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spk00: year-to-date capital markets platform revenue coming from recurring and long-term customer contracts ensuring our core business remains strong and intact. At the end of the second quarter, ARR was 53.3 million, an increase of 12.4% year over year, driven in part from 107 existing customers purchasing additional subscriptions with us. It is exciting to see so many customers increasing the scope of their relationship with us. Our investment into the development of additional subscription offerings that are valuable to our existing clients coupled with the ramping investment in our expansion sales capabilities has fueled this growth channel. As well, our bundled sales approach focusing on selling platform has continued to work very well with annual contract value of new sales increasing in both North America and Europe. However, the acquisition of new logos slowed as a result of tougher market conditions that dramatically impacted the pace of new IPOs in the market and corporate customers delaying their IR spending. Average revenue per account, or ARPA, was $18,642 at the end of the quarter. This represents a 4.1% increase over the prior year. and also generates an increased growth rate compared to the first quarter's 3.2%. Expanding our offerings into the existing customer base contributed the majority of the ARPA growth in Q2 and delivers early ROI on the investments to build that expansion capability. The combined efforts of our expansion sales and our client success team produce the highest quarterly increase of ARPA on record. Additionally, our team continues to enact renewal billing increases to ensure we can absorb the increasing inflationary costs while maintaining the highest quality service levels. Product adoption continues to move towards customers leveraging two or more products. This quarter, 65.4% of ARR was generated from these customers, up from 63.2% a quarter ago. These clients also have a strong propensity to engage with us for value-added services, supporting overall revenue growth. Our integrated platform strategy is evolving as anticipated, as shown in the chart, with clients buying a higher number of solutions and services, driving increased value in the hands of the clients and increased retention for us. It is a true driver of ARR and ARPA. As customers adopt additional products and gain unique value through our platform approach, we are further entrenched in the customer workflow. This creates a strong moat around our core business and will help us retain customers. In the second quarter, we saw the addition of 79 new clients, of which 61 became subscribers. Our quarter ended with 2,685 customers on the platform. A notable strain on our ARR growth and retention during the quarter was uncontrollable churn tied to M&A in the public markets causing customer consolidation. This trend continued from Q1 when we saw the majority of our revenue churn come from these uncontrollable types of events. However, our controllable logo retention remained strong at 96%, consistent with last quarter. Our low churn levels supports the durability of our business and our ability to be valuable to customers in tough economic times. Looking at gross margin in the second quarter, we saw cost impacted by inflation, which, when combined with lower revenue, slowed our gross margin expansion. resulting in gross margin for the second quarter being relatively flat for the comparable quarter last year at 56.5% and 56.8% comparatively. It decreased slightly in sequential quarters, primarily because of inflation, and that unfavorable trend is being addressed with additional margin expansion initiatives. We are still tracking to exit 22, with mid 60s gross margin and mid 70s next year. We remain focused on the original pillars of our gross margin expansion strategy, but we feel that they alone are insufficient to deliver the margin outcomes we expect. The first of our original pillars is to consolidate and reduce the fixed cost of our data and other direct costs. On a percentage basis, these costs reduce over increased revenue volume, but we have also targeted an assessment and rationalization of providers to generate absolute savings. The second pillar, which is the vertical integration of our virtual events platform, delivered significant progress this quarter. We completed the migration of our North American customers and will continue with the migration of our European customers over the next quarter. The third pillar relates to investments we are making in product automation to improve the customer experience with less manual effort for us and the customers. As Daryl mentioned earlier, the launch of the website management app is a perfect example as it has made it easier for customers to manage their websites while also making it much easier for us to manage these requests. But to help us realize our gross margin expansion, we have added two additional pillars. The fourth pillar is an expansion of our workforce into new lower cost geographies where we don't currently operate while remaining intensely focused on service excellence. This hiring strategy is underway and will impact COGS in Q3 and beyond. And the fifth and final pillar is to increase prices to offset the negative impact of inflation on our costs