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spk06: Good morning, everyone, and welcome to Q4's fourth quarter and full year 2022 earnings call. My name is Sarah Pearson, and I'm Q4's Director of Investor Relations. I'm joined this morning by Daryl Heaps, our CEO, and Donna DeWinter, our CFO and COO. Thank you for your interest in joining our fourth quarter call. Please note a copy of today's presentation will be available on our website. Please be aware that today's prepared remarks are being hosted live. Following the remarks, we will be looking forward to welcoming our research analysts onto the call for a live video Q&A session. To those in our virtual audience, you can use the webcast Q&A button to submit a question in real time. We need to remind participants that certain information discussed on today's call may be forward-looking in nature. Such information reflects the company's views with respect to future events. Any such information is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected in the forward-looking statements. For more information on the assumptions related to the forward-looking statements, please refer to Q4's public filings available on CDAR. During the call, we will be referencing certain non-IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance, they are not recognized measures and do not have standardized use under IFRS. Please see our MD&A for additional information regarding our financial measures, including for reconciliation to the nearest IFRS measure. Please note that unless otherwise stated, all figures are in U.S. dollars. And with that out of way, I'll pass it over to Daryl Heats. Daryl?
spk03: Great. Thanks, Sarah. And good morning, everyone. Just a quick note. I just wanted to say also thank you to Donna. Donna was going to be here with me in person for the live video webcast. However, she is at home with COVID and on recovery. So thanks so much, Donna, for joining us via phone. And I look forward for you to join me next quarter back on the video. All right, so good stuff. So it's my pleasure to spend a few minutes here today talking about the progress that we made in 2022 and everything that we accomplished throughout the year. And while 22 was a challenging year for the capital markets and driving top-line growth, I'm extremely proud of how our team has been executing over the last couple of quarters as we've really been focused on profitable growth. We stayed focused on what we can control, on optimizing our operations, all while continuing to drive double-digit growth for the year. By executing our path to profitability plan, we have significantly improved efficiency across the business, putting us on track to deliver profitable growth in 2023. For today, I'm going to spend a few minutes touching on the progress that we made in 22, and then I'll focus on 23, which is all about profitable growth and being best positioned strategically, operationally, and financially to benefit from a market recovery, one which for early signs are starting to emerge. This year, we dramatically improved our efficiency while narrowing our focus onto our core products, our platform, data, and analytics, which are essential to our growth and success. We took steps to right-size our operating expenses, ensuring sustainable improvements to our bottom line, and progressing toward profitability later this year. In parallel to these initiatives, we also launched multiple new products, which are highly innovative and impactful to our clients, while also improving our efficiency and our margins. One of the things I'm most proud about 2022 is the gross margin expansion strategy that we committed to at our IPO with the objective of closing out this year with gross margins in the mid-60s. I'm super proud to share that we closed the fourth quarter at 63.7% gross margin. This accomplishment is due to our execution on our virtual events platform, our fixed data contracts, the adoption of our web management app on Capital Connect, and the buildup of our LATAM operations. These structural changes are permanent and sustainable and will have a lasting impact for continued margin expansion through 2023 to end this year in the mid-70s. If you've listened to prior calls, you know that I've always believed in the resiliency of this business and its ability to weather many storms. I do think that 2022 is a perfect example of that. In a market where we saw increases in uncontrollable churn due to canceled IPOs, M&A, and take privates, we were still able to achieve a 12% normalized growth for the year, while simultaneously increasing our average revenue per account to our highest level yet. Moving forward this year, we're really well positioned to continue capturing market share by expanding the value of our platform and the impact it can have for our customers. This is evident by some great brands that went live on Q4 during the last quarter, including Costco, Rite Aid, JetBlue, and Cardinal Health. From an overall market perspective, I would say that we are beginning to see things thaw. We've seen the market perform fairly well so far this quarter, along with an increase in backlog of confidential filings for IPOs with the SEC, as well as some new IPOs coming to market. Q4 is incredibly well positioned to benefit as the market recovers. We have the right products in place, the right team, and the right partnerships to drive growth during the recovery. The launch of Capital Connect platform in 2022 has been instrumental in driving scale and engagement, enabling us to deliver exceptional experiences to our clients without increasing our costs. We're seeing record levels of adoption with more than 1800 clients using the platform to engage and interact with us on a regular basis. As this adoption rises, it increases the amount of interaction data flowing through our platform and enables us to deliver exponentially better workflow, insights and analytics to our clients. Our platform approach gives us