Semantix, Inc.

Good morning, everyone, and welcome to the Semantics fourth quarter and full year 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, we will conduct a question and answer session. As a reminder, this call may be recorded. I would now like to hand the call over to Augusto Vilela, Semantics Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining our fourth quarter 2022 earnings conference call. Joining me on the call today is Leonardo Santos, our CEO, founder and chairman, and Adriano Caldi, our CFO. By now, everyone should have access to our earnings announcement. This announcement is also on our investor relations website. During this call, we will make forward-looking statements, including statements about our business outlook, strategies, and long-term goals. These comments are based on our plans, predictions, and expectations as of today, which may change over time. Our actual results could differ materially due to the number of risks and uncertainties, including the risk factors outlined in our 20F that will be filed with the SEC. Also during this call, we will discuss certain long-term financial measures. These non-GAAP measures are not intended to be a substitute for our GAAP results. Please refer to our earnings release on our investment relations website for a reconciliation of GAAP to non-GAAP financial measures, as well as additional context on our key operating metrics. And finally, this call in its entirety is being webcast from our investment relations website at ar.thematics.ai. And another replay will be available on the website in a few hours. With that, I'd like to turn the call over to Leo. Leo, good morning.

Thank you, Augusto, and thank you, everyone, for joining us today. We have a lot of exciting developments to go over. On today's call, we will provide details on our fourth quarter and full year 2022 results, as well as offer guidance for fiscal year 2023. I'm happy to report that in the fourth quarter, we delivered record revenue of 96 million reais, an increase of 132% year-over-year. With growing across each of Semantic's revenue lines, despite a more challenging macro environment, Adriano will provide greater details during his remarks. But we again delivered a material increase in our gross margin as we continue to see healthy uptake of proprietary stocks. Forty-quarter growing was again driven by proprietary stocks, which can in the booth consensus expectation and increased 67% year over year. This higher margin revenue stream is the result of our increasing strategy focus on growing our proprietary business and is the key lever of growth and scaling our business. We plan to double down on our go-to marketing forces with this special offering. Each I will discuss in a few moments. In 2022, we invested to scale the business for a long-term success. Each include a restricting in the fourth quarter, a while successfully making our entry into the public market with a lesson on Nasdaq in August. While our focus remains on accelerated top-line growth, we plan to drive leverage through the balance and investment approach. with the goal of achieving operating profitability within fiscal year 2023. I would like to provide an update on the progress we have made across key initiatives that we have identified that are paramount to our success. This includes, one, product development and innovation across our proprietary platform offering. Two, enhancing the capability through the selected two key M&A, and three, improvement in our sales motion and go-to-market strategy. Turning first to the product side, at the core of our offering in the Semantic Data Platform, or SDP, a proprietary, highly scalable end-to-end data enterprise AI platform, which enables organizations to extract value from data in a time-efficient way without the largest-scale deployment of resources that a multi-vendor approach requires. Recent developments on the SDP include today's release of the Semantic Data Marketplace, empowering our customers to analyze a vast array of data and enabling the creation of powerful AI algorithms with increased accuracy. Looking ahead, we expect the data marketplace to increase our overall addressable market and along with the addition of more than 50 new features to our data integration model to directly translate to a growing cross-cell pipeline. Additionally, in the area of generative AI, We have a broad-to-market solution that allows customers to cost-efficiently leverage our infrastructure to fine-tuning and training their models. This is a huge opportunity to scale. This is a pioneer B2B solution in the generative AI field. Second, I would like to discuss target M&A and enforce to expand