Latest on the Tech and AI Front

From AI to machine learning, the municipal industry is adapting to technological change. How can the public finance industry benefit from these advances in technology to be more efficient with time and money while maintaining the personal connections the market is known for?


Transcription:

Lynne Funk (00:10):

I just wanted to kick this off with, we have these technology panels. There's obviously so much going on in this space. I want you to kind of get to know who our panelists are, what they do in this market and why it matters to you. I guess right now I'm going to kick it off with Dan, right to my left. Dan Silva, take it away.

Dan Silva (00:30):

Thanks Lynne. Let's see. There we go. Hi everyone. Thanks for joining us. My name's Dan Silva. I'm CEO of Adaje. We are a software business. We produce software that folks use to model their debt and manage their debt, primarily bankers, advisors and issuers as well to size their transactions, model their transactions, take into account investments of bond proceeds of model scenarios around what their primary issuance might look like, and then have access to that information post issuance for things like continuing disclosure and reporting to their audited financial statements, tracking debt authorizations, things like that. Happy to be here and excited to talk to you all today about state of technology in the space.

Lynne Funk (01:17):

Great, thanks. Go for it Tyler.

Tyler Traudt (01:21):

Just going to grab it and go. Nice to see everybody. My name's Tyler Traudt, one of the Founders & CEO of DebtBook. We're about 140 person company in Charlotte, North Carolina. I think the way to think about our business, we've got multi products, multi-platform now, but most pertinent for this audience. We are a treasury management system for governments and nonprofits. So if we were talking to a number of large corporates, they would be talking about how they use treasury management systems to manage all their liquidity outside of their ERP, their major accounting system. So think like cashflow forecasting, daily cash positioning, cash optimization, think debt management. Pertinent to this group here, investment management, how are you ensuring that you have the appropriate amount of liquidity inside your organization and that it's optimized to reduce risk? These things obviously improve operating efficiency, but they can improve your revenues, reduce your costs, all those items.

(02:19):

We are really excited to bring a hopefully world-class treasury management system to government and nonprofit office of the CFO. I was just spending a minute with a gentleman who was talking about how he came from the corporate space and the treasury management systems for governments and nonprofits are not made for them. They were very different. Organizations we're unique and I was eating it up because I was like, this is exactly what we're really excited about. And so I believe in the future, if you're working with or if you are a CFO, if you're working with these organizations and you ask them, how do you know you have enough cash and you have enough cash on the balance sheet, you've invested it correctly, how are you dealing with all the accounting around that? How do you make sure that you've got really tight control into your money, your debt, your cash, your investments? My hope is, and our mission is that they'll say we use DebtBook for that. That takes care of those things for us.

Lynne Funk (03:09):

Great. Thanks. Abby.

Abhishek Lodha (03:12):

Hi, Abhishek Lodha. I work for a short guarantee. I'm the director of FinTech strategy. So as everyone knows the short guarantee, we focus on ensuring the principle and interest payments on bonds. A huge focus is municipal market for us. My work really centers around our credit analytics and workflow capabilities, so how do we scale up our credit analytics process? We look at maybe 2000 to 2,500 deals every year. On the primary side, it's a lot of deals. We have to be fast in our approach of analytics and also providing the price to the market to our issuers, working closely with them. So a lot of my focus is around primary market workflow, secondary market workflows, and really keeping up with the evolving market and technological space.

Lynne Funk (04:00):

Great. Will,

 William Kim (04:03):

Excellent. I'm Will Kim, Founder and CEO of MuniPro. We're a data analytics and financial forecasting technology company and we partner with large investment banks as well as municipal advisors, issuers and asset managers. So what we do varies depending on our clients, but the core proposition is the same. We provide technology to look at debt management or debt profiles for every issuer in the market. We do refunding analysis, new money analysis, financial forecasting for 30 years as well as advanced option analytics on secondary trades.

Gregg Bienstock (04:39):

Thanks Lynne. Thanks for the Bond Buyer for having us today. Gregg Bienstock from SOLVE around the Muni group. So we are essentially data and software company and we're focused really on public finance market in the sense of looking at it from pre-transaction. So being able to look at debt analysis similar to what Will is speaking to 15 CT 12 analysis pricing, helping generate indicative scales, looking at both primary and secondary market activity and then post issuance as well, helping manage disclosure obligations. So we're kind of trying to do cradle to grave if you will with regard to the public finance market that we're serving. And then the other aspect of what we're doing is around pre-trade price transparency, which is a little less relevant to some in this room, but it's really critical. It was an issue that was raised by the MSRB again earlier this year. It's off the table for the moment, but it's something that's pretty important in terms of getting observable data and access to the same and we've been focusing on that. And then most recently launching predictive pricing. We started in the muni space and we're going to be heading as corporate shortly.

Lynne Funk (05:49):

Okay, excellent. We have this panel at our various events and I am usually the moderator of it. And in our national Outlook event in February, I had started with a group to talk about what everyone was talking about at that very moment was the news of the threats to the tax exemption. And I'm like even our technology panel had some insights on that and we are going to talk about it a little bit of tax policy and how it might actually implicate even have implications for their roles. But I think there's so much we could talk about. I think tariffs have been bandied about quite a bit too, and I think we're going to get into that as well. But I do want to start off with something else that I think is kind of a lot of what technology aims to do is make things more efficient. That's the goal. And I think we've also heard a bit about government efficiency in this space. It's particularly interesting right now given what we transpired at the federal level. So I guess maybe we can start there and talk a little bit about what technology can do to provide maybe state and local governments and their issuers with more efficiency in the work that they do. And I'll let anyone take it, but I think maybe Tyler wants to jump in there first.

