Q3 2022 ON24 Inc Earnings Call
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Good day and welcome to today's on 24 incorporate third quarter earnings Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Ms. Laurie.
Please go ahead ma'am.
Okay.
Okay.
Thank you Hello, and good afternoon, everyone welcome to <unk> third quarter 2022 earnings Conference call.
On the call with me today are sure Alterra on co founder and CEO of on 24 and see that Xiaomi.
Chief Financial Officer of 24.
Before we begin I would like to remind everyone that some information provided during this call will include forward looking statements regarding future events and financial performance, including guidance for the fourth quarter and full fiscal year 2022.
These forward looking statements are subject to known and unknown risks and uncertainties on 24 cautions that these statements are not guarantees of future performance. All forward looking statements made today reflect our current expectations only and we undertake no obligation to update any statements to reflect the events that occur.
After this call.
Please refer to the company's periodic SEC filings and in today's financial press release for factors that could cause our actual results to differ materially from any forward looking statements.
We'd also like to point out that on today's call. We will report both GAAP and non-GAAP results.
We use these non-GAAP financial measures to evaluate our ongoing operation and for internal planning and forecasting purposes.
non-GAAP financial measures are presented in addition to and not as a substitute for financial measures calculated in accordance with GAAP.
To see the reconciliation of these non-GAAP financial measures. Please refer to today's financial press release I.
I will now turn the call over to Sharon.
Thank you and welcome everyone to <unk> 20 fours third quarter 2022 financial results Conference call. We appreciate you joining us.
On today's call I will review, our Q3 results.
Introduce two new members will be on 24 executive team and discuss our focus on returning to topline growth with line of sight to breakeven profitability by Q4 2023.
First for those of you who are new to the 124 hour electric quickly sure who we are and how our platform is fueling revenue growth for industry, leading VW organizations.
134, as a digital engagement platform that enables VW organizations, who use our platform of six products.
<unk> like all resolved and personalized experiences that work together to drive deep engagement generated first party data and provide a unified set of customer insights that integrated business systems, So that sales and marketing organization and take the right actions to deliver pipeline.
And revenue growth.
Our customer base consists of thousands of the world's largest and most recognized organizations.
<unk> is uniquely positioned to serve as a one stop shop for visual engagement.
Following global market use cases expand demand generation walkman enablement customer and product marketing.
Care Communications member enrollment and life certification.
By consolidating onto our platform our customer is going to drive more growth at a lower cost streamline operations and gain actionable intelligence with an integrated set of customer insights. We have a very large tam and expect to see long term tailwind as sales and marketing continues.
To accelerate the move to digital channels.
Now turning to Q3 results.
For the third quarter, we reported total revenue of $47 6 million.
Subscription or other platform revenue was $43 3 million and professional services revenue was $4 3 million.
We posted a non-GAAP operating loss of $3 6 million meaningfully better than our guidance of $8 million to.
Two 7 million.
As we drove efficiencies and cost containment across the organization.
Engagement can be on the platform was at record levels with audiences are spending more time and having more interaction within our experiences demonstrating the value of our customers continue to derive from our platform.
Ending ALR was $165 $6 million.
Representing a sequential net ALR degrees of $2 2 million or $1 $7 million when excluding the impact of foreign currency.
While our performance has been adversely impacted by a virtual conference Brock.
This product is a managed service solution for the specific use case of multi day large scale high production digital conferences with the return of large scale imports and events. We are seeing less demand for our virtual conference product and an experience that churn rate for this product that is more than two times greater.
Then our core products over the past several quarters.
This has created an approximate total three.
Headwinds to our IRR and revenue growth in 2022.
We expect virtual conference to represent mid single digits as a percentage of our IRR at the end of this year and in that sense.
It is not expected to be a core part of our business in 2023.
When excluding the virtual conference product and impact of foreign currency, our IRR was essentially flat quarter over quarter.
The core platform you are excluding the virtual conference product has been stable and it grew low single digits year over year in spite of post COVID-19 normalization and garner macro headwinds.
The macro trends facing many companies, resulting in banker customer budgets and greater deals globally with does become more challenging in the third quarter, particularly in Europe .
Offsetting these headwinds we continue to see strong expansions from some of our customers in Q3, which I'll go into more detail shortly.
As we focus on a path to return to top line growth and improving execution, we have deepened our bench and added two senior leaders will be on 2014.
Jason Our gasket has joined as chief customer success officer, and gathering young as Chief marketing Officer.
