Q3 2022 TechTarget Inc Earnings Call
Trade it for today.
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I would now like to pass the conference over to our host Charles Rennick with Tech target.
Charles Please go ahead.
Thank you Austin and good afternoon, joining me here today are Greg slate Hotshot executive Chairman I'd like to tell you, our Chief Executive Officer, and Dan <unk>, Our Chief Financial Officer.
Before turning the call over to Greg I'd like to remind everyone on the call of our earnings release process.
As previously announced in order to provide you with an update on our business in advance of the call. We've posted our shareholder letter on the Investor Relations section of our website and furnished it on an 8-K.
Following greg's introductory remarks, the management team will be available to answer your questions.
Any statements made today by type targets that are not factual, including during the Q&A maybe considered forward looking statements. These forward looking statements, which are subject to risks and uncertainties are based on assumptions and are not guarantees of our future performance.
Actual results may differ materially from our forecast and from these forward looking statements.
Forward looking statements involve a number of risks and uncertainties, including those discussed in the risk factors section of our filings with the SEC.
These statements speak only as of the date of this call and tech target undertakes no obligation to revise or update any forward looking statements in order to reflect events that may arise. After this conference call, except as required by law.
Finally, we may also refer to certain financial measures not prepared in accordance with GAAP. A reconciliation of certain of these non-GAAP financial measures. The most comparable GAAP measures accompanies our shareholder letter with that I'll turn the call over to Greg Greg. Thank you Charles.
For Q3.
2020 to GAAP revenue grew 11% to approximately $77 4 million adjusted revenue grew 8% to approximately $77 4 million.
Net income was approximately $14 $8 million an increase of 49%.
Adjusted EBITDA grew 15% to $32 4 million net income margin was 19% adjusted EBITDA margin was 42%.
GAAP gross margin was 74% adjusted gross margin was 77%.
Longer term revenue grew 25% to $33 million, representing 43% of total revenue.
Cash flow from operations was $22 5 million and free cash flow was $18 $8 million.
Now open the call to questions.
Thank you.
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Yeah.
Yes.
Our first question is Justin Patterson from Keybanc.
Justin Your line is open.
Great. Thank you very much and good afternoon.
Perhaps two if I can first I was hoping you could elaborate a little bit more on some of the slowdown you saw during the quarter refer to lots of companies talk about.
Longer sales cycle. So just kind of curious about what your observations have been around customer behavior and then secondly, really appreciate the 2023 initial outlook could you talk a little bit about some of the assumptions that give you confidence in mid single digit growth and 40% EBITDA margins. Thank you.
Yes, Justin this is Mike in terms of what.
Terms of the Q3 slowdown typically when we discussed this in previous quarters, when we talk about Q3.
It's a back weighted quarter its biggest back weighted quarter when.
When we get after labor day.
You, usually see a really big push.
With customers' spending on their sales and marketing dollars in sales.
Enablement dollars to finish off a strong Q3 for us as well as set us up for Q4. It was a global macro uncertainty when we got out of Labor day post Labor day.
They see a lot of deals get pushed.
Budgets within.
Customers.
And our customers.
Cut or on hold and they're really doing a reset where they're going to evaluate.
What their budgets are going to be.
With the global macro uncertainty.
Behavior is not surprising I mean, we've seen this before where they will reset evaluate budgets it might take a quarter or two to go through those budgets and assessments.
<unk> typically seen as a flight back to quality.
Talk about our business without editorial content strategy opt in permission based audience first party purchase intent data and really the resiliency of the market today versus 10 years ago and wanted to look at the last real big downturn.
I think that's really guided and it's not surprising how customers react and you will see some customers shift their products.
If their product portfolio, where they may step back from brand, which Fortunately for US is only 10% of our business, but some of the larger customers may have pulled back on brand and some of the current campaigns. They may shift to more what we call further down the sales funnel type of lead to a qualified sales opportunity rich QL product so that.