while maintaining our ability to provide premium customer service. These price increases began rolling out in Q2 and will positively impact Q3 and future quarters. As you can see, maintaining our customer base through service excellence is our paramount strategy. We also believe that a strong balance sheet and income statement creates a sustainable ability to serve these customers. In the second quarter, Operating expenses, excluding depreciation, amortization, foreign exchange loss, and other expenses, totaled $17.3 million. This quarter's operating expense was at our highest planned level of spend. The leading investments we have made in sales and marketing and research and development this quarter provide the foundation for our future growth, with a solidified infrastructure and the ability to scale our platform sales without further investment. Sales and marketing costs were 6.5 million or 47% of revenue, an increase of 2.1 million compared to Q2 last year. The increase included necessary investments in our expansion and European sales capabilities. Research and development came in at 5 million or 36% of revenue, an increase of 2.2 million compared to the second quarter costs last year. The increase supported the continued investment in both the improvement of current products within our capital markets platform and the development of new offerings. P&A for the quarter was $5.8 million, or 42% of revenue for the quarter. This increased $1.2 million from the comparable period in the prior year when we were private, primarily because of the expenses associated with operating as a public company. G&A expenses will level off as a percentage of revenue into the back half of this year as we scale and find leverage on our costs associated with going public. Our adjusted EBITDA was negative 8.7 million or negative 63% of revenue for the quarter. This reflects the high investment levels associated with a hyper growth strategy that we feel is challenged in this macro environment. As we execute our accelerated planned profitability, which I'll touch on in a moment, this loss will narrow considerably over the second half of the year and become positive in 2023. In terms of our balance sheet, our core working capital metrics remain strong and consistent with historical trends, ending with a working capital balance of $40.2 million. As of June 30, 2022, we had 45.1 million in cash, net of net operating, negative operating cash flow in H1 of 18 million. As described, this is primarily the result of investments made across sales, marketing, and research and development. As of June 30th, we had no outstanding debt with a total revolving facility of 22.5 million. our balance sheet continues to be well positioned to execute against both our organic and inorganic growth opportunities. Our intention is to maintain that strength. We have weathered previous cycles of challenging macroeconomic conditions. We recognize the durability of our business model and the importance of adapting the pacing of our strategic priorities to combat the headwinds we are facing. As such, we are taking deliberate measures to shorten our timeline to profitability through enhanced focus on cost management and business efficiency. I wanted to reaffirm that we are still expecting gross margins to exit this year in the mid-60s and in the mid-70s for 2023. As I mentioned earlier, our strategies on this front are well underway and will impact Q3 and Q4 in an effective manner. Of equal importance to EBITDA is optimizing the return on OPEX with initiatives for improving sales efficiency and utilizing low-cost geographies to drive down OPEX, expanding our operating leverage through the remainder of 2022 and 2023. This will result in the business being cashflow and EBITDA positive in the second half of 2023, ahead of our earlier expectations of reaching EBITDA positive in early 2024. Accelerating this path to profitability will ensure the business remains well capitalized. giving us the ability to singularly focus on executing our organic growth strategy while ensuring we have ample capital for inorganic opportunities. And with that, I'll now pass it back to Daryl.
spk01: Fantastic. Thanks, Donna. That was great. And with that, we'll now switch over to the Q&A session. So I will pass it back to Sarah to kick us off. Sarah?
spk04: Thanks, everyone. With that, we will have our first question come in from our analyst audience. We have Kevin McVey at Credit Suisse.
spk07: Great. Thank you so much. And congratulations on the execution. And it's obviously a tough environment. And welcome, Donna. Hey, Daryl or Donna, is there any way to think about the revenue against the gross margin objectives, particularly as we think about Q3 and Q4, just the sequencing of the...
spk05: Thank you for your patience while you were waiting while we were having some technical difficulties. We're back on the Q&A for the Q4 earnings call. We're going to go back to our first question with Kevin McFay at Credit Suisse. Kevin, if you're on the line, can you please join?
spk07: Yes. Again, thanks so much, Donna and Daryl. Congratulations on the execution of the tough environment. Just hoping to get a little bit of sense of the sequencing of the revenue in Q3 and Q4, just to try to reconcile that against the gross margin objectives as possible.