the ability to deliver a single user experience into all of our products and is a core element of our product-led growth strategy for 2023. We now have the ability to offer different levels of our products and utilize the power of the user experience to drive incentives related to add-ons, extensions, and new capabilities across all of our products. This product-led growth approach is starting to work as seen by our 9.2% increase in ARPA for the quarter, our highest sequential quarterly growth we've seen yet. On the product innovation front, we launched new features and product enhancements this past quarter that continue to provide value to our client base. One of the first apps we launched on Capital Connect was the web management app, which has really changed the game in terms of usability and reliability for our clients. Today, we are processing thousands of support requests weekly while maintaining a 90% plus five-star rating for all of these interactions. Since this app is incredibly sticky and used every day by most of our clients, it gives us the ability to execute on these product-led growth initiatives. Virtual events continues to be one of our fastest growing segments. With the advancements we made in customization capabilities and our industry-leading lower error rate of 1%, we are solidifying our position in the virtual events space. Some of the recent enhancements include the seamless integration of Zoom and MS Teams to more easily bring video content to earnings calls. Our strategy here has been working quite well. Just this quarter, we had some of the world's largest brands reporting on the platform, including both Meta and Amazon, who used Q4 for their earnings calls with tens of thousands of attendees. As well, Rolls-Royce in the UK, who just reported just a few weeks ago. This business segment is an integral part of our margin expansion strategy. By the end of 2022, we had 97% of our event clients on our proprietary platform. This will continue to enhance our margin profile throughout 2023, as we will benefit from our entire event client base running on the platform. To further drive client satisfaction and adoption of multiple products, we continue to innovate and upgrade our current products, including our CRM. Recently, we released two upgrades to the CRM that I think are noteworthy. The first is an email management feature that gives clients the ability to distribute mass emails to investors via the CRM, while simultaneously tracking email engagement through our analytics. Additionally, we launched a new mobile app called Q4Go that includes a broad set of features to help IR teams manage their engagements while on the go. The timing of this is just great as so much of the world has returned back to meeting in person. One of our recently released products, Engagement Analytics, is one of the core areas of our R&D focus. where we just released benchmarking and investor targeting. Benchmarking aggregates the interaction data from millions of investor activities across the Q4 platform, including website visits, email alert opens, and event attendance. The ability to compare the level of investor engagement across companies is now possible because we have built our platform and the millions of interactions occurring on it each month. This truly innovative product gives our clients the ability to benchmark their IR program performance against peers in the industry and to target investors in an entirely new and effective way. We have a lot more to come from this part of the platform and an aggressive roadmap to continually expand these analytics. To continue enhancing the investor experience, Q4 Login enables investors to easily sign on to events without the need to re-register each time. At the end of 2022, there were 190,000 investors with Q4 login accounts. There's a lot that we plan to do with this feature, bringing new features to expand the investor experience across the platform and to make it easier for investors and corporate IR departments to connect directly. When combining features with our data analytics and generative AI, we plan to bring a lot of value to these millions of investors over the coming quarters. One of the things that you've heard a lot about recently I'm sure is generative AI, chat GPT among others. We've been paying very close attention to generative AI and we believe that we are at a transformational step in terms of what's happening with the web. I would say that this is similar to the impact that mobile had on the web experience. And the great news for us and how we think about it is that with each major disruption that occurs on the web, it's been an incredible accelerant to our business. Today, we're already using ChatGPT on an internal basis to improve efficiency in a number of roles from content creation to programming and advisory services. And I would expect us to continue to integrate generative AI features across our platform and products to both enhance functionality for all of our users while also increasing our efficiency and margins. Finally, on the partnership front, we continue to have strategic partnership discussions to expand our product solutions with complimentary offerings. Our existing partnership with the New York Stock Exchange puts us in a preferred position to capture new IPO opportunities as the market normalizes and provides NYSE corporate issuers with the flexibility to leverage the IR products and services that best fit their needs. In addition, we established new preferred relationships with the London Stock Exchange and OTC markets in the fourth quarter, enabling us to access clients in multiple geographic areas and validating our position as the leading investor relations partner. Moving forward, we will continue to remain focused on positioning our clients with access to the best quality products and services. And with that, I'll now pass it over to Donna to take us through the fourth quarter financial results. Over to you, Donna.