our footprint. Early this year, we acquired Elemento, US-based, called Management Machine Learning Operations Provider, complementing the SDP. In addition to expanding presence in the US and deepening the engineer bench with a highly technical team, the Generative AI features are a byproduct of the acquisition. I'm also happy to announce we have a fully integrated Zepa. a health tech focus analytics provider, into the DSTP. Healthcare is an underserved vertical in any area of increasing focus for semantics. In this quarter, we have further enhanced our capabilities with the acquisition of ATE Saúde, which provides analytics and insights in an innovative way to the pharma industry. With ATE Saúde, we will be able to increase our offering to this sector, presenting a great opportunity for growth. Third, we are making rapid progress and enhancing our specter of our go-to-market motion. To that end, in January, we announced the hiring of Maurício Melo, Vice President of Sales and Marketing. Maurice has a deep public company experience, having a working in the senior sales leadership role at Avanade, a joint venture between Microsoft and Accenture, as well as holding management position at Google, IBM, and SAP. His driven improvement across the entire range of go-to-market activities include an increased focus on vertical selling, enhanced to our market and lead generation activities, building our indirect sales motion, and importantly, continue to build a strategy relationship with the key partners. Reflecting on the past several quarters, I'm especially pleased with the growth of proprietary staff in our results and the material expansion in our growth margin profile. Proprietary SaaS is the key lever of growth and scaling our business, and we plan to increase and prioritize our go-to-market resource with this differentiated offering. Going forward, we will be guided to this method as the primary measure of the underlying health of our business. As we place greater emphasis on the proprietary SaaS update, we will continue to offer the third-party products, which continue to support our lending and expanding strategy, while focused on improving the margin profiles of this business. In summary, I'm impressed with the progress we made in 2022, leaving us well-positioned at the forefront of emerging data analytics and AI technology. Further, recently M&A, ongoing integration and new product launch align with our goal of supporting our customers throughout their entering the data journey. Looking forward, giving the largest opportunity in the front of us, we plan to keep investing while also placing increased rigor on our expenses. discipline, and are targeting a juice EBITDA profitability in the last quarter of this year. As always, we are focused on what we can control, especially given the understanding macro environment. That said, I remind confidence in our ability to deliver profitable growth this year while meaningfully increasing our proprietary needs of business. Now, I would like to share a couple of the key wins from the quarter that emphasize the unique power of our platform. First, we won a contract to monitor several hundred thousand streetlights in São Paulo. Leveraging our SAP, this customer can monitor their distributed physical infrastructure in real time and organize and maintain it as necessary. Further, members of the public can report issues with their feedback became integrated to analytics' dashboard. This win aligns with our lengthy and extensive sales motion, as we have the opportunity to layer on AI models to increase efficiency. This win also illustrates the broad range of the data-related problems that our AI-rich platform can solve, and a use case that can be easily replicated. Second, we are engaged with the major agribusiness companies that work with the farmers to realize business efficiency in the areas such as risk analysis, personal processes, and financial structuring. This customer is delivering our data AI expertise to build a data lake within SDP, delivering information collected from the farmers to financial institutions and improve farmers' access to the credit. In an open point, as we cited last quarter, we are seeing increased opportunities in agribusiness and under-penetrated vertical with a vested runway for growth that represents over a quarter of the Brazil GDP. Overall, I'm incredibly proud of what the Semantic team has accomplished in such a short time and wish to take this opportunity to thank you all of our employees, partners, clients, and investors for their continued support and commitment. With that, I would like to turn the call over to the Semantic CFO, Adriano Caldi. Thank you.