What we're seeing right now.
And in terms of the 2023 initial outlook.
We're entering this global pullback right now, but what we've seen before and we believe it's still going to be real our customers still have numbers and targets to hit.
And we talked about this reset where theyre going to be looking at new investments.
You have to make sure that they are enabling their sales teams to have the right pipeline understand the right accounts understand the right prospects and buying teams within those accounts.
Historically, we believe this will be the case to see a flight to quality.
So.
At a certain point.
Our customers are going to have to reinvest reinvest quickly. We also see a snap back pretty quickly when they get to the point, we don't have enough pipeline to support the sales targets to support the company targets. So as you can see our initial guidance into 2023 as we believe this current environment will carry over to Q1.
We will see we are into the first half, but ultimately customers have numbers to hit targets and pipeline to fill.
And having that quite back to quality does play well for protect target.
That's helpful. Thank you very much.
Our next question is with Aaron Kessler from Raymond James.
Aaron Your line is open.
Great. Thank you just maybe.
The slower growth that youre seeing.
And across the board U S and international as well as by companies side. There's also can you detail.
Many product differences youre seeing it sounds like priority priority engine still seeing pretty solid growth of 15%. So the.
Slow down more on the AD side, just a little bit more color there would be helpful. Thank you.
Yeah, I mean, we're seeing a slowdown.
Again, when we reported Q3 numbers, we have reported 11% growth.
I think if you look at constant currency it would be close to that.
13% growth.
It's a call back.
I would say EMEA as we've all seen we think the economy.
And right now in North America EMEA and.
Pretty tough shape.
Daily obsession high prices is cost.
The war on Ukraine, I mean, there's a lot of challenges going over there as well as some of the political turmoil. So.
We're seeing that across the regions I would say the hardest hit regions, probably EMEA right now.
And in terms of products, yes, we saw some good growth with priority engine as I mentioned in the previous question, we are seeing some shifts in.
Product or budget allocation from the.
The brand name of the AD spend which again is 10% roughly 10% of our overall business, but customers that spend and that they will quickly Paul.
I've gone on that because that's probably the hardest product to measure ROI. They may shift some of their.
Programs demand Gen programs and re shift that budget to what.
I call. It further down the sales funnel types of products, we got qualified sales opportunities.
<unk> high quality leads and that's really what they're doing that they're trying to get.
As much.
Opportunity to close any outstanding deals that they have in their pipeline. So they're trying to drive immediate revenue because it's driving new net new logos and closing deals has taken longer for them. So that's kind of what we're seeing in the product mix, but we're keeping an eye on it what we are also seeing that the customers will need.
You need really good content to make sure that they're getting their message out there, but we're navigating this right now based on what we say those are some of the shifts and we're seeing the impact.
The slowdown in EMEA as well as in North America.
Great and then.
Any changes to your kind of expense growth plans for 'twenty three it sounds like your name may take them a bit more careful approach for any plans or change in hiring plans et cetera.
Yeah.
Throughout our 23 year history.
Part of our DNA is to invest wisely and smartly and we'll make sure that we continue to invest in the right areas on the right priorities that will.
Hum grow and support our long term short and long term priorities around the company, but we do keep a close eye on expenses as.
As you'll see we will finish the year at 40% EBITDA margin, we're projecting 2023 years at 40% EBITA margin. So we will manage the expenses in accordance with our revenue projections and we have a good track record of doing that as well.
On free cash flow.
We will continue to execute on what we've done in the past and it's really paid dividends for us.
Great. Thank you.
Yep.
Our next question is with Bob <unk> Shah from Deutsche Bank.
Robin Your line is open.
Great. Thanks for taking my question, just kind of focusing back on the guide for <unk> and I guess 23 could you just maybe elaborate a little bit more I know you talked about it a bit but just in terms of.
