Wishpond Technologies Ltd.

The conference call will be starting shortly. Thank you.

Thank you everyone for joining us today and welcome to Wishpond's 2023 fiscal fourth quarter and full year 2023 financial results conference call. My name is Adrian Lim, group controller, and joining me on the call today are Ali Tashkandar, chairman, founder, and CEO of Wishpond, and David Pace, the company's CFO. This call is being recorded and we will be having a question and answer session at the end of the call, which will be limited to analysts only. I trust that everyone has received the 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 and discussion and analysis from cedarplus.ca. 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 those laws. Please refer to today's press release and in our management discussion and analysis for disclosure of risks and uncertainties. We provide forward-looking statements solely for the purpose of providing information about management's current expectations and plans relating 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 is required by law. We use terms such as adjusted EBITDA, annualized revenue run rate, and monthly recurring revenue on this conference call, which are 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 Tazkandar, Chairman and CEO.

Thank you, Adrian. Good day, everyone. We hope that you are all keeping well. We truly appreciate everyone for joining us today. On today's call, I will first provide some general commentary and an update on the quarter and the full year ended December 31st, 2023, followed by our CFO, David Pace, who will provide a financial summary of our results. I will then come back and provide some commentary on our outlook. 2023 was a transformational year as Wishbone underwent the two most significant new product initiatives in the company's history. The first being the launch of Propel IQ, our next generation marketing platform, and the second being the development of our suite of AI-powered marketing tools, including our flagship Sales Closer AI product. We believe the combination of Propel IQ and Sales Closer AI positions Wishpond for the next phase of the company's growth. Propel IQ firmly places Wishpond in an elite league amongst very few digital marketing companies and all in one bundled sales and marketing platform. Meanwhile, the recently launched Sales Closer AI product launch is garnering tremendous interest in the industry. We believe artificial intelligence is going to completely change the way that companies will do sales calls and demos in the future. And Sales Closer AI is leading the charge in this evolution. We are very excited about the company's outlook for 2024. In Q4 2023, we completed the transition of our sales team to selling our new Propel IQ product, which we expect will be a key driver of revenue growth this year. Furthermore, Propel IQ has higher gross margins, lower customer churn, and greater customer lifetime value compared to the company's other product offerings. We are expecting to improve profitability this year as we aim to achieve positive adjusted EBITDA in each quarter of 2024. Our cash position should also improve in 2024 as a result of higher revenues and because the company has now completely paid out all of its earn outs related to prior acquisition. We feel confident in our ability to fund the company's future growth through cash flow from operations and the company's $6 million credit facility. Turning to our financial results, I'm very pleased with our record fourth quarter and record annual revenue, which one achieved revenues of $6.1 million in Q4 2023, representing approximately over 24 million annualized revenue run rate driven by the company's focus on organic growth and successful market positioning. We are also pleased to report the sixth quarter in a row of positive adjusted EBITDA, demonstrating our commitment to profitable growth. Wishbone's cost optimization efforts over the past year have contributed to the company's continued positive adjusted EBITDA profile. Our outlook is strong and positive for 2024. I would like to emphasize that despite 2023 being a transition year, Wish Fund continue to increase its revenue and we achieved positive adjusted EBITDA in each quarter in 2023. With renewed optimism based on continued sales growth and improving cashflow, we expect our accelerated hiring of new sales resources will drive growth in 2024. We are also experiencing increasing demand for our products as we continue to transition to the bundled Propel IQ product offering and leverage our suite of AI marketing solutions, including sales closer AI. I will provide additional details on our output 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 year.