Jason strategic priorities, including maximizing retention driving adoption of our platform and re imagining our customer experience.
Calendar focused on evolving our platform positioning.
Bolstering our demand generation function and honing our go to market strategy within key verticals.
Now, let me discuss our plan to drive top line growth by improving gross redemption.
<unk> net retention with customer expansion and accelerating new business acquisition.
First we are seeing a renewed cohort stabilize and expect gross retention for our platform will improve in 2023.
With new customer success leadership now in place we are intently focused on supporting customer adoption to better Onboarding and end product education.
We're also driving proactive initiatives to impact customer health with a key focus on increasing the number of our customers who have integrations with CRM and marketing automation systems.
One lever or higher retention.
As I mentioned earlier, we have a customer base comprising of some of the world's largest enterprises spanning several verticals are.
Our expansion motion is primarily driven by expanding the use of our new and existing products and cross selling into new departments.
Our product portfolio and industry expertise uniquely positions us to provide our customers with a single platform to power enterprise wide digital engagement initiatives and mission critical sales and marketing use cases.
Once our customers start using our platform and have the first party data generated from 144 integrated with their tech stack, it's easier to adopt more horror experience products and have their first party engagement data unified and generated from one platform.
As the macro environment evolves with organizations looking to drive efficiency and consolidate it was strategic vendor, we expect the attach rate of our newest products.
To accelerate which will improve our net retention rate and growth within our installed base.
What percent of those customers with two or more products in Q3, 2022 was close to the highest ever.
Let me provide a few of the Q3 expansions that further demonstrate how we are winning with our one platform strategy and multi product portfolio.
First one of the top American investment adviser firms has been a long time on 24 customer this.
This customer's product marketing team was already using <unk> to build part of leadership and awareness, but wanted to engage smaller audiences with more targeted experiences and replace in person events that were costly and impossible to scale.
In Q3, this customer added onto the forums and target.
Now they can provide the high value clients direct access to subject matter experts, who live virtual office hours and clients can deepen their education with personalized content experiences.
Over the past four years, we've expanded our business with discussed by approximately by X.
Next we are seeing traction within the health care provider vertical with a six figure expansion as one of the largest not for profit health care insurers.
We expanded into the Medicaid division, where they needed to transform their member retention and enrollment strategy to be physical force.
With the power of Entre for relief and engage with our platform provides an accessible efficient way to reach and educate the senior members and highly interactive and data driven way.
This customer has now expanded by more than six times since the initial purchase back in 2017.
Turning to our new business efforts.
We are most focused on enterprise and upper mid market companies in the key verticals of technology financial services Life Sciences, and healthcare manufacturing professional services and information services.
The macro environment backdrop is more challenging for new business with greater budget scrutiny.
Despite these challenges we landed some impressive new logos in the third quarter.
One example is a six figure win at a multinational medical device manufacturer.
As part of a larger digital first go to market initiative. The company knew that they needed a third pillar in their tech stack to complement their content management and CRM systems borrower, All Forest party busily engagement and improve the customer experience.
This led them to replace multiple collaboration tools and learning management borne solutions and consolidate onto our platform adopting 144 leap forums and engagement.
Another notable six figure wins this quarter came from our leading Asia based healthcare distribution company, where we beat out a competitor driven by our comprehensive and deeply integrated digital engagement platform.
As this company expand across Asia, we selected <unk> because of our ability to support multiple countries on one platform and provide continuous scale as they enter new markets.
With the rapid expansion plans it was critical for them to streamline the operational infrastructure between <unk> 2004 and their CRM.
Using the ongoing book platform. They can set up the initial integration runs.
Keep adding more and more teams and easily have older engagement data flowing from one place for a single view of the health care professional clients.
Moving on to our product innovation and platform strategy.
Customers need for a platform to support enterprise wide digital engagement continues to drive.
Our product roadmap today.
This past year, we have built out a fully integrated platform of six self service experience products.
On political webcast elite 144 breakout one political forums, one for employee engagement up 144 target and on 24 go lives.
All of these products are powered by our robust set of analytics.
And AI driven content recommendation engine.
And they all use a single integration to connected third party sales and marketing systems.
We are continuing to strengthen our single platform data advantage to adding more integrations to our ecosystem and further developing our AI driven content recommendation engine.
This enabled our customers to dynamically personalize the <unk> for experiences at scale building, a more intelligent and higher performing digital journey for their audience.
