The company has a 40-year history and CEO Steve McGough has been with HCSS for over 20 years in different capacities: President, COO and CFO. Thoma Bravo acquired HCSS in 2021, continuing our theme of investing in construction software.
In this episode, you’ll hear how Thoma Bravo navigated acquiring a 37-year old company from its founder Mike Rydin, and since then, how we have kept the HCSS culture special, while investing heavily in new end markets, like utilities.
And today, we’re also going to do something a little different. Thoma Bravo Principal George Jaber will be joining Senior Partner A.J. Rohde to discuss everything that went on ‘Behind the Deal’ -- followed by their conversation with HCSS CEO, Steve McGough.
A.J. RHODE:
Hi, everyone, I'm A.J. Rohde. I'm a senior partner here at Thoma Bravo. I've been here almost sixteen years now since basically, we helped start Thoma Bravo as a separate, separate software only investment fund. I started and run the Discover Fund and the European Fund here Thoma Bravo. And my focus area is really the middle market. I started a smaller version of the core flagship fund many, many years ago. That was a Discover fund. George, you're here obviously here with me today. You were you were, I think, employee number three as part of that effort. So you've been with me since day one and really helped build this franchise to what it is today from a $1 billion fund to an $8 billion fund almost. That's my background.
GEORGE JABER:
It's great to be here.
A.J. RHODE:
Tell us a little about yourself.
GEORGE JABER:
Yeah. I'm George Jaber. I'm a principal with Thoma Bravo. Like AJ said, I've been in the firm for ten years. I live here in San Francisco, and I lead our investment into HCSS along with a handful of others.
A.J. RHODE:
So, George, why do you talk about the last decade together? What has it been like in this business together?
GEORGE JABER:
Yeah, well, when I joined Thoma Bravo, we didn't have the Discover Fund. It was just– it wasn't even flagship fund. It was one fund, and it was Thoma Bravo and it was fund eleven, and it was $4.5 billion.
[MUSIC OUT’]
And at that point in time, you saw a huge opportunity to take us back to the mid-market. And so I raised my hand immediately and we started the Discover Fund and we had $1 billion fund. There were three of us in a corner of the Transamerica building. AJ Rohde, Carl Press, who now runs our Explore fund and myself. And it was go time.
A.J. RHODE:
Brick by brick.
GEORGE JABER:
Brick by brick. And here we are. And our investment strategy hasn't changed since then. It's the same thing. But we've had to adapt as the markets change.
A.J. RHODE:
Yeah and I think HCSS is a pretty good example of what makes us special.
GEORGE JABER:
Yeah.
A.J. RHODE:
We should probably talk a little bit about the problems that HCSS actually solves and the applications that they actually sell.
GEORGE JABER:
HCSS build software for the heavy civil market. So when you think about heavy civil, it's roads, bridges, highways, tunnels, railroads. They are the software vendor for all of those now. When you think about construction software, everyone thinks about vertical construction buildings going up and down. HCSS is all about horizontal construction. And that's where the roads, bridges, highways come in.
When I think about what HCSS does, they do five things. One, they help their customers bid. They have a bidding project so that all the contractors can bid on work. So think about it, the Department of Transportation post, We need ten miles of highway work on Route 34 in North Texas. One HCSS customer downloads that project from the D.O.T. website and goes into Heavy Bid. And they bid on the project just like we do in Excel, but they're doing it in a heavy construction profile.
A.J. RHODE:
Or the Gordie Howe Bridge in my hometown of Detroit, which is now being built across the Detroit River. You know the HCSS experience is powering that project.
GEORGE JABER:
It is, and a lot of the money is made when you're bidding the project, and so they live in it. They look at the time materials, historical costs, all the templates so they can put a good bid forward. And it's the software to do that. And you can actually submit your job to the DOT, your bid to the DOT through the software. And so that's how the company started and when the bid is done then you move over to the job site and they released their other project “Heavy Job” where you actually manage the job site, you manage the crews, you manage the foremen, you also manage the equipment, the scrapers, the excavators, the tractors, the diggers. All of that is tracked in Heavy Job. And then they added all these other modules. So safety, you want to make sure all your workers are safe on a project. You want to make sure that all your equipment is utilized. And the last point, I mean, what the software fundamentally does, HCSS helps contractors make more money. It helps them have higher margins on all of their projects in a safe environment.