spk01: Sure. Thanks, Kevin. I'll let Donna answer that question. But first, I just want to just acknowledge that the outage that we just had on the broadcast, it was due to an internet outage that happened with one of our video partners. So just our apologies for the delay. Hopefully, you've stuck with us during the call. And we look forward to going through the Q&A session with the analysts. And so with that, we'll take your question, Kevin, and over to you, Donna.
spk00: Great. And thanks, Kevin. When we think about the gross margin expansion, it is in the context of modest sequential quarterly revenue growth, not our historical growth rates. So the margin accomplishment will be in that modest environment on the top line and not against, as I said, historical trends. So there's high certainty to getting to those levels.
spk07: Great. And then as we think about the incremental pillars, because it's just really, really impressive that you're able to maintain that, is there any way to think about what the potential benefit from pillars four and five are? And obviously it offsets probably some revenue headwinds, things like that, but just as we think about the components of what those incremental actions help on the margin line, if at all?
spk00: Well, we're not providing absolute guidance on the magnitude of the dollars, except to say that it brings forward our EBITDA into H2 2023 positive EBITDA versus early 2024. But I think we know now, Kevin, the size of the service and the type of the service that it takes to be truly excellent with the clients. So it is both then creating that environment at non-North American cost levels and really exploring how to attain both, having some resource availability and lower cost geos and having North American talent as well. And so that combination drives to the margin materially. The second one is more point in time. having experienced the inflation over the last 12 months and really adjusting our understanding of how to flow that through, maintaining and our obligation to maintain the premium service levels. So it is as much about retaining clients and giving them the value that they have come to expect from us and balancing that with the inflation that we're experiencing as an operating entity.
spk07: Very helpful. It sounds like you have even more control of the outcome than you did six months ago, which is a great outcome. Thanks so much.
spk01: Absolutely.
spk00: Absolutely, and thanks for that.
spk01: Our pleasure. Thank you, Kevin. Back to you, Sarah.
spk05: Thanks. Our next question is going to come in from Stephanie Price.
spk06: Talk a little bit more. Hi, good morning. I was hoping you could talk a little bit more about the demand environment, what prospects are saying, and if you've seen any impact of the sales cycles, just given the difficult macro environment.
spk01: Sure. So maybe I'll take that one. And Stephanie, thanks for joining the call today. So I think, as I mentioned in the prepared remarks, the macro environment is something is really as a result of kind of the dramatic change that happened starting in Q1, but really during Q2. And I think when you see kind of a dramatic repricing in valuations happen across the board, there is a, we call it kind of like a shock factor of companies. Now, as I mentioned, the ones that are existing customers, their adoption and use of our products and our services actually increases during that environment because they're looking for more help to be able to understand what's going on, understanding what's going on with their peers in the market as they execute their programs. But this other aspect is when we're having conversations with customers, they are looking at the valuation has changed dramatically. And so what ends up happening is it takes longer to convince them to kind of move over to a new vendor during that environment. I think what you've seen is in a lot of cases, companies also looking at cost cutting, looking at budgetary aspects. So in that environment, when you have kind of like hiring freezes happening or procurement freezes happening, that's what makes it a little bit harder to be able to close those new customers onto the platform. And certainly it impacts IPOs as well. But what I will say is that that is really kind of a shock to the system that occurred during the second quarter. I think what we see going forward is not valuations have certainly come down. We I'm not forecasting the market, but it's not you know, we don't think there's a huge other leg to come down in the market. So we think we have bottomed out from the impact it has on our business. So we should be able to get back to not experiencing that same dynamic as much in the third quarter and the fourth quarter. So that's how that's how we're thinking about it now. And hopefully that's helpful.
spk06: That is helpful. Thanks. And maybe a follow-on to that, on the existing customer base, you mentioned more than 100 customers have upgraded subscriptions. Can you talk a little bit about the key services that are driving that cross-sell and up-sell?