We expect to add additional experience products that broaden our platform and address new sales and marketing use cases, this will enable our customers to drive even more engagement generate more horse bharti data and deliver more revenue growth all through one flat.
While we continue to make targeted investments, we are tightening our focus and driving efficiencies, particularly within sales and marketing functions, where we are making additional cost reductions in Q4, and optimizing resource allocation across the organization.
We are committed to improving our operating margin performance as demonstrated in our Q3 results with the bottom line well ahead of our previous guidance.
The range of top line scenarios, we believe that we have line of sight to reach breakeven profitability by Q4 'twenty 'twenty three.
Steve will give you a few more details when he discusses guidance and we'll share more on our Q4 earnings call.
In conclusion, I'd like to summarize a few key points.
First we are one of the leading <unk> digital engagement platforms for sales and marketing.
That cost effectively powers mission critical sales pipeline generation and marketing use cases across the enterprise.
This is increasingly important in the current macro environment as companies look to drive cost effective pipeline and revenue growth and maximize the efficiency of their spend.
Second while the economic outlook remains uncertain.
Early innings of a very large market opportunity and positioning ourselves for long term industry leadership and success.
Third our focus is on driving core platform growth and we have line of sight to deliver breakeven profitability by Q4 of 2023.
We continue to improve our execution and have strengthened our executive bench with two new leaders and finally, we have a strong balance sheet with over $341 million in cash and investments, which enabled us to invest in our core platform and drive customer penetration and market share.
We are focused on capturing more of our Tam by adding more products and use cases to our platform, while driving efficient and durable growth.
Now I'll turn it over to Steve.
Thank you, Sean and good afternoon, everyone.
Wanted to start with our third quarter 2022 results and will then discuss our outlook for the fourth quarter and full year of 2022.
Total revenue for the third quarter was $47 6 million.
Presenting a decrease of 4% year over year.
Subscription and other platform revenue was $43 3 million.
<unk> to 1% year over year.
This concludes all branches, which were approximately 1% of total revenue to Q3 of this year.
Hard to over 2% of total revenue in Q3 of the prior year.
Professional services revenue was $4 3 million, a decrease of 25% year over year.
Presenting approximately 9% of total revenue compared to 12% in the year ago period, we are facing headwinds with professional services as more customers electricity self service in the current macro economic backdrop.
Moving on to <unk>.
<unk> represents the annualized value of all subscription contracts at the end of the period and excludes professional services and Overages.
<unk> was $165 6 million, a decrease of 1% year over year.
Sequential decrease of $2 2 million from Q2.
Excluding the impact of foreign currency fluctuation in Q3.
That's a decrease of $1 7 million from tissue.
As Rob mentioned, we are seeing less demand than expected for our virtual conference product.
We are experiencing a higher churn rate than our core products.
The virtual conference product contributed mid single digit percentage in 2019.
Contribution increased to approximately 10%.
At the end of 2020.
Okay.
By the end of 2022, we expect virtual conference to be in the mid single digit percentage of BR.
With a low overall contribution we expect headwinds from this product to lessen in 2023.
The virtual conference product resulted in a $1 8 billion reduction.
In Q3.
For the full year and has acted as a two to three point headwind to our revenue growth.
The impact of foreign currency and virtual conference product.
<unk> would have been essentially flat from Q2 to Q3.
Would have grown low single digits year over year.
Turning to customer metrics.
Customers contributing more than $100000 totaled 351.
349 in Q2, and our average <unk> per customer was close to the highest ever.
<unk> contribution from the 100, K plus customer cohort continues to represent approximately two thirds of our total IRR, which is consistent with the prior quarter.
Our customer count was 2053 customers compared to 2054 in Q3 last year.
We experienced a sequential decline compared to Q2.
Slower new business environment.
Before turning to expense items and profitability I would.
I'd like to point out that I will be discussing non-GAAP results going forward.
Our non-GAAP results exclude stock based compensation restructuring charges as well as certain other items.
<unk> financial results, along with a reconciliation between GAAP and non-GAAP results can be found within our earnings release.
Gross profit in the quarter was $35 7 million, representing a gross margin of 75%, which is a two point decrease year over year.
Over the past year, we have been investing in our public cloud infrastructure capabilities and have grown our customer success teams to drive improved retention and customer experience.
Now turning to operating expenses.
Sales and marketing expense in Q3 was $22 4 million compared to $24 2 million in Q3 last year.
This represents 47% of total revenue compared with <unk>, 49% in the same period last year and 52% in the prior quarter largely due to the cost saving measures implemented in Q3.
