Wishpond Technologies Ltd.

Thank you everyone for joining us today and welcome to Wishpond's 2023 Fiscal Second Quarter Financial Results Conference Call. My name is Jordan Bones, Director of Marketing, and joining me on the call today are Ali Tadjkinder, Chairman, Founder and CEO of Wishpond, and David Pace, the company's CFO. This call is being recorded. There will be a question and answer session at the end of the call, which will be limited to analysts only. I trust that everyone has received a copy of our financial results press release that was issued earlier today. Listeners are also encouraged to download a copy of our quarterly financial statements and management discussions and analysis from cedar.com.

Please note,

portions of today's call, other than historical performance, include statements of forward-looking information within the meaning of applicable securities laws. These statements are made under the safe harbor provisions of these laws. Forward-looking statements involve known and unknown risks, uncertainties, assumptions, and other factors, many of which are outside of Wishpond's control, that may cause the actual results, performance, or achievements to differ materially from the anticipated results, performance, or achievements implied by such forward-looking statements. These factors are further outlined in today's press release and in our management discussion and analysis. We provide forward-looking statements solely for the purpose of providing information about management's current expectations and plans related to the future. We do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions, assumptions, or circumstances on which any such statement is based, except if it's required by the company. We use terms such as adjusted EBITDA, annualized revenue run rate, and monthly recurring revenue on this conference call, which are all non-IFRS and non-GAAP measures. For more information on how we define these terms, please refer to the definitions set out in our management discussion and analysis. And with that, let me turn the call over to Mr. Ali Tachkinder, Chairman and CEO.

Thank you very much, Jordan. Good day, everyone. We hope that you are all keeping safe and healthy. We truly appreciate everyone for joining us today. We are pleased with our second quarter results in which WishFund achieved positive adjusted EBITDA for the fourth quarter in a row, demonstrating our commitment to profitable growth. During the first six months of 2023, we generated $400,000 of positive adjusted EBITDA compared to an adjusted EBITDA loss of $600,000 in the first six months of last year. And as an outstanding improvement of over $1 million, which we are proud of achieving, WishFund's cost optimization efforts over the past year have contributed to the company's positive adjusted EBITDA profile. I'm also pleased to report that our new Propel IQ platform is gaining traction in the market, and early signs are showing higher margins and increased customer retention. We are now accelerating the hiring of new sales resources to drive additional growth in the second half of the year. Based on the company's performance and growth momentum in the first half of the year, we expect to deliver strong results for the remainder of 2023. Our outlook continues to look promising for 2023 with increasing sales, positive adjusted EBITDA, and improving profit margins. We are experiencing increasing demand for our products, and we expect to grow rapidly as our sales pipeline remains robust, and we continue transitioning to bundled product offerings for our customers. I will provide additional details on our outlook later on the call, but first I would like to turn it over to our CFO David, who will review the financial results for the second quarter. David.