spk08: Thanks, Daryl. And good morning, everyone. As Daryl conveyed, our 2022 initiatives have made meaningful improvements to securing our profitable growth late in 2023. I will take this time to dive further into the fourth quarter and all of the 2022 results, following which Daryl will provide a perspective on the road ahead and 2023 initiatives. Please keep in mind all figures are in U.S. dollars. And now on to the financials. Let's start with revenue. Total revenue for the fourth quarter was $14.2 million, a 3.3% year-over-year increase compared to $13.8 million in the fourth quarter of the previous year. On 2022 as a whole, we saw $56.1 million in revenue, or 11.8% normalized growth, excluding 2021 BSM discontinued operations. Delivering double-digit growth in the tougher economic dynamics of 2022 demonstrates our core business durability, leaning on all our growth assets of new logo acquisition, sale of products to existing clients, success in customer product adoption, and client retention overall. In the fourth quarter, the capital markets platform revenue grew 1.8% to 13 million from the comparable quarter last year. Platform services expanded by 22.2% year over year to 1.2 million for the fourth quarter, driven in large part by increased demand for website services. Looking at the full year, capital markets platform revenue was 51.3 million, a 10% normalized growth over last year. Platform services increased by 37.4% to 4.7 million for the full year and remains a strong value added source of revenue. As committed, we executed our gross margin expansion strategy, targeting several initiatives, I am pleased to report that our gross margin for the fourth quarter was 63.7%, a 405 basis point expansion. Significant on its own, it also conveys the importance of the actions taken in 2022 to position ourselves for future profitable growth. The virtual events migration and creation of our Latin America operating center were the key pillars driving the fourth quarter gross margin improvements. The fourth quarter played out as expected, delivering the improvements from the reductions in cost and the efficiency gains. On the virtual events business, we are now running all earnings events on our proprietary platforms. We anticipate additional margin improvements in 2023 as we benefit from a whole year of full client migration to our platform. Our Latin America operating center has surpassed all our expectations, giving us the ability to leverage a new, strong employee talent pool while maintaining anticipated cost improvements. Looking into 2023, we see all five gross margin pillars contributing to incremental improvements, as well as the benefits of the prior initiatives for a full year in operations. In the third quarter, we spoke of aligning our cost structure to our targeted strategies and profitable growth. We took action in the third and fourth quarter towards attaining expense levels that are appropriate, although the full benefit of our execution will only be experienced throughout 2023. In the fourth quarter, operating expenses excluding depreciation and amortization, foreign exchange loss, and other expenses totaled $14.1 million, down from $16.8 million in the last quarter. The actions taken drove annual cost reductions and efficiency gains of $10.8 million, a portion of this benefit reducing fourth quarter OPEX. Sales and marketing costs were $4.5 million or 31% of revenue, having a $1.2 million sequential quarter-over-quarter improvement. we expect it to remain in the low 30s as a percentage of revenue in the near term and decrease further as a percentage of revenue in H2 2023. Research and development was 4.2 million or 30% of revenue. In the quarter, we continue to invest in Capital Connect platform as the critical component of our strategy to connect all sides of the capital markets. Our R&D investments are aligned with our growth strategies, focusing on opportunities with a more targeted return. This will allow us to drive innovation and still attain normalized levels of R&D as a percentage of revenue in the low 20s as we accelerate profitable growth in 2023. G&A for the quarter was 5.4 million, or 38% of revenues. Our efforts will continue to reduce G&A, and we expect a gradual decrease as a percentage of revenues through 2023 to attain a mid-20s level. It is a balancing act to achieve top-line growth, gross profit growth, and OPEX reduction to produce positive EBITDA. Evidence that we have charted the course for the fourth quarter 2023 positive EBITDA is the drastic improvement in negative EBITDA for the fourth quarter 2022. Our adjusted EBITDA was negative $4.5 million for the quarter. Meaningful improvements in adjusted EBITDA represent the first full quarter of impact of the strategic initiatives taken throughout 2022 to be prudent with our balance sheet. This demonstrates our commitment to positioning our business to profitable growth. Earnings per share is negative 16 cents for the fourth quarter 2022 compared to negative 20 cents in the same