R&D expense in Q3 was $9 1 million compared to $7 9 million in Q3 last year.
This represents 19% of total revenue compared to 16% in the same period last year and 18% from last quarter.
We increased our R&D spend this past year as we have brought new products to the market and expanded our platform.
This is consistent with past guidance for relatively moderate increases in R&D spending throughout the remainder of the year.
G&A expense in Q3 was $7 9 million compared to $7 3 million in Q3 last year. This represents 17% of total revenue.
15% in the same period last year.
17% of revenue last quarter.
Our G&A expenses have increased this past year due to the costs associated with being a publicly traded company.
We've taken actions as part of our broader cost containment measures to moderate our G&A costs.
Operating loss for Q3 was $3 6 million negative, 8% operating margin compared to an operating loss of $1 4 million and a net.
3% operating margin in the same period last year.
It was a meaningful improvement from Q2, and well ahead of our Q3 guidance as we move to improve our cost structure.
Net loss for Q3 was $3 3 million.
For share based on approximately $47 6 million basic and diluted shares outstanding.
Paris to a net loss of $1 6 million or <unk> <unk> per diluted share in Q3 last year, using approximately $47 1 million basic and diluted shares outstanding.
Turning to the balance sheet and cash flow.
We ended the quarter with 341 million.
Dollars in cash cash equivalents and marketable securities our strong balance sheet affords us the ability to navigate current market, while providing us the ability to repurchase shares under the current authorization and we expect to be active in the market this quarter.
Additionally, it gives us the flexibility to pursue the most attractive organic and inorganic investments that we believe will maximize shareholder value.
Turning to our use of cash in the quarter cash used in operations in Q3 was $3 5 million compared to cash used in operations on the zero point $9 million in Q3 last year free.
Free cash flow was negative $4 2 million in Q3 compared to negative $1 6 million in Q3 last year.
Free cash flow margin.
Negative, 9% in Q3 compared to negative 3% in Q3 last year.
Now turning to guidance.
As Rob mentioned, we are optimistic about our long term growth opportunity.
However, we are operating in a period of macro uncertainty and greater budget scrutiny from customers.
We continue to see increased headwinds from services as more of our customers a lot to be self service and reduce the use of professional services.
On the platform side as discussed we are seeing headwinds from our virtual conference product and our focus is on driving core platform AOR growth for.
For Q4, we expect total revenue in the range of $45 7 million to $46 7 million.
Personal services is expected to represent approximately 9%, 10% of total revenue representing a year over year percentage decline in the mid Thirty's, which was below our previous expectations for Q4 professional services revenue.
Over the next few months, we are launching new service offerings that drive higher platform and data adoption, which we believe should positively impact service revenue over time.
In terms of our IRR, which impacts our Q4 platform revenue.
Cooperating headwinds from foreign currency and expect the performance of our virtual conference product to be similar to what we saw in Q3.
This is incorporated into our Q4 revenue guidance, excluding foreign currency impact and a virtual conference products, we expect Q4 to be slightly down from Q3 levels.
We expect a non-GAAP operating loss in the range of $4 five to $3 5 million.
non-GAAP net loss per share.
<unk> per share to <unk> <unk> per share based on 48 3 million basic and diluted shares outstanding.
Our updated bottom line guidance reflects a meaningful cost reductions carried out under a cost reduction plan, which includes actions already taken in Q3 as well as additional actions were taking in Q4 to further reduce our cost structure.
Our cost reduction actions in both Q3 and Q4.
All areas of the company.
Primarily focused on the go to market function to better align that with the current demand environment.
In addition, as we expect lower revenue in Q4 relative to Q3, we anticipate a modest decline in our gross margins in Q4, which is reflected in our guidance.
We expect a restructuring charge of one to $1 $3 million related to our cost reduction plan.
This restructuring charge is excluded from the non-GAAP amounts provided.
For the full year, we expect total revenue in the range of $190 million to $191 million.
Professional services revenue is expected to be approximately 10% of total revenue compared to our previous expectation of low double digits.
This represents a decline of low <unk> year over year, the headwinds from a virtual conference product represents approximately a three point drag on our.
Total revenue growth for the full year.
We are meaningfully improving our previous full year 2022 bottom line guidance and now expect a non-GAAP operating loss in the range of $20 1 million to $19 1 million and a non-GAAP net loss per share of <unk> 41 per share to <unk> 39 per share using 47, sorry.