Thank you, Ali. I'm pleased to report that we've had strong Q2 results for the third quarter for the three months, and the June 30th 2023. Our second quarter 2023 results are as follows. WishPond achieved quarterly revenues of $5.6 million during Q2 2023 compared to revenue of $5 million generated during Q2 2022, an increase of 13%. Revenue growth was primarily driven by stronger product demand, an increase in sales and marketing activities, and new product introductions. As we mentioned on our last conference call in May, the company experienced some softness in Q2 due to the need for training our sales executives and transitioning them to sell the new bundled Propel IQ platform. Revenue growth was also negatively impacted in Q2 due to the decline in legacy non-Propel IQ related revenue from our largest customer, which happens to be an agency. On a positive note, this customer contributed greater than 10% of WishPond's total revenue last year, but with a growth in our overall revenue and decline in this customer revenue, we now have less customer concentration, as we did not have any customer contributing more than 10% of our total revenue in Q2 2023. WishPond achieved gross profit of $3.7 million in Q2 2023 compared to $3.4 million during Q2 2022, representing an increase of 10%, driven by an increase in overall revenue. WishPond's gross margin percentage in Q2 2023 was 65% compared to 67% in Q2 2022. The gross margins were within the company's historical range of 65 to 70%. The United States remains our largest and fastest growing market, generating 72% of our total revenue in the quarter, with approximately 11% and 17% of revenue generated from Canada and the rest of the world respectively. During Q2 2023, WishPond achieved positive adjusted EBITDA of $215,000 compared to an adjusted EBITDA loss of $192,000 in Q2 2022, a -over-year positive swing of $408,000 in adjusted EBITDA. The improvement is primarily driven by an increase in gross profit and our cost optimization efforts over the past year. We continue to have a clean and healthy balance sheet. As at June 30, 2023, WishPond had $1.1 million of cash in short-term investments and the company has no debt. The reduction in cash balances during the quarter was caused in part by payment of an earn-out for an acquisition, capitalized R&D costs related to investment in the business, and changes in working capital. The reduction in cash in Q2 2023 was due in part by our earn-out of $323,990 related to the viral loops acquisition. There is a final remaining earn-out in the amount of $304,000, which will be paid in equal installments in each of Q3 and Q4. We have no further earn-out obligations after this payment. WishPond has an un-drawn $6 million secured revolving operating line of credit agreement with National Bank of Canada's Technology and Innovation Banking Group. I will now provide an update on our cost reduction strategies. As Ali mentioned earlier, since last year, the company has been implementing various cost reduction strategies, which resulted in a $1 million positive swing in adjustability in the first six months of this year, as compared to the first six months of last year. WishPond has continued its ongoing efforts with cost optimization and enhanced operational efficiency. By leveraging the power of AI technology, we have seamlessly automated various processes and lead generation activities. As a result of these efforts, we have reduced our headcount by approximately 20 team members across the organization. Additionally, we have rationalized subscription and hosting costs across the organization, resulting in lower monthly operating costs. Through these multifaceted initiatives, we remain committed to maximizing resource allocation and driving sustained growth. As a result of these cost reduction efforts, our declining earn-out payments, increasing revenue, and improving cash flow, we feel confident that WishPond can continue to fund the growth of its sales team and new product launches from cash flow from operations. From time to time, we may dip into our credit line for short-term working capital requirements. The cash flow generated by the company will continue to be reinvested in the business and allocated in a disciplined manner to accelerate organic growth, future acquisitions, or share repurchases. Before I turn the call over to Ali, I would like to provide an update on the NCIB. On June 27, 2023, the company announced that its Notice of Intention to Make a Normal Course Issue a Bid, or NCIB, was accepted by the exchange. During Q2 2023, the company purchased 32,000 common shares under the NCIB for an aggregate consideration of $18,528. The Board of Directors of WishPond believes that the recent market price of the company's common shares do not properly reflect the underlying value of such shares, and that the purchase of the shares would be a desirable use of corporate funds in the best interest of the company and its shareholders. Hence, we will be opportunistic in purchasing shares under the NCIB program while prioritizing the company's other cash requirements. In summary, WishPond remains in a solid financial position with growing revenue and profitability. Based on the company's performance in Q2 and growth momentum, we expect to continue delivering strong results in the second half of the year, 2023. This concludes my financial update, and I will turn the call back over to Ali.

Thank you. I would now like to share with you some recent business highlights. During the

second quarter, we also completed the acquisition of Essential Studio Manager, or ESM, which is the sixth acquisition in the company's history, and further expands the breadth of our product offering. With over 150 customers, ESM is a provider of business management software, including invoicing and customer relationship management solutions for small businesses in the services industry. The integration of ESM with WishPond's Propeller IQ platform is well underway. On July 27, 2023, the company announced the launch of our new partnership program, introducing a transformative approach to collaboration for our partners to collaborate closely with WishPond's marketing platform. This program involves three types of partners, including one, affiliates, two, marketing agencies, and three other technology companies. We've been working with partners, including marketing agencies and technology companies in the past, but this program creates a methodology which makes it easier to partner with WishPond. Earlier this week, the company announced the upcoming launch of Sales Closer AI, a fully autonomous AI sales rep that delivers personalized sales demos

over Zoom without the need for human intervention. And now I would like to provide an update on our AI-related

activities. The use of AI technologies is rapidly changing the digital marketing landscape and WishPond is at the forefront of utilizing these new innovations to provide small businesses with new advantages against larger competitors. We've already launched two AI-based products with Braxy and Website Builder, which is powered by generative artificial intelligence technologies. The AI Website Builder allows our target small and medium-sized businesses to cut down on significant setup and maintenance time and save thousands of dollars on potential programming, design, and copywriting services. In addition, we are actively working on developing additional AI-powered marketing tools, including an AI email responder, AI content generator, and AI-produced promotional videos, all of which we intend to launch in the coming quarters. Yesterday, we announced the launch of Sales Closer AI, which we expect to have available for general release by the end of the year. We would like to show

you a brief demo of this new product.