A.J. RHODE:
Why don't you tell our listeners today a little bit about it how we came about finding the business and how we kind of—
GEORGE JABER:
Our construction theme. Yeah. You can talk about Deltek first?
A.J. RHODE:
Sure. So, you know, for those of you who know the construction software market, you know, and have followed it for many decades, you'll know that the first generation of systems sold into general contractors and subcontractors were monolithic project management systems. And our view of construction software decades ago was actually not super favorable. But as the industry evolved and the vendor landscape evolved, what we started to see was those project management suites started to get a lot more broad. Where I first really experienced my first foray into this market was through an investment we made back in 2012 of a company called Deltek, which really own the market for government contractors, architectural firms, engineering firms. It was the project management suite. Deltek had started to build connectivity into the subcontractor market in this market. So what I started to see, what we started to see was the potential of a lot more application software and a lot more multimodal revenue streams in these companies. And that was the first foray where I think we started to see generation two of these applications of what could be possible. And when you and I started talking about some of these ideas, you know, we wanted to stay true to our principles, which was market leadership. And then maybe you should talk a little bit about Command Alkon and how the Deltek road kind of led to Command and then vice versa at HCSS.
GEORGE JABER:
It's funny at Thoma Bravo our best investing is by studying the ecosystems that were already in. Command Alkon is a separate investment in the Discover Fund, and it's a software for the heavy building materials industry. Think concrete and where Command Alkon ends is exactly where HCSS picks up.
A.J. RHODE:
Yeah. And we put Martin at the time our CEO of command. Yeah. In touch with Mike Rydin, who's a wonderful founder of HCSS. And they started to talk about ways maybe the companies could collaborate.
And that started to lead to “wow, there's probably a deeper product partnership here” which then started to lead to “I wonder if HCSS could be a good investment for us on its own” It was of course a company that lots of people knew. Category leader. It was kind of a Sugarland, Texas, where the company base was a frequented location by private equity firms trying to make the investment or buy the company from Mike. And Mike wasn't ready at the time. So maybe talk a little bit about, George, the moment upon which Mike knew it was the right time for him.
GEORGE JABER:
Yeah. Mike Rydin was able to watch our investment at Command Alkon and so he knew the company; he saw what we were doing with the company. And so as he started thinking about his own succession planning and what he wanted to do with the business, he knew that we would be good stewards of the business and he saw what we were doing. So AJ and I use that opportunity to get to know Mike, and we flew down to Sugar Land and we spent a whole day with him. We got a tour of the facilities, we walked around the track, we went to the basketball court.
A.J. RHODE:
The slides! The dog kennels.
GEORGE JABER:
We each went down the slide and after that tour we went into a little room with Mike and he pulled out a piece of paper and the piece of paper was a wish list of 17 things that were a requirement to continue at his company for us to do a deal together. And in that two hour session, we went through each one of those one by one. And what was so important about that, we really understood what made HCSS tick. We didn't have numbers, but we were really understanding what HCSS was all about.
A.J. RHODE:
Yeah, And when someone furnishes a piece of paper like that to you, you know, after 40 years, or Mike's case, 36 years, right? He wrote those 17 down for a very important reason. They were not self-serving. These were values that needed to be preserved with a future owner. And so for us to understand each one was basically our first round of due diligence on the company. It's like, why do you— why do we need to maintain that every single customer support call is picked up within three rings 24 hours a day by any employee at the company, no matter who's calling? Well, there's a reason for that, right? Of course, there's a good reason for that. But there's a very specific reason for that. And so Mike was very clear about why these things needed to be adhered to. So George and I really needed to understand why those were important to not just to Mike, but to the ecosystem and the vendor that HCSS was.
GEORGE JABER:
Yeah. And he had something in there that said, you know, upon the review of an employee of the company, you don't do them all at year end. You do it based on the anniversary of which they were hired.
A.J. RHODE:
Yeah.
GEORGE JABER:
And so there were a lot of little things like that, that a founder on business had that we really wanted to keep.