Thank you, Leo, and thanks, everyone, for joining us. I will start by reviewing our fourth quarter and fiscal 2022 results and then move on to providing guidance for 2023. Despite the economic uncertainty and acknowledging some companies are optimizing expanded, companies are broadly moving forward with their data and AI projects. Against this backdrop, And as Leo mentioned, we delivered a record sales on top line growth of 132% year over year in the fourth quarter. With 2022 revenue of 262 million reais. We highlight 17 customers contributing more than 5 million reais or 1 million US dollars exceeding the year and increased from 12 at the end of this third quarter. In the fourth quarter, we saw volatility in large third-party SaaS contracts, but are pleased that our third-party SaaS growth margin expanded by approximately 20 percentage points year-over-year to 35%. Our growth was driven by proprietary SaaS, the core of our scalable end-to-end data analytics platform, which grew 67% year-over-year in the Q4. Growth and proprietary stats drove meaningful improvement to our gross profit, which increased 167% year-over-year. We delivered a gross margin of 54% and increased of 7 percentage points year-over-year. Moving to operating expenses. We remain highly focused on improving the leverage in our business while being mindful of our investment for growth. In the fourth quarter, we implemented a series of cost-saving initiatives, including a workforce reduction that allowed us to redouble our investment in proprietary product development, and we will accelerate our path to profitability. We expect to realize these benefits as we move through 2023. Adjusted SG&A net of merger-related costs stock option plan and other no operational expenses in 2022 grew 76% year over year and 166% in the fourth quarter of 2022 compared to the same period of 2021. The increase in the SDG&A for the year was due mostly to our investment in sales and marketing expenses. as we reinforced our go-to-market approach. S&M expansion was also impacted by provisions for expected credit loss or receivables in line with our top-line growth. Adjusted EBITDA loss for the fourth quarter of 2022 was R$ 26 million, reflecting a gross profit of R$ 52 million. which was offset by the SG&A in the fourth quarter due to the reason I just mentioned. As of December 31st, we held a cash and cash equivalence of 338 million reais. Note that during the fourth quarter, we paid an amount of 73 million reais in banking loans. And as of December 31st, we had $4.9 million remaining in our share repurchase authorization. To summarize 2022, our revenues increased 24% year-over-year to R262 million in a challenging microenvironment. Our core proprietary SaaS revenue grew 38% year-over-year, driving overall gross margin improvement of 5% points to 45%, and the adjusted debt loss was R69 million. Before offering guidance, I'd like to share some thoughts on the near-term environment. As we have indicated, we plan to keep innovating and investing for the opportunity ahead of us, with a mindful approach to expense levels and a sharp focus on factors within our control. Like the vast majority of our technology peers, we are seeing the impact of microeconomic headlines affecting broader IT expanded, which have intensified in recent months. Many customers and prospects are taking longer with their purchasing decisions and are requiring extra layer of approvals in the budgeted process. As we plan for 2023, we remain extremely mindful of this dynamic and have considered them closely in developing our outlook, which I would like to discuss now. As Leo previously addressed, we increasingly view proprietary stats as the key measure of underlying health of our business. As such, we are adjusting our guidance and philosophy to include proprietary stats. We will continue to sell third-party products strategically and for specific use cases, and now expect a total net revenue growth rate of at least 10% for 2023. We expect proprietary stats revenue for the full year of 2023 to be between R$ 75 million and R$ 8 million, implying growth in the range of 40% to 50% compared to the full year 2022. We expect that for this forecast, most of the revenue will come from existing contracts. Although we are not providing quarterly guidance, we expect a year-over-year decline in proprietary SAS in the Q1. Multiple factors are contributing to this below, typically seasonality, including no recurrent health data revenue in Q4, the discontinuation of some non-core contracts, and contract timing due to the introduction of new versions of some SDP models. Finally, reflecting the margin benefits from increased mix of proprietary assets and the full impact from recent cost savings initiatives, we anticipate reaching the milestones of positive adjusted EBITDA in the fourth quarter of this year. As we look ahead to 2023, while microeconomics dynamics remain a factor, we remain focused on the significant opportunity ahead of us and are committed to the fiscal discipline and driving competitive return for our shareholders. With that, we thank you all for joining, and I'll send it back to the operator for Q&A.

Certainly. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. One moment for our first question. And our first question will come from Rudy Kessinger of DADCO. Your line's open.

Hey, guys. Thanks for taking my questions. I appreciate the increased focus on the proprietary SAS line and the guidance for that line next year. In Q4, you know, I don't see the hard revenue split figures in the press release, but I guess using that growth rate you gave, I'm coming to a proprietary SAS revenue figure of about 24%. million in Q4. Is that accurate, or how much was proprietary SAS revenue in Q4?

Rudy, we had a lot of financial statements.

We have the split of the revenues that we public, but especially in the Q4, we had a peak in demand for one of our health products that put this number in a higher position.

And is that, those, I guess, the healthcare-related revenue, is that, you said that's not repeating in Q1, so is that, you know, is that revenue that will repeat in Q4 of next year, or was it more one-time, and just how much was it related to healthcare in Q4?

For the Q1, we're going to have a, We don't see this effect of Q4 because we had a peak of demand in Q4.