I've put together a brief presentation for us to go over, but let's get to know each other a bit better first. How does that sound?

Sounds good. What would you like to know?

Could you tell me a bit about your business and what you do?

Yeah, I run an online flower business where we deliver flowers in all of British Columbia. That

sounds lovely. There's just something about receiving flowers that can really brighten up someone's day. How did you get started in this business? Here's something interesting. Typically, 98 to 99% of visitors to a website never convert into paying customers. They just bounce. Does that sound familiar? Do you have an idea of what your conversion rate might be right now?

I don't really know what our conversion rate is. I assume probably the same, the 1 to 2% that you mentioned.

That's a common scenario and something we can improve on. Once you pick a template, you can easily drag, resize, and reposition elements to your liking. We ensure your pages look great on all devices, including mobile, with our easy to use mobile view. Here's an example. Imagine a landing page for your Mother's Day bouquet. The page would be laser focused on promoting these bouquets with beautiful imagery, a compelling call to action like, order now to surprise mom, and a simple form to order or inquire.

Thank you, Jordan. I'm going to go through a few more examples of how we can improve our conversion rate. I'm going to go through a few more examples of how we can improve our conversion rate. I'm going to go through a few more examples of how we can improve our conversion rate. Wishbone's outlook for Q3 2023 and heading into 2024 remains strong and healthy.

Wishbone is well positioned for continued growth and profitability. Wishbone expects to achieve record revenue and cash flows in 2023. This is driven by organic growth from ramping up sales of the company in Propel IQ bundled product offerings, increasing the size of its sales team and new product introductions, and we continue to experience strong performance across all of our businesses with robust demand for our products. We expect to be adjusted even a positive each quarter going forward. In line with the company's focus on profitable growth, Wishbone will continue to scrutinize all discretionary expenditures across the organization with the intent of optimizing operations and achieving cost-saving synergies.

Wrapping up the sales team.

As of June 30th, 2023, we had just under 40 sales professionals, which is flat compared to the beginning of the year. Our focus in the first half of the year was on transitioning our existing sales personnel to selling the new bundled Propel IQ platform, as this transition takes some time for sales staff to familiarize themselves with the products and the value proposition. We have since started to ramp up our sales resources more aggressively in August. We are hoping to increase the number of sales account executives between 60 and 70 by end of the year compared to our prior estimate

of 70 to 80 sales account executives by the end of the year. As a result of this lower ramp in our sales team and also

lower revenue contribution for our largest customer, we believe Wishbone could land below its historic organic annual growth rate of 30% for the full year, and December 31st, 2023. Although we are experiencing some short-term softness in our revenue growth, we are expecting the increase in sales resources in the second half of 2023 will help accelerate growth in 2024 and beyond. With the launch of Propel IQ, we are expecting higher customer retention rates going forward. Clients are increasingly signing up for annual 12-month terms. Propel IQ improves the stickiness of our platform and aids in retaining customers for longer periods of time. The bundled pricing of Propel IQ provides better customer value and is expected to result in greater customer satisfaction, less churn, and consequently, higher customer retention. Wishbone will continue to invest in research and development efforts to launch new AI-based marketing tools and products. We are in a fortunate position to be able to lead the charge in applying AI to marketing applications and to democratize AI technologies for our SMB customers. By providing our customers with powerful tools, we can help them grow their businesses more efficiently and profitably than was possible in the past. Wishbone is recession resilient. The business has felt no impact due to recession, inflation, supply chain, or other macroeconomic effects. In an economic slowdown, companies often reduce or freeze their budgets on their in-house marketing and sales staff or on individual fragmented marketing solutions. However, they still need to acquire new customers to keep their businesses

afloat.

And so, the businesses looking to cut costs find value in Wishbone's -in-one consolidated software platform, which costs a fraction of all the individual products it would replace. Furthermore, businesses keeping an eye on their costs or looking to cut costs find Wishbone as a much cheaper alternative to an internal marketing resource. Wishbone is an effective,

low-cost alternative that is thriving in a recessionary environment. Management is optimistic about the company's growth prospects.