Tyler Traudt (07:06):

Would love to thank you for letting me go first. No, it's a really interesting topic to us and we are talking to a lot of our customers about it. We probably all think different things about Elon Musk. We think different things about Doge and the work that they're doing. But what I think is clearly happening if you start to get into the minutes of state local board meetings and start to read what those organizations are all talking about, governmental efficiency is making its way down. There are a large number of doge like efforts at the state levels and even at the local levels. And so as you read these minutes as you talk to these customers, I think it's pretty clear that these organizations want to look at their spend, they want to look at their contracts. How much is there out there that maybe we don't need to be spending that we are spending currently?

(07:58):

And for us, this is going to sound like a shameless plug, but it's important to have visibility into your data, into your information to be able to go and analyze that and make some of those choices. So I think that efficiency is good. I think that most people would agree that being really efficient is important to your organization. And I do think a lot of the organizations around the country now, governmental, nonprofit, are all looking at ways that they can become more efficient. Save money tax policy is woven into that. I'll share just a quick example. We work with a large private college and we were talking with them very recently and they've historically issued taxable debt. They've not come to the municipal market, but now they're looking and they're saying, okay, well if there's significant yield that we can pick up, if we can reduce our interest costs pretty significantly, maybe the pain of tax compliance is going to be worth it for us to go and reduce our interest costs here.

(08:56):

So in that instance, this organization is looking at the way they're spending their money and they're trying to find ways to reduce that spend down. And so I think that it's really interesting to think about governmental or nonprofit CFOs looking in their businesses today saying, how many people do we have? What's the work that they're doing across accounting, financial reporting, budget, procurement, treasuries where we spend a lot of our time. And then if you want to go and find ways to become materially more efficient, you can't just remove the people they're doing something. Is there a way that you can materially improve the efficiency of that process? Can you give them better data access to better information? Can you reduce the amount of time you have? Multiple people doing duplicative work, double checking, triple checking, comparing, those kinds of things. And we're selfishly excited to be hopefully a little piece, a piece of that efficiency that's going to come over time.

Dan Silva (09:50):

I had kind of echo some of Tyler's points. We're working with a state agency who has a revolving loan program they have to manage across. They're focused on higher education and they lend their funds out to a number of different universities and they had an issue where tracking talent, and you guys probably see this as difficult sometimes in the public sector. They lost an individual and that individual was in charge of running the numbers and making sure things were getting allocated and managed properly for that revolving fund. They started using Adaje and were able to fold that responsibility underneath someone else instead of managing it manually in an excel spreadsheet and having to keep track of it. We were able to help them do it in a way more efficient way where instead of having an individual just focused on that responsibility, it ended up becoming just a matter of an hour a week for someone else underneath their responsibility. So I think in these ways, you look at the technology here that we're offering, there's ways of folding it into the organization that can really speed up and let you do more with less, especially when it's tough to attract talent, especially when there is budgetary pressure and efficiency pressure. So we've seen some of the same things on our end.

 William Kim (11:01):

What we're seeing across our issuer clients is the same drive for efficiency, right? Everyone's kicking off it seems into ERP planning process, how to be more efficient. So definitely top of mind, we're definitely a partner to our issuer clients in helping manage that. Everyone's asking you to do more with less, right? No surprise there. But we're also seeing some other effects, right? We're seeing with federal dollars seemingly drying up for certain sectors. It's not just about being more efficient with your current organization, but it's how do you deal with that exogenous shock to your sector. On top of that, with market volatility, a lot of our large state issuer clients are waiting and seeing to time their issuances, but that has a counterbalancing effect. Is tax exemption going to go away? Do I want to rush to market even in these volatile times?

Gregg Bienstock (12:00):

Just a quick add. So Tyler made a good point. I think time is essentially money and so there's accessibility and access to data and information depending on the size of the issuer, the relevance of the information that's coming in. But we think about for example, accessibility to observable market data. So what's going on, for example with your secondary bonds. So we know for example, we have clients, issuer clients who want to access information around how their bonds are trading in the secondary or how new issues and secondaries are trading for their market segment or geography or look at their rating cohort and combined with other factors. The point is that these are things that in many cases were being done but took a significant amount of time and resources and it's the premise behind what each of us do, right? It's the idea is technology is all about taking a task that took X amount of time and getting to a fraction of that. And I think what's most critical when you think about how we all can help issuers, and I think it's a really kind of strong premise of what each of you guys talked about here.

Tyler Traudt (13:08):

Yeah, efficiency is what many software solutions should be able to provide. Computers can do things faster, we can unify data, we can make it accessible to different teams. Those things are all there, but a lot of times there's higher levels of value across the organization to go capture with that additional time. I mean, put that question to anybody listening, if you could get an hour back in every single day, how would you allocate it? What's the most effective allocation of your time? Because allocating resources in that very moment, and so by hopefully for a lot of these organizations, materially improved processes and the work to do in every single day, and a lot of this is a lot of the work inside of treasury for our world. It's not always the sexiest work, it's daily cash management. You're going into bank accounts, you're pulling down bank transaction data, you're making sure you got specifically enough in there, are there any suspicious transactions?

