Q4 2022 Q4 Inc Earnings Call
Speaker 1: Oh
Thank you for your interest in joining our fourth quarter call. Please note a copy of today's presentation will be available on our website.
Please be aware that today's prepared remarks are being hosted lives.
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We need to remind participants that certain information discussed on today's call may be forward looking in nature.
Such information reflects the company's views with respect to future events.
Any such information is subject to risks uncertainties and assumptions that could cause actual results to differ materially from those projected in the forward looking statements.
For more information on the assumptions related to the forward looking statements. Please refer to Q4, it's public filings available on SEDAR.
During the call, we will be referencing certain non <unk> financial measures.
Although we believe these measures provide useful supplemental information about our financial performance. They are not recognized measures and do not have their head Ics under Ifr S. P.
Please see our MD&A for additional information regarding our financial measures, including a reconciliation to the nearest I FRS measure.
Please note that unless otherwise stated all figures are in U S dollars.
And with that out of way I'll pass it over to Daryl heaps Daryl.
Great.
Sarah.
And good morning, everyone.
Just a quick note I just wanted to say also thank you to to Donna Donna was going to be here with me in person for the live video webcast. However, she is at home with Covid and on recovery. So thanks, so much Donna for joining us.
My phone and I look forward for you to join me next quarter back on the video.
Alright, so good stuff so.
It's my pleasure to spend a few minutes here today talking about the progress that we made in 2022 and everything that we accomplished throughout the year.
And while 22 was a challenging year for the capital markets.
And driving topline growth I'm extremely proud of how our team has been executing over the last couple of quarters as we've really been focused on profitable growth.
We stayed focused on what we can control on optimizing our operations all while continuing to drive double digit growth for the year.
Executing on our path to profitability plan, we have significantly improved efficiency across the business.
That is on track to deliver profitable growth in 2023.
For today I'm going to spend a few minutes touching on the progress that we made in 'twenty two and then I'll focus on 23, which is all about profitable growth and being best positioned strategically operationally and financially to benefit from a market recovery, one which for early signs are starting to emerge.
This year, we dramatically improved our efficiency, while narrowing our focus onto our core products, our platform data and analytics, which are essential to our growth and success we.
We took steps to right size, our operating expenses, ensuring sustainable improvements to our bottom line and progressing towards profitability later this year.
In parallel to these initiatives. We also launched multiple new products, which are highly innovative and impactful to our clients, while also improving our efficiency and our margins.
One of the things I'm. Most proud about 2022 is the gross margin expansion strategy that we committed to at our IPO with the objective of closing out this year with gross margins in the mid sixties.
We're proud to share that we closed the fourth quarter at 63, 7% gross margin. This accomplishment is due to our execution on our virtual events platform, our fixed data contracts the adoption of our web management App on capital connect and the buildup of our Latam operations.
These structural changes are permanent and sustainable and we will have a lasting impact for continued margin expansion through 2023 to end this year in the mid seventies.
If you've listened to prior calls you know that I've always believed in the resiliency of this business and its ability to weather many storms.
I do think that 2022 is a perfect example of that in a market, where we saw increases in uncontrollable churn due to canceled ipos M&A and take privates were still able to achieve a 12% normalized growth for the year, while simultaneously increasing our average revenue per account to our highest level yet.
Moving forward. This year, we're really well positioned to continue capturing market share by expanding the value of our platform and the impact it can have for our customers.
This is evident by some great brands that went live on Q4 during the last quarter, including Costco Rite aid Jetblue and Cardinal health.
From an overall market perspective, I would say that we are beginning to see things thaw.
Seen the market performed fairly well so far this quarter, along with an increase in backlog of confidential filings for Ipos with the SEC as well as some new ipos coming to market.
Q4 is incredibly well positioned to benefit as the market recovers, we have the right products in place the right team and the right partnerships to drive growth during the recovery.
The launch of capital connect platform in 2022 has been instrumental in driving scale and engagement and <unk>.
Willing us to deliver exceptional experiences to our clients without increasing our costs. We're.
We're seeing record levels of adoption with more than 800 clients using the platform to engage and interact with us on a regular basis.