So in the Q1, we will have a regular number on this line.

Okay. And then as I look to the overall revenue guidance, 10% growth versus, you know, 30% growth plus previously they gave last quarter. As I think about the reduction in that number, that 20% reduction in the growth outlook, I guess, how would you split it out between maybe one greater macro pressures and increased difficulty to close deals versus two, a, you know, strategic, um, wind down or reduction in your efforts to grow the third party revenue. I would leave it here.

That's the point. Then they changed the strategies and the focus on our go to marketing, the proprietary software. And, of course, maintain the three-party partners in scale and expansion strategy. But the focus in here is, of course, proprietary SaaS solution.

Got it. Okay. And then how should we think about, I know you're not guiding to EBITDA or cash flow or anything, but just, you know, you mentioned the headcount reduction. How big was the headcount reduction and Do you have any target date you can share with respect to EBITDA profitability or free cash flow positive?

Regarding the cash flow, we are still a high-growth company investing, as I said, just now investing in proprietary products development and in our go-to-market strategies and M&A agenda, which certainly demands a higher cash consumption. However, as we start into the call, we expect to have a positive impact in the last quarter of 2023, which will have a positive impact on our cash generation for this year and the years to come. So it's important to say that we are constantly forecasting cash flow scenarios, combining with our product results, and those scenarios will support any decision of investment and sustainability. This is a scenario for cash.

Got it. Okay. That's it for me. I'll jump back in the queue. Thank you. Thank you so much, Uruji.

Again, ladies and gentlemen, if you would like to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. To ask a question, please press star 11 on your telephone. And I'm showing no further questions. I would now like to turn the call to Leonardo for closing remarks.

Thank you, everyone. I'm happy to share with you the great progress we are achieving in execution. We are delivering what we promised in the terms of the product roadmap, M&A, and proprietors as revenue growth. We still have a lot accomplished, and I know that will not be easy. We have a great and committed team to the execution of our strategy. Our journey is just in the beginning. Thank you so much.

And this concludes today's conference call. Thank you for participating. You may now disconnect. Thank you.

Thank you. you Thank you. Thank you. Thank you.

Good morning, everyone, and welcome to the Semantics fourth quarter and full year 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, we will conduct a question and answer session. As a reminder, this call may be recorded. I would now like to hand the call over to Augusto Vilela, Semantics Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining our fourth quarter 2022 earnings conference call. Joining me on the call today is Leonardo Santos, our CEO, founder and chairman, and Adriano Caldi, our CFO. By now, everyone should have access to our earnings announcement. This announcement is also on our investor relations website. During this call, we will make forward-looking statements, including statements about our business outlook, strategies, and long-term goals. These comments are based on our plans, predictions, and expectations as of today. which may change over time. Our actual results could differ materially due to the number of risks and uncertainties, including the risk factors outlined in our PDF that will be filed with the SEC. Also during this call, we will discuss certain non-GAAP financial measures. These non-GAAP measures are not intended to be a substitute for our GAAP results. Please refer to our earnings release on our Investor Relations website for a reconciliation of GAAP to non-GAAP financial measures, as well as additional context on our key operating metrics. And finally, this call in its entirety is being webcast from our Investor Relations website at ar.thematics.ai. And another replay will be available on the website in a few hours. With that, I'd like to turn the call over to Leo. Leo, good morning.