And I'm pleased to reiterate Wishbone's key goals for 2023. One, increase monthly recurring revenue through both organic and inorganic means. Two, scale the size of the sales team to help achieve the company's organic growth profile. Three, remain adjusted to be profitable by balancing aggressive growth with increased positive cash flow from operations. Four, invest in R&D so that we can continue to launch new AI-powered products and services to increase long-term value for our clients. Five, leverage the Propel IQ platform to further accelerate the company's growth, improve margins, and increase customer retention and long-term customer value. In closing, I want to reiterate that Wishbone is an elite software company with profitable growth. Technology companies are known to burn lots of cash for many years before becoming cash flow positive. It is rare to find a software company of our size that is growing rapidly, maintains gross margins of over 65%, and is also adjusted even though positive. Wishbone truly is a unique high-growth profitable company, and we remain committed to delivering profitable growth in the future. Wishbone today is in an enviable position with a growing customer base, increasing revenue, broader product offerings, clean balance sheet, and positive EBITDA. I'm proud of what we have accomplished, and I'm excited with our future plans. Finally, I want to thank the entire team at Wishbone whose hard work continues to elevate the company to higher levels. We want to thank our customers who rely on us to help them with their digital marketing needs. Also, I'd like to thank you all for joining us on this call today. We look forward to providing an update next quarter. I will now hand it back to

Jordan for questions.

With that, we will now open the call to questions. Just a reminder that the questions will be limited to analysts only. The first question is from

John Luca Tucci of Haywood Securities. Please go ahead, Mr. Tucci.

Hi, good afternoon, Ali and David. Just wondering if you can speak to the early progress on Propel IQ and how customer adoption rates have progressed since that product launch?

Yeah, it's been definitely going well, but not without its challenges. Because it's a more -in-one platform, especially on the side of our sales team, there have been some challenges initially to get the messaging right, to get the presentation right, and position it in a way that conveys the value without overwhelming or complicating that value proposition for the audience, as well as us organizationally really hone in and fine-tune every aspect of the presentation, of the pricing plan, and those things to make sure that we do the best. And that has now progressed quite well, and the team is now hitting their strides, and we're seeing that they're doing quite well with that. And on the execution side of it, clients are having success with the platform. We're getting a lot of happy customers that are also already seeing early signs in the first few months that they're being retained better and getting more value. Before, just the other day, I was looking at a very small business that before joining WishPond and using Propel IQ, from their website, every month they got zero leads. So everyone who went to the website or whatever, they got zero leads out of them. With Propel IQ, which included redesigning their website to be on WishPond, different lead capture elements like forms of pop-ups and landing pages, email marketing that goes with it, SMS marketing, referral marketing, all of those, in the first month after switching to Propel IQ, they went from zero leads to 30 leads per month. And that is completely transformative for that business. And that's a small example that I will share. So we are very excited with what we're seeing so far.

That's a good color, thanks Ali. And as a follow up to that, it sounds like growth should accelerate in Q3 and Q4 and then into 24. But how should we be thinking about the second half altogether compared to the first half in terms of overall growth rates? And does the launch of Propel IQ, does that change your expected seasonality of the business?

In terms of the second half of the year, we expect the growth rate quarter over quarter to increase and go back to more what we've seen in the past. And already we're partly into Q3 and the momentum is quite strong. So the second half of the year, definitely we're going to have record, I guess, definitely, we expect to have record revenue and profits as well. In terms of seasonality for Q1 of next year, it's hard to comment on it. So I think over time, there will be probably less seasonality as a result of that. Having said that, we still have a lot of our legacy clients from the past that make up majority of our revenue. So it will take some time before it shifts more, the balance shifts more towards a new Propel IQ revenue and then seeing higher margins of it and higher stickiness as a

whole take effect.

Okay, thank you guys.

No problem.

Great. The next question is from Jason Zandberg of PI Financial. Please go ahead, Mr. Zandberg.

Thanks for taking my question.

So, I just wanted to, Ellie and David, just wanted to talk a little bit about your cash position and cash burn. You know, you mentioned in the presentation, you've got your last run out payment that will be paid out over Q3 and Q4. Just wondering if you anticipate dipping into your LOC in the second half of the year or do you expect to generate cash from the business and actually build cash? What would be the outlook there on cash? Yeah,

yeah, yeah, very good question, Jason, and I'm glad you asked that. I'll pass it to David to add some color as well, obviously, but I'll provide my, my, you know, response to that first. For normal working capital needs, you know, on a week to week basis or something like that, we might dip into the line of credit, but we currently don't expect that we will need to use a line of credit. We currently expect that by end of the quarter, we will still, you know, our cash balance to be more or less flat compared to what it is right now. And that is for a number of reasons. One is that there's, you know, less earn out to be paid because the remainder is now spread out. But also we've done a lot of work in terms of reducing our, you know, expenses that has already, you know, taking effect and we can see the results of that. And there's increased revenue as well. So we actually expect to be more or less in terms of cash balance flat for the quarter. But again, we do have the line of credit available should we need to dip into it for any short term needs. And currently we don't see short of a major disaster that we cannot foresee. We don't currently foresee the need to raise any money for continued operations or continued organic growth. And we do definitely want to raise money when it makes sense for purpose of acquisitions, not for continued operations. David, you might want to add your two cents to it as well.