Some of the underlying assumptions in terms of the macro are you expecting the macro getting worse and budgets to get worse or kind of what's embedded as we think about the guide and be thinking about that deceleration.
And the revenue growth in <unk> in the first half of the year.
Yes, Robert I mean, when we looked at as we looked at our customer behavior and based on the.
The real time global macro uncertainty this behavior is not surprising to us.
Kind of predictable so when we got into September when we saw the pull back and you saw the global market has really dropped.
Yes.
Back and say, Okay. How does our business performed over the last couple of years, all the way into the summer of 2022.
Bookings growth penetration across the different regions is going really well when this happens and this happens quickly.
First really saw this was coming back from Labor day, where deals were delayed in deals proportionate budget. Some budgets were cut not for all customers, but we saw it across small large and mid sized customers.
What typically happens is they do a reset.
They get direction from their management that things are on hold.
You're reducing your budget you are cutting your budget you are putting things on pause they.
They take a look and they start reassessing, what I would call the must have quality investments versus the nice to have.
During a high tide rises all boats right. So a lot of companies went out and made extra expenditures investments in different areas.
I'm, not saying that they've been scrutinized why but they were a little bit more free in terms of industrial and that will now theyre going to reach that youre going to take a look at every single one of your investments how long the uptake I really can't tell you what I've seen in the past that could take a couple of quarters to really get that reset.
Identify the best solutions data and partners that can help them accelerate and meet those numbers, if theyre going to have to hit.
So in the next quarter or two we see them really trying to scrutinize reset and then drive back to that flight flight to quality and I think it will end up in the long term probably been good for our customers and good for us as well in terms of the flight to quality and necessity must have ROI driven solutions.
That's helpful. There and then I guess during the quarter and for Labor day like have you seen any impact from any of your larger customers and having a more pronounced impact on your business, whether it's on the brand side or anything else like within one or two specific customers that that materially pick back up there.
Yeah.
Terms of the brand we definitely saw the brand business pulled back again, that's the fastest thing that customers can can pull back on and cancel it because it's also the hardest product to measure now if you look back at our business 10 years 15 years ago. It was probably closer to 30% of our business right now, it's approximately 10% of our business.
Maybe even a little less than 10%, so yeah, it impacts us, but it doesn't impact us like.
Now somebody that's 100% AD advertising Mark add marketing business.
It's not one customer that said, okay, where we don't have a 10% customer.
So it wasn't where somebody just pull back and canceled you'll see and I think you are seeing this as well across the market where customers whether they are small and middle life is just really manage and scrutinizing every expenses they are going to look to invest.
Invest in and it's going to take a little bit of time to assess that but again as they go back to when we've seen this back in the last financial year.
You know pull back customers still have numbers and targets to hit and they have a pipeline of fees. They have sales reps to make sure that they are supporting and there is always a flight back the quality in terms of data.
And insights for both sales and marketing organizations.
That's helpful and just one last quick one and then they see that 40% EBITDA target for next year. Despite the uncertain macro but how committed are you targeting I mean, if the macro gets worse revenue kind of continues to be impacted where you've completed a kind of a craft room for kind of hit that target or given some of the longer term opportunities.
You have to kind of rebalance some of that.
We'll take a look at it the good thing about it is we have a 23 year DNA.
Investing wisely not over you know spending in areas that are not going to impact the business and I think having that DNA.
And that type of discipline has paid well for us we made a lot of really key investments in 2022, we doubled the product.
Software and development teams to help us with that priority engine enhancements and features and roadmap and we're glad we did that we don't want to pull back on that and there are some other investments that we're making towards our content enablement services that we know that our customers are going to need really good content to engage with a self service buying team that we want to keep going so that way.
We manage our expenses over 23 years, we'll keep an eye on it if theres something that provides an opportunity to.
Accelerate growth and we have to.
A percent here or there, we'll look at that but we have done a really good job. We are well disciplined in cost management and it's also we're very well disciplined investing in the right business areas and we're going to continue to execute on that path discipline.