9 million basic and diluted shares outstanding.
On a run rate basis, we have been able to reduce our spend by approximately $4 million per quarter or $16 million annually compared to where we exited Q2, 2022, which will allow us to enter 2023 with an improved cost structure.
Given the current macro environment uncertainty, we would expect a return to revenue growth to be in the second half of 2023.
Under a range of top line scenarios for 2023, we believe that we have line of sight to reach breakeven non-GAAP EPS by Q4 2023.
Plan to provide guidance on our outlook for fiscal 2023.
Q4 earnings call with that trial, and I will open the call for questions operator.
Sure.
Thank you Sir.
I'll remind you to the participants if you would like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star one to ask the question could you, possibly just a moment to allow everyone the opportunity to signal for question.
Maybe I'll take the first question from Rob Oliver from Baird. Your line is open. Please go ahead.
Okay, Great and then you guys hear me okay.
Hey, Rob.
Hey, Hi.
Sure Rod Hi, Steve Thanks for taking my questions I appreciate it sure I'd love to hear from you a little bit more about the puts and takes in the macro and.
I think particularly relative to the confidence around the back half of 2003, when youre, having renewal discussions right now and for those that are coming up for renewal over the next 12 months, obviously macro headwinds right pressure on sales and marketing budget on the other hand, I mean, we're starting to hear about some travel constraints, which of course benefited you guys true.
Amendatory prior.
Some vendor consolidation, which you guys as a leader might be in a position to benefit from so just wanted to understand what youre hearing from customers and what gives you guys that confidence of being able to return to revenue.
Revenue growth in the back half of next year, and then I had a quick follow up.
Yes.
So as we look at our business, we look at from the point of view off of gross retention net retention and new business and one of the things that we have talked about is.
Our Cogs going into next year have normalized all of the cohorts have at least when you launch and so we feel really good about that kind of that kind of a core.
Cohort about two thirds of that cohort also is integrated in boats and that kind of a cohort our customers are really using that as a mission critical way to drive sales growth and pipeline growth.
Better cohorts doing a better job on integration. So we believe that our gross retention into next year will improve from this year. We expect Q4 this year to be one of the best in the year. So that's the first spark secondly on the net redemption part I mean in Q3, we did a good job from an from an expansion in <unk>.
Within our installed base point of view and with our new with our new product, especially as a new product we get more mature we do expect to do well with them in Q4, I believe that that will also continue to play well.
Into next year so.
Better growth.
Stronger expansion and upsell on the new business side.
That will depend upon the macro.
That being said, we are kind of aligning our sales execution to focus a lot more on the enterprise and upper mid upper mid market with the addition of a new CMO. We're also kind of enhancing our vertical integration and go to market. So yes, there will be some headwinds there will be some headwinds there, but but we are very focused on.
On improving gross potential net retention and and the new business, that's what gives us confidence.
So next year.
The other thing also is more and more our customers are looking to cost effectively generate.
<unk> and revenue growth that is going to increasingly become important as they stretch their.
There is a lot more and our products.
Allow us allow them to kind of.
So all of it in one product offering and we are seeing more and more of that happen.
Great. Okay. That's helpful. Thank you and then Steve just one quick follow up for you.
You detailed I think some of the sources.
Spence.
Management for you guys.
The one that you called out being kind.
Sales on the sales side and just just just wondering.
That's not on the enterprise side like.
Is it more lower end at mid market is that still where you guys are focused and then could you maybe talk about some of the other sources of Av.
<unk> expense management that you guys can tap into thanks, so much.
Yeah, Rob so the bulk of it did actually come out of our commercial and.
To some extent the F&B business the largely the commercial business, that's really where we're seeing more of a headwind.
And we work to better align our cost structure there around what we're seeing out in the macro environment.
<unk> of that as I mentioned at all areas of the company. So we.
Tightened up.
The board.
And all functions and that's reflected in <unk>.
Our guidance that we provided we have been.
We will reduce the cost structure quite a bit of $6 million $16 million on an annual basis, and we were able to meaningfully increase our annual guide on the bottom line as a result.
One other thing I wanted to add on to <unk>.
Trough was saying earlier about 2023 and that gives us confidence to return to growth. We are having some headwinds this year as mentioned in the prepared remarks, which are going to abate next year, we have about a four point headwind on services, which we think is going to normalize next year or two about.
About a point on Overages in two or three points on the virtual conference product and probably about a point on FX, we've got about $8.