This adoption rises it increases the amount of interaction data flowing through our platform and enables us to deliver exponentially better workflow insights and analytics to our clients.
Our platform approach gives us the ability to deliver a single user experience into all of our products and is a core element of our product led growth strategy for 2023.
We now have the ability to offer different levels of our products and utilize the power of the user experience to drive incentives related to add ons extensions and new capabilities across all of our products. This product led growth approach is starting to work as seen by our nine 2% increase in ARPA for the quarter, our highest sequential quarterly growth we've seen yet.
On the product innovation front, we launched new features and product enhancements. This past quarter that continue to provide value to our client base.
One of the first apps, we launched on capital connect was the web management App.
Which has really changed the game in terms of usability and reliability for our clients. Today, we are processing thousands of support request weekly while maintaining a 90% plus five star rating for all of these interactions.
Since this app is incredibly sticky and used every day by most of our clients. It gives us the ability to execute on these product led growth initiatives.
Virtual events continues to be one of our fastest growing segments with the advancements we made in customization capabilities and our industry, leading low error rate of 1%. We are solidifying our position in the virtual event space.
Some of the recent enhancements include the seamless integration of zoom and EMS teams to more easily bring video contents two earnings calls.
Our strategy here has been working quite well just this quarter, we had some of the world's largest brands reporting on the platform, including both meta and Amazon who use Q4 for their earnings calls with tens of thousands of attendees as well Rolls Royce in the UK, who just reported just a few weeks ago.
This business segment is an integral part of our margin expansion strategy by the end of 2022, we had 97% of our event clients on our proprietary platform. This will continue to enhance our margin profile throughout 2023, as we will benefit from our entire event client base running on the platform.
To further drive client satisfaction and adoption of multiple products, we continue to innovate and upgrade our current products, including our CRM.
Recently, we released two upgrades the CRM that I think are noteworthy.
First as an email management feature that gives clients the ability to distribute mass E mails to investors via the CRM.
While simultaneously tracking email engagement through our analytics.
Additionally, we launched a new mobile app called Q forego that includes a broad set of features to help by our teams manage their engagements while on the go the timing of this is just great as so much of the World has returned back to meeting in person.
One of our recently released products engagement analytics is one of the core areas of our R&D focus.
We're we just released benchmarking and investor targeting benchmarking aggregates the interaction data from millions of investor activities across the Q4 Q4 platform, including website visits E Mail alert opens and event attendance.
The ability to compare the level of investor engagement across companies is now possible because we have built our platform and the millions of interactions occurring on it each month.
But truly innovative products. This truly innovative product gives our clients the ability to benchmark their IR program performance against peers in the industry and to target investors in an entirely new and infective way.
We have a lot more to come from this part of the platform and an aggressive roadmap to continually expand these analytics.
To continue enhancing the investor experience Q4, login enables investors to easily sign onto events without the need to re register each time.
At the end of 2022, there were 190000 investors with Q4 logging accounts.
There's a lot that we plan to do with this feature bringing new new features to expand the investor experience across the platform and to make it easier for investors and corporate IR departments to connect directly.
When combining features with our data analytics and generative AI, we plan to bring a lot of value to these millions of investors over the coming quarters.
One of the things that you've heard a lot about recently I am sure is generative AI.
GPT among others.
We've been paying very close attention to generative AI and we believe that we are at a transformational step in terms of what's happening with the web.
I would say that this is similar to the impact that mobile had on the web experience and the great news for us and how we think about it is that with each major disruption that occurs on the web it's been an incredible accelerant to our business.
Today, we're already using chat GPT on an internal basis to improve efficiency in a number of roles from content creation to programming and advisory services.
And I would expect us to continue to integrate generative AI features across our platform and products to both enhanced functionality for all of our users while also increasing our efficiency and margins.
Finally on the partnership front, we continue to have strategic partnership partnership discussions to expand our product solutions with complementary offerings.
Our existing partnership with the New York Stock exchange puts us in a preferred position to capture new IPO opportunities as the market normalizes and provides NYSE corporate issues with the flexibility to leverage the IR products and services that best fit their needs.
In addition, we established new preferred relationships with the London stock exchange and OTC markets in the fourth quarter, enabling us to access clients in multiple geographic areas and validating our position as the leading investor relations partner.