Thank you, Ali. And thanks everyone for joining us on the call this morning. I'm pleased to report that we have achieved record revenue, record gross profit, and record adjusted EBITDA for the year ended December 31, 2023. Wishpond achieved record annual revenue of $23.1 million during fiscal 23 compared to $20.5 million in fiscal 22, an increase of 13%. Revenue growth was primarily driven by organic growth, resulting from strong product demand across the product lines. The revenue from a major customer reduced from $2.9 million in 2022 to $1.5 million in 2023. Without this decrease in revenue from email delivery services, revenue from the rest of the business would have increased by 22%. Wishpond achieved gross profit of $15.2 million in fiscal 23 compared to $13.6 million in fiscal 2022, representing a 12% increase driven by an increase in overall revenue. Wishpond achieved gross margin percentage of 66% during fiscal 23 compared to 66% in fiscal 22, which is in line with the company's historical performance. During fiscal 23, Wishpond achieved record adjusted EBITDA of $759,000 compared to $648,000 in fiscal 2022, an increase of 17%. Adjusted EBITDA growth was positively impacted by the company's cost-cutting measures over the past year. As at December 31, 2023, Wishpond had $1.4 million in cash and debt of $995,000 from our credit facility, which comprised of cash of $2.7 million, which compared to cash of $2.7 million and no debt at December 31, 2022. The reduction in cash balances was caused by earn-out payments for businesses acquired in 22, continued investment in R&D, including the development of AI marketing tools such as Sales Closer AI, ramping up sales and marketing costs with the launch of Propel IQ, and by changes in working capital. Wishpond has a $6 million secured revolving operating credit facility with National Bank of Canada's technology and an innovation banking group. While we had positive net cash position at the end of 23, the company's cash balances are maintained in several accounts. So we draw down from our credit facility from time to time for working capital purposes. We expect our cash balances to improve in 2024 and continue to have plenty of additional capacity on our credit facility if needed in the future. In 2023, the company underwent a cost-cutting program, which included headcount productions and the implementation of AI technologies to improve internal processes. Wishpond has a reliable stream of monthly recurring revenue and very good visibility of revenue and cashflow. We have been able to continue growing comfortably from cashflow from operations without the need for an equity or debt capital raise. I will now provide an update on our normal course issue a bid or share buyback program. On June 27, 2023, the company announced that the renewal of its normal course issuer bid, or NCIB, was approved by the exchange. During the full year 2023, the company purchased 32,000 common shares out of the NCIB for aggregate consideration of $18,528. The board of directors of Wishbond believes that the market price of the company's common shares do not properly reflect the underlying value of such shares, and that using some of the company's surplus cash under the NCIB would be in the best interest of the company and its shareholders. The company intends to purchase shares under the NCIB program from time to time based on available cash. At the end of the fourth quarter, on December 31, 2023, the company had 53,983,620 fully deleted securities issued and outstanding. This concludes my financial update, and I will turn the call back over to Ali.