spk01: Sure. So the one thing I'll mention too, I know in the remarks we made was about the hundred buying additional subscriptions and that's what drives ARR. That's what drives ARPA. But the other thing that happens is customers also buy what we call like attachment products. So these are really upgrades within their existing product category. So that would be things like additional like redesigns on their website or one-time events or investor days or things that are not typically kind of like ARR in nature. So the ARR products that they're buying are really around CRM, analytics, and other packages that would be like virtual event kind of subscription packages. So that would be like add-ons to their earnings events, but done as a subscription annually. So it's predominantly the one-time stuff ends up being mostly kind of web and events, but it's CRM and analytics. And the one final thing I'll mention as well is we have additional subscription products in ESG and in accessibility. And there's been actually a lot of demand on the accessibility side. So we've been able to package all those as incremental subscription purchases.
spk06: Great. Thank you very much.
spk01: Our pleasure. Thanks for the question.
spk05: Our next question is going to come in from Steven Boylan from Raymond James. Steven.
spk03: Thanks. Can you hear me okay?
spk01: Yeah. Absolutely. We can hear you. Thanks, Steven. Okay.
spk03: Maybe the first question is on total deferred revenue. You know, that number fell quarter over quarter. And I always thought that was like a signal of billings, you know, that would be basically earned over the period of the year. so what is it when it when it falls maybe just give me an idea of what that that means again is that um that revenue is although you're saying it's modestly going to grow but maybe not all revenue goes through deferred revenue maybe just explain the that decline yeah i i think there's um one of the uh comments made in uh the prepared remarks
spk00: was around the fact that the linearity of this selling that occurred in the second quarter and it really being loaded into June, a good portion of the quarter being in June, not hitting deferred, not hitting revenue, and definitely not hitting deferred revenue. So there is, what I would say, an adjustment going to happen early in July when all of that late-stage invoicing makes its way onto the deferred Those products go live with clients, whether it's CRM analytics or website, and the more robust deferred occurs. The only other impact I'd say in the clear was the own control return and that impacting renewal, what we would call renewal deferred revenue. But it really just speaks to the freshness of the bookings in Q2 and fully expecting that to restore in Q3.
spk03: Okay, so when you say sales closing in June, there is a lag between that sale translating into deferred revenue. Is that the way to look at it? That is correct. Okay, that's great. And then the second question is, Daryl, you mentioned the cash down $18 million year-to-date. When I look at that versus what is going to occur probably for the rest of the year, and then couple the M&A strategy on that, are you in a position now where you're being priced out of certain acquisitions that you may have looked at three months ago or six months ago in terms of having available capital to execute?
spk01: So I think when we look at the market out there and the targets that we are most interested in, I think we are certainly very cognizant in terms of what cash do we have available to put against the M&A strategy, as well as what availability we have from a debt perspective. Those two things, as well as utilizing to a degree, our own stock and facilitating those deals. So when we look at kind of the available financing options that we have, whether cash, stock, bringing on leverage, we still feel that we are very well suited to execute the strategy that we've mentioned in terms of this accelerated path to profitability, while also ensuring that we remain, that we have cash, we have resources available to continue executing on M&A. I mean, certainly with that, it's not unlimited. We don't have kind of we can't do every single deal out there because there is certainly a certain amount that we can utilize. But but that's something that we feel is gives us all the firepower that we need for the targets that we're looking at. OK, thanks very much. Pleasure. Thanks for the question.
spk05: Our next question is coming in from Richard C. at National Bank.
spk08: Hey, everyone. Hopefully you can hear me. And I just sort of leave a login now. So I apologize if I repeat any questions. In terms of the environment, it's changed a lot since you first became public. I'm curious to see if there's anything that strikes you as surprising or things you didn't expect in the business now that the environment has normalized somewhat.