Moving forward, we will continue to maintain sorry, we continue to remain focused on positioning our clients with access to the best quality products and services.
And with that I'll now pass it over to Dana to take us through the fourth quarter financial results already you Donna.
Thanks Darryl.
Good morning, everyone.
As Darryl can date, our 2022 initiatives to make meaningful improvements to securing their profitable growth late in 2023.
I will take this time to dive further into the fourth quarter and all of the 2022 results following which Daryl will provide a perspective on the road ahead in 2023 initiatives.
Please keep in mind all figures are in U S dollars.
Now onto the financials.
Let's start with revenue.
Total revenue for the fourth quarter was $14 $2 million.
Three 3% year over year increase compared to $13 8 million in the fourth quarter of the previous year.
2022, as a whole we saw $56 1 million in revenue or 11, 8% normalized growth, excluding 2021 DSM discontinued operations.
Delivering double digit growth in the tougher economic dynamics of 2022 demonstrates our core business durability leaning on all our growth assets of new logo acquisition.
Sales of products to existing clients success in customer product adoption and client retention overall.
In the fourth quarter the capital markets platform revenue grew one 8%.
$13 million from the comparable quarter last year.
Form services expanded by 22, 2% year over year to $1 2 million for the fourth quarter driven in large part by increased demand for website services.
Looking at the full year capital markets platform revenue was $51 3 million or <unk>.
10% normalized growth over last year.
Platform services increased by 37, 4% to $4 7 million for the full year remains a strong value added source of revenue.
As committed we executed our gross margin expansion strategy targeting several initiatives.
I'm pleased to report that our gross margin for the fourth quarter was 63, 7%.
405 basis point expansion.
Significant.
It also conveys the importance of the actions taken in 2022 to position ourselves for future profitable growth.
The virtual events migration and creation of our Latin America operating center with the key pillars, driving the fourth quarter gross margin improvement.
The fourth quarter played out as expected delivering the improvements from the reductions in cost and the efficiency gains.
On the virtual events business, we are now running all earnings events on our proprietary platform.
We anticipate additional margin improvements in 2023, as we benefit from a whole year of full client migration to our platform.
Our Latin America operating center has surpassed all of our expectations.
Giving us the ability to leverage a new strong employee talent pool, while maintaining anticipated cost improvements.
Looking into 2023, we see all five gross margin pillars contributing to incremental improvements as well as the benefits of the prior initiatives for a full year in operations.
In the third quarter, we spoke of aligning our cost structure to our targeted strategies and profitable growth.
We took action in the third and fourth quarter towards attaining expense levels that are appropriate although the full benefit of our execution will only be experienced through 2023.
In the fourth quarter operating expenses, excluding depreciation and amortization foreign exchange loss and other expenses totaled $14 1 million.
Down from $16 8 million in the last quarter.
The actions taken drove annual cost reductions and efficiency gains of 10 8 million.
A portion of this benefit reducing fourth quarter Opex.
Sales and marketing costs were $4 5 million or 31% of revenue.
Being a $1 2 million sequential quarter over quarter improvement.
We expect it to remain in the low <unk> as a percentage of revenue in the near term and decreased further as a percentage of revenue in <unk> 2023.
Research and development was $4 2 million or 30% of revenue.
In the quarter, we continued to invest in capital connect platform as the critical component of our strategy to connect all sides of <unk> capital markets.
Our R&D investments are aligned with our growth strategies, focusing on opportunities with a more targeted return.
This will allow us to drive innovation and still attain normalized levels of R&D as a percentage of revenue in the low twenties as we accelerate profitable growth in 2023.
G&A for the quarter was $5 4 million.
38% of revenue.
Our efforts will continue to reduce G&A and we expect a gradual decrease as a percentage of revenue through 2023 to obtain a mid twenties levels.
It is a balancing act to achieve top line growth gross profit growth and opex reduction to produce positive EBITDA.
Evidence that we have charted a course for the fourth quarter 2023 positive EBITDA is the drastic improvement in negative EBITDA for the fourth quarter 2022.
Our adjusted EBITDA was negative $4 5 million for the quarter.