Overages that we're fighting against this year that are largely going to dissipate next year as the year progresses.
Great. Okay I appreciate that helpful color. Thanks, guys.
Okay.
And our next question from Arjun Bhatia from William Blair. Your line is open. Please go ahead.
Yeah.
Alright, thank behind birds eye can you guys hear me okay.
Yes, hi, good afternoon.
Nick.
Beautiful.
On prior Gen.
Wanted to just take a step back from a macro perspective can you guys talk about your own.
We're all outlook on virtual bank just as the <unk>.
Macro uncertainties continue to think as customers work for that more cost effective high ROI that pushed back tomorrow <unk> seen before or how are you guys thinking about that.
Yes.
Im pronouncing my name right when we talk about virtual events.
We focus on the virtual conference product Okay.
And that's that at the end of the Arizona.
Yes.
Close to mid single digits of our platform.
Thing about virtual events.
Our overall, we brought our digital engagement platform that has a that is about six different self service products for our customers, but let me talk about the virtual conference product.
Our ALR this year have been impacted by that it's a managed services solution for large scale digital conferences and with the return of large scale imports and events. We are seeing less demand for that product because right. Now people are just they seem to go back the more physical stuff also if you've seen the charter rate for that particular product.
It will be about.
Over two times more than one.
And the last.
Last several quarters compared to our other core products I mean this was at the end of 2019 about mid single digits part of our ALR went up to 10% and now by the end of this year, we will be back to mid single digits as Steve said, it's creating about three points of headwinds.
<unk>.
This year on revenue for us and going forward. This is not part of our core mission are part of our core mission is our self service product that's about six different offerings that we take to market now coming back to if you are asking about what happened at the macro tightens up we expect or what <unk>.
Our customers as a mission critical sales.
And pipeline generation engine, we are continuing to see our customers consolidate the various use cases with <unk> 24, and we expect that could provide a tailwind for us.
Into 2020.
Okay awesome. Thank you for the color.
The next question from Noah <unk> from JP Morgan. Your line is open. Please go ahead.
Okay.
Okay.
Hey, guys. Thanks for taking our questions and congrats on the quarter.
Hum.
And coming back to the elongated sales cycles you're experiencing.
Purely with the new business above the.
100000 dollar threshold at home cycle.
Longer what does it really change I guess.
Last quarter and how.
How is that looking I guess.
Through October or laptop.
Okay.
Yes no.
I mean, I think the macro if anything has gotten a little tighter.
And anything and so.
Just new logo acquisition is a little harder.
We are seeing some longer sales cycles, especially with business over $100000 threshold.
But our sales cycle still continues to be between three to six months enterprise is a little on the longer side.
No.
As we looked at the new logos.
Looked at where we are going to see some.
Even more headwinds and Thats why we also realign on the lower end of the commercial segment.
We kind of realigning some of the head count that will be more effective in that market. So as we move currently as we see that we do see some elongation, especially for for larger deals and some pressure on the lower end of the commercial market. That's what we are seeing.
Yes.
Thanks, Paul.
Albert I think October is the first month.
After the quarter. So it has got that kind of the seasonality.
We are seeing some headwinds that continue from September to October okay.
Got it that's really great color and then just a quick follow up maybe if you can just touch upon them at a high level, which verticals whether it whether it's manufacturing healthcare you mentioned.
Pretty strong are seen.
Which areas are seeing more strength relative to maybe some other areas that are seeing some weaker growth. Thank you.
Yes. Thank you.
So two things first of all one of the things that we have.
Focus our execution more like we've talked about enterprise and upper end of the mid market. As we've also focused a lot more on our installed base because we've got one of them.
Some of the world's best our best logos.
When you look at the six core verticals that we have technology life Sciences.
Manufacturing financial services information services and professional services.
The two I think the life sciences vertical I mean, we are seeing.
I think there are some headwinds across the verticals technology cost is the toughest okay, but we are seeing probably the life sciences has some.
It has got some good opportunity.
Especially as once you or any of those accounts and some on the financial services and asset management side other than that it's kind of all across the globe.
There was an across the board.
Great. Thank you.
Next question from Scott Berg from Needham.
Please go ahead.
Yes.
Hi, everyone. This is Michael <unk> I'm on for Scott today.
For taking my question I.
I appreciate it.
Just kind of wanted to ask one on the competitive dynamic I mean, I know you've touched a lot on kind of some of the macro headwinds and what youre seeing there, but it's been generally the same players.