quarter of 2021. On an adjusted EBITDA basis, earnings per share is negative 11 cents compared to negative 10 cents in the prior year. Critical to our revenue growth are the two components of ARR and ARPA. Our strategies are intended to grow our subscription revenue with priority, both with new clients and into our client base. ARR at end of 2022 was 55.5 million, a 6.8% year-over-year growth. ARR expansion was driven by new client growth this quarter with 62 new subscription clients, totaling 268 new subscription clients in 2022, as well as 141 existing Q4 clients who expanded their offering into CRM and analytics. With our large client base, one of the main ways to fuel ARR and revenue growth is sales of additional products into that base. The power of the platform is exponential when additional products are added. So our efforts to rent this revenue source is gaining momentum. Average revenue per account, or ARPA, was 19,821 at the end of 2022, a meaningful 9.2% increase from the prior year, driven primarily by upsell, pricing strategies, and new sales bundles at higher ARR values. In 2022, we delivered consistent quarterly ARPA expansion at an increasing rate per quarter. We expect to continue this trend in 2023 with our unique positioning of the Capital Connect platform, driving existing clients to adopt new products and new clients to join with product bundles. We focus with intent on value creation for our clients in the functionality of our platform to promote client retention and adoption. This quarter, we had 90 existing customers add to their subscriptions, bringing our customers list more than two products to 66.8% of our ARR. Steady growth over the course of 2022 and an even larger focus for us in 2023. The expansion sales growth initiative is a primary focus of our sales and client service teams. ensuring our clients understand how our offerings meet their IR needs, and that they understand the unique value proposition of Capital Connect to tie all of the functionality together. Adding ARR clients and adding ARR to existing clients works to grow revenue, but only in the presence of strong client retention. Controllable logo retention remains strong at 95% at the end of 2022. Softer than prior quarters in 2022, but consistent with historical rates. The pressure on the retention has squarely been on the uncontrollable churn, tied to M&A, delistings, and withdrawn IPOs. In the fourth quarter, we added 72 new clients on Capital Connect, of which 62 were subscribers. Our quarter ended with 2,662 clients on the platform. On to the balance sheet. As of December 31st, 2022, we had $29.1 million in cash, cash equivalents, and short-term investments. In the fourth quarter, we had negative operating cash flow of $7.6 million compared to $6.6 million in Q3. Although our P&L was positively impacted by the material changes to expenses, the positive impact on cash will lag by a quarter because of the overlapped expenses in the fourth quarter of building out the LATAM operating center. In the fourth quarter, the company took action to buy back our stock to be opportunistic on valuations. We assess this as a good use of our capital to create shareholder value. We plan to renew our NCID and merge to allow for future buyback efforts as we see fit. Our core working capital metrics remain strong, ending with a working capital balance of $25.2 million as of December 31st. As of the end of the year, we have no outstanding debt, with a $22.5 million revolving credit facility available if needed. And we remain committed to operating with a strong balance sheet and to be good stewards of your capital. And with that, I turn it over to Daryl for his closing remarks on our focus for 2023. Great. Thanks, Donna.
spk03: To wrap up, I'm sure it's quite clear that we are pretty pleased with these results. By focusing on what we're able to control, we have made significant progress over the last couple of quarters, despite the macro conditions. Delivering 12% annual growth for the year and ending with gross margin of 63.7, along with managing our costs and improving our operating leverage is really setting us up very well to deliver on our objective of becoming profitable later this year. Looking forward, we are incredibly well positioned strategically, operationally, and financially to take advantage when momentum returns to the market. Finally, as you've seen through insider filings, I've been personally buying Q4 stock for a while now. I feel strongly about the value of this business and what we're building and how we're executing. And I really do feel that our future potential will be rewarded by investors as we continue to execute our plan and deliver on our profitability objectives. And with that, we want to thank, and in closing, we want to thank our shareholders, our clients, and employees for their continued support and loyalty. Thank you, everyone, for listening on today's call. We're now going to switch over to the Q&A session. And with that, I will hand it over to Sarah.