Meaningful improvements in adjusted EBITDA represent the first full quarter of impact of this strategic initiatives taken throughout 2022 to be prudent with our balance sheet.
This demonstrates our commitment to positioning our business to profitable growth.
Earnings per share is negative <unk> <unk> for the fourth quarter 2022, compared to negative <unk> 20 in the same quarter of 2021.
On an adjusted EBITDA basis earnings per share was negative 11 cents compared to negative 10 cents in the prior year.
Critical to our revenue growth are the two components they are and DARPA.
Our strategies are intended to grow our subscription revenue with priority.
Both with new clients and into our client base.
At end of 2022 was $55 5 million.
Six 8% year over year growth.
Air our expansion was driven by new client growth this quarter with 62, new subscription clients totaling 268, new subscriber subscription clients in 2022.
As well as 141 existing Q4 clients, who expanded their offering into CRM and analytics.
With our large client base one of the main ways to fuel IRR and revenue growth as sales of additional products into that base.
Power of the platform is exponential when additional products are added.
Our efforts to rent this revenue source is gaining momentum.
Average revenue per account or ARPA.
With 19821 at the end of 2022, a meaningful nine 2% increase from the prior year.
Driven primarily by our pricing strategies and new sales bundles at higher <unk> values.
In 2022, we delivered consistent quarterly ARPA expansion at an increasing rate per quarter.
We expect to continue this trend in 2023 with our unique positioning of the capital connect platform driving existing clients to adopt new products and new clients to join with product bundles.
We focus with intent on value creation for our clients in the functionality of our platform to promote client retention and adoption.
This quarter, we had 90 existing customers add to their subscriptions.
Bringing our customers with more than two products to 66, 8% of our a R. R.
Steady growth over the course of 2022 and an even larger focus for us in 2023.
The expansion sales growth initiatives is the primary focus of our sales and client service teams.
Ensuring our clients understand how our offerings.
To meet their IR needs and that they understand the unique value proposition of capital connect to tie all of the functionality together.
Adding <unk> clients and adding <unk> to.
Two existing clients works to grow revenue, but only in the presence of strong client retention.
Controllable local retention remains strong at 95% at the end of 2022.
Softer than prior quarters in 2022, but consistent with historical rates.
The pressure on the retention has squarely been on the uncontrollable churn.
Tied to M&A D listings and withdrawn ipos.
In the fourth quarter, we added 72, new clients on capital.
Of which 62 were subscribers.
Our quarter ended with 2600 62 clients on the platform.
Onto the balance sheet.
As of December 31, 2022, we had $29 1 million in cash cash equivalents and short term investments.
In the fourth quarter, we had negative operating cash flow of $7 6 million compared to $6 6 million in Q3.
Although our P&L was positively impacted by the material changes to expenses.
The positive impact on cash will lag by a quarter because of the overlap expenses in the fourth quarter of building out Latam operating center.
In the fourth quarter, the company took action to buyback our stock to be opportunistic on valuations.
We assess this as a good use of our capital to create shareholder value.
We plan to renew our NCI D in March to allow for future buyback efforts as we see fit.
Our core working capital metrics remained strong.
Ending with a working capital balance of $25 2 million as of December 31.
As of the end of the year, we have no outstanding debt with a $22 $5 million revolving credit facility available if needed.
And we remain committed to operating with a strong balance sheet and to be good stewards of your capital.
And with that I turn it over to Daryl for his closing remarks on our focus for 2023.
Great. Thanks Donna.
To wrap up I'm sure. It's quite clear that we are pretty pleased with these results by focusing on what we're able to control. We have made significant progress over the last couple of quarters. Despite the macro conditions.
Delivering 12% annual growth for the year and ending with gross margin of $63 seven along with managing our costs and improving our operating leverage is really setting us up very well to deliver on our objective of becoming profitable later this year.
Looking forward, we are incredibly well positioned strategically operationally and financially to take advantage when momentum returns to the market.
Finally, as you've seen through insider filings I've been personally buying Q4 stock for a while now I feel strongly about the value of this business and what we're building and how we're executing.
B and I really do feel that our future potential will be rewarded by investors as we continue to execute our plan and deliver on our profitability objectives.
And with that we want to thank and in closing we want to thank our shareholders our clients and employees for their continued support and loyalty.