Thank you, David. There are two main things that I want to focus on. The first, Propel IQ, and secondly, Sales Closer AI. As for Propel IQ, last year we announced the launch of Propel IQ, Wishpond's next-generation marketing technology platform. Propel IQ is redefining the landscape of digital marketing and puts Wishpond on track for its next stage of growth. Propel IQ is our most extensive platform offer to date, combining Wishpond's award-winning software with its recent acquisition to create one connected platform. In addition to Wishmont AI-powered website builder, lead generation, email marketing, automation, and marketing technology solutions, Propel IQ includes SMS marketing from Winback, referral marketing from Viral Loops, AI-powered Braxy from Brax, and sales engagement software from Persys IQ, all integrated together into one platform. With Propel IQ, businesses will be able to manage the complete customer life cycle in one platform, eliminating the need to invest in additional marketing and sales tools. Propel IQ allows Wishpond to truly capture the most value out of its acquisitions. We've successfully integrated our acquisitions and connected the products across the businesses to implement new cross-link capabilities. Additionally, our development team has worked hard to build out the platform completely, incorporating features such as single sign-on capability and a unified dashboard for all the products in the platform. Furthermore, our pricing allows customers to reach the benefit of lower bundled pricing for the full product suite compared to paying for each product individually from different vendors. Propel IQ's pricing strategy benefits our clients who no longer need to navigate the various disparate vendors and juggling individual product costs. Instead, they enjoyed the benefit of one lower bundled price with which they received the full potential of our bundled product suite seamlessly integrated for unparalleled efficiency. On March 5th, 2024, the company provided an update on several key metrics for Propel IQ. Since launch, the number of Propel IQ customers has increased to over 500. Monthly recurring revenue or MRR from Propel IQ customers has increased approximately tenfold over the past year. The customer churn rate for Propel IQ customers is up to 40% lower compared to customers of other WishBond solutions. Customer lifetime value or LTV is over 20% higher for Propel IQ than customers of other WishBond solutions. Propel IQ is the future for WishBond And we believe that the platform will give us deeper integration into the client's business and marketing systems, increasing our customer retention and long-term customer value. Moreover, through the Propel IQ platform, we expect to further increase Wishbone's margins. I would now like to talk about our AI initiative. AI will have a profound impact on the way sales and marketing is done in the future. The use of AI technologies is rapidly changing the digital marketing landscape and Wishbond is at the forefront of utilizing these new innovations to provide businesses with new advantages against larger competitors. I believe that artificial intelligence technology truly has the potential to disrupt much of the way people and businesses operate. And I firmly believe many AI applications are here to stay and will revolutionize the marketing industry. Over the past 18 months, we announced the launch of several AI tools for marketing, including AI Website Builder, Sales Email AI, Braxy's AI Platform, and our most recent launch of Sales Closer AI. Wishbone's Website Builder, which is powered by generative AI technologies, leverages the latest generative AI technologies to analyze user inputs and automatically generates website designs that are tailored to the user's specific needs. To create a website using the Website Builder, entrepreneurs and business owners enter a few details about their business, and the system's AI algorithms will generate high-quality content and imagery using the information provided. The Website Builder further allows users with the ability to edit and refine their website using AI technologies, including the ability to translate the website into multiple languages. Another AI-powered product we launched last year was sales email AI, engineered to deliver tailored responses to emails from potential clients. Sales email AI provides users with a level of personalization that sets it apart from traditional automated responses, allowing users to elevate and streamline sales communications. Previously, we also announced that Brax.io, our wholly owned subsidiary, had launched Braxi, a user-friendly AI-powered advertising solution for businesses. Braxy's AI platform automatically creates and optimizes campaigns, enabling businesses to attract more customers in less time. With Braxy, businesses can craft ads targeting precise customer profiles, enhancing their chances of converting leads. We believe that utilizing Braxy can yield significantly better results compared to managing Google Ads independently and at a fraction of the cost of hiring a full-service agency. Combined with our recently launched Sales Closer AI, which I will talk about in more detail shortly, these components are a part of our expanding AI product suite. It represents our vision of a comprehensive lineup of AI-powered marketing tools tailored for our Propel IQ platform. These tools are being crafted to provide an automated end-to-end marketing pathway, seamlessly guiding users from lead generation to sales closure and thereafter to customer support and service. By leveraging our automated tools, clients can efficiently scale and nurture their businesses in a cost-effective manner, thereby fostering growth and success. Looking forward, there are numerous use cases of AI in marketing that we intend to launch in the future, including AI can be used to generate personalized content for newsletters, websites, emails, and SMS messages. AI can help SMBs provide more background information on the leads in their prospect funnel and AI can be used to produce professional looking promotional videos that would otherwise cost a lot of money for small business to produce. These are just some of the exciting R&D projects that are taking place at Wishbone. We are in a very fortunate position to be able to lead the charge in applying AI to marketing applications and to provide our clients with powerful tools that will help them grow their businesses more efficiently and profitably than was ever possible in the past. Moving on to Stealth Closer AI, Stealth Closer AI contributes to our expanding suite of AI-driven products, aligning seamlessly with our vision to empower businesses of all sizes to scale efficiently and accomplish more with fewer resources. Here are some of the milestones we've achieved for Sales Closer AI. On December 7, 2023, the company announced it filed a non-provisional utility patent entitled Virtual Artificial Intelligence Representative to protect the underlying technologies of its Sales Closer AI platform that can perform automated demos, calls, and presentations. This technology is