Thank you, Augusto, and thank you, everyone, for joining us today. We have a lot of exciting developments to cover. On today's call, we will provide details on our fourth quarter and full year 2022 results, as well as offer guidance for fiscal year 2023. I'm happy to report that in the fourth quarter, we delivered record revenue of R$96 million, an increase of 132% year-over-year. With growing across each of Semantic's revenue lines, despite a more challenging macro environment, Adriano will provide greater details during his remarks. But we again delivered a material increase in our gross margin as we continue to see healthy uptake of proprietary stocks. Forty-quarter growing was again driven by proprietary stocks, which can in the booth consensus expectation and increased 67% year over year. This higher margin revenue stream is the result of our increasing strategy focus on growing our proprietary business and is the key lever of growth and scaling our business. We plan to double down on our go-to marketing forces with this special offering, which I will discuss in a few moments. In 2022, we invested to scale the business for a long-term success, each including a restricting in the fourth quarter, a while successfully making our entry into the public market with a national Nasdaq in August. While our focus remains on accelerated top-line growth, we plan to drive leverage through the balance and investment approach. with the goal of achieving operating profitability within fiscal year 2023. I would like to provide an update on the progress we have made across key initiatives that we have identified that are paramount to our success. This includes, one, product development and innovation across our proprietary platform offerings. Two, enhanced capability through the selected two key M&A, and three, improvement in our sales motion and go-to-market strategy. Turning first to the product side, at the core of our offering in the Semantic Data Platform, or SDP, a proprietary, highly scalable end-to-end data enterprise AI platform, which enables organizations to extract value from data in a time-efficient way without the largest-scale deployment of resources that a multi-vendor approach requires. Recent developments on the SDP include today's release of the Semantic Data Marketplace, empowering our customers to analyze a vast array of data and enabling to create powerful AI algorithms with increased accuracy. Looking ahead, we expect the data marketplace to increase our overall addressable market and along with the addition of more than 15 new features to our data integration model to directly translate to a growing cross-cell pipeline. Additionally, in the area of generative AI, We have a broad-to-market solution that allows customers to cost-efficiently leverage our infrastructure to fine-tuning and training their models. This is a huge opportunity to scale. This is a pioneer B2B solution in the generative AI field. Second, I would like to discuss target M&A and enforce to expand our footprint. Early this year, we acquired Elemento, US-based, called Management Machine Learning Operations Provider, complementing the SDP. In addition to expanding presence in the US and deepening the engineer bench with a highly technical team, the Generative AI features are a byproduct of the acquisition. I'm also happy to announce we have fully integrated the ZEPA a health tech focus analytics provider, into the DSDP. Healthcare is an underserved vertical in any area of increasing focus for semantics. In this quarter, we have further enhanced our capabilities with the acquisition of ATE Saúde, which provides analytics and insights in an innovation way to the pharma industry. With ATE Saúde, we will be able to increase our offering to this sector, presenting a great opportunity for growth. Third, we are making rapid progress and enhancing our spectre of our go-to-market motion. To that end, in January, we announced the signing of Maurício Melo, Vice President of Sales and Marketing. Maurice has a deep public company experience, having a working in the senior sales leadership role at Avanade, a joint venture between Microsoft and Accenture, as well as holding management position at Google, IBM, and SAP. His driven improvement across the entire range of go-to-market activities include an increased focus on vertical selling, enhanced to our market and lead generation activities, building our indirect sales motion, and importantly, continue to build a strategy relationship with the key partners. Reflecting on the past several quarters, I'm especially pleased with the growth of proprietary staff in our results and the material expansion in our growth margin profile. Proprietary SaaS is the key lever of growth and scaling our business, and we plan to increase and prioritize our go-to-market resource with this differentiated offering. Going forward, we will be guided to this method as the primary measure of the underlying health of our business. As we place greater emphasis on the proprietary SaaS updates, we will continue to offer the third party products, which continue to support our lending and expanding strategy, while focus on improving the margin profiles of this business. In summary, I'm blessed with the progress we made in 2022, leaving us well positioned at the forefront emerging data analytics and AI technology. Further, Recently M&A, ongoing integration and new product launch align with our goal of supporting our customers throughout their entering the data journey. Looking forward, giving the largest opportunity in the front of us, we plan to keep investing while also placing increased rigor on our expenses. discipline, and are targeting a juice EBITDA profitability in the last quarter of this year. As always, we are focused on what we can control, especially given the understanding macro environment. That said, I remain confident in our ability to deliver profitable growth this year while meaningfully increasing our proprietary mix of business. Now, I would like to share a couple of the key wins from the quarter that emphasize the unique power of our platform. First, we won a contract to monitor several hundred thousand street lights in São Paulo. Leveraging our SAP, this customer can monitor their distributed physical infrastructure in real time and organize and maintain it as necessary. Further, members of the public can report issues with their feedback became integrated to analytics' dashboard. This win aligns with our lengthy and extensive sales motion, as we have the opportunity to layer on AI models to increase efficiency. This win also illustrates the broad range of the data-related problems that our AI-rich platform can solve, and a use case that can be easily replicated. Second, we are engaged with the major agribusiness companies that work with the farmers to realize business efficiency in the areas such as risk analysis, personal processes, and financial structuring. This customer is delivering our data AI expertise to build a data lake within SDP, delivering information collected from the farmers to financial institutions and improve farmers' access to the credit. In an open point, as we cited last quarter, we are seeing increased opportunities in agribusiness and under-penetrated vertical with a vested runway for growth that represents over a quarter of the Brazil GDP. Overall, I'm incredibly proud of what the Semantic team has accomplished in such a short time and wish to take this opportunity to thank you all of our employees, partners, clients, and investors for their continued support and commitment. With that, I would like to turn the call over to the Semantic CFO, Adriano Caldi. Thank you.