Thank you everyone for listening on today's call, we're now going to switch over to the Q&A session and with that I will hand, it over to Sarah.
Great. Thanks, everyone. Our first question is coming from Doug Taylor Canaccord, I think Doug the line on that.
Very good hi, Doug.
Okay.
Hi, Good morning, Dawn, Ontario.
First question, you've previously spoken to low teens, or I think 10% to 15% topline growth.
Expectation amid the current market conditions, which obviously are persisting here is that still a realistic expectation in this market you know the results. This last quarter were a little shy of that and if so what I.
What levers do you have in terms of the error.
On a per account growth versus new.
New customer growth do you expect to get you there.
So thanks, Doug and thanks for joining maybe.
Maybe Dan I'll take that one to start, but if you'd like to add to it.
So I think the certainly when we look at the growth rate in the fourth quarter and kind of like the roughly three 5% kind of quarter over quarter growth rate.
We are certainly impacted by some of the macro conditions in terms of the on the uncontrollable churn side.
Now we see some of those particularly are kind of like the cancel ipos as being largely behind us. So when we're looking into 'twenty. Three we continue to feel that with the current market maintaining conditions, not improving that kind of like 10% to 15% topline growth expectation is still in line with what we think is possible the key thing.
For us and you touched on it is two fold one is continuing to to sell and market and acquiring those new clients and having them join at higher bundled prices.
But also in terms of how we're executing our cross selling Upselling cross sell into the client base and that's something that we're really quite pleased with when we see where we're ARPA is now we think that's just the beginning in terms of what we can do with our with our clients and when you look at what we're doing from the product perspective.
Lot of the focus is around how do we add more value to the platform how do we add more value to our existing clients to really drive that ARPA up.
There's two factors that drive our growth the number of clients that we have and what they're spending on an ongoing basis and so we're really focused on kind of executing on both of those fronts. So we think that the overall market conditions, assuming that they don't improve.
We should stay in that kind of range, but when they do improve which we do think at some point in the future. We should see some momentum coming back to the market as I mentioned in my comments, we're seeing kind of glimmers of that and I mean in your business, Doug I'm sure you see that as well some of the kind of initial conversations happening. So we see that as that happens we're going to have a very efficient.
Base to operate against this kind of improving demand environment.
Environment and so we think that that is something that helps us get back to kind of like the in broken into kind of 'twenty when that momentum returns.
Yeah, I think we're all looking forward to seeing that as my my follow up question, you're sticking with the guidance of achieving EBITDA adjusted EBITDA profitability by year end.
There are three levers there marching your gross margins at least 10% higher will certainly help you've made great progress there, but perhaps you can bridge us through with 10.
Percent plus growth on the top line, 10% gross margin expansion. It would seem to you would require some more opex reductions from the current level to get to that threshold can you, perhaps help clarify the mix of those kind of three buckets that gets you there.
Sure why don't done if youre going to take that one yeah.
I am and Doug we won't be as specific as as plotting the path of how much is going to be on the each of the opex lines, but.
<unk>.
There is the we've not assumed and as we think through 2023 that theres going to be an improvement in the markets.
Which even with some signs of it all the time, we are assuming and have actually executed the actions on a 10% gross margin improvement with or without that revenue growth and then Opex. You are correct that there will have to be.
There are there are opex opportunities in they're not in the way of <unk>.
Reductions in force that.
We've previously previously seen.
Also actions around our Latin America operating center, which is which is a strong talent pool.
Some of the product efficiencies that are driving product and process efficiencies that are not only driving savings in the margins, but driving savings into our into G&A in particular.
We've provided guidance on the sales and marketing R&D and G&A.
<unk> levels and those will be attained and in most of the actions are taken for those to play out.
At light double digit growth revenue levels.
And and without without further significant actions.
Thank you.
Great. Thanks, Doug.
Our next question comes in from Richard Tse at National Bank.
Yes, Thank you talked about the.
Sort of a control level can you give us a sense of your win rates and perhaps some thoughts related to that around the competitive landscape.
Sure.
Good morning, Richard.
I think the what we see is the.