the breakthrough in AI-powered presentation technology utilizing advanced large language models and deep learning technologies for voice synthesis. This innovative AI-based platform acts as a virtual AI representative and can engage in conversations and deliver presentations in real time through various meeting applications, showcasing its versatility and efficiency. On February 7th, 2024, the company announced the beta launch of its proprietary AI-powered sales platform, Sales Closer AI. Sales Closer beta program had several hundred businesses signed up for its launch. On April 4th, 2024, The company announced the official launch of its AI-powered sales platform, Sales Closer AI, that the company anticipates will be able to deliver personalized round-the-clock sales calls and product demos, just like a next-generation virtual sales agent. The platform can work 24-7 to engage leads, close deals, and deliver insights in 10 different languages. Sales Closer can also be adapted for use across a diverse range of industries, such as software slash SaaS, professional services, financial services, education, travel and hospitality, insurance, real estate, and more. Sales closures transcend some of the constraints that take businesses in the realm of sales. These include language barriers and time zone disparities when selling to international clients. as well as the scarcity of time or sales personnel available to commit to sales meetings. Previously, these challenges often led to missed opportunities. However, Sales Closer empowers businesses to automate their sales processes, effectively helping to overcome these obstacles and enabling seamless sales interactions. This innovative AI-based platform can act as a virtual AI representative and can engage in conversations and deliver presentations in real time through various meeting applications. Once a customer provides Wishpond with a relevant knowledge base for upload, the custom trained AI can conduct sales presentations tailored to that business and can manage the entire sales process from discovery to close with minimal need for human intervention. As a result, the platform allows businesses to automate tasks scale their sales team and sell globally, all with detailed analytics to enable continuous improvement. Sales Closer can be adapted for different customer applications. Some other potential uses for Sales Closer include AI products designed to function as sales developer representative, product trainers, customer support agents, product onboarding specialists, customers success representative, and more. Wishbone believes that there are further use cases for sales closers, such as market research and data collection, translation services, hiring and recruiting, autoresponders, the criteria of work and education. As we continue to engage with more clients on the product, we anticipate the emergence of new and innovative use cases. While it is still early days, the feedback from our beta testers and initial customers has been incredibly encouraging. This is particularly thrilling because it signifies ample room for growth and enhancement as we continue refining the product and broadening its knowledge base. In addition, we see an enormous opportunity to use Sales Closer AI for our own wishbone sales. During the beta testing process, we actually closed some sales of Propel IQ using Sales Closer without human intervention. We are finding that Sales Closer could be a great addition to our sales team. In the long term, in the long run, this could result in substantial reduction in costs as we ramp up our sales of Propel IQ, as we may not need to hire as many salespeople. This is an extremely exciting possibility for us, as it will allow us to expand our sales coverage into different countries that speak other languages. We are very optimistic about the company's growth prospects, and I'm pleased to share Wishpond's key goals for 2024. One, accelerate organic revenue growth and increase monthly recurring revenue. Two, achieve positive adjusted EBITDA in each quarter in 2024. Three, leverage the Propel IQ platform to improve margins, decrease churn, and increase long-term customer value. or ramp up sales of company's new Sales Closer AI product. Wishbone's outlook for Q1 2024 and heading into 2024 remains strong and positive. Wishbone is well positioned for continued growth and improving profitability. While traditionally Q1 has been a softer quarter for us in terms of performance, we anticipate Q1 2024 revenue to be in line with Q4 2023 results. The prospect of maintaining stability in our top line revenue is particularly encouraging as it sets the foundation for continued growth during the second half of the year where we have our traditionally stronger quarters. Which one expects to achieve record revenue and positive cash flows in 2024? This is driven by organic growth from ramping up sales of the company's new Propel IQ bundled product offerings, increasing the size of our sales team and new product introductions like Sales Closer AI, which one continues to experience strong demand for its products. I'm especially optimistic about the blue sky potential of Sales Closer AI, which can be a game changer for our customers. We expect to be adjusted EBITDA positive in each quarter going forward, in line with the company's focus on profitable growth, which one will continue to scrutinize all discretionary expenditures across the organization, with the intent of optimizing operations and achieving cost-saving synergies. With the launch of Propel IQ and Sales Closer AI, we are expecting higher growth margins and lower customer churn 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 is expected to result in greater customer satisfaction, less churn, and consequently higher customer retention. Wishbone can continue to fund the growth of its sales team and new product launches from cash flow from operations. without having to raise additional equity or debt capital. The cash flows generated by the company will continue to be reinvested in the business, primarily in the new product introductions and ramping up sales and marketing. In closing, I want to reiterate that Wishpond is an elite software company with profitable growth Technology companies are known to burn a lot of capital for many years before becoming cash flow positive. It is rare to find a software company of our size that is growing rapidly, maintains high growth margins, and is also adjusted with a positive. Wishbone truly is a unique, high growth, profitable company, and we remain committed to delivering profitable growth in the future. WishBond today is in an enviable position with a growing customer base, increasing revenue, broadened product offerings, 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 WishBond whose hard work continues to elevate the company to higher levels. We want to thank our customers for relying on us to help them with their digital marketing needs. I also want to thank all of you for joining us on this call today. We look forward to providing an update next quarter. I will now hand it back to Adrian for questions.