A.J. RHODE:
Yeah. You know, another important element of the type of investing we do, you know, we are big supporters and purveyors of employees owning stock in the companies that we invest in. We have very, very, very, very deep ownership of employees across the spectrum of our portfolio companies. And HCSS had an employee stock ownership program.
GEORGE JABER:
A big one.
A.J. RHODE:
And a bonus program which affected every employee. Those were really important things of the culture. So we needed to understand and build a structure with Mike for how that continued in a private equity setting.
GEORGE JABER:
That's right. Yeah, we kept that.
A.J. RHODE:
We kept that gap, that and that exists still today.
Okay, so now we've told everyone why HCSS is such a unique company. Let's talk about that seminal moment. The moment when we knew we wanted to make the investment, how that came about, talk about that, when the light bulb went off in your head.
GEORGE JABER:
We spent a lot of time with HCSS, and we spent a lot of time with Command Alkon, and we earned their trus,t and we were able to go under the tent. We were under NDA, and we received information on the company– information on HCSS for the first time. And neither of us are very patient to wait for things to be processed. So, I made a janky little spreadsheet. I put in all the numbers, and you add them all up. And I looked at it, and I thought, my God, like we just found gold.
A.J. RHODE:
Yeah. Really special franchise. So sometimes, in these situations, you obviously have a moment where there is either an auction and there's a bunch of valuations proposed by buyers or, in the case here. Mike had a very specific number that he required that we pay, and he was very clear about that from the moment we got there, and we said, okay, we'll work backwards to do that. So maybe talk about the moment where you knew that we could accomplish that and what that felt like to you and how that looked.
GEORGE JABER:
Yeah, actually, I remember very vividly I put that little spreadsheet together and, you know, that moment where I felt like we had found gold, but I hadn't told you yet. And you call me and no pleasantries. We get right to it. He's like, “What do you find? What do you think?” And I said “I think we can pay the price” And then I told you all the facts and you said “I know we can pay the price”
A.J. RHODE:
I did say that. I did say that. And, you know, it's was still a pretty big leap at the time. You know, it was a healthy valuation. It was way above what I think Mike probably had expected at some point before that. But we could see I believe I could see both of us could see the future of where this is headed.
GEORGE JABER:
It's true. Yeah. You know, as we kept digging into HCSS, every little thing kept getting a little bit better. And we always find that when things get a little bit better, that trend continues. And that happened in our diligence. I'll give examples you would look at you would look at a customer and they would start with the heavy bid, the core product paying $7,000. Well, then in another two quarters they'd be paying $30,000 as they've added Heavy Job. And then they added plans and then they added safety and all of a sudden this was a $70,000 customer and it just ramped. And you started seeing that over and over and over again.
A.J. RHODE:
Okay. Let's talk about, I would say the icing on the cake, but really the final piece, which was as Mike was transitioning from CEO, founder to board member. Steve McGough, his president, now our CEO was ready. He had been the company for 16 years. He was ready to ascend to that role. So, can we talk a little bit about what that look like for the business how we helped Steve through that process?
GEORGE JABER:
Mike Rydin was a brilliant founder. In HCSS there's an obsession over the customer. All of that came from Mike. You take care of the customer no matter what. You pick up the phone and three rings or less, whatever problem they have, you solve it. They're welcome to come on site. You welcome them and show you how you do things. That all came from Mike. And as we as Mike was retiring, Steve was his number two for, you know, 15 plus years. And so it was a very natural transition to have Steve step up into that CEO role. And it was important continuity for the company to have someone from within. And we love to promote from within.
A.J. RHODE:
But we needed to sit with Steve. I mean, for us we’re “big people people” you know?
GEORGE JABER:
We are.
A.J. RHODE:
And we make decisions based on human to human connection and the art of the possible and leaders who want to take the Hill. And so we have to find that symbiotic relationship with somebody. And so what's the easiest way for us to do it? Just get on a plane. In this case, it was actually to hop in the car because Steve was at a conference.
GEORGE JABER:
Beaver conference.
A.J. RHODE:
Beaver conference in Napa Valley, which is coincidentally a 90 minute drive. And we said “we're going to come up and see you”. Maybe talk a little bit about that moment.