spk06: Great. Thanks, everyone. Our first question is coming from Doug Taylor at Canaccord. I think Doug's on the line with us.
spk03: Very good. Hi, Doug.
spk04: Hi, good morning, Donna, Daryl. First question, you've previously spoken to low teens or I think 10 to 15% top line growth, you know, expectation amid the current market conditions, which obviously are persisting here. Is that still a realistic expectation in this market? You know, the results this last quarter were a little shy of that. And if so, what I mean, what levers do you have in terms of the ARR per account growth versus new customer growth? Do you expect to get you there?
spk03: So thanks, Doug, and thanks for joining. Maybe Donna, I'll take that one to start, but if you'd like to add to it. So I think the, certainly when we look at the growth rate in the fourth quarter and kind of like the roughly three and a half percent kind of quarter over quarter growth rate, we are certainly impacted by some of the macro conditions in terms of the uncontrollable churn side. Now, we see some of those, particularly kind of like the canceled IPOs as being largely behind us. So when we're looking into 23, we continue to feel that With the current market maintaining conditions not improving, that kind of like 10% to 15% top line growth expectation is still in line with what we think is possible. The key thing for us, and you touched on it, is twofold. One is continuing to sell in market and acquiring those new clients and having them join at higher bundled prices. but also in terms of how we're executing our cross-selling, upsell and cross-sell into the client base. And that's something that we're really quite pleased with. When we see where ARPA is now, we think that's just the beginning in terms of what we can do with our clients. And when you look at what we're doing from the product perspective, A lot of the focus is around how do we add more value to the platform? How do we add more value to our existing clients to really drive that ARPA up? You know, there's two factors that drive our growth, the number of clients that we have and what they're spending on an ongoing basis. And so we're really focused on kind of executing on both of those fronts. So we think that the overall market conditions, assuming that they don't improve, We should stay in that kind of range. But when they do improve, which we do think at some point in the future, we should see some momentum coming back to the market. As I mentioned in my comments, we're seeing kind of glimmers of that. And I mean, in your business, Doug, I'm sure you see that as well. Some kind of initial conversations happening. So we see that as that happens, we're going to have a very efficient base to operate against this kind of improving demand environment. And so we think that that is something that helps us get back to kind of like the growth in the kind of 20s when that momentum returns.
spk04: Yeah, I think we're all looking forward to seeing that. As my follow-up question, you're sticking with the guidance of achieving EBITDA, adjusted EBITDA profitability by year-end. There's three levers there. Marching your gross margins at least 10% higher will certainly help, and you've made great progress there. But perhaps you can bridge us through with 10% percent plus growth on the top line 10 gross margin expansion it would seem to you would require some more opex reductions from the current level to get to that threshold can you perhaps help clarify the mix of those kind of three buckets that gets you there sure why don't uh donna if you're good to take that one
spk08: Yeah, I am. And Doug, we won't be as specific as plotting the path of how much is going to be on each of the OpEx lines. But we have not assumed, as we think through 2023, that there's going to be an improvement in the market, even with some signs of it thawing. We are assuming and have actually executed the actions on a 10% gross margin improvement with or without that revenue growth. And then OPEX, you are correct that there will have to be, there are OPEX opportunities and they're not in the way of reductions in force that we've previously seen, but also actions around our Latin America operating center, which is a strong talent pool. But some of the product and process efficiencies that are not only driving savings in the margins, but driving savings into G&A in particular. So we've provided guidance on the sales and marketing and R&D and DNA percentage levels, and those will be attained and most of the actions are taken for those to play out at light double-digit growth revenue levels and without further significant actions.
spk03: Thank you. Great. Thanks, Doug.
spk06: Our next question comes in from Richard C. at National Bank.