Kind of recessionary behavior within within clients is certainly evidence not just within Q4, but kind of across the software landscape. So what we're seeing there is probably some more scrutiny. Some more oversight on deals which is causing some deals to extend out a little bit in terms of.
Days to close, but we continue to see kind of consistent win rates, we see consistent very positive positioning from a competitive standpoint, one of the key benefits that we have from a platform strategy perspective is that we can consolidate spend so one of the value proposition from a in a recessionary type environment.
<unk> is that we can reduce the overall cost as clients consolidate and bring.
Multiple products onto our platform and so that's what we've seen that even though deals are probably taking a little bit longer to close. The average deal size continues to be strong. The close rate continues to be strong and so we feel good about continuing to deliver on the booking side.
It is the uncontrollable kind of headwind, which is something that as I mentioned, having that kind of some elements of that behind us at least from withdrawn ipos.
We feel like that's going to help us get back to kind of expected growth rates into Q1 and beyond.
Okay, Great and then for my follow up question is.
You Didnt talk in your prepared comments about acquisitions and that was sort of part of the.
Kind of the initial part.
Those projects so that the IPO can you give us an update on how you're thinking about that these days.
Sure Yeah, I mean, I think from a long term perspective, we certainly believe and they are an integral part of our strategy is utilizing acquisitions to be able to expand the value that we provide to our customers expand the business and drive incremental growth.
We are very focused now on the profitable growth strategy and delivering too.
Achieving that kind of profitable operations I think as we're doing that we have been maintaining relationships out there in terms of the at the potential targets that we have and remaining active from a discussion standpoint, but we are really focused first and foremost of delivering on the profitable growth mandate and then once we are on the other side of that and we believe that.
We have a good kind of road ahead than acquisitions will come back into focus in terms of from an execution standpoint.
Okay, great. Thank you hope you feel better Donna.
Thanks Richard.
Thanks Richard.
Our next question is coming from Stephen Boland at Raymond James.
Yes.
Thanks can you hear me okay.
Yes, thanks for trying to Steven.
Okay.
Just one question and one of them.
Already but just going back to the.
The slight decline in sales and marketing and most curious about that.
The lever in terms of when you when you reduce the amount is it that youre fine tuning, what youre doing in sales and marketing or it's across the board.
Does that impact your revenue growth at all.
Okay.
And good morning, so when the reduction that you are seeing quarter over quarter in the sales and marketing is we announced a restructure at the end of August I believe August 29. The press release went out on a restructure on our sales and marketing organization and.
That was really to rightsize, the sales and marketing in the CAC.
The CAC machine with the with the growth opportunity. So the fourth quarter is really a play out of that action that was taken at the end of August .
We actually feel quite comfortable and confident about the sales and marketing size against the against the sales opportunity against what's in the pipeline prospects and deals flowing through to close them.
<unk> seen a healthy healthy sales pipeline in 2023.
The other thing I'd note is that in.
In that action, we did we we left untouched.
European core sales team because we are seeing that European sales engine really come into stride or take stride and generate M. B a round out our new logo acquisition.
Coming from both now North America and European sales so.
They it is appropriately sized and the benefit that you're seeing was the action announced late in two in Q3 of 2022.
Alright.
Maybe you've already answered this question for your call. It so forgive me I'm just.
When you look at your ARPA is it.
Level of growth we expect.
For unit three.
The cheapest 70% margin.
What what level of growth you need in your ARPA.
We have been obtaining sequentially, we had every quarter sequential growth and the growth rate has actually been accelerating to where it was nine 2% in Q.
Q4 over Q3, and we expect that at least still be sequential quarter growth and at least it will be at that at that nine that 9% race.
We expect that trend to continue quarter over quarter all throughout 2023.
It does get easier and to expand those product offerings as the clients are spending more time in in the product.
In in capital connect and experiencing the products because adding products is an easier aspect as Daryl said around the consolidation of that but it's also creates more value some exponential power around engagement analytics by adding more products. So we are not expecting that trend to source.
Often in 2023.
Maybe I'll I'll add to that as well.
Steven is that from a gross margin expansion standpoint, we really see that the the work that we did and the changes that we made in 'twenty. Two we'll have a kind of a ongoing benefit from our margin expansion in 'twenty three most notably the migration of our events business onto our proprietary platform, which we now have about 97 <unk>.