(13:58):

You got organizations that are doing a lot of accounting, a lot of filing of reports internally and externally. It's not always the sexiest stuff out there treasury. But if we can materially improve that process and all of a sudden a team, every team gets a person back, how would you allocate their time? Well, you would allocate that time to doing the most impactful strategic work possible that could improve your organization. So maybe it's a new directive from a board member or a CFO, maybe it's doing more debt structuring work, maybe it's doing more portfolio analysis work, whatever it might be to move your organization forward. So efficiency, yes, that's when we all go to, it's really easy to ring that bell and that's very true, but once you get that time back, if you can snap your fingers king for a day and make a choice about how you would allocate one additional hour every single day, if you put it into the highest protein stuff, the most valuable stuff, then you're probably going to move the needle pretty materially for the organization. And hopefully we get stronger financial performance, we get stronger finance and treasury teams in this country that are going to market with more time to do more work with investors and with their investment bankers and financial consultants and those kinds of things as well to make hopefully better decisions and better outcomes for their teams.

Lynne Funk (15:16):

So that's a good segue actually,

Gregg Bienstock (15:17):

You want to go one other piece for it?

Abhishek Lodha (15:19):

I just think.

Gregg Bienstock (15:19):

We heard it on a couple of panels already today, how critical transparency is when you're coming to market. Murph mentioned earlier, Rob mentioned it yesterday because there is so much data out there and the idea of being able to leverage technology to create information for the investing community, your investors, it's really critical that you give them that information. Murphy made the point earlier or Rob one of you guys did, but it's the idea of you can tell your story and use whatever information is out there. Your investors, your constituents have access to information too. So you need to tell your story.

Lynne Funk (16:02):

Yeah, Abhishek, you want to jump in there? Actually, I think you might have some thoughts on that.

Abhishek Lodha (16:07):

From an investor's angle,

Lynne Funk (16:08):

Yeah.

Abhishek Lodha (16:10):

And being such a credit focus shop, we're the long tail risk takers and for us, we can't change our credit process based on what the market technicals look like. So yes, market technicals and spreads have been super tight for a long time until we saw recent moves, we had the same strong credit process. And for that you need better disclosure. So I was talking to one of our analysts, we're seeing a lot of talk about federal cuts, we're talking about efficiency and cost and what that really means is how are you going to manage your money? And more importantly, how are you going to disclose that to us so that the right narrative is put into place, right? Texas is a great example for us. We did 300 deals that we insured last year and I'm looking at one of my colleagues, Jim out there, we probably looked at 600 deals.

(16:56):

That's a huge number of deals to go through just on the primary. I'm not even talking about a secondary volume. What I need is better and faster access to information. The buy-side has become a lot more smarter in terms of scraping tools like AI is the new big buzzword, but it has really helped in some cases and we're also improving our processes on how we essentially look at this information and break it down. And what that means is better access to information, more access to information from the issuer is going to help us a lot. So what I think someone in the previous panel made, I think it was Horatio from NTTA, every company and every enterprise is a technology company now including issuers. We think of tech as a core business enabler, and as you are disseminating this information, disclosure is strategy for you and that really helps us make better decisions and hopefully help the issuer get a better market rate in the market.

Tyler Traudt (17:57):

I was going to ask a follow-up question, so let me play down for a second. So what, talk about that. You said better market rate, but your organization is looking at a lot of these opportunities. You're trying to analyze this credit, you're going to get different levels of disclosure, accuracy, timeliness, frequency, all of these different variables. How does it impact you? How does it impact you? Somebody's just struggling internally, they're not producing it, it's not accurate, it's not timely. What's the impact?

Abhishek Lodha (18:24):

I think eventually it comes down to credit selection. We are now, no two triple Bs are looked at the same. Texas is again a great example. So many unrated muds that are coming out which we look at day in, day out basis. And I was going to give a shout out to Mac, Texas, great example, right Laura, I don't know if you're in the crowd right now, but that data for us has been a game changer for a few years now, and getting access to that data has really helped us get comfortable with smaller issuers and do that credit process in a more diligent way. And the last is speed. Again, another aspect of the market is, and coming back to Texas, we see a lot more competitive deals, which means the time horizon that we have to make a decision quickly is very, very short and it just gets shorter over time, which means we need access to data quickly and we need to understand and assess that data very fast.

Gregg Bienstock (19:20):

I think the follow on to that is talk about with algos in the marketplace and predictive pricing tools and all those things. To your point, the time to be able to make those decisions is critical. So if you go back 15 years ago and you look at how long it took some market participants to get their financials out, for example, and where we are today, that's a sea change and it becomes more and more critical as people are moving faster and faster. And that's shameless plug for you here, but that's where a platform like yours is making a difference.

Tyler Traudt (19:56):

Yeah, it's super interesting just thinking about inside the organization how the work is getting done, what's happening and it's literally humans with paper calculators, excel spreadsheets and a documented process, hopefully a documented process that are going through to produce financial information, to check the financial information and then publish the financial information. And when you lose that one person that knows how to do that exceptionally well, Dan was talking about that a moment ago. When you lose that person, all hell breaks loose inside some of these organizations. Filings aren't happening, they're not happening or they're wrong or whatever it might be. So finding ways to put systems in place to surface all this information, create a very clearly documented process around it, make sure you centralize and unify all your data so that somebody can't just delete this information is going to be important to help organizations just do a really nice job, do a really nice job over time. So efficiency, yes, but at the same time, like we've mentioned here, struggling to hire in underneath, we haven't updated all of our internal systems. We've got lots of spreadsheets in there. It's a really, I don't want to say interesting because it's it an interestingly challenging time for a lot of treasury teams.