spk05: Yes, thank you. You talk about the sort of the controllable. Can you give us a sense of your win rates and perhaps some thoughts related to that around the competitive landscape?
spk03: Sure. And thanks for joining, Richard. I think what we see is the kind of recessionary behavior within clients is certainly evident, you know, not just within Q4, but kind of across the software landscape. So what we're seeing there is probably some more scrutiny, some more oversight on deals, which is causing some deals to extend out a little bit in terms of days to close. But we continue to see kind of consistent win rates. We see consistent, very positive positioning from a competitive standpoint. You know, one of the key benefits that we have from a platform strategy perspective is that we can consolidate spend. So one of the value propositions in a recessionary type environment is that we can reduce the overall cost as clients consolidate and bring multiple products onto our platform. And so that's what we've seen, that even though deals are probably taking a little bit longer to close, the average deal size continues to be strong, the close rate continues to be strong. And so we feel good about continuing to deliver on the booking side. It is the uncontrollable kind of headwind, which is something that, as I mentioned, having that kind of some elements of that behind us, at least from withdrawn IPOs. We feel like that's going to help us get back to kind of expected growth rates into Q1 and beyond.
spk05: Okay, great. And then sort of my follow-up question is, you didn't talk in your prepared comments about acquisitions, and that was sort of part of the initial, well, part of the growth strategy, I suppose, at the IPO. Can you give us an update on how you're thinking about that these days?
spk03: Sure. Yeah. I mean, I think from a long-term perspective, we certainly believe and they're an integral part of our strategy is utilizing acquisitions to be able to expand the value that we provide to our customers, expand the business and drive incremental growth. We are very focused now on the profitable growth strategy and delivering to achieving that kind of profitable operations. I think as we're doing that, we have been maintaining relationships out there in terms of the potential targets that we have. and remaining active from a discussion standpoint. But we are really focused first and foremost of delivering on the profitable growth mandate. And then once we are on the other side of that, and we believe that we have a good kind of road ahead, then acquisitions will come back into focus in terms of from an execution standpoint.
spk05: Okay, great. Thank you. Hope you feel better, Donna.
spk06: Thanks, Richard.
spk03: Thanks, Richard.
spk06: Our next question is coming in from Stephen Bolin. at Raymond James. Over to you.
spk00: Thanks. Can you hear me okay?
spk03: Yes. Yeah. Thanks for joining us, Stephen.
spk00: I guess just one question, and a lot of them have been sort of asked already, but just going back to the, I guess, the slight decline in sales and marketing, and I'm always curious about that. the lever in terms of when you reduce that amount, is it that you're fine tuning what you're doing in sales and marketing or it's across the board? And does that impact your revenue growth at all?
spk08: And good morning. And so when the reduction that you're seeing quarter over quarter in the sales and marketing, we announced a restructure at the end of August, I believe August 29th, the press release went out on a restructure on our sales and marketing organization. And that was really to right size the sales and marketing and the CAC machine with the growth opportunity. So The fourth quarter is really a play out of that action that was taken at the end of August. We actually feel quite comfortable and confident about the sales and marketing size against the sales opportunity, against what's in the pipeline. and deals flowing through to close and seeing a healthy sales pipeline in 2023. The other thing I'd note is that in that action, we left untouched. the European core sales team because we're seeing that European sales engine really come into stride or take stride and generate and be round out our new logo acquisition coming from both now North America and European sales. So it is appropriately sized and the benefit that you're seeing was the action announced late in Q3 of 2022.
spk00: Right, and maybe you've already answered this question through your comments, so forgive me. When you look at your ARPA, what level of growth would we expect for you to achieve this 70% margin? What level of growth do you need in your ARPA?
spk08: We have been attaining, sequentially, we've had every quarter sequential growth, and the growth rate has actually been accelerating to where it was 9.2% in Q4 over Q3. And we expect that at least there'll be sequential quarter growth and at least it will be at that 9% rate. We expect that trend to continue quarter over quarter throughout 2023. And it does get easier to expand those product offerings as the clients are spending more time in the product. In in capital connect and experiencing the products because adding products is an easier aspect, as Daryl said around the consolidation aspect, but it's also creates more value some exponential power around engagement analytics by adding more products so we are not expecting that trend to soften in 2023.