Super helpful. Thanks for taking my question.
Our next question is Jason <unk> from Craig Hallum.
Jason Your line is open.
Hey, Kyle here on for Jason you kind of talked about a little bit earlier.
Customer behaviors, but I was just wondering if you could kind of talk about the business metrics around that.
Contract duration sales cycles churn and if youre seeing the macro have any impact on these kpis.
Yeah, I mean, what we're seeing on our.
What I can share is that we've seen.
Some of the deals that we have forecasted and as you saw in our you know.
Shareholder letter.
This is the first time since Q3 of 2010 46 quarters over 12 years.
Target is missed both the quarterly revenue and adjusted EBITDA number so what we're seeing is a delay.
In terms of budget customers are telling us that their budgets are frozen. So if we had something in the forecast that we committed at 70%.
We have a really good track record of knowing when that is going to come in when that's going to land and when that's going to run and recognize and so some of those deals have been delayed and we've seen customers just pull back on budget, where they want to reset and make sure they're assessing the right quality investments and again I can't repeat it enough flight back to quality.
It will eventually happen and that's what we're seeing to customer behavior. We've also as I've mentioned have seen some customers ship their product strategy in terms of what they are investing with tech target from yeah. Some of that brand or demand Gen campaign focused to more bottom of the funnel lower end of the funnel qualified.
Those opportunities in HQ wells to help their sales teams and the lowest hanging fruit that they can get right now to support their current numbers because they've gone through the same thing and I'm sure you've seen that on some of your other calls, but that's the guidance I can give you and that's what we're seeing and we're keeping a close eye on it.
Perfect. Thanks, and then just last one here for me as you went through Covid.
So I would more tech target products or prospects for shorter duration of engagements as opposed to some of them are priority engine deal just wondering if youre seeing any of that here in the early stages of this recession.
I think we're seeing some of that where people are.
Some of our customers.
I'm not going to they're going to delay, making long term commitments 123 year commitment.
There are some signs of that sort of keeping an eye on that but I think that that's a safe assumption over the next quarter or so as people navigate through this.
That you might see similar patterns and behaviors are at the beginning of 2020.
Okay.
Our next question is from Joshua Reilly from Needham.
Joshua Your line is open.
Alright, Thanks, guys for taking my questions here.
I wanted to hit on the the.
The customer be difference I think this is an interesting point to highlight with investors.
Four five years ago.
We all know you had a very different customer base back then are you surprised at some of these more software oriented customers are pulling back maybe a bit more than we would've expected given their secular growth versus the legacy guys, who had a little bit more cyclical growth.
Yeah Josh.
It's a good point.
Five years ago, where you didn't have as many cloudy had a lot of on Prem hardware.
Customers, where and when they pulled back they pulled out for a while and we had a bigger percentage of our customer segmentation allocated to those folks.
I would say that you know well.
The last few years, we've also gone from.
When you look at the last 10 years.
<unk> 1000 customers of over 3000 customers.
Different product suites, we have different entry points, we have different capabilities, which has really evolved in our business and also have a 42% of amount of revenue under long term contracts all very favorable but when you also get hit with a global macro uncertainty you will see a lot of these customers.
At least pull back they won't necessarily cancel and be gone, but they will pull back and you're seeing in the market cost cutting and reductions there.
They're doing across you know small VC backed firms midsize girlfriends, even some of the largest stalwarts that you see out in the market are all doing that and it happened. So fast that if you looked at some of this data from the middle of September till today.
We had a bigger percentage of our customer segmentation allocated to those folks.
It's really these folks trying to SaaS reset and re prioritize and making sure that their focus on ROI. So yeah. They are more insulated.
So I would say that you know.
Over the last few years, we've also gone from.
If you look in the last 10 years, you know almost 1000 customers.
3000 customers.
What happened.