Dan Silva (21:09):

You're hitting on the institutional knowledge aspect. Someone leaves, they leave with not just their skills and the hours they were putting towards something but how to do some aspect of the job that's critical that may have been part of or locked in some spreadsheets. How many times we get involved in situations where they have some very complex modeling spreadsheet. And this is across the gamut, it happens at investment banks, advisory firms and issuers alike where we'll get involved and there's some complex process that maybe one person knows what the heck is going on and that person leaves and someone else needs to come in and learn what was going on. What's nice about having at least critical processes mainly driven by a software solution is that hopefully, and I think everyone here has well-documented solutions, right? Exactly what should happen. How that workflow works is incredibly well documented.

(22:06):

We keep records on this stuff actually was speaking with the executive director of the National Association of Municipal Advisors the other day and something that hadn't really dawned on me is how important the record keeping is for the municipal advisors and bankers out there. That automatically happens when you're dealing with a cloud-based solution like everything that we have up here, including Adaje where you're running transactions, you're running numbers, and you don't have to worry about whether you're doing the record keeping, we're doing the record keeping for you automatically. It's just part of the workflow. So you're not losing that data if the regulator comes in knocking, you can just retrieve, oh, these are the scenarios we offered up to the issuer or as an issuer, this is what we looked at. The whole process was vetted. We looked at these options, this is the pricing we were looking at.

(22:55):

Everything is well maintained and you don't have to go searching through Excel files or did this get lost in an email or did it get deleted from this shared drive? We maintain all that record keeping for you and it was an interesting topic she brought up that I had not even thought about. And since Abhishek you reminded me and Hi Laura, nice to see you here. Just from a transparency in the data side, we actually are happy to announce that we just did an integration with Texas Mac as well. We kept a number of our clients, were pushing for integration with Texas Mac because they have great data. Just another aspect of on the transparency side, being able to get critical information into the system as quickly as possible. We're relying on that integration with the Texas Mac now as well, so happy to be partnered with them.

Lynne Funk (23:42):

Can we take a step for a second and I want to think about maybe higher level even to go how technology can help in the primary market pricing of a bond and then also kind of go into the secondary and I think for if you're talking to maybe the issuers first and then maybe you can talk to the investors as well. Does that make sense? You want to jump in there? Maybe Greg's kick out,

Gregg Bienstock (24:06):

I'll jump in there. I think obviously from an underwriting perspective, you all the underwriters in room have their way of approaching the market. What we think about from a technological standpoint is not necessarily how can we help do the final pricing on a deal, but it's how we can help create indicative scales. And so the idea is to be able to, in a highly efficient way, be able to take the basic information, your structural and credit characteristics of a potential transaction and be able to source in a matter of seconds comps and the comps are really up to at the end of the day, the person who's utilizing the software or the information or accessing. So if you go back maybe before November and you decide it's look for comps, maybe you'd look back a month, right? Maybe look for primary transactions, maybe then do a tighter analysis and look for secondary transactions on an institutional level and limit that to a specific part of the market perhaps if dealer trades, fast forward to today, if you're thinking of going to market today or the past five trading days, your approach is going to change materially.

(25:22):

What happened a week ago, week and a half ago in the primary market, candidly is going to have a little less relevance. You're going to want to access information. For example, I wanted to zero in on secondary activity with regard to the market segment, perhaps the geography as I mentioned before, for example of relevance to the new issue. So the idea is the data is out there and then it's the accessibility of the tools to be able to pull that information. The second part of that is to be able to access also historical scales and be able to look, for example, what is my issuer client used to seeing in terms of market conditions? Where are they used to pricing their deals, being able to access that information for themselves also for their competitor issuers. And so the idea is to be able to, I think, create an efficiency tool, whether it's for the issuer and it is interesting, I look at our history, the technology, some of the technology that we've developed.

(26:23):

We have some larger issuer clients who are able to access it and use it more for the purpose of saying, Hey, I want to have similar information to my banker. I want to be able to access that information. I want to be able to run alternative scenarios and deliver back the results in terms of structure, what we think is the best or potential solutions show the financial analysis associated with it. So I think it is really about creating tools and accessible so that you can get to the accessible information that can help you best get to a place. At the end of the day though, I'll say this and I firmly believe this, irrespective of what we all do here is that at the end of the day, the pricing is really going to be about what each institution and what each issuer can really tolerate. So technology's going to take you pretty far down the line. We're going to make you a lot more efficient, but those decisions are human decisions based on the unique circumstances of each of the organizations that we serve.

Lynne Funk (27:28):

Okay, Yeah.