Thank you, Leo, and thanks, everyone, for joining us. I will start by reviewing our fourth quarter and fiscal 2022 results and then move on to providing guidance for 2023. Despite the economic uncertainty and acknowledging some companies are optimizing and expanding, companies are broadly moving forward with their data and AI projects. Against this backdrop, And as Leo mentioned, we delivered a record sales on top line growth of 132% year over year in the fourth quarter. With 2022 revenue of 262 million reais. We highlight 17 customers contributing more than 5 million reais or 1 million US dollars exceeding the year and increased from 12 at the end of this third quarter. In the fourth quarter, we saw volatility in large third-party SaaS contracts, but are pleased that our third-party SaaS growth margin expanded by approximately 20 percentage points year-over-year to 35%. Our growth was driven by proprietary SaaS, the core of our scalable end-to-end data analytics platform, which grew 67% year-over-year in the Q4. Growth in proprietary SaaS drove meaningful improvement to our gross profit, which increased 167% year-over-year. We delivered a gross margin of 54% and increased of 7 percentage points year-over-year. Moving to operating expenses. We remain highly focused on improving the leverage in our business while being mindful of our investment for growth. In the fourth quarter, we implemented a series of cost-saving initiatives, including a workforce reduction that allowed us to redouble our investment in proprietary product development, and we will accelerate our path to profitability. We expect to realize these benefits as we move through 2023. Adjusted SG&A net of merger-related costs stock option plan and other non-operational expenses in 2022 grew 76% year over year and 166% in the fourth quarter of 2022 compared to the same period of 2021. The increase in the SG&A for the year was due mostly to our investment in sales and marketing expenses. as we reinforced our go-to-market approach. S&M expansion was also impacted by provisions for expected credit loss or receivables in line with our top-line growth. Adjusted EBITDA loss for the fourth quarter of 2022 was R$ 26 million, reflecting a gross profit of R$ 52 million. which was offset by the SG&A in the fourth quarter due to the reason I just mentioned. As of December 31st, we held a cash and cash equivalence of 338 million reais. Note that during the fourth quarter, we paid an amount of 73 million reais in banking loans. And as of December 31st, we had $4.9 million remaining in our share repurchase authorization. To summarize 2022, our revenues increased 24% year-over-year to R262 million in a challenging microenvironment. Our core proprietary SaaS revenue grew 38% year-over-year, driving overall gross margin improvement of 5% points to 45%, and the adjusted debt loss was R69 million. Before offering guidance, I'd like to share some thoughts on the near-term environment. As we have indicated, we plan to keep innovating and investing for the opportunity ahead of us, with a mindful approach to expense levels and a sharp focus on factors within our control. like the vast majority of our technology peers we are seeing the impact of microeconomic have means affecting broader i.t expanded which have intensified in recent months many customers and prospects are taking longer with their purchasing decisions and are required extra layer of approvals in the budgeted process as we plan for 2023 we remain extremely mindful of this dynamic and have considered them closely in developing our outlook, which I would like to discuss now. As Leo previously addressed, we increasingly view proprietary stress as the key measure of underlying health of our business. As such, we are adjusting our guidance and philosophy to include proprietary stress. We will continue to sell third-party products strategically and for specific use cases, and now expect a total net revenue growth rate of at least 10% for 2023. We expect proprietary stats revenue for the full year of 2023 to be between R$ 75 million and R$ 8 million, implying growth in the range of 40% to 50% compared to the full year 2022. We expect that for this forecast, most of the revenue will come from existing contracts. Although we are not providing quarterly guidance, we expect a year-over-year decline in proprietary SAS in the Q1. Multiple factors are contributing to this below, typically seasonality, including no recurrent health data revenue in Q4, the discontinuation of some non-core contracts, and contract timing due to the introduction of new versions of some SDP models. Finally, reflecting the margin benefits from increased mix of proprietary assets and the full impact from recent cost savings initiatives, we anticipate reaching the milestones of positive adjusted debt in the fourth quarter of this year. As we look ahead to 2023, while microeconomic dynamics remain a factor, we remain focused on the significant opportunity ahead of us and are committed to the fiscal discipline and driving competitive return for our shareholders. With that, we thank you all for joining, and I'll send you back to the operator for Q&A.