We have different product suites, we have different entry points, we have different capabilities, which has really evolved in our business and I also haven't and 42% of my revenue under long term contracts all very favorable but when you also get hit with a global macro uncertainty you will see a lot of these customers.
Versus five years ago, but they're not immune to it so there will be some pullback.
Okay got it that's helpful. And then if you look at the 15% growth in priority engine, how much of that you know you had been trending pretty consistently at 20% for a long time, how much of the D salaries due to weakness in the SMB express product versus.
At least pull back they won't necessarily cancel and be gone, but they will pull back and you're seeing in the market cost cutting and reductions that they're doing across.
You know more general demand there.
I think you'll see it across more of the general demand as people are looking to whether they renew in and saying I want to hold off and see how this goes for another couple of weeks a couple of quarters or months.
Small VC backed firms mid size growth brands, even some of the largest stalwarts that you see out in the market around doing that and it happened. So fast that if you looked at some of this data from the middle of September until today.
I think it's across you see it a little bit across the board. We've also seen some of our priority engine customers.
Kris there theyre span their investment their commitment, but I think it's not just in one ear right now because of this sudden pullback in the you know.
I think it's really these folks trying to SaaS reset and re prioritize and making sure that they're focused on I O. I. So you have your more insulated from what happened.
In the global macro environment that you're seeing across different customer segments say.
Versus five years ago, but they're not immune to it so there will be some pullback.
Starbucks SaaS, let's make sure that we have the right investments and again what plays well for US is that we've always seen a flight back to quality. When you have first party intent data watch Google eliminate announced the elimination of third party cookies get a permission based audience you really got a strong content investment.
Okay got it that's helpful. And then if you look at the 15% growth in priority engine, how much of that you know you had been trending pretty consistently at 20% for a long time, how much of the detail and due to weakness in the SMB Express product versus just more general demand.
My prediction on this as it plays well as we navigate through this and come out picking up market share on the back end.
Sure.
Got it and then maybe I'll just sneak one more in here you know you you mentioned in the letter that E investing here in the downturn, which makes it kind of sense, how do how should we think about your appetite for M&A here versus buybacks given.
I think you'll see it across more of the general demand as people are working to whether they are renewing and saying I want to hold off and see how this goes for another couple of weeks a couple of quarters or months.
Stock is obviously down in the valuations come down and do you have to have a pretty high threshold in terms of growth and returns from an acquisition.
It's across you see it a little bit across the board. We've also seen some of our priority engine customers.
Greece, there their span their investment their commitment, but I think it's not just in one ear right now because of this sudden pullback in the and the global macro environment that you seem to across different customer segments to say, let's start with the SaaS, let's make sure that we have the right investments and again what plays well for us.
To make an acquisition versus buying back stock here.
Yeah, that's a good question.
Manage and be opportunistic we announced a 200 million dollar buyback, but we're also very involved you know looking for the we've talked about this in the past and we think theres going to be some really good opportunities based on the recent valuation resets with companies around content.
We've always seen a flight back to quality. When you have first party intent data watch Google eliminate announcing the elimination of third party cookies get a permission based audience you really got a strong content investment.
And Tan.
<unk> audience.
Peripheral opportunity.
<unk> capabilities as well as adjacent markets and so we are going to be opportunistic on that and when we see the right organization that can help them help tech target at the right valuation.
My prediction on this as it plays well.
Navigate through this and come out picking up market share on the backend.
Got it and then maybe I'll just sneak one more in here you know you you mentioned in the letter to eat investing here in the downturn, which makes a ton of sense, how do how should we think about your appetite for M&A here versus buybacks given the stock is obviously down in the valuations come down and do you have to have a pretty high threshold in terms of growth and returns from an acquisition.
That's our playbook along with the buybacks, yes. So I mean, we're fortunate we're in a position we can do both so we've got $384 million in cash, we think will generate $100 million of cash flow next year. So.