spk03: Maybe I'll add to that as well, Stephen, is that from a gross margin expansion standpoint, we really see that the work that we did and the changes that we made in 22 will have a kind of an ongoing benefit from a margin expansion in 23. Most notably, the migration of our events business onto our proprietary platform, which we now have about 97% of our clients running on that platform. That migration was kind of progressive over the course of 22. But now in 23, we have the benefit of that enhanced margin profile of our own platform running for the entire year. So that's something which is not driven by ARPA or by revenue growth to get that additional margin expansion. And similarly, the changes that we made from a LATAM perspective, so setting up the LATAM operations, bringing kind of our OPEX down and COGS down, sorry, and from that perspective is that the benefit of that was really just, we're just starting to see that really in kind of in Q1. So we're going to, that LATAM kind of structure is going to impact COGS positively throughout the course of 23. So those are two, probably the biggest drivers of the margin expansion from here through to year end. And they're not predicated on driving additional revenue growth or ARPA. So we really see those two things as kind of being mutually exclusive. Very good. Thank you, Stephen.
spk06: Our next question is coming from Maxim Matushansky at RBC.
spk02: Good morning, guys. I'm just wondering if you've been seeing any changes in the customer demand or the receptivity to discussions over the last few months as the markets have begun to stabilize. Has the environment and the conversations that you're having with customers gotten any tougher or easier, or would you characterize it as about the same throughout the course of 2022 and now into 2023?
spk03: So thanks, Max. I think largely it's maintained. We did see some, as I mentioned in my earlier comments, we have seen some behavior that is causing deals to take a little bit longer, more oversight, more kind of hoops to jump through in terms of being able to get deals closed as clients come on board. But we've really seen kind of the concern about a recession in 2023 amongst our clients being something which is real in our conversations. But again, coming back to our value proposition and our ability to deliver a superior product set, a superior platform while consolidating their spend and actually reducing their overall spend is something that we've seen as being quite effective. So that was really through kind of the end of 22. I would say that coming into 23, we have seen that, as I mentioned, kind of a thawing or some improvements in that sentiment across clients and as well from a kind of like IPO backlog, I would say. So we do see, we believe the demand environment is improving. I would say marginally in Q1, but it's giving us good hope that we do believe that the market will continue to improve over the course of the year from a demand perspective.
spk02: And just as one follow-up on that backlog thawing, you talked about the backlog of confidential filings is growing. I'm just wondering when a company decides to IPO, how much earlier before the actual IPO data to engage you for? And, you know, do you have a sense of, you know, they might need a website and then some of the other tools? Or is that typically done, you know, once a company is already public and then kind of establishing? I'm just trying to get a sense of, you know, how much visibility for new customer growth, you know, the potential pipeline you would have and how far out you might see that.
spk03: Sure. Yeah. So it certainly happens before they go public. We would be able to engage once they do file with the SEC. We are able to we then know emphatically that they are planning to to go public. We do have some discussions with companies even prior to that. And in terms of kind of the lead time that we have before they would be going public, I think a safe assumption is probably three months on average would be kind of like the visibility that we would normally have. Sometimes it's longer, you know, kind of a six-month cycle. And during different periods, sometimes it's much, much shorter. But I think in general for your work, I think thinking through kind of like a quarter ahead is probably a safe assumption.
spk02: Great, thanks.
spk03: Our pleasure.
spk06: Our next question is from Stephanie Price at CIBC. Good morning.
spk03: Good morning, Stephanie. Thanks for joining.
spk07: Thanks for taking my question. As you think about the fiscal 23 revenue growth expectations, just curious about how we should think about the mix between upsell and new client wins. And I guess a similar question for ARPA growth as well.
spk03: You want to take that one, Donna?