Are your win rate.
Kind of tracking in a similar way.
Has that changed kind of over the past 345 quarters.
Yes.
Michael.
Okay.
Our win rate is about the same.
For the last few quarters.
Actually we have seen our competitive position improved and we are.
Many of the venture back growing solutions.
Were funded in the last three years, they've started to retreat from the marketplace.
And our solution.
Even more now now that we have with us.
Our platform with six core products that Brian .
Cost effectively power mission critical sales and pipeline generation for our customers and this is becoming increasingly more important for these customers in recessionary times, while they're maximizing the efficiency of their spend so.
Previously we have talked about what our competitors improve bifurcation in two different segments. One was the video collaboration tools that area continues to be a competitor, but those folks like the zoom into Webex is this all due to that very limited data and insights. They don't provide pipeline they don't provide our sales.
That form.
And actually they are a great lead generation tool for us because people and they get their first one to one of a conditional engagement there, but then they need a data rich platform that drives pipelines when they come to 124 and on the other side. The point solutions that we saw in March in the last couple of years as I said.
See them retrieve it so.
We believe that as we move forward in 2023.
And as our customers deploy us multiple even more use cases driving more pipeline that our competitive position is going to get going to get a lot stronger.
Great. Thank you so much.
A final reminder, to the participants please press star one to ask a question.
We'll take the next question from DJ Hynes from Canaccord. Your line is open. Please go ahead.
Okay.
Hey, Steve Thanks for taking the questions.
Hey, Sean.
I'm curious how you are managing conversations around price and I guess.
And may be different between kind of new customers and what's happening at renewal I mean, my sense is you guys are the premium place player in this space for good reason from a functionality perspective on what you deliver but I'm curious how sensitive are buyers to price in this environment and how are those conversations going.
Okay.
So let me talk about.
Renewables first because clearly large deals come in.
<unk>.
Up for renewals and.
Oh.
We are cognizant of the fact that DJ that customers are very price price sensitive. So one of the PR feedback one of the clear guidance that we have to our to our sales team and others with market lose a customer in a way some down sellers better than chart, but thats an important thing, but the other thing that we are also growing with our customers we are getting.
Much better in terms of executive business with us quarterly business reviews sharing with them the new product the more of the new use cases that they can adopt and NTIC.
And we are seeing better adoption of products like forums and engagement. So that's an important thing generally we also have recharge about.
Uplift off price and was seven 8% a year.
<unk>.
Which is what we lead with but we are being a little open.
That becomes a negotiating topic. We are also continuing to do.
Give up some some pricing discounts compared to multiyear deals. So so those are the things on the renewal basis then.
And then on the new business side.
We have to be a little more efficient in terms of of discounted level than others. Now again, we're not we're not betting the farm at all because the good thing is we have multiple products. So we are taking we are taking more products. So yes. There is some higher discount compared to before before the new business side, but again, what we are talking to these customers.
The.
It's not about just the cost its about what is the pipeline growth, they're going to get the new businesses that are coming to us in this kind of an environment are really looking to solve a problem or they're looking to drive pipeline are they looking to provide partner cleaning so on and so.
Sure.
I'll give you. One example, one of the largest software companies.
Is standardizing on 24 for the global demand generation, they're integrated with our platform now their partner team came and said hey listen.
We've been using collaboration tools, we need to enterprise scale partner partner Black Swan and David already integrated so that they visit a spun off the partner training platform on non 24, and the output is now 78% or better. So this is going to.
Essentially being able to take it into other use cases other departments allows us a little more flexibility, while giving us more of a slump in before.
Okay. That's helpful color.
And then look I mean.
The stock is basically trading at cash now.
I appreciate what you guys have done from a cost structure perspective, I think getting the business profitability will be important.
But a lot of the fundamental stuff that we're talking about kind of been the same for several quarters in a row now so I guess I guess the question is like what else are you considering kind.
Kind of create value from here right does M&A look more attractive deals accelerate buybacks is there other stuff that you can do like what are you thinking about when you sit around the board.
Yes.
Let me say.
I think that.
That's a very good question, let me answer it in a couple of manner the couple of ways.
So first of all leader in the last two three years we've had.
We were at 45% grower.
<unk> basis pre COVID-19.
At the end of 2019.
And then we.
Last two or three years that have been a little bit different.
Different because you had the coverdale lens than we had a normalization knowledge that'd be adjusting for the normalization.
Dealing with the macro and we have about eight points of <unk>.