Thanks, Ali. And hi, Jason. Thanks for that question. You know, just to add to what Ali said, you know, we've I think WishPond has always been quite conservative in how we've managed our business. So we've always walked that fine line between managing growth, you know, trying to maximize growth and at the same time controlling our expenditures. And none of that has changed, except that what has changed is quarter to quarter. And then the other thing is that if you look back over the last two years, our top line has increased, right? So if you consistently have 65 to 70 percent margin on an accelerating top line, but at the same time, you've kind of kept your costs in check. More so actually in Q2, we started implementing further rationalization efforts. So our costs have actually come down a little bit. You know, that spills more cash to the balance sheet that we can use for other things. So the other things, namely earn outs, you know, in the Q1, we had 371,000 in earn outs. In Q2, we had 324,000 that we paid out in cash. In Q3, we're going to have 150,000 and the same in Q4. So the quantum of that is decreasing. The good news is by the end of Q4, we'll be done with all the earn outs, all the acquisitions that we've done. So unless, you know, we do raise more money, we do more acquisitions, there's not going to be any more earn out payments consuming cash, right? The other component of cash that we use is really product, it's capitalized R&D, so it's really for product development. And that's been in check as well, even though we continue to roll out the products. But as we spill more cash from operations, be able to, you know, control, or basically cover that expenditure. If you look at our last four trailing 12 months, Jason, we've actually had $1.7 million in adjusted EBITDA from the business. So yes, in the first half of this year, it's been 400,000, an excessive 400,000 in adjusted EBITDA. But you're moving into the larger two quarters, or the second half has traditionally been larger quarters in terms of revenue growth and cash flow generation. So, you know, just to add to what Ali said, I think you're fairly comfortable that even if you dip into the LLC from time to time for temporary reasons, overall, our cash flow from operations will cover us.

Yeah, and two more elements that I think might be helpful to note here as well is that we also paid for the ESM acquisition in cash in Q2 that we don't have in Q3. And another element is that so far all the acquisitions we made, earn outs, have been structured so that it's our discretion whether we use cash or stock. The fact that we paid the earn out for viral loops in cash, and we also decided to pay the remainder also in cash was completely our decision, because the current price of the stock is not reflective of the value of the company. And we were comfortable enough that we will still be able to handle our cash burdens, regardless of that earn out. So, you know, I hope that answers the question, Jason, but if you have any follow-ons to that, we'd be happy to answer.

Yeah, no, that's fantastic. Very good color. Just for a second question, just wanted to ask about your sales closer AI. Very impressive demo that you showed here on this call. You know, and I see in the demo that you were using it to sell or, you know, sell your own product and I'm just wondering, are you currently live using sales closer AI as an active sales channel for yourselves and if not, when would you expect to go live with that?

Obviously, like most things we rolled out and productize, we are client number one. And because of that, you rightly, you know, noticed that it was actually presenting wishful propel IQ to, you know, this fictitious client who happened to be me. Some people joke after watching that video, they're like, we don't know who's AI and who's a real person, but that's another point. So, we are not live using it for our sales channels yet. But, you know, when we said by the end of the year, we'll be ready to release it, that would be productized where everyone can sign up and use it. We're gonna, we expect to use it a lot earlier than that in matter of, you know, I don't want to put a date, but relatively soon. And I think that product is a potentially transformative one for the whole industry and for wishful as well. And the price point for it would be also quite different from some of the things we've seen in the past, you know, if you can imagine, for example, per seated, you know, we have a pilot as a person, but you can imagine per seated might be in the orders of thousand dollar per seat, you know, and that was still a significant in the world and the alternative to that. And that is something that can really accelerate our growth as well. You know, in some cases, you can imagine one large client can pay for 1000 seats and that's a million dollar per month, you know, just, just, you know, if you want to imagine the impact that can have on us, but also the impact that can have on the industry as a whole is quite revolutionary.

Yeah, no, thanks. Thanks for my question.