GEORGE JABER:
Yeah, we drove up to Napa. We went to Silverado. The Beavers event had just finished, and it was a hot day. We sat on the patio with Steve. We had iced tea and lemonade, and we spent a lot of time with him. And, you know, that's when the deal got done. You know, we had a piece of paper. We drew out our four year plan. We talked about how it was really important to keep the ownership mindset, the profit sharing, how do we keep that in a private equity environment. That was really important to Steve and we figured that out on the spot.
A.J. RHODE:
Yeah, yeah and as a firm who's known to have a lot of processes and a lot of templates. It's as an investor you need to know when to discard some of those and embrace some things that work really well and not change company culture. And Steve was very good. Mike was very good with his 17 list, and then Steve gave us a lot of context for why those things mattered. And then—I literally think at that table, we scratched out, okay, how are we going to do the ESOP?
GEORGE JABER:
Yeah, we did, yeah.
A.J. RHODE:
How are we going to the bonus plan? And so all these things which were a little bit nuanced into a normal private equity structure, we got to business with Steve in person.
[MUSIC IN]
A.J. RHODE:
Speaking of Steve, it's actually you that gives me a big smile on my face to be able to bring him into the studio today.
GEORGE JABER:
Right outside? Right now?
A.J. RHODE:
Yeah, he is. To bring him in and talk through some of the history, get his impressions of us, get his story. I think the listeners are really enjoy that so I told them pulled no punches, no holds barred but we're going to bring him in the studio with us today.
GEORGE JABER:
Steve's coming on in.
A.J. RHODE:
Should be fun.
[MUSIC OUT]
A.J. RHODE:
Up next, George and I will talk to Steve McGough, president and CEO of HCSS.
CEO INTERVIEW
A.J. RHODE:
Hi everybody. I'm so excited to be here today with my good friend and business partner, Steve McGough, CEO of HCSS. Steve, welcome to Behind the Deal.
STEVE MCGOUGH:
Glad to be here, A.J.
A.J. RHODE:
First question, Steve, for you. You've been at the company since 2005. Will you give us a little background about what attracted you to HCSS? The sector? How did you find out about the company? I just want to get a little bit of your story here.
STEVE MCGOUGH:
Yeah, I have an unconventional path to HCSS. I went back to school as a later in my career to get my MBA and for a couple of reasons. One, to so my younger sons at the time would know that what it meant to be a lifelong learner. And I felt like it was important to go back and see what other career opportunities and some other industries there might be. I had a good friend that was working at Trilogy Software at the time and he had made the comment to me running a software company was pretty straightforward as long as you were making money. So I had got the Houston Business Journal and looked up the top 20 companies in the Greater Houston and mailed them unsolicited cover letters of my resume.
A.J. RHODE:
That sounds like you.
STEVE MCGOUGH:
Yeah and I ended up with three job offers, two of them were turnarounds and one from HCSS. And what attracted me to HCSS, it was A, it was still in construction. B, I understood the industry knew the customer base really well but Mike Rydin, the founder of HCSS, was just intent on solving the customer's business problems. And that's probably what attracted me the most.
A.J. RHODE:
ll right. So you've been with the company 20 years now. You've worn many hats: CEO, president, COO, CFO. Talk about your experiences in those roles.
STEVE MCGOUGH:
Well, it's obviously been a valuable experience to work across the entire organization in many different aspects and getting firsthand look at the vertical functions within each of those departments. But probably what I learned more than anything else was just the type of individuals that I work best with, whether that's in a leadership role or a team in general. And so when Thoma Bravo acquired us and we started to build out the executive team, I found myself looking at those prospective employees and leaders in measure number against a lot of those values and traits.
A.J. RHODE:
Give us an example of what you're talking about. A few examples.