Thanks, Ali. With that, we will now open the call to questions. Just a friendly reminder that questions will be limited to analysts only. The first question is from Gabriel Leung from Beacon Securities. Please go ahead, Gabriel.

Hi, everyone. Thanks for taking my questions and congrats on the progress. A couple of things. First on Propel IQ, maybe a two-part question. First, what percentage of your new bookings are you finding are being driven by Propel IQ now, number one and number two? For any customers that you've seen churn off of Propel, what was the rationale for them leaving?

I don't have a specific number in terms of what percent of the bookings are Propel IQ. What I can tell you is that majority of the new hires are now for our sales team are for Propel IQ. And that's where the majority of the push on sales are. Now, in terms of percentage of bookings, I think that's something that we can look up and maybe in the next call or something, we can talk about it. I don't want to be wrong about that. But it's an increasing percentage of our revenue. In terms of reasons why someone might not continue with Propel IQ, I see a few. One of the main reasons could be things that are honestly outside of our control, meaning that when dealing with small businesses, a lot of times patients are short and You know, they have a short time horizon and hoping that they would immediately turn their business around. And sometimes there are elements that are outside of our control and the platform we provide. We are here to provide our clients with an all-in-one marketing and sales platform that gives them the best chance of success and take the guesswork of marketing and sales technology out of the way. But still, there remains effort that they need to put in and elements on their business that if they're not completely nailed, they might not necessarily get the success that they need. And I think as we move forward, there will be an increased push towards you know, moving up market and to more established businesses. Some of that effort has already begun. Salesforce is going to do more of that as well. While we're still available to all businesses, but I think more and more of our sales efforts will be focused on businesses that are more established and they have best chance of success with the platform.

I should know. It's super helpful. And just moving over to a sales closer, I know this is obviously super, super early days for the new platform. But, you know, in terms of the beta customers that you dealt with and maybe some even some of the early launch customers, can you talk to us about, you know, what sort of ROI they're seeing, early ROI that they're seeing with sales closer today? you know is it is it working the way they think it's it's working to justify i think the aspiration was to get you know sort of thousand dollar per seat per month for sales closer um

It is really early and I don't want to really share any insights based on limited data. I think we're in the early days and there's more to be done. I anticipate that that return on investment would be huge because a lot of times you're really comparing, let's say $1,000 per month versus the cost of a full-time resource that might be like $10,000 a month. And that time is actually productive time, right? And you can ramp up Let's say you have a marketing event where for holidays you're promoting something and you need 20 salespeople today only. And then after that, maybe you don't need them. Traditionally, what option did you even have? You couldn't hire 20 people, train them, get them productive just for a day, and then after that, let them go. So now with Sales Closer, you have those possibilities that you didn't even have before. Or for example, in the beta testing for WishBond, we use Sales Closer a lot with our countries that are outside of our core focus and outside of the hours where our North American sales personnel could actually take those demos. And those are the kind of opportunities that in the past we would have completely missed. So it's not just optimizing on the cost of ownership, but giving them an avenue that would open new doors that they didn't have before. In terms of specific ROI, really it's gonna be case by case. And as we develop further and get specific use cases and numbers, we'll share them, but I don't have enough to give you a specific number.

Gotcha. Just one last question. Do you have an updated sales rep headcount number? Number one and number two is, I know in your preamble, you talked a little bit about plans to increase that sales rep count. At some point over the course of the year or so, does the focus then shift at some point more towards driving more efficiency out of the guys you have in the field right now?

Yeah, very good question, Gabriel. In fact, that is actually where we are right now. So in terms of headcount across the company, from a year ago to now, we have fewer people in the team driving larger revenues now versus a year ago. On the sales team itself, as we were ramping up and nailing Propel IQ sales, we had some natural churn of employees and people who unfortunately didn't work out. And as we were figuring things out, So, you know, we started with 40 account executives a year ago and it went down a little bit. And then we started ramping them up more in Q3 and Q4. And now we're basically back to the same number of account executives that we had back then. Now, in terms of adding headcount versus driving more efficiency, that's actually where we are right now, where our focus is. getting the sales resources that we have to produce more and higher percentage of them to hit quota, which we've made tremendous progress on, and then gradually add to them and also complement them with sales closer so that we wouldn't need as many additional sales resources as typically in the past we would have needed.

Gotcha. So would it be fair to say the sales rep count is somewhere in the 40, 45 range right now? That's right. That's right. Gotcha. Okay. That's helpful. Thanks a lot for the feedback.

No problem. Thank you for the question.

The next question is from Daniel Rosenberg of Paradigm Capital. Please go ahead.

Good morning, Ali and David. My first question comes around the growth aspect of Wishpond. So you ended the year, you mentioned there was that one customer, but 22% growth. And that's in a year where you stood up several products. So I'm just trying to understand as we think about the year ahead, how do you balance an acceleration in growth and how much continuous investment is needed in these products as you penetrate into market?