spk08: Yep. And good morning, Stephanie. We have historically, historically, we attain a balance over a couple of year or over the course of a year of about 50-50 on new logo versus expansion sales. And in 2022, we definitely saw that tilt more towards expansion. And in more of the 60-40 range. And in the frothier 2021, we saw more 60-40, the opposite way of new logo to expansion. So we think about it in the 50-50 range, Stephanie, but we understand that as we see market dynamics change, quarter over quarter, we probably are going to shift 60-40 on either side. My expectation in H1 at least is that expansion will be more dominant than new logo. And that will exist both in the ARPA improvement with the new products that are available and also in the new ARR overall.
spk07: That's helpful. Thanks. And my second question is around cash and liquidity positions. Just curious about your comfort with the current cash and liquidity position and how you think about the path to cash flow positivity. I think in the past, the target was to be cash flow positive in the back half of this year. Just curious if that's still the case.
spk08: And that is still the case, is cash flow positivity in the back half of this year. The fourth quarter, unfortunately, didn't show all of the benefit of the cash flow being freed up because the actions taken late in Q3 and the redundant resourcing that we did in the fourth quarter to make sure that all clients' service levels were maintained and and transitions happened appropriately meant that the cash was still going out the door in the fourth quarter. But that's only a one-quarter lag. So when we think about 2023, each quarter as the expenses are materially improved, as is the cash flow materially improved. And so feeling very confident about the improvement in free cash flow and liquidity and still confident that we will continue in the back half of the year, attain cash flow positive.
spk07: Great. Thank you very much.
spk03: Thanks, Stephanie.
spk06: Our next question, we have Kevin McVeigh on the line from Credit Suisse. Kevin, your line is open if you'd like to ask a question.
spk01: Hello? Hey, Daryl, can you hear me okay? Stephanie? Oh, great. Thank you. Hey, good morning. I wonder, Daryl, you talked about some new partnerships, I think, with leveraging the existing one with the NYSE and then a new one with the LSE. Is there any way to think about what the potential revenue can be? I mean, I know that's a little going to maybe a little bit more abstract, but any way to think about what the potential revenue could be associated with that and really nice to see the buyback. I guess there's two questions and one, was it increased confidence in the free, obviously the valuation is super attractive, but was it increased confidence in the cashflow that gave you the kind of ability to do the buyback? So just kind of wondering about that, the buyback, and then just what those partnerships can bring as we think about the monetization of them.
spk03: Great. Thanks, Kevin. Maybe I'll take the question from the exchange partnerships, and then Donna, maybe if you can take the NCIB question. So with the exchanges, we're really pleased. I mean, first off, the partnership with the NYSE has been just a really great partnership for us for many years. I think the way to think about that partnership in particular is – although there are benefits kind of outside of the IPO market, I would kind of connect our positioning in that program with the returning momentum to the market. So as I mentioned kind of earlier, Kevin, was like, you know, we're looking at kind of the low mid-teens in terms of growth in current market conditions. Once we see a return to kind of normal IPO markets, we see that kind of coming back to kind of like a 20% growth rate or so, something like in that ballpark. So I think the net impact of that, and a lot of that was gonna come from the position that we have with the NYSE because that essentially gives us a kind of a preferred look or proprietary look and ability to talk to potential IPO companies much, much earlier. The similar with the LSE and OTC markets is that having the relationships with the exchanges are very beneficial from a new issuer standpoint. Having said that, there are benefits in terms of us being able to market to LSE issuers in particular through their issuer marketplace. However, the way I think that would make sense for you to think about it is that really upon the return of market momentum, these partnerships position us very, very well to benefit from that.
spk08: I'll jump in just on the question on the share buyback. And you're correct and appreciate you pointing that out. It was twofold. We were looking at both the valuations and being opportunistic on that side, but also we would not have... gone into market and done buyback without confidence that cash management, cash flow has turned and that we feel confident in our cash balances and being able to consume the cash on the share purchase.
spk01: That makes a lot of sense. Congratulations again.
spk03: Thanks, Kevin. Much appreciated.
spk06: And with that, we have no further questions.
spk03: Okay, fantastic. Well, thank you, Sarah. And thanks to all of our covering analysts for joining the call today. And also thank you, Donna, for joining, for calling in. And this concludes the question portion of the call. And just thank you, everyone, for joining. If we were unable to answer your questions, please do submit those through our website and we'll do our best to get back to you. So thanks very much, everyone. And have a great day.
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