Cent of our clients running on that platform that migration was kind.
Progressive over the course of 'twenty, two but now in 'twenty three we have the benefit of that enhanced margin profile of our own platform running for the entire year. So that's something which is not driven by ARPA or by revenue growth to get that additional margin expansion and similarly, the changes that we made from Latam perspective, so setting up the Latam opera.
<unk>, bringing kind of by our Opex down in Cogs down sorry.
From that perspective is the benefit of that was really just we're just starting to see that really in kind of in Q1. So we're gonna that Latam kind of structure is going to impact Cogs positively throughout the course of 'twenty. Three so those are two probably the biggest drivers of the margin expansion from here through to year end.
And they are not predicated on driving additional revenue growth or ARPA. So we really see those two things it's kind of been mutually exclusive.
Very good thank you Steven.
Our next question is coming from Maxim <unk> at RBC.
Hi, good morning, guys.
I was just wondering if you're seeing any changes in the customer demand or the rest of pivoted to discussions over the last few months as the markets have begun to stabilize.
Environment, and the conversations that youre, having with customers got on any tougher or easier or would you characterize it as about the same.
Throughout the course of 'twenty, three and now into <unk>.
22, and now into 'twenty three.
So thanks, Max I think the.
Largely it's kind of it's maintained we did see some as I mentioned in my earlier comments, we have seen some.
Behavior that is causing deals to take a little bit longer more oversight more kind of hoops to jump through in terms of being able to get deals closed as clients come on board, but we've really seen that kind of the.
<unk>.
The concern about a.
Recession in 2023, amongst our clients being something which is which is real and our conversations but again coming back to our value proposition and our ability to deliver a superior product set a superior platform, while consolidating their spend and actually reducing their overall spend is something that we've seen has been.
Being quite effective so that was really through kind of the end of 'twenty two I would say that coming into 'twenty. Three we have seen that as I mentioned kind of a thein or or some improvements in that sentiment.
Across clients and as well from a kind of like IPO backlog I would say so we do see we believe the demand environment is improving I would say marginally in Q1, but it's giving us good hope that we do believe that to be at the market will continue to improve over the course of the year.
From a demand perspective.
And just as one follow up on that Bob.
Backlog Si.
You talked about the potential for or the backlog of confidential.
Filings is growing I was just wondering when a company does.
Besides to IPO, how much earlier before the actual IPO dated engage Q4 and the other sense of they might need.
Site and then some of the other tools or is that typically done once the company is already public and then kind of establishing I'm just trying to get a sense of how much visibility for.
New customer growth.
The potential pipeline, you would have and how far out you might see that.
Sure Yeah. So it certainly happens before they go public.
Would be able to engage once they do file with the SEC. We are able to then know emphatically that they are planning to go public we do have some discussions with companies even prior to that.
And in terms of kind of the the lead time that we have before the they would be going public I think in a safe assumption, that's probably three months on average would be kind of like the visibility that we would normally have sometimes it's longer.
Six months cycle.
And during different periods, sometimes it's much much shorter, but I think in general for your work I think thinking through kind of like a.
A quarter ahead is probably a safe assumption.
Alright. Thanks.
My pleasure.
Our next question from Stephanie price with CIBC.
Good morning.
Good morning, Stephanie Thanks for joining.
Thanks for taking my question as.
As you think about the fiscal 'twenty three revenue growth expectations. Just curious about how we should think about the mix between upsell and new client wins.
So similar question for ARPA growth as well.
Do you want to take that one Donna.
Thanks, and good morning, Stephanie we we have historically it historically, we attain a balance over a couple of year or over the course of the year of about 50 50 on new logos versus expansion sales.
And.
In 2022, we definitely saw that tilt more towards expansion.
In in more of the 60 40 range and in in the crop year 'twenty 'twenty. One we thought more 60 40, the opposite way as of new logo too.
Expansion. So we think about it in the 50 50 range separately, but we understand that.
As we see market dynamics quarter over quarter, we probably are going to ship 60, 40 on either side my expectation and each one at least is that expansion will be more dominant than the new logo and that will exist. Both in the ARPA improvement with the new products that are