So we think that we're gonna be able to.
To make an acquisition versus buying back stock here.
Do both in terms of.
Be aggressive with buybacks and.
That's a good question I think so.
We're going to manage and be opportunistic we announced a 200 million dollar buyback.
Also take it obviously taking advantage of any.
We're also very involved.
Downward valuations in our share price, but also downward valuation and acquisition targets.
Looking for the we've talked about this in the past and we think theres going to be some really good opportunities based on the recent valuation resets with companies around content.
And again like I said, we have a good history on this.
Taking advantage of downtime to produce in terms of reinvesting and take market share buying back shares at good prices, we have a good history of that.
10.
The audience.
Our referral opportunity.
Capabilities as well as adjacent markets and so we are going to be opportunistic on that and when we see the right organization that can help them help tech target at the right valuation.
And making smart acquisitions at good prices.
That's that's the silver lining of these of these global pullbacks It gives.
Strong companies the opportunity to.
Yeah.
That's our playbook along with the buybacks, yes. So I mean, we're fortunate we're in a position we can do both so we've got $384 million in cash, we think will generate $100 million of cash flow next year. So.
To really strengthen themselves.
We look forward to taking advantage of that.
Alright, Thanks, guys. Good luck.
Our next question is with Bryan Bergin from Cowen.
So we think that we're going to be able to.
Do both in terms of.
Brian Your line is open.
Be aggressive with buybacks and.
Hey, this is derrick.
Brian I just wanted to touch on priority engine and I was hoping for an update on the overall progress the sales use case for Jpmorgan.
Also take it obviously taken advantage of any.
Downward valuations in our share price, but also downward valuation and acquisition targets.
Now that we're lapping a year one anniversary maybe going into <unk>.
And again like I said, we have a good history on this.
Performance has been versus your expectation, where they've been positive surprises and maybe where things might be a little bit off of the year.
Taking advantage of downtime previously in terms of reinvesting and take market share buying back shares at good prices, we have a good history of that.
Yeah right in terms of the sales use case, yes, we launched that yeah, that's coming up in one year.
And making smart acquisitions at good prices so.
We've seen really good success on that as you know historically, we've sold priority engine to marketers and modules with leverage that for their nurture email strategy.
That's that's the silver lining of these of these.
Global Pullbacks Gibbs.
Strong companies the opportunity.
To really strengthen themselves.
So at the beginning of 2022, we launched a.
We look forward to taking advantage of that.
Our sales used case modular from priority engine, we've seen really good adoption on the sales side.
Alright, Thanks, guys. Good luck.
Our next question is with Bryan Bergin from Cowen.
We've seen.
Great usage trends on that reps.
Brian Your line is open.
Reps using it for various different ways, whether it's around customer retention.
Hey, this is Derek on for Brian I, just wanted to touch on priority engine and hoping for an update on the overall progress on the sales use case for Jpmorgan.
Making sure it's net new logos territory management, and we're going to continue to build upon that what I'd like to also let you know.
Now that we're lapping a year, one anniversary and maybe going into <unk>.
I mentioned earlier and we also brought up in the shareholder letter.
We put a lot of investments in 2022, and a lot of in the back half mid year into the back half from round Dar developers software team working on priority engine in one of the key.
Performance has been versus your expectations, where they've been positive surprises and maybe where things might be a little bit across the year.
Yes in terms of the sales use case, yes, we watched that yeah, that's coming up in one year we.
The key areas that we're really focused on is the integrations of our data through priority engine into our customer sales force now we have that today, but we want to expand on that make it easier enable our customers to leverage our information in their workflow, but also in a bidirectional manner protect target to be able to have access to certain.
We've seen really good success on that as you know historically, we've sold priority engine to marketers and modules with leverage that for their nurture email strategy.
So at the beginning of 2022, we launched a.
Our sales used case modular from priority engine, we've seen really good adoption on the sales side.