 William Kim (27:30):

So techwise we get involved really early in the process. So in the capital planning process when an issuer's contemplating a project or maybe has a project already planned and they're thinking about, okay, here's my preliminary construction spend schedule and seeing how running those scenarios of how new money can be structured for this project over a number of years. And they vary in complexity. Some are simple, some are multi-year, even decade long projects and looking at that over 30 years, that's where we help issuers on the financial planning process. But we also look at automatically generating pre pricing and post pricing books where an issuer like Gregg mentioned, we also look at comparable issues as well as past issues and look at the different market environments in each, right. A deal priced in 2019 is going to be very different than a deal priced today. And then when you get to the day of pricing, we have advanced option analytics and where that helps is you go to an underwriter and yeah, you come with a standard 5% 10 year call structure, but when you're trying to evaluate, hey, maybe I throw in some 4% or look at a seven year call trying to look at the equivalent option, adjusted spread or yield can help an issuer make that decision real time so they get the best execution for their pricing.

Lynne Funk (28:52):

Okay. Anybody else?

Abhishek Lodha (28:57):

I can go from the investor's perspective.

Lynne Funk (28:59):

Yeah,

Abhishek Lodha (29:00):

I think again, credit selection and credit analytics is the space we live in. So when we think of technology, we think in I guess three buckets, right? One is accessing data. How can I plumb this data in quickly to my systems? The second is analytics. How can I now take this data and synthesize into informed information or knowledge that can help me make decisions? And the third is workflow. How do I now connect into systems where I can disseminate that information back to the issuer so that they have the right economics and information or pricing from our side in a more consumable fashion? So for us, the biggest thing is making sure we get access to the data. The number of times we've spoken to people who are like, Hey, wish there was a way we could just get your debt service schedule quickly fed into our systems so that we can start making pricing decisions in a more informed way or do scenario analysis as you said, will being able to do that in a more reactive way because the markets are changing, everyone's now looking at a lot of different structures, so we need to make sure we adapt and give a price that works for both sides very quickly and really finances.

(30:07):

We live in a world of PDFs. We live in a world of 300 PDFs, and now with new LLM models or data vendors, a lot of our focuses, how can we bring that data in a more structured and standardized format and build certain sort of scoring engines or rule sets that help us allow to say go or no go on these credits. And that's really where we're living and breathing right now.

Lynne Funk (30:29):

Okay.

Tyler Traudt (30:30):

I'll just share because I want to, and I'll share maybe a different perspective on this, and mine's very fundamental and it might be too fundamental, but when I think about our own company's pricing, we have a stock price we've raised five times when we talk to investors, investors ask us for our financial information, they ask us for our historical financial information, and they ask us for our forecasted financial performance. And then they meet with us every quarter when they're talking to us and they're evaluating, is this organization able to forecast successfully? Does this organization have a pulse on their business when they say that this is what's going to happen to us next quarter, next half next year, do those things actually materialize? And they use that to inform their internal analysis on the quality of that organization's business, but also the quality of that organization's leadership of their management, their ability to actually do the exercise and really understand their business.

(31:28):

So the analog here, I was talking to Mike Ronal at Fitch in the booth room and I was talking about cash, I was talking about cash forecasting and that work, and I was talking about a number of customers that were never able to successfully forecast. They weren't able to answer questions like, what's our balance sheet going to look like in six months? What's it going to look like in 12 months? Can we afford to pay for this project with cash or do we have to do debt financing? And we were talking about how cash management integrated with debt management made a lot of sense and he was sharing a story around receiving a spreadsheet that was completely broken and it just made the point. I just thought back to my time sharing those spreadsheets out with our investors. If you are able to do the fundamentals really well inside your organization, if you are able to have good clean information about your business, your organization, and you are analyzing it and you are forecasting it, and you are comparing how you're forecasting to how you're actually performing, you're going to have more success.

(32:25):

But two on the, here's my wrap into pricing, two those folks around you, investors or representing investors doing credit analysis, they will see those things. They will see the organizations that have instant access to it because it's readily available to them. They touch it every single day. And then they will see the organizations that had to jam the spreadsheet together to answer the question that may or may not have a bunch of hard-coded values in it and messed up formulas and those kinds of things as well. And so our belief certainly just inside of our company from our financial operations perspective is we're just going to try to improve fundamentally every single thing inside of our business and then those pricing results will come. And I too believe that the CFOs and the organizations that are improving their internal operations and using software makes it easier for them to accurately and readily prepare that information and share it out. And I'm not saying it's an upgrade. I'm not saying that you get a better rate, but it is absolutely, it's not breakeven, it's not a middle of the road thing. It's absolutely going to be a positive influence on your brand with those organizations that are charging you.

Abhishek Lodha (33:36):

And it's the narrative, I think what you said at the end of the day, it's all about storytelling for me in form of data and how do you do that in a manner of keeping it clean, good, standardized and quick? And that's what we struggled with. And it reminds me of a very good example. I started off as an analyst and then I kind of went towards the software development side of the world and one of the very first projects that I had was during Harvey and I had to look through 800 different names in Texas to identify which ones had a good cash position based on what the level of flooding and storm surge in their areas was. Took me maybe three or four weeks. And now with all the data that's present and that we have access to right now, similar thing happened in California and with the wildfires and we were able to do that in two hours and two hours is a stretch. And that's only because we wanted to check the data three times to say, Hey, how did we get it so quick? But again, that access to information and if issuers can disclose more, that helps us again stitch the story out very quickly so that we're not making knee jerk reactive moves, which I mean in this kind of time and phase that is happening a lot more than we'd like

(34:52):

. it to. Yeah.