The next question is from Neil boxy of can accord, please go ahead. Mr.

Boxy. Hi, thank you for taking my question. Just asking a little bit more about the, the major customer who reduced spend, I just wonder if you provide more color on. So I see it was about 400,000 they spent this quarter, but should we anticipate that being kind of the go forward from the customer or should they be more focused on the customer? Should we expect any further kind of runoff? Just wondering if you provide more color there. So

currently, our forecasts are assuming that it would be at the same, you know, $400,000 or so per quarter. But having said that we're working actively with that client to help them accelerate their spending again. And, you know, there are some early signs that that might happen. But it's hard to know, because a lot of it is not really in our control and is more external to us and their business. So we're, we're, you know, kind of our assumptions are somewhat conservative from that point of view.

Okay, and then just one last thing on just in that customer. Was there anything in terms of like the margin profile about it that was maybe in line or above or below your typical margins?

Yeah, their margin profile is a lot lower than our average margin profile. So, so yeah, you know, as a whole, the rest of the business actually has a higher margin profile. But one thing that you have to keep in mind is that as they reduce their spending, it's not that there will be higher margin contributed, because there's a fixed element of some of our costs related to that client that are going to still stay. At least for the next few months. And then it

could change. Okay, great. And then just one more question with respect to the sales closer AI very, very interesting demo. Just wondering in terms of, I guess, how you look at, like an illustrative kind of rollout with a customer, you know, integration with their kind of software flow, what you would see is kind of the uptime for, you know, let's say a client wants to take it on and is it a matter of weeks or would be a longer touch point for getting it ramped up with, you know,

client. But by the way, maybe the next earnings call will be presented by AI, but we'll see what that they might be able to answer the questions better than me. So we were going to have a self serve dashboard, where they can sign up, enter the information, including the call flow and knowledge base and you know demo recordings and all that. So if someone really wants to launch it, you know right away and they have everything ready they can. I expect that for certain clients, especially larger clients, they might want us to also help them with best practices and setting some things up for them. In which case it might, you know, take a couple of weeks of helping them on board. But, but again, you know that's dependent on the case by case.

Great,

thank you.

Oh, that's fine.

The next question comes from Christian's grow of a capital please go ahead Mr screw.

Hi, good afternoon. Is there any color you'd offer around, you know, call it turn or retention. And this macro. I'm a lot of the software companies have commented on things being tougher. Just wondering what you're seeing across the SMB market and your clients.

What we've seen so far has been relatively steady. We haven't seen a big change. So, I think SMB is generally as a whole have always had a higher, you know, sharing profile anyway. And we're not necessarily seeing that have increased over the past month.

That's good to hear. And then the second question last today is on, you know, pricing dynamics glass we chatted, you're exploring different types of packages whether it's no usage or transactional or within the bundling to see what made the most sense. Just wondering how you're going to mark with propel IQ, and what sort of pricing and positioning there is the best value for clients.

It's more or less the same as what we had in the past. One of the changes that we're actually experimenting with is a faster onboarding and more streamlined onboarding and, and as a result of that waving to set up the, so that there would be less friction when signing up new clients, so that we just get started and they will pay the monthly fees. So that's that's kind of what we're seeing and obviously as clients use us more, more of them will end up paying for overage fees and there's also off sale opportunities for, you know, additional products like Raxi to be offered to them or additional services to help them with some of the marketing needs.

I was thinking one more only because it's related but for propel IQ, the typical contract length is one year out the gate. Is that still the strategy Ali? That's right. Perfect. Thanks for taking my question. My pleasure.

The next question comes from Gabriel Lung of Beacon Securities. Please go ahead Mr.

Liam. Hey guys, thanks for taking my questions. Just a couple things. First, just going back to that, the large customer for a second, Ali, just just curious, the year of your decline in revenues from these from these guys, is it their own business declining or is it this agency transitioning maybe to another provider? I'm just just want a little bit of color on that.

As far as we know, and I have no reason to doubt it, they're not transitioning to any other provider, it's their business, changes related to their business.

Gotcha. Okay, that's helpful. And then just shifting over to propel for a second. I'm curious as you go through this, the sales, I guess retraining some of the transition of the selling there, are you worried at all about your sales team focusing more of their time, trying to set up new banners for propel, as opposed to sort of base hits with you know cross selling within the existing legacy customer base? And whether that might have a little impact on overall growth rates over the near term?