Key data points within your sales force to help.
Drive Ottawa and analytics dashboards and updates such as open pipeline close one wausau opportunities wherever these deals in the pipeline how do we set up our sales reps without within our customers.
We've seen.
Great usage trends on that reps.
Reps using it for various different ways, whether it's around customer retention.
Making sure it's net new logos territory management, and we're going to continue to build upon that what I'd like to also.
Diamond to make the most appropriate and relevant follow up.
I mentioned earlier and we also brought up in the shareholder letter.
We also want to make sure that we are working with our customers to.
We put a lot of investments in 2022, and a lot of in the back half mid year into the back half from round to develop our software team working on priority engine and one of the key.
To provide more insights across their total campaign with that target both on the sales side and on the marketing side, So what theyre doing with their lead generation and demand gen. Their content their branding the visitors on their website to really bring that end to end view into priority engine to help you and help modernize which we've been talking.
Some of the key areas that we're really focused on is the integrations of our data through priority engine into our customer sales force now we have that today, but we want to expand on that make it easier enable our customers to leverage our information in their workflow, but also in a bidirectional manner.
A couple of years, both sales and marketing so there's a lot that we're doing on the platform. We like where we are with the sales use case, we're going to continue to expand on that but we're also not forgetting the market is as well.
Protect target to be able to have access to certain key data points within their sales force to help.
Drive Rois and analytics dashboards and updates such as open pipeline close one wausau opportunities wherever these deals in the pipeline how do we set up our sales reps without within our customers'.
Great. Thank you and if I could just add one more here I know you've talked a lot about kind of clients pushing back their budgets and revaluations I was just wondering if you could kind of go into if youre seeing any pushback from clients on pricing, maybe what levers you guys might have.
Environment to make the most appropriate and relevant follow up.
Due to more cost conscious consumer.
Yes.
We also want to make sure that we are working with our customers.
<unk>.
We don't see a lot of pushback in terms on a pricing I mean once in a while we do I think our customers understand that whether the highest priced in the highest value based on how we get our data at both the account and at the individual prospect level. So I think they see that there are low cost.
Provide more insights across their total campaign with tech target both on the sales side and on the marketing side, So what theyre doing with their lead generation and demand gen. Their content their branding the visitors on their website to really bring that end to end view into priority engine to help you and help modernize which we've been talking about.
Deiters, where sometimes we will you know if a customer comes back and says I want you to drop your CPL to ask.
A couple of years, both sales and marketing so there's a lot that we're doing on the platform. We like where we are with the sales use case, we're going to continue to expand on that but we're also not forgetting the market is as well.
If we.
If they're not embracing the carrying value of our options, we might not take that deal and walk away from it.
And I think that's a strategy that we've.
Great. Thank you and if I could just add one more here I know you've talked a lot about kind of clients pushing back their budgets and revaluations I was just wondering if you could kind of go into if you're seeing any pushback from clients on pricing, maybe what levers you guys might have to kind of navigate a more cautious consumer.
We've been very.
No.
We've been consistent with.
And we're going to continue to do that and you know as like I said when people and customers navigate through this they reset.
They need a flight to quality and that means having the most accurate precision quickest and transparent path to get to their prospects to get to the right account as well as to engage with their existing customers because there's a big customer retention focus and having access to <unk>.
Yes.
We don't see a lot of pushback in terms on a pricing I mean once in a while we do I think our customers understand that whether the <unk>.
Highest priced in the highest value based on how we get our data at both the account and at the individual prospect level. So I think they see that there are low cost providers, where sometimes we will you know.
Data and our capability set through content campaign activation insight intent.
Hospital comes back and says I want you to drop your CPL to ask.
Cause you know.
Content to close capabilities enables our customers to have that so we really want to comment to the pricing pressures.
Yes, we do.
If they're not embracing the current value of our offer.
We might not take that deal and walk away from it.