STEVE MCGOUGH:
There's there's actually seven core values that I think work best with myself: passion, grit, purpose, consistency, empathy, kindness and humility. And just to touch on, you know, some of those passions from a standpoint of when I'm talking to someone, it doesn't really matter if it's in business or in their personal life. If they don't get passionate or light up about something, I got to assume they're going to bring that same level of enthusiasm to the business the next day. And from a grit or perseverance standpoint, I tend to work well with people that have been socked in the nose and got up to fight or gone through some adversity in their life and came out the other side a better individual purpose. If you're going to lead, you should know why you want to do that. From a consistency standpoint, it's probably not what you think. It's more along the lines of if can you stick with something? If I go to the gym and work out for two weeks, I know I'm not going to see results, but like if I go six months, I'm surely going to see some positive outcomes.
A.J. RHODE:
Follow through.
STEVE MCGOUGH:
Yeah, some positive outcomes from, you know, an empathy standpoint. This is important to me because if you're a leader and you're going to work someone over 10 or 20 years of their career, people are at different stages in their life. You might have a young parent that needs more flexibility in their hours. Are you extremely black and white and or can you work with those types of people to make sure that you've got a great employee for years to come?
A.J. RHODE:
Not a one size fits all.
STEVE MCGOUGH:
That's right. Kindness. That's a that's a it's another one. I think that where we could all come together a lot more from that. And quite frankly, some of the smartest people that I personally know are also some of the kindest, and then just last, from a humility standpoint, is probably another big one. Do you have to does it always have to be your idea? Do you have to be the hook and bowl in the room? Or can you allow your people that work for you to run ideas to ground and and come up with a solution that actually works for the business? Those are those are the keys for me.
A.J. RHODE:
And when we sit in board meetings with you, the attribution you give to your team around the ideas that they come up with and the attribution they give to each other, I find it really, really special.
STEVE MCGOUGH:
Yeah, it's a–You got to share the credit.
A.J. RHODE:
Yeah. Yeah, for sure. Yeah. Yeah.
GEORGE JABER:
We love that that's so special about HCSS.. I'd like to transition it a little bit and talk about our partnership together. You know, we've known the company for many, many years. HCSS has been on every single buyer's list of dream software companies to buy. Every single private equity firm has wanted to buy HCSS And no one could crack the code. And we were somehow able to in the fall of 2021. Could you talk a little bit about your experience with us and your first memory of meeting us?
A.J. RHODE:
Oh boy. Here we go [laughs]
STEVE MCGOUGH:
Well, I remember that we met at a construction industry event called the Beavers out in Napa. Over. And what surprised me, probably about the meeting the most is how well you guys fit in. Now, don't get me wrong, I wasn't expecting investment bankers, but I didn't expect you guys to look like you fit into construction. And in all sincerity, I remember that you guys had a genuine interest in the business, how we ran the business, and what was important to us. And a lot of questions around why I believe that our customers were such fans of HCSS.
A.J. RHODE:
So what are the biggest challenges facing general contractors, subcontractors today that work on infrastructure, heavy civil, and how are we—how do we think about helping them solve those in the future?
STEVE MCGOUGH:
Well, probably the biggest challenge facing our industry is still the same. It's the workforce. And it's really we're struggling to attract this next younger generation to see construction as an industry with valuable careers and in a public works environment. A lot of those in and around urban areas, a lot of that work is night work. You have weather constraints that mess with people's schedules, and we're having a hard time attracting women to the workforce, especially in the field. Now, the good news from that, we do have customers in certain markets that are addressing it head on where they're setting schedules for their people. So even if someone has—is working on a crew and they have a weather constraint where they're working the weekend, if they schedule that time off, they honor so they can go to a family member's birthday. So that's helping. And I believe that as we move forward, the companies get creative to balance that the workload that's required to be able to meet a schedule and the demands and the wants of this next generation of worker to be able to attract them to construction are the ones that are going to be the winners. Yeah.
A.J. RHODE:
Good.
GEORGE JABER:
Steve, did you talk to us about Heavy Bid, your core product, the history of the company? Could you explain it to all of our listeners?
STEVE MCGOUGH:
Sure. Heavy Bid made was our first product. We released it in 1986. Its flagship product originally written in Dutch and rewritten in Windows in the 90s, and it's been the market leader for decades. And it took a lot of companies of pen and paper and spreadsheets and gave them the ability to build up their cost at a granular level, which gave them the ability to estimate more accurately and ultimately bid more work and win more work. If you look today in the public market, so across 50 Department of Transportation, the DOTs, HCSS customers are winning 75% of that work and they're producing 40% more bids than their competitors. Just an incredible product.
