When Ray Carpenter headed a financial planning group within AT&T, he led a task force to help the company make better use of its working capital. The group devised a way to improve visibility into the period when capital is deployed to build an asset and when that asset starts generating revenue.
Simply by creating that visibility, Carpenter said last week in a CFO Thought Leader podcast, the group helped business leaders identify ways to save money by making small changes in their plans without decreasing the quality of their asset or slowing down its development.
"As a company like AT&T grows, it doesn’t take a lot to make a change in a working capital practice that can translate into dollars with a B behind it," Carpenter said. "An [unused asset creates] fallow capital. We’d much rather have it earning a return, so [with the new visibility] everyone was looking at the same metrics, thinking about working capital in a total fashion."
The increased visibility led to a cultural shift, Carpenter said.
"People who otherwise wouldn’t have even thought about working capital, because they’re out trying to sell the next account or do the next release on a development cycle … [could see] if they just changed the practice a little bit, they could actually improve cash for the company and give them more money to invest."
Today, Carpenter is CFO of Xandr, a data analytics-based advertising company he helped AT&T launch in 2017 so companies can better target their ads to people watching TV and online video.
The company, which leverages the resources of its patent company, has 2,000 employees and is generating $2 billion in revenue and $1 billion in EBITDA.
"This is a rare opportunity, because you still have the balance sheet and stability of AT&T but you have the latitude to build something new," said Carpenter, who joined AT&T in 2005 as a financial analyst.
At Xandr, Carpenter focuses mainly on a monthly reporting and results (MRR) package that looks at the significant elements of the business — such as product profitability and the amount of time it takes a prospect to become a paying customer — through both a financial and an operational lens.
"It’s not happening in silos," he said. "We don't have an operations report in one part of the business and a finance report in the other part; it's all combined and coherent and gets everyone aligned on the metrics that really matter."
The elements incorporated into MRR change over time. "Right now, the big things we’re looking at are bringing more revenue and participation to our marketplace," he said. "So, we look at gross revenue both from internal use as well as third-party use, and we look at our operating leverage. Are we actually scaling in a way that we’re getting more profitable because we’re keeping our fixed costs at the right level relative to the business? Are we investing in the right kind of automation that allows us to do that?"
Also key to MRR is its link to executive compensation. "We actually isolate anywhere between three and five [business elements] that drive compensation for our management employees, so their measurement against these KPIs is real and meaningful," he said.
AT&T has been Carpenter’s only employer since he left business school. "I tell people, I’ve been with AT&T for 16 years but I think I’ve had 11 jobs," he said. "It was always exciting, always something new, a chance to do things in big, material ways."
In all of his jobs, data analytics is the common thread. While heading up integration of an acquisition that AT&T’s entertainment division had made, he relied on data analytics as he worked through a strategy to innovate on a multiple-programmer type of platform for distributing video over the Internet.
"As we worked through that strategy, a couple of things became even more clear for us," he said. "One was how important it was to think about data … to actually get the most out of the monetization opportunities you have with content."
His efforts integrating that acquisition and monetizing the distribution platform led him to throw his hat into the ring after AT&T acquired Time Warner (now Warner Media) and announced it would launch Xandr as its vehicle for leveraging Warner’s huge library of content.
"In the pending merger for Time Warner, it was announced we were looking to establish an advertising company that would help power this data to monetize content, so I raised my hand," he said.
AT&T brought in a veteran advertising executive to run the new company as CEO and Carpenter stepped in as CFO to complement the CEO in two ways: one, as an AT&T insider who knew how the company worked internally, and two, as someone who was comfortable acting independently of the larger company.
"[The new CEO] knew he was going to need a good mix of support from people who know how to navigate AT&T but also aren't going to be hindered by doing things the AT&T way," he said. "I felt like I could add a lot of value and was excited about the subject area and to be part of a startup environment within a company like AT&T. I didn’t want to miss being part of an opportunity like that."