Yeah, I'll answer some parts of that. And I think David probably has elements to add to that. So I think one thing that is actually interesting, we didn't have it in the slides, but when you think about Q4 numbers, one is to compare the whole year versus the year before. The other comparison is actually quarter over quarter. And I think to some extent that might be even more important because last year our growth was more flat than historic years. And as we started growing further, then you see the early signs of it on the quarter by quarter growth. Q4 over Q3 numbers grew by close to 5%. And if you exclude that one large client, it would have been 6.9% in one quarter, right? So you already see some of the early signs of that reacceleration. Now in the coming year, I think going back to Gabriel's question, we really want to make sure as we scale to nail before we scale. And some of the pain points that we encountered with growing and scaling Propel IQ was precisely from that, that at times it was difficult to add so many sales resources and make all of them productive and have their sales managers also know exactly what it takes to make them successful. And, you know, We realize that sometimes we have to actually make sure that we hire some, get more than 80% of them hitting quota, then add the next people. What that means in terms of the question you're asking is that that will be more responsible in terms of its footprint on cash flow as well. So we wouldn't have to burn cash so much. We also in Q4 and Q1, we did a lot of cost-cutting measures that we expect actually to see some of that show up in the adjusted EBITDA for Q1 and moving forward. We are trying, and I think we are very likely to succeed in this, to balance growth and going back to our earlier higher growth profile while balancing our cash flow. flow and have positive cash flow and cash balance increasing. David, anything you want to add?

Yeah, I think you covered a lot of it, Ali. I think just in terms of a couple of numbers, you've kind of touched lightly on them, but You know, on an annual basis, our revenue growth would have been 22% without, you know, that large customer dragging us down a little bit. On a Q4 22 to Q4 23 comparison basis, you know, our revenue growth seemed somewhat flattish. I mean, very small growth, but... If he took out that customer, dragging this down, it would have been 12% revenue growth. And I think Ali, you mentioned the Q3 to Q4 would have been a full 2%, two percentage points higher in terms of growth, which is all to say that, you know, the underlying business is doing extremely well. You know, Propel IQ is contributing to revenue growth, the underlying products contributing to revenue growth. And at the same time, we are a smallish company. It's $6 million quarter, $24 million annualized ARR. But we're still producing adjusted EBITDA, positive adjusted EBITDA, in spite of all the investments that Ali went through in his remarks as well as in his response. So I think I'd just like to emphasize that the underlying business is healthy. We are making investments as we should be, but the revenue growth may be masked a little bit, but it is contributing to positive cash flow.

Okay, thanks for that. And when you think about sale closer and imagine a future with it, I understand the connection to the current customer base, but I'm wondering, do you envision this being a standalone product on its own? Or is there always going to be a connection to the core marketing services?

Yeah, right now actually is its own product independent from Wish Fund. So one of the questions actually is, is there going to be a closer tie? And yeah, there will be a closer tie. But we see a lot of our existing clients benefit from Sales Closer, but we also see a whole bunch of verticals and clients that we've never had in the past benefit from that. And from that point of view, it made sense for us to not burden it with the rest of the platform and say, Sales Closer on its own has a lot of merit and there's a lot of things that we can do with it in a lot of different industries. And, you know, it's quite interesting as I talk to more, you know, potential partners and talk about the use cases of Sales Closer, things come up that I never even thought about or imagined. You know, for example, yesterday I was talking to one of, a co-friend and we're talking about in the financial advisory services there's KYC know your customer requirements and a lot of times that's a burden that a lot of advisory firms find difficulty in getting a hold of their clients and get the latest information from them. Some people fill a form, but you end up not getting everyone to do that. A sales closer can play a really important role in that. And that's just one example. You see that in car dealership, you see that with insurance, and you see a lot of different avenues. And a lot of those verticals are not typically or historically verticals. that we've targeted for Wishbone and ProfileIQ. And because of that, you could see how it would make sense to have that separation and have independence for that product.

Lastly, for me, and to that end, as you think about new vertical applications, and it's an interesting point about international sales, I'm wondering, has your thinking changed around kind of regional markets you serve? You know, is there... a case where your addressable market expands rapidly on account of sales closer being used in Europe or what have you.

For sure it does. I mean, we haven't really pushed on that that hard because our focus mostly has been about making sure Sales Closer does a good job on the demos and our Propel IQ sales team hits quota and they're doing what they're supposed to. In terms of expanding market size for us, yeah, that would be some of the things that would naturally come up in the next phases. You can imagine there are Even in the English-speaking countries like Australia, it's a great market for us, but a lot of times it's difficult to find time on the calendars of our predominantly Canadian sales force to connect with them. You have the same now in Europe in terms of UK, you have Germany, France, a lot of the different countries, and Sales Closer can play a very important role in that.

Okay, appreciate the answers. I'll pass the line. Thank you, Daniel.

Next question is from Jason Zandberg of PI Financial. Please go ahead.

Hi, everyone. Thanks for taking my questions. Just wanted to, you mentioned gross margins were steady year over year. You commented that you might see an increase given sales closer, some of these new products. Are you able to provide any sort of guidance in terms of magnitude of increasing gross margins going forward?