GEORGE JABER:
Steve, that was really innovative back then. What is HCSS doing now to continue to innovate?
STEVE MCGOUGH:
Well, from a technology standpoint, we've led the way. Our second product, even, you know, in 1998, was a product called Heavy Job, a job costing product that set in the field and would give the form and the ability to capture diary notes, time and attendance, productions, equipment utilization. The challenge with that is, is when we introduced that at our user meeting, we had a decade's worth of estimate only. And when we told them that we would be putting a laptop in their foreman's hands, you could have heard a pin drop because laptops in 98 were the size of sewing machine. And so you just no one envisioned that the field could capture that type of data. But we always believed in the knowledge worker and that companies that would excel were the ones that at the frontline workers that were the closest to the work by providing them the ability to know how they're doing on a daily basis against what the estimaters are estimated and how their productions went against that amount, of making money or losing money was well ahead of its time. And today, as we continue to innovate in and around cloud based technologies and AI, our mission hasn't changed. It's still to make our customers stay more competitive, enhance their profitability, improve workplace safety and optimize their equipment utilization. But we do that all in the hopes of giving them the ability to make better, more informed decisions on their job sites.
GEORGE JABER:
Now you're doing everything you can as the vendor, but what are the customers have to do to be ready for this change?
STEVE MCGOUGH:
Well, from a change, in at least from a digital transformation, I think a lot of times companies lose sight. It's not just a matter of making the data digital. They missed the human factor. And it is so critical for all of our businesses, quite frankly. And in order to have true digital transformation scale your business, I think companies need to foster a culture of innovation where people can try new things within their business. They need to upskill and empower their employees. So not just buy the tools but train them how to be successful in a digital world. I think all companies need to adopt a customer centric mindset, so we're all solving to our customer's pain points. And then probably the last is just plan for agility and resiliency. So when you're looking at your products , you're modeling your workflows in such a way that you can handle the market disruptions that are surely going to come as we move into the future.
A.J. RHODE:
Yeah, we'll get into some of that later, too. That's really important. I'm going to switch gears for a minute. Okay. This is a loaded question. Tell our audience what it's like to work with us with Thoma on Bravo and give us an example of something big operationally, strategically challenging that's come up that we kind of solved with you together.
STEVE MCGOUGH:
Fair enough [laughs] I will tell you, for me personally, working with Thoma Bravo has just been incredible, especially the way you guys set up our board of directors. I think it's unique the way that half of the board is our–is operating partners and the other half is a TB team. I have Bill Mackenzie, who's just a phenomenal chairman that works tirelessly to make sure at least the two of us are always aligned on the important issues. And Jim Hagen's always been extremely helpful, supportive. You know, he's been with us since day one. So that part's been incredible as far as solving, you guys helped us build out our executive team. A.J., you personally helped and talked to Drew Thomas, who is our CFO. It's just been an incredible hire for HCSS, has changed the face of a lot of the company on how we do stuff. But I will tell you the the biggest impact that you guys have had is because Thoma Bravo owns so many portfolio companies of varying sizes because you guys sit on so many boards. You help us tremendously from a solving ,not just from a planning, but probably more importantly from our processes. You have the ability to look and see when we're proposing stuff, whether or not that will scale with the business, because you're already dealing with it in some of your other larger companies.
A.J. RHODE:
Yeah. And it's a two way partnership. You've always had an open mind about some of the ideas and working with us and we've tried to respect what's unique about HCSS’s culture and some of your processes too, and you do things a very specific way, and we haven't wanted to change those things that are working either. So in that sense, it's been really good.
GEORGE JABER:
Steve, could you talk about what it's like building a company in Sugarland, Texas? And talk about your incredible headquarters.
STEVE MCGOUGH:
Yeah, Sugarland has been great for us. We bought 12 acres out in SugarLand, finished our first building in 2009, complete with a gym, a basketball court, a full running track like you see, like at a high school and dog kennels where people could bring their dogs to work. We finished our second building a few years after that for our development team that has a circular slide that goes from the second floor to the first floor. I think you guys may have been on it.