Gregg Bienstock (34:53):

I just want to double back on something Abhishek said before, which I think is really relevant for every one of you in this room, is that we're essentially, at the end of the day, vendors, data vendors and software vendors, we need to be able to deliver to you in a way that's most efficient and effective for you. So your database is what we need to feed it into. So it's not just the GUI that you get, that's what you want. You can get that, but I think the point that you made before is so very relevant, which is you should be able to say, this is the output I want. How can you help me get there? And what is the data, whether it's any one of us up here, our companies have the data, and then it's all about creating the most efficient and effective way, cost effective way to get that data to you to get the information you need out at the end.

Lynne Funk (35:46):

Excellent. So I do want to pivot for a second here to the tax policy changes that have been kind of bandied about in Washington. And I'm just curious, in February, some of you who were on this panel had some thoughts about it, are there implications? Are you thinking about the changes to potential federal tax policy in the muni market and what it might mean for your business itself and as well as the market? Anybody want to take a crack at that?

Abhishek Lodha (36:17):

Buy a short guarantee insurance? I'll start with that. And Tyler was, we were going back and forth on an email exchange, right? Yeah. Obviously we're not economists. What's fascinating for me about that from the lens of technology is really going to be obviously as we discussed this morning, the likelihood is low. There may be certain slivers of the market where you'd see changes happen, but what's more important is the thematic trading that happens based on that last two days. We've seen 112,000 trades again mentioned this morning, right.

Lynne Funk (36:53):

Record.

Abhishek Lodha (36:54):

If you look at the last 30 day average, that's 65,000 trades and par again, the same, 35 versus 15 billion in trading. The point I'm trying to make is thematic trading leads to trading across the entire sector and market, which means if you have better information, you are being again, mindfully reactive to that. So with tax exemption, what will happen is there's going to be this pressure on credit and there's going to be this process of more scrutinized credit selection that happens. And if you don't have the right story out there, you may potentially get dinged. And that's where again, technology plays a role is like how can I quickly go through this data to make a decision very quickly?

Dan Silva (37:38):

We've seen just with the kind of market turmoil we've seen in the last few weeks and fed policy including tariffs and just the ability to be nimble is really important. We've seen dozens of issues that were going to come to market, folks modeling up their deals and then all of a sudden had to change not only pricing, but potentially structure and strategy around how they were going to get to market and just having the tools that you need to be able to effectively pivot when something comes. Sometimes you do have to be a little bit responsive. Keep in mind the overall strategy of the financing, but the world is changing constantly around us, sometimes pretty significantly, and it's really useful to be able to evaluate other options that are out there so that you can be responsive and get to market when you need to. So I'm pretty happy that we're able to do that for our clients.

Gregg Bienstock (38:34):

I'll jump in here. So first off, it's really hard to even think about what's going to come next because it seems not, it happens every day that there's something new that we didn't expect was going to happen, but as people who are a lot smarter than I am on the subject have talked about, there may be a little piece carved off here or carved there, and hopefully they do it with a scalpel as opposed to the chainsaw. But I also think about the fact that our market is incredibly resilient. And so whatever it is that that does happen, if something does happen and the likelihood unfortunately, I think there's going to be some impact, I think collectively we'll be quite resilient kind of as a market. When I think about technology and what we all do, that's part of our job, part of our responsibility I'll call it.

(39:30):

I also think about the fact that in the muni space we already have a taxable component. So there's some knowledge there. And then I think I'm fortunate, we're fortunate in the sense we, being my former company, we were acquired by a company that participates across fixed income asset classes. So we have the benefit of the knowledge that exists in those spaces to be able to apply that as things start to move forward. The last piece I'll say goes back to the point Abha was making with regard to number of trades and what's going on in the market, literally point in time technology. And one of the great things about technology as to where it is today is the ability to process that data in real time and deliver it back to you in useful information, whether it's just taking pure trade data and be able to deliver it that way, or being able to literally retrain AI and predictive pricing models with literally every hour. So the data's coming in constantly, but the models literally are retraining themselves every hour to be able to get that information back out to you. So whether it's being responsive to an announcement from the White House or something more significant, like a change in the tax exemption in some form, I think we're going to be very responsive as an industry.

Abhishek Lodha (40:53):

And I'm sorry, I don't mean to take too much of everyone's time, but I think that's an important point. What we've seen, and I was talking to one of my algo friends, the speed with which the market has reacted in the last two days is significantly faster than what's happened in the last few years, maybe during covid. Yes. So you've seen bigger widenings happen during COVID than right now, but the speed with which the trading is happening is a lot faster. And the implication of that is information is being processed much faster on the buy buy-side. Algos are turning around their books quickly. You've got 80% volume in trading coming from algos now apparently, or maybe 50 depending on who you ask. But again, that speed of execution means that if issuers don't have those kinds of tools to be responsive, that could be a negative implication on them and create some sort of risk. So actually I'm more curious to hear from the issuer's perspective on that.