spk01: First off, Richard, thanks for joining and apologies for the technical glitch that happened there, but it's nice to speak with you again. I think that certainly when we went public, which was the end of October, the market was certainly still at a very high point. We certainly weren't expecting the market to continue to be at record highs forever. However, you know, I think that when you look at the second quarter and just how quickly the valuations came down, I think that and how broad that how broadly that impacted the entire market. I think that for us, along with I think probably everyone in the market, that was certainly unexpected. The kind of the velocity that occurred during the second quarter. Now, I'll say that. When you look at kind of the longer timeframe, you think about how many periods have been like this that have had that, you know, we'd go back to kind of the financial crisis of 2008. I think early in the pandemic, maybe it looked like it, but as we all know, that rebounded incredibly quick. So when you look at that, we really look at the second quarter at being quite an isolated event in terms of the change. Now, going forward, what we're not assuming is that we're going to get back to kind of record high valuations like nine months ago. But we do believe that as the market stabilizes, then we're able to continue executing our plan, bring new customers onto the platform, expand their spend, et cetera. So we think kind of Q3 and Q4, we get into much more normalized patterns versus kind of the dramatic change that happened in the second quarter from a market perspective.
spk08: Okay. And so I guess my second follow-up question related to that, has that caused you to sort of permanently change how you run the business in any way? Like, I understand that you're obviously moderating your spend, but in terms of, you know, whether it's practices on the sales side or the marketing side, you know, given a normalized environment, what has sort of changed permanently here going forward?
spk01: So maybe I'll pass to Donna to answer that.
spk00: Hi, Richard. How are you doing? I'm going to assume you're new. I'm good. I think it's a great question. And I think the first part is that, you know, the tenants of the business that went public a year ago or, you know, nine months ago remain intact. The plan's being executed. And I don't see that changing in any meaningful way. Where I think, you know, age... Experience and durability in the model says you have to have a better balance of short-term, mid-term, and long-term priorities. There can't be as many go-gets or leading investments that have a longer time to ROI. So I think those are really important aspects that you have to overlay on a three-year vision. And it was a three-year vision and we're nine months in, so you don't abandon that kind of business strategy and business value. So it is more about making sure that every dollar has an ROI, making sure that there's balance in that ROI, making sure that what has been built has both scalability to come out of it quickly, to respond when we're coming out quickly, but that it's also highly efficient in this challenging macro environment. So I would say it doesn't change the strategy, but definitely the day-to-day execution has more focus and more certainty around ROI, more certainty around revenue, and spending against that certainty instead with less leading against some of the more uncertain growth.
spk08: That's great. Thank you.
spk01: Thank you, Richard.
spk05: Perfect. So our last question is coming in from Doug Taylor. He sent in his question via our Q&A application. So I will read the question out to you guys. The question is, there's a lot of increased discussion about achieving cash flow and EBITDA break even earlier than previously targeted. What are the revenue growth assumptions required to do so versus the prior 30% growth targets?
spk00: Do you want to take that one? I can take that one. Sure. Thanks, Doug. So as we talked about in the prepared remarks, we think about modest sequential revenue growth, not half in that kind of range of what we would have experienced in headier markets. And so our margin targets are against that modest revenue outlook and not against historical trends or historical growth patterns.
spk01: Maybe what I'll add to that as well is that our ability to execute in market, and we've talked a lot about customer service and customer success, that aspect coupled with our ability to sell, when we talk about kind of the modest growth rate and bringing that down while looking for efficiencies across OPEX and delivering on the gross margin expansion, all of which brings profitability sooner, you know, we're also making the assumption that although, as I mentioned, it's not another shock kind of is coming like the second quarter, but we're also not expecting kind of like high growth market that's coming back with those assumptions. So we are being conservative in terms of what the health of the market is going to be, what the demand cycle is going to look like in the interim while we execute this. And I say that because as the market does return, and as we all know, the market will return, growth will come back. And as growth comes back, and we will be very well positioned to be able to continue executing to drive that kind of accelerated growth during that period.
spk00: Yeah, I think our conservativeness, when we refer to double-digit growth as modest, we're conservative in our approach. And thanks for adding that context to, Daryl. Absolutely.
spk05: That was our last analyst question. So with that, we're going to wrap up the call.
spk01: Okay, very good. Thank you, everyone, for joining us on the call. And again, apologies for the technical glitch we had halfway through. Thank you for sticking with us during the call if you're still here. And have a wonderful day, everyone. Take care.
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