No, I don't think so. I mean, there definitely have been short term, short term concerns. But in terms of it affecting our growth profile with distracting them from off selling or you know, those kind of things of existing clients. No, that's not really what we're seeing. What we're seeing more is that sometimes there's a challenge with, you know, they can executives shifting the mindset from what they were selling or point solutions to more streamlined propel IQ with less service involvement and more And, you know, of course, the monthly and monthly MRR per client for propel IQ starts lower than what we were charging before, but then it has more off sell more old bridge and more LTV associated with it. And that's some of what we've experienced, but I think a lot of it is behind us now. And David, if there's anything you want to add as well.

No, I think you covered it off. I think it's typical when you change a product or, you know, bundle the product and the sales team are used to selling a certain product in the past. They've now got to retrain and just realign how they present their demos and so on. It takes a little bit of time. And I think we're seeing that. So I think just as Ali mentioned, it takes a transition. Hopefully be at the end of the transition and it's going to be smooth sailing.

Gotcha. Just one last question. I'll see you guys think about propel. There's a very good value proposition there just given the all in, you know, all in platform type services they offer. But I'm curious though in your discussions with your customer base who have traditionally been sort of SMB players. Are they actually looking to pay a little bit more for all this feature and functionality? Or do you feel you need to sort of move up cap, which may require a different sort of selling strategy, perhaps more targeted selling strategy towards larger customers? I'm just curious to get your thoughts around that.

Well, they are willing to pay for it and our prices are quite reasonable, right? We're talking about $300 a month subscription fee, which is quite affordable and fraction of the cost of the alternatives. So from that point of view, we are not seeing a lot of issues with that. But in terms of going up market and starting to larger businesses, you know, as I mentioned, we need to be in per se. Yeah, we're doing some of that and we will push more towards the medium size of the businesses as well. Sales closer is a good example of it that I think there's a huge appeal in the larger businesses for a solution like that. You can even imagine in the case of Wishbone, for example, we have a lot of interest for receiving demos at Wishbone. At times that we don't have any salespeople working or in languages that our sales team doesn't speak or in countries where the value of the price is lower and our current price doesn't make sense for them and we'd have to have a smaller entry price point that would not be feasible to sell to normal salesperson. And so, you know, sales closer can help with that. And that, again, goes back to that solution and some of the solutions that we're doing are definitely quite appealing to larger businesses. And as that happens, we will we will approach that as well. And we will push up market when

necessary.

Gotcha. That's perfectly super helpful. Congrats on the progress. Thank you.

Great. The next question comes from Daniel Rosenberg of Paradigm Capital. Go ahead, Mr.

Rosenberg. Thanks. Hi, Ali and David. My, my first question is around just kind of the demand trends that you're seeing on the front lines, like X the customer that rolled off. Is there anything to say between Canadian operations and US operations that you're seeing on the front lines?

In terms of whether the demand is greater or weaker between the US audience and the Canadian audience?

Yeah, exactly.

I mean, majority of our revenue comes from US audience anyway, about 72%, as we mentioned, is US 11% Canada, 60% everywhere else. And, you know, I don't think I personally have noticed I mean I do listen to a lot of sales calls I personally haven't noticed or haven't heard also that there is a difference between those two audiences in terms of their demand. Yeah, I think I think, you know, the demand is quite strong. The challenge with us, as we talked about it alluded to it earlier has been that we haven't expanded the size of the sales team, even with national edition has been slightly declined. So we can bring a lot of demos for salespeople but correctly we haven't had enough salespeople to actually provide those demos so that's why now we're accelerating to add more account executives to the floor.

But keeping them busy has not been an issue at all.

Okay, understood. And then, in terms of the sales hiring. You're also at a point where cash generations seems to be improving the scale of the business is generating more resources to be able to invest, I'm just curious, at the same time, you seem to be rolling out a lot of AI tools that can potentially be quite interesting as well. So in terms of your thinking around hiring back into sales like where do you want to be. And at what point, you know, do you really want to increase the R&D effort into developing some of these tools into the opportunities that you see.

So we're slightly short of 48 account executives right now. And as we mentioned, we're hiring now adding more salespeople to get to about 60-70 by end of the year. Starting at the beginning of August, we've added some people and that's our plan for the remainder of the year. You probably also remember that our first year revenue to cost of acquisition ratio is 4 to 1, which means that salespeople that we add to the floor within three months, they become profitable. And because of that, as we invest in bringing more salespeople, it doesn't take long before they contribute positively and so because of that, we're not too worried about adding some headcount there. In terms of AI, especially because we've done a lot of cost control and cost reductions, we feel like we have enough offer to be able to invest appropriately in research and development. And some of it will also be shifting existing resources that we have from other projects into projects like SalesCloser, at

least for now.