GEORGE JABER:
Yeah, we've all been on it.
A.J. RHODE:
Yeah, we love taking the slide.
STEVE MCGOUGH:
And so and then in our third building with was finished during COVID, that also has a parking garage, has another gym, and a racquetball court. But I tell you all of that because it was meant to be a place, a campus where employees wanted to come interact with their coworkers, a place they wanted to stay, build their careers. And it's been lights out, successful. We attract a lot of talent from the local area because we do a lot within the community and it allows us to get our name and reputation out there so we get the you know a lot of the local people that look and want to be part of that as well.
GEORGE JABER:
You also have a lot of customers come and visit.
STEVE MCGOUGH:
Yeah, we always love to have our customers come to our office just because we tend to like to give them a show of the building.
GEORGE JABER:
Yeah. And you have their hats all around the campus. Yeah. Yeah.
STEVE MCGOUGH:
That started actually in another office before we moved there as a way to, you know, because we had sound issues in the hallways and stuff in it. And what happened is we'd have customers come to our office, see other customers' hats, and then they would automatically send them to us. And that's how we ended up with all those hats.
A.J. RHODE:
That's funny. I didn't know that.
GEORGE JABER:
Speaking of customers, could you talk about your UGM, your User Group Meeting?
STEVE MCGOUGH:
Yeah, for sure. So this is our 39th year in business, and I think our User Group Meetings have been going on for almost 38 years. It started with Mike Rydin, our founder really around his kitchen table with four customers, is the roots of it. Now, this yea,r we'll have roughly 20 to 2300 attendees. It's a citywide event in Houston, but it's really meant for a place for customers to come and network and learn and have some fun. But for u,s it's invaluable because it's where we get the feedback to make our products more valuable to the customers. We run town halls where customers get to ask questions about the software, suggest things, and vote on it, quite frankly. And if enough people want it, we usually put it in the software. It's just for our growth and our ability to respond to what our customers' needs are. It's been extremely valuable.
GEORGE JABER:
And it's not a normal user group conference.
A.J. RHODE:
No, I mean, It's like a revival.
GEORGE JABER:
It's like a revival. It is. The energy is unbelievable. Last year I went, 1900 people in one room. You're giving the keynote, ACDC Thunderstruck is playing as you’re walking on stage. I mean, everyone is so excited to be there because they live in HCSS every single day. They're in Heavy Bid just like, you know, private equity and spreadsheets. Yeah, I mean, they're in it all day. And then at the job site, they're living in Heavy Job. So when people go there, it's not just a vendor. I mean, it is their lives. It's a way of doing business.
STEVE MCGOUGH:
And we love our customers. I mean, some of my best friends in this world to this day are our customers. And it's just you—it's a unique bond when when you have a company or you've hired people that are friendly and helpful and you're a customer focused, customer centric company, people believe in that and helping the customer. And that just transcends. And so those relationships naturally build.
GEORGE JABER:
The entire culture of HCSS is about taking care of the customer every single time.
STEVE MCGOUGH:
100%.
GEORGE JABER:
Could you talk about your technical support? I heard you talk about an interview once. Could you talk about your three rings?
STEVE MCGOUGH:
Well, for myself, I believe that in business you can only have one thing that's core to your business. And in everything else, you have to do as good as your competitors. And for HCSS, that's our technical support. We answer the phone in three rings or less, last 24 hours a day. Most people would think in a software company that your software has got to be core to the business and, and well we have to have great software and it has to work. It's our technical support. Our customers don't leave a company, go to work for someone else and then work to get our software into the next company because we have the best marketing in town or we have the best billing system that's so clean and slick. It's not. It's our technical support. They know that when they call in, they're going to get help from somebody. It's going to stick with their issue until it is resolved. And so hands down for us. That's it.
A.J. RHODE:
Can I add to this? That is an element or one element of things that make HCSS really special. Can you give us another few examples of things that are so nuanced and so specific to your culture that really resonate?
STEVE MCGOUGH:
Well, we do a lot with our employees from just from a career growth standpoint. So the reason we can handle– we can answer the phone in three rings or less, is that we overhire within our technical support, which gives our technical support people the ability to work on other projects. And so most of the people that move in and around our organization into other jobs, whether that's development and customer success or implementation. Most of those are coming out from customer support.