That's great. Thank you.
And I think that's a strategy that we've.
We've been very.
Our next question is from Max Michael Lewis from Lake Street Capital.
They don't.
We've been consistent with.
And we're going to continue to do that and you know as.
Max Your line is open.
Like I said when people and customers navigate through this they reset.
Hey, guys just one from me just.
Just given the guide in Q4 and the outlook into 2023, what are your expectations for gross margin as well as where you guys should we plan on making any.
They need a flight back to quality and that means having the most accurate precision quickest and transparent path to get to their prospects to get to the right account as well as to engage with their existing customers because there's a big customer retention focus and have an access swipe.
Wage inflation in the operating expenses for next year as well. Thank you.
Yeah, I think that our gross margin will be relatively consistent with what they are today and we've got it's a 40% ROI projects, a 40% EBITDA margin so.
Data and our capability set through content campaign activation insight intent.
Good.
Picked out on the model.
I don't think there's going to be a lot of change that.
Thanks.
Ive called you know content to close capabilities enables our customers to have that so we really want to comment to the pricing pressures.
And then on my last part of my question, though just like Opex with wage inflation should we plan on making any any of that into 2023 as well.
I will take that much into it I mean, there's.
That's great. Thank you.
I think you're seeing some of the markets turn right now and you see a lot of our companies.
Our next question is from Max Michael Lewis from Lake Street Capital.
Companies out there really trying to manage.
Expenses, all across the board, including headcount employees in waves, so I wouldn't I wouldn't take.
Your line is open.
Hey, guys just one from me just given the guide in Q4 and the outlook into 2023, what are your expectations for gross margin as well as where you guys should we plan on taking any.
Much of a change.
Okay.
Okay.
Yeah.
Our next question is with Greg Burns from Sidoti and co.
Wage inflation into operating expenses for next year as well. Thank you.
Greg Your line is open.
Yeah, I think that our gross margin will be relatively consistent with what they are today and we've got it's a 40% you aren't really projected 40% EBITA margin. So.
Hi, I'm looking at your guidance revenue guidance for 23 does that assume growth in priority engine.
You know what.
We don't break it down by.
Picked out on the model.
I don't think there's going to be a lot of change that.
Product, but.
Hum.
<unk>.
Thanks.
We gave us a preliminary Ah we feel this will run quarter to quarter throughout the year.
And then on my last part of my question, though just like Opex with wage inflation should we plan on making any any of that into 2023 as well.
Well the mid.
Does it grow, but we don't break it out by product.
I really wouldn't take that much into it I mean, there's.
Okay and then.
I think youre seeing some of the markets turn right now.
Of your 3200 customers that you called out what what percentage of those are currently deploying the sales use case.
See a lot of our companies.
Companies out there really trying to manage.
Expenses, all across the board, including headcount employees in waves, so I wouldn't I wouldn't take.
Hum.
We don't break that out I mean, it's very small as it is.
Much of a change.
Okay.
It's still one year within their first year.
Okay.
Yeah.
Growing nicely, but it's still off a small base.
Our next question is with Greg Burns from Sidoti and co.
Okay. Thank you.
Greg Your line is open.
[laughter].
I am looking at your guidance revenue guidance for 23 does that assume growth in priority engine.
That concludes our Q&A. Thank you for your participation you may now disconnect your lines.
We don't break it down by.
A problem but.
You know it's.
We gave us a preliminary Ah we feel this will run quarter to quarter throughout the year and you know well.
Well.
Does it grow, but we don't break it out by product.
Okay and then.
Of your 3200 customers that you called out what percentage of those are currently deploying the sales use case.
Hmm.
We don't break that out I mean, it's very small.
It's still one year within their first year.
Growing nicely, but it's still off a small base.
Okay. Thank you.
Yeah.
That concludes our Q&A. Thank you for your participation you may now disconnect your lines.
Okay.
Okay.
Yeah.