Dan Silva (41:52):

Mostly from a primary issuance perspective, it's useful to be able to have already, there's only so much you can predict in advance, right? We're seeing things happen that have not happened before, but what we're seeing is folks have multiple options teed up leading into issuance as backup plans. So that just lets them in an eventuality that the market does shift as it did in the last couple of weeks, that they have an alternative plan that they can execute on, maybe adjust it a little bit right before bringing it to market and then get that in front of investors as opposed to the original plan. So we see this both in terms of not just again pricing but changing the term structure of bonds, maybe changing other aspects of how the bonds are going to be delivered. So we're seeing it really structurally like attributes of the bonds that they're fundamentally changing in some instances in reaction to what's happening in the market, and they're able to do that really quickly and then put out a new come to market with a different POS or a different offering than they would've otherwise. And they're doing that pretty quickly. This isn't like, okay, let's take a step back. Let's wait weeks and let everything calm down. No, in some instances folks are okay, this happened, we plan for it, we have an option, let's slightly modify it and let's go to market next week as opposed to shelving the deal for weeks at a time.

 William Kim (43:14):

I think technology also really gives you that independent capability and it removes bottlenecks. So Wendy's market wide events happen. Everyone's calling their municipal advisor at the same time or they're calling their investment bank at the same time. You've got 50,000 issuers calling the same people. They're just not going to get to you as much as they want to in a responsive manner. Whereas if you have that technology, if you sign up with any of us and have our technology solutions, you can do that independently. You can structure on the fly, you can do project planning on the fly and really look at how the secondary trading really impacts or the market impacts your particular pricing.

Dan Silva (43:51):

There's bankers and amaze in this room will be careful.

Tyler Traudt (43:56):

Can I answer it from a slightly different perspective?

Lynne Funk (43:58):

Of course. Welcome it.

Tyler Traudt (44:00):

So just want to share a story I thought would be interesting about this. We have a new team member comes to us from the corporate treasury space and when we were recruiting this person, he was sharing a story about Amazon and the treasurer at Amazon was a customer of theirs, and he was telling the story about how an Amazon, they were using technology inside their treasury function. So all of their cash, all their bank accounts, all over the world, they had all their investments, all of their debt. One unified system with visibility, live data coming into it. And he tells a story about how Amazon before the great recession knew the great recession was coming before it was popping up, before any of the news outlets were picking up before there was lots of chatter about it, Amazon knew was happening. They could see it because they could see every single day what their cashflow situation looked like around the entire world.

(44:52):

They saw it in the things that were being purchased, they saw it before it happened. And we in the United States and government nonprofit, we have different challenges than corporates do, but the organizations that have live access to their information, they have their finger right on the pulse of what's happening inside their organization. They're at an advantage. They're going to be able to react more quickly. Now does that mean that you should freak out? No, of course it doesn't. Getting ready for this question is actually the tariffs question that I was getting rid of because while I'm a tariffs economist, I'm not. I wanted to get read up on a couple of folks around us. So we're in Charlotte, North Carolina, Mecklenburg County is a large county right there. Talked to David Boyd, the CFO, and I just asked him, how are you reacting right now to these things?

(45:42):

And his reaction was, this is what our balance sheet's for. We've been building a balance sheet, we've got a strong balance sheet. We are going to sit and wait. Seems like everything's changing all the time. We're going to wait and see what happens. And cash has been yielding pretty nicely recently. So they've been investing in cash, short-term liquidity, and so watching it, yes, absolutely waiting and trying to figure it out. Sure. But if you have access to information, if you can centralize all of your data and you can actually see not when do we pull out the unaudited P&L from our ERP and generate that and take a look at that together, but every single day what's happening, you're in a better position. I'll say that a question, what happens if there's tax policy changes specifically to our business? Those kinds of things.

(46:28):

I mentioned this a moment ago and it'll be really interesting. Some organizations that have historically said, we don't need to issue tax exam. We're pretty substantial. We would like to borrow taxable, and we like to do whatever we want with it. Great. Those organizations are looking at tax exempt options. And William said this a second ago. Well, the counterbalance to that is what happens if tax exemption goes away? So it's like a really interesting moment, but I think that these organizations, the CFOs, the treasury teams, they're looking at their businesses. They're saying, how do we become more efficient? How can we save more money? If we lose federal funding, what are we going to do specifically about it? Federal funding's coming into our organization is going out for which purposes getting really, really tight inside your organization and then hopefully you've got a really strong balance sheet and then hopefully you've got your finger right on the pulse so you can go and know going into it that no, we're doing just fine. I'm comparing what I thought we were going to perform at to what we're actually performing at. And to date, there's no change.

Lynne Funk (47:25):

I'd say maybe disclosure of financials from issuers might be a little even more important if it were a taxable market, just the shift of who might be looking at them.

Tyler Traudt (47:35):

I'm sorry for hogging. The mic needs in these organizations are not going away. So if tax exemption goes away, our industry doesn't go away. I mean things change, sir, but these organizations are unique because we cannot access the equity markets. Most of us, I think all of us, we can't at DebtBook, we don't have any debt. It's because we sell shares of our company. We put that money on our balance sheet to go pay for things. But Mecklenburg County, I don't own any of Mecklenburg County. I don't think anybody's going to own any of Mecklenburg County any single anytime soon. They have to fund these. If grants are going and equity's not available, it's like cash. It's cash and it's debt. And we will have debt in this country, I assume forever.

Lynne Funk (48:17):

I'm not suggesting that I actually agree with the first panel of the day. I think the probability of the exemption going away fully is not going to happen. I would like to open it up though to the audience. Are there any questions for the panel? Any takers?

Tyler Traudt (48:34):

Not really.

Abhishek Lodha (48:35):

I've got a question for my fellow panelists.

Lynne Funk (48:37):

That's good. Let's do it.