A.J. RHODE:
Started talking to customers.
STEVE MCGOUGH:
Yeah and it helps tremendously because what we find is that those people have also learned the product. So not only are they moving into roles, they also understand the products and the customers issues firsthand. Big difference.
A.J. RHODE:
How stuff works.
STEVE MCGOUGH:
Yeah.
GEORGE JABER:
Everyone at HCSS just had to start in customer support at one time.
STEVE MCGOUGH:
Well, not everybody.
GEORGE JABER:
Not everyone, but most.
STEVE MCGOUGH:
But most, I mean, a good part of them outside of maybe the majority of our development team. But when you look when you look at the leaders within or within the organization, the people that moved up through the organization, a lot of them moved up, got their start as their very first job in tech support. And most people look at tech support and think it is help desk type stuff, right? It is a career or a professional career in our organization, and we look at it and treat it that way because they're the lifeblood of who we are.
A.J. RHODE:
Yeah, for sure.
GEORGE JABER:
Did the customer support reps also have to take the HCSS math test to work at the company?
STEVE MCGOUGH:
We no longer do the math test.
GEORGE JABER:
I know.
STEVE MCGOUGH:
Tell you that. But for decades everyone took it.
GEORGE JABER:
Everyone? Every single person in the company.
STEVE MCGOUGH:
Everyone.Every single person for a number of years until we completely moved away from it would take the test.
A.J. RHODE:
Sounds like getting a job here.
GEORGE JABER:
Yeah. It’s true [laughs]
A.J. RHODE:
Yeah, I'll end with the final question. Steve. This is one of the most special companies that that we've ever had the privilege to work with. And you're an executive. There's an exemplary example of that. What are your hopes for this company going forward and its role in the market? You know, we're the first institutional partner that you've ever had after four decades. And so we're just at the precipice of what this company could be at scale, operationally, you name it. So what are your hopes and dreams is probably the best way to put it for the future?
STEVE MCGOUGH:
Well, I mean, to your point, I'm the second CEO in the organization, so a lot of stability in and around the organization. But it's our 39th year in business. And I guess, ultimately, I would never want us to lose sight of what built the business to where it is. And that's being a very customer focused company with innovative products. I believe that if we stay customer focused, continue to provide world class support and innovate in and around our products, that we will remain the dominant player with a great brand, great reputation for decades to come.
[MUSIC IN]
GEORGE JABER:
We agree.
A.J. RHODE:
It's a pleasure having you here, Steve. Thank you so much. This has been such a good talk. It's kind of a walk down memory lane, but it's good for our viewers to get to see some of the nuances that make the company really special. It's good for the two of us to kind of walk back through some of these things. And so thanks for flying out, being here with us today.
STEVE MCGOUGH:
Yeah, I love coming out, seeing you guys. You've got literally I was walking down the hallway earlier and just looking out at the bay and the boats, you guys have just incredible offices, I'll give you that for sure.
OUTRO
GEORGE JABER:
Thanks to Steve for sitting down with us today. To learn more about HCSS, visit h-c-s-s-dot-com. Steve is going to join us on next week's episode of Beyond The Deal, our mini-series where we get to ask him anything.
If you like this episode, be sure to subscribe to Thoma Bravo’s Behind The Deal wherever you get your podcasts.
Also, catch it on YouTube next week.
ORLANDO BRAVO:
Behind the Deal is brought to you by Thoma Bravo in partnership with Audacy’s Pineapple Street Studios. Join us next week for more stories Behind The Deal. Thanks for listening.
[MUSIC OUT]
DISCLAIMER:
Certain statements about Thoma Bravo made by portfolio company executives are intended to illustrate Thoma Bravo's business relationship with such persons rather than Thoma Bravo's capabilities or expertise with respect to investment advisory services. Portfolio company executives were not compensated in connection with their podcast participation, although they generally received compensation and investment opportunities in connection with their portfolio company roles, and in certain cases are also owners of portfolio company securities and/or investors in Thoma Bravo funds. Such compensation and investments subject podcast participants to potential conflicts of interest.