Certainly. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. One moment for our first question. And our first question will come from Rudy Kessinger of Dadco. Your line's open.

Hey, guys. Thanks for taking my questions. I appreciate the increased focus on the proprietary SAS line and the guidance for that line next year. In Q4, you know, I don't see the hard revenue split figures in the press release, but I guess using that growth rate you gave, I'm coming to a proprietary SAS revenue figure of about 24%. million in Q4. Is that accurate, or how much was proprietary SAS revenue in Q4?

Rudy, we had a lot of financial statements.

We have the split of the revenues that we public, but especially in the Q4, we had a peak in demand for one of our health products that put this number in a higher position.

And is that, those, I guess, the healthcare-related revenue, is that, you said that's not repeating in Q1, so is that, you know, is that revenue that will repeat in Q4 of next year, or was it more one-time, and just how much was it related to healthcare in Q4?

For the Q1, we're going to have, We don't see this effect of Q4 because we had a peak of demand in Q4.

So in the Q1, we will have a regular number on this line.

Okay. And then as I look to the overall revenue guidance, 10% growth versus, you know, 30% growth plus previously they gave last quarter. As I think about the reduction in that number, that 20% reduction in the growth outlook, I guess, how would you split it out between maybe one greater macro pressures and increased difficulty to close deals versus two, a, you know, strategic, um, wind down or reduction in your efforts to grow the third party revenue. I would leave it here.

That's the point. Then the change, the strategies and the focus on our go to marketing, the proprietary software. And, of course, maintaining the three-party partners in scale and expansion strategy. But the focus in here is, of course, proprietary SaaS solution.

Got it. Okay. And then how should we think about, I know you're not guiding to EBITDA or cash flow or anything, but just, you know, you mentioned the headcount reduction. How big was the headcount reduction and Do you have any target date you can share with respect to EBITDA profitability or free cash flow positive?

Regarding the cash flow, we are still a high-growth company investing, as I said, just now investing in proprietary products development and in our go-to-market stretches and M&A agenda, which certainly demands a higher cash consumption rate. However, as we start into the call, we expect to have a positive impact in the last quarter of 2023, which will have a positive impact on our cash generation for this year and the years to come. So it's important to say that we are constantly forecasting cash flow scenarios, combining with our product results, and those scenarios will support any decision of investment and sustainability. This is a scenario for cash.

Got it. Okay. That's it for me. I'll jump back in the queue. Thank you. Thank you so much, Uruji.

Again, ladies and gentlemen, if you would like to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. To ask a question, please press star 11 on your telephone. And I'm showing no further questions. I would now like to turn the call to Leonardo for closing remarks.

Thank you, everyone. I'm happy to share with you the great progress we are achieving in execution. We are delivering what we promised in the terms of the product roadmap, M&A, and proprietors as revenue growth. We still have a lot accomplished, and I know that will not be easy. We have a great and committed team to the execution of our strategy. Our journey is just in the beginning. Thank you so much.

And this concludes today's conference call. Thank you for participating. You may now disconnect.