And

when needed, we also will use external resources.

And maybe

just one kind of follow up on the SalesCloser. It would seem like a tool like that could be quite interesting to an enterprise level customer, but in adjacent markets and thinking of like financial services or something like that. Is there any thought process or is this more of a long term thing that you have enough in the near term to pursue? I'm just curious how you're thinking about adjacent verticals if there's an opportunity.

Well, I mean, as the name suggests, our focus right now is on sales. And you're right. This could potentially apply for a whole bunch of different industries. Including even medical and financial and a lot of different things. But with the sales area, the need is a very pronounced one. It is a huge market, many, many billions of dollars market. And because of that, we feel like by focusing on sales specifically, we can have a product experience that would be better and more fine tuned. And then later on, sure, we can look into expanding

into other verticals.

Okay.

All right. Thanks for taking my questions.

Thank you.

And the last last question comes from the hell up idea of a capital markets. Go ahead with your question.

Hey guys, thanks for taking my questions. In terms of M&A and, you know, talking about some of the smaller tuck in similar to ESM, is there anything out there that you're seeing right now that potentially moves the needle in terms of filling product gaps?

There are always different ones that we look at. And some of them are quite interesting. But obviously, given that our cash balance is lower than it used to be, we're more careful. And our priority is more on organic growth and operations right now. And we have a lot of opportunities that we're already pursuing. Product Suite, I think, is quite rich right now and, you know, sticking quite well with the client. I think acquisitions in terms of accelerating growth and adding more revenue to our financials would be something that would make more sense as the stock price appreciates and we can, you know, properly raise and do larger acquisitions for that. Obviously, we're going to be opportunistic but, you know, nothing immediately in front of us like ESM. David, do you want to add anything to that?

No, I agree with everything you said, Ali. I mean, Nehal, we pretty much get different types of deals in our email mailboxes pretty much every week, right? And Ali, Jordan, and I, you know, we often chat about many of these pretty much on a weekly basis. We've always been disciplined even when we had a ton of cash to the bank. We were very selective. We continue to be selective. The only one difference right now is, you know, the issue of getting something that's egregious, right? So we are extremely careful. We don't want to make a mistake, you know, making a large acquisition that potentially may not produce cash flows. We've never done that in the past. We tend to continue on making sound acquisitions. So we look at everything that comes in. We don't know when we'll pull the trigger on the next one. Hopefully sooner rather than later. You know, and to respond to your question directly, there's always

deal flow. No, fair enough. Thanks for that. And then look, it's been a few quarters since the launch of Propel IQ. Anything you've learned that was maybe surprising, good or bad?

I think we expected the rollout and the change management, especially in terms of our team members, to be difficult. So from that point of view, it is not surprising, but maybe I was hoping that some of those challenges would be handled more quickly. You know, that's one that I've seen. But I think as a whole, it is interesting that a lot of the theories and hypotheses that we had about how it's going to resonate and, you know, how it's going to be more sticky and how it's going to be perceived and the value that is generous. I actually have materialized exactly the way we thought. And now, you know, the partnership program that we talked about. It is a lot easier to make those partnerships with Propel IQ and make them work well than previously before having proper like a lot of doors are opening now that weren't available to us in the past.

Perfect. Thank you. And then maybe one last one. David, I think you mentioned that you let go of 20 team members. Can you provide some color on which cost functions the headcount was reduced from?

It's pretty much across the organization, Nihal. You know, we have just been very careful with where we have people. Sometimes there's employee oppression. We might not be full that position. We'll just get it done, you know, with whatever resource we have internally. In other cases, they've been very specific initiatives that Ali and Jordan have implemented, like with the SDRs and so on in terms of how we respond to emails. We use AI for that. So we're able, you know, to get better productivity from the existing number of team members without adding to them. So, you know, it's been across the board that we've been able to save on headcount.

Perfect. Thank you. That helps. I'll pass the line.

There are no further questions, so I'll pass it back

to Ali Tashkinder for closing remarks.

Thank you very much, Jordan. In closing, I want to thank everyone once again for joining us today for this call. Thank you to the analysts for your questions. Everyone, please stay safe and healthy, and we look forward to providing more updates this

year. Thank you.