Abhishek Lodha (48:38):

Something what Tyler was talking about, right? So when you look at the govtech space, so we have a lot of issuers here in the audience. I guess my question to everyone would be, we don't have the kind of money Amazon or large corporations do. We can't raise equity. We're relatively smaller, we don't have a lot of staff. How do we think about a tech strategy? The tech market has exploded. We have a lot more open source tools available than we ever did. I mean, hell, we didn't have panels like these tech panels at Bon Bayer years ago. So now we have a lot of vendors coming in as well.

Lynne Funk (49:14):

And I'm trying to actually make them maybe more than one because it's kind of hard to herd all these smart cats up here.

Abhishek Lodha (49:19):

So now there is buy versus bill decision. Your budget constrained. I guess, how do you as an issuer think about your tech strategy?

Gregg Bienstock (49:28):

I'll just start with two things. So first is new tech always really expensive and then in a very short period of time, your cost flattens out some. So I don't think the problem that they're going to face is an exorbitant cost. I think what it comes down to is allocation of their dollars to what is the most efficient way to get the job done. I think the reality is that you look at any organization ask to do more with less. And so it becomes a cost benefit analysis of someone mentioned it before if it used to take five hours to do and now it could take me 15 minutes, what is that worth? And you start to do the math and it becomes a cost benefit analysis that has to be done. I think it becomes pretty easily justified once as long as the offering is sound and stable and is delivering what it says can deliver.

Tyler Traudt (50:31):

Didn't prepare for the question, sorry. But here comes. Here's what I would do. If I were a CFO inside a governmental or nonprofit organization and we had to just start over a couple of different things, I would go and find vertically focused best in class solutions that we're going to be able to take care of an entire functional area. But I would not necessarily say I need one vendor for 100% of everything. We know that the major accounting systems and we love them, we partner with them, but they're very expensive. They're extremely difficult to get in. The implementations take years and you're in it seven years later, you've spent a lot of money. You might want to move to something different, but you're really captured because the pain of leaving the system is tremendous. Getting your team to turn over, talk to a lot of people.

(51:19):

Everybody knows this, if I have to do one more, if I lose one more person in the middle of this implementation, I'm going to lose my entire team. And so for me, what I would think about is can I find best in class systems that are going to take care of enough scope for particular functions, self-serving treasury, we won't just be for one person inside the treasury function. When the University of Cincinnati lost their cash manager, the debt team had to come over and start doing cash. Well, they should be in the same product, same vendor, same team, rolling up with the same responsibility. And then I would say you should integrate those things together. But if you find best in class solutions, modern SaaS businesses, technology is getting more affordable, more affordable. It is. It doesn't always feel like that, but it is more competitors than ever.

(52:01):

I'd have a treasury system. I'd have an accounting system. I would have a budget system, I'd have a purchasing contract system. I would have, depending on your organization, you'll have different systems. And then I would go pick the best in class solutions that are going to get me to value as soon as possible. If somebody shows up with a 12 month implementation process, I'd be like, gosh, there's got to be a vendor out there that can really help me get to time to value 90 days or less to save my staff resources. One of the things we try to do really well, I'm sure all these folks up here do really well too. And I would not say that every single thing has got to be in software because software is hard. It's hard. And there are going to be edge cases where a spreadsheet's going to be your saving grace, but is that software, does it have core data in it? Is it talking to your other systems that you can easily get information out, get into a spreadsheet to do the work that you need to do? Those things aren't going to go away around the edges. That's what I would say.

Lynne Funk (52:54):

Anyone else? Any takers on Abhishek's question?

Tyler Traudt (52:57):

Any CFOs in the room that are like absolutely not how we do it?

 William Kim (53:02):

I think my take on Tyler's response, which is just want to echo again, that speed to implementation is really, really important and you want to make sure that they're also flexible in terms of contracts. You want to be able to get in and out if it's not working for you. And I think that's really important because if you can reduce the cost of making the wrong decision to almost nothing or little to nothing, that makes it easier to make the case to adopt something new. It's really hard to move someone from Oracle they've been using for 30 years if the new solution that you move to takes 12 months and you're locked in for five years or something like that.

Tyler Traudt (53:40):

So it's having, sometimes if you have an old legacy system and it's a big legacy system, it's like having a knife in your side, but you're afraid to take it out. You don't want to bleed out. So you live with the knife in your side and that's like you're just walking around, you literally got one sticking out, but you're like, don't touch it, don't take it out. It's better than an analogy.

Abhishek Lodha (54:02):

And yeah, I think that's what I've seen. Right? It's also on the buy side. Most of the financial institutions and Munis are legacy institutions. Been in this business for 30 years. So it's better to not take the risk with any possibility of being wrong than actually take the risk and build something that can have a huge amount of positive ROI in 10 years. So thinking of technology as iterative, thinking of technology as a long-term capital asset is absolutely critical. Otherwise it doesn't have a successful implement.

Tyler Traudt (54:33):

I totally agree with you. Everybody should run out and buy a treasury management system who's bill for a government nonprofit integrate with your account.

Lynne Funk (54:39):

Well, I know we can keep going, but we can't. So thank you so much to our panel. We really appreciate all your comments. If anybody has any Questions. Of course you can find them here. Thank you everyone, and please join us in the second level for our lunch and our keynote speaker who be Chris Hollins, the controller of Houston. So thank you everybody.

Abhishek Lodha (55:01):

Thank you.