Headwind that Steve talked about between.
The services and Overages and the virtual conference and the FX now somewhat a lot of that is going to abate next year. So of course, we don't believe that our current share price reflects our long term growth opportunity as well as actions we have taken to improve our business model and our focus right now is on core platform growth one getting to profitability.
Got it.
Thats, what we are focused on getting to breakeven profitability by Q4 2023 now we do have a strong balance sheet as you know.
And our focus right now is maximizing shareholder value, we will be repurchasing shares we have talked about that in our earnings call. We are looking at as valuations go down how do you continue to beef up our engagement platform organically and Inorganically.
So those are the things that we're doing.
Yes, yes, okay I appreciate the color. Thank you guys.
The next question from Thomas <unk> from Keybanc. Your line is open. Please go ahead.
Yes.
Yeah.
Hello.
Can you guys hear me.
Yes, Hi, Donald.
Hi, Tony.
Thanks, Thanks for taking my question guys.
Hi, My question is about engagement.
So kind of I guess, a little bit off of David's question there.
Sure.
Yes.
It seems like engagement still strong here a few million.
Per month, I don't know if thats unique per month, but you can come up with some mathematics, if it's not unique per month at about 60 Bucks a year.
Or is <unk>, 5% said that they are unique every three months every every month.
As engagement still growing that's the question in a second secondarily.
Now, let's talk about pricing where kind of.
Where can someone go.
Outside of.
Side of your tools.
Tools and engagement tools and analytic tools.
Generate leads and customer service contacts for something cheaper than that.
That's my first question I have a follow up for Steve.
Your question about engagement with that audience engagement on the platform.
Understood.
The metrics you provided the $3 million per month.
Okay.
Yes, let me answer to the question of engagement on the flat on the platform. What we're seeing is engagement on the platform is the highest.
The last one that we have seen and the interactions of the attendees are having on the platform.
This will also be until we have more products that people are using it.
It's highly the product is highly engaging so we are not seeing any digital fatigue or anything like that there.
And all of that engagement is converting into first.
First party data and buying signals core people too.
For our customers to convert them into sales in market sales.
For sales and.
Pipeline now the.
The other question that you had if you could repeat that.
On pricing could you repeat that Thomas.
It was just kind of a higher level commentary about engagement is strong which you just alluded to.
You can run a arithmetic in terms of the revenues coming into your model.
Subscription revenue.
Sure.
What.
There seems to be a great value proposition.
The pricing pressure come from where we're at.
Let's go to for more regeneration that that's such a low dollar amount per per touch.
I think the competition is really I mean generally what we're seeing is that.
In some cases, where it focuses people to go back to go back to video collaboration tools, especially in an environment like this that's where they get very limited data.
Any insights okay that is if people wanted to do just the status quo in this environment without getting the data and insights that's where they probably end up going so we see some level of competition from that site now I did talk about that there are point solutions that are retreating and.
And we expect them to be agreed because theyre venture back and Theres not enough runway for many of many of these folks but they are not completely gone. So in some cases. They are they are competing with us for some of some of those deals but as.
We move into 2023 and others, we believe our opportunity is going to get much much larger and some of those companies may be potential acquisition targets too.
That's great. Thank you for that.
Steve just a follow up question on that.
Some sort of like.
Inside our normalized gross margins as we go here pre pandemic in the 70% range mid Seventy's here.
As you look out and provide us with that outlook of breakeven by <unk> 23, what should we be thinking about in terms of gross margins. There and also maybe even normalize little longer term would be would be helpful. Thanks Scott.
Yes, I mean, we were at 75% in Q3 and the commentary in the prepared remarks, I suggested we'd see a little bit of pressure on that in Q.
Q4 based on the revenue guide.
Our goal is our long term target model of 78% to 80%, we know what that looks like.
I've been in the past I think you've just alluded to.
We're not going to get there next year, most likely we are not providing 2020 guidance, yet, but I don't expect us to be in the high <unk>.
Next year I would expect next year to be probably.
<unk>.
Consistent with what we're seeing in the second half of this year.
That's helpful very helpful. Very helpful. Thanks, guys for answering my questions.
Okay.
It appears that there is no further question at this time.
I'd like to turn the conference back to you for any additional or closing remarks.
Thank you all for joining US today, we look forward to meeting with you soon.
Okay.
Dan. Thank you for your participation you may now disconnect.
Okay.
Yes.
Okay.
Okay.
Okay.
Okay.
[music].