And David, do you want to take that?

Yeah, so generally, Jason, the gross margin of Propel IQ is higher than the other products. But what happens when you onboard a lot of new customers, which we are with Propel IQ? There's always an initial investment in the company, in the new customer. And as that tapers off, you know, like initially in the first month, first two months, we put a lot of efforts to get him up and running. After that, they're on their own. So, you know, on an ongoing basis over the next 12 months, we have much less time and effort spent on him, which contributes to the better gross margin. So you're not going to see that right away because of all the new customers we've been onboarding. But definitely over time, like, for example, for 2024, we probably would have EBITDA margins we're expecting between 5% to 8%, depending on the quarter and the revenue growth in those specific quarters and so on. Over the long term, this kind of business can easily sustain gross margins of whatever, 10% to 20%, right? I mean, as the total top line grows, there's no reason why you wouldn't see 50% to 20% gross margin. EBITDA margin. Yeah, EBITDA margin.

That's helpful. And then just in terms of your major customers, so you mentioned that it went, you know, the customer contributed 2.9 million the year before and this last year was 1.5. I guess what I want to find out is sort of, What's your best guess moving forward? Is this client stabilized now? Would we expect to see a similar sort of contribution this year? Will that sort of hamstring or be any sort of headwind to your future growth here? What are your expectations on that?

Yeah, we have continued to see decreased spending by that client heading into 2024. Whether it will be decreased further, that's hard to tell, but we are running the business as if the trajectory is a negative one or if at some point they stop working with us. So, you know, I can't say for sure. I haven't received an indication that they're not going to continue working with us. But what we have seen is gradual decrease in expenditure, as you've also seen that, but heading into 2024. So I'm not counting on that revenue in a major way.

Okay. Okay. No, that's great to have that in mind. Okay. Thanks very much. I'll pass the line.

No problem, but the plan is to obviously make that of elsewhere. Absolutely. Yeah.

The next question is from Christian escrow of eight capital. Please go ahead.

Hi, good afternoon. Hi, Christian question on propel IQ, which is now an over 10% of customers. Are you transitioning? Because part of the active work right now to transition all customers over to Propel IQ, is that an ongoing initiative? And could you confirm all new customers or most new customers are joining the Propel IQ platform? Are those the two main levers to get that 10% higher each quarter?

Yeah, so... There's some effort in transitioning existing customers to Propel IQ and they, you know, existing customers benefit from the changes that we make in Propel IQ platform. But majority of the focus and effort is in onboarding new clients that find value and they are set up for success with Propel IQ. We have different know entities within wishbone we have persists iq brax viral loops um you know wishbone and so forth and they obviously are also still growing some of the you know siloed products on their own as well where there's value and we see growth there too so not all the growth is coming from putting everyone on selling protocol iq or majority of the new hires are Propel IQ and that's going to be the flagship and that's going to be the future that we're working on. And there's good reason for that, right? You know, as we said, Propel IQ has a different margin profile and retention profile and, you know, all of those things. And that's the reason that we went through the hard work of the last year and some of it continuing right now to build a foundation that we can build many more stories on top of this building. And because of that, you're increasingly going to see more and more of the hires go there. In fact, a lot of times we've had to fight the temptation of adding more salespeople, selling the legacy Wishbone product, and it would be easier to show revenue growth. But no, we have to stay disciplined on this, even if the short-term pain is greater, to make sure that we set ourselves up for the next stage of growth. And I feel that right now where we are is an inflection point where we have a product that is really solid, that people are getting value from, that is secure, that is higher margin. And we've had challenges with our sales resources, ramping them up as scale always has some of those challenges. A lot of them are in the rear view mirror. Some of them we're gonna scale and continue working on, but I see that the future is gonna be more smooth sailing from those angles than we've seen in the past because of the work we put into it already.

Okay, perfect. And for my second question, I don't know if there's a way to think of the business as a split between like recurring software and then some of the services work, but is that a split you could think about currently or a way you could kind of break that out in 2023 or is it a little bit more, you know, gray or bundled than that?

It's more bundled. So in the legacy products that we've had, the services have been also recurring. So they, you know, they have been part of you're paying $500, $750, whatever the price is, $1,000, depending on the package, and you're getting some of that service help ongoing. And because of that, it is recurring too, and it is difficult to separate it. With Propel IQ though, there's initial month that we help our clients, and in the past we had a setup fee associated with that, and more recently we waived that. So there's no setup fee, we just help them because, you know, Because they need that and we know that they would succeed with us more. So there's none of that. And then after the first month, there's no service element involved. And more of our business is going to shift that way and hence the expectation of margins improving.

Thank you. Thanks for taking my questions today. Thank you.

The next question is from Gianluca Tucci of Haywood Securities. Please go ahead.

Hey guys, good afternoon. Most of my questions have been asked, but on the Propel IQ side, I'll ask in a different way. Propel IQ has some pretty solid metrics, so thanks for sharing that. Can you also share what your success rate is or has been with switching or upselling existing legacy customers?

I don't have a number for that because, as I mentioned, that hasn't been the biggest area of focus, converting existing clients. And it's difficult for a number of reasons to convert existing clients from legacy products to Propel IQ. One reason is that a lot of times they're actually paying more than the Propel IQ monthly fees and switching them over might actually cannibalize some of the revenue. That's one part of it. But the other part of it is that The expectations that are set up when someone was signing up to a legacy product a lot of times was more white glove services, more we'll do everything for you, you know, we get you the results. And Propel IQ is not like that. Propel IQ is that we set the foundation that you need. We help you with that initial onboarding and setup so that you have best chance of success, but you are still the driver of the car and we're here to support you. And because of those two expectations being different, sometimes it's not that easy to move one from one bucket to the other, unless there's that conversation about, okay, let's press the reset button and how about this? Maybe this is better for you.

I hear you. And David, I think you touched on your target EBITDA margins as Propella Q grows its percentage of the overall pie. But how about on the gross margin side? Like, what do you see that scaling to?

Right, so similar, right? So initially, you're not going to see a huge impact on gross margin because we're onboarding a lot of customers each month. And so we have the same number of people actually servicing those customers on a smaller revenue base because initially starting from zero, we got up to 500 customers and more. But let's say you get up to 2,000 customers and such, and then you have a large install base That's not placing demands on your service team. You get a certain number of new customers each month. That's the time that you're really going to see an impact on your gross margin. So in the first couple of quarters, maybe the first half of this year, we don't expect a lot of impact, but you're going to see that gross margin start ticking up each of the quarters that expect in the second half and beyond. So eventually we expect a gross margin like in the 70 plus, 80 plus range.

The other thing that I think might be worth mentioning, I hope it doesn't confuse the conversation, but that large client of ours becoming a lower percentage of the revenue has contributed negatively and has been a downward pressure on the margins because some of the fixed costs associated with the infrastructure that is necessary to support it and Different fees that we have to pay for email pipeline and all that have remained more or less the same while the revenue has come down. And so the margin profile excluding them actually looks even better than the numbers that we're seeing right now. And it's kind of kept a tap on it.

I got you. Well, that sounds, yeah, those targets sound great. And just on the sales closer AI front, you touched on this, Ali, but how do you expect this to be rolled out given that it is very, very new? And how do you expect customer adoption to unfold, A, within your existing user base and as you target new and onboard new clients and customers?

Very good question. So we are going after three different ways of promoting sales closer. One is marketing initiatives. So, for example, the other day there was a push on product hunt that for a lot of SaaS companies, when there's a new launch, you hear about them. There have been some viral marketing on Reddit and so forth. There's going to be advertising efforts related to that. So some of those are going to continue and, you know, influencer marketing on YouTube and so forth. But that's on the marketing side. And we're going to slowly ramp that up. The second one is through sales. And for the Salesforce one, you're being very deliberate right now to talk to a lot of different folks and see what verticals are going to give us the best chance of success immediately. And then wrap that up with more ease of mind. I think the problem with Salesforce to some extent is that we don't want to have problems of digesting the opportunities because there's many different ways that we can go about it. So a lot of our effort is nailing those verticals at work. And scaling that with our app on sales that, you know, the way we've done for the rest of our products and we're very good at that lead generation and app on sales and we can apply the same to sales. The third that we in the past have not done much of is partnerships and channels. I mentioned one example of some of the conversations, but you can imagine there could be channels that help us with penetrating into the car dealership market. There could be channels that help us penetrate into the financial advisory services, some with the SaaS and sales services. You know, we're going to go after all three of those opportunities. And we are still in the early days of this. And we want to make sure that we do this properly and ramp up on a solid footing as we move forward.

That's great, guys. Thank you. Thank you.

So I don't see any other raised hands here, so there being no further questions, we now pass the call back to Ali Tashkandar for closing remarks.

Thank you very much. Once again, I want to thank everyone for joining us on our call today. Thank you, the analysts, for great questions. And everyone, please stay safe and healthy. We look forward to providing more updates this year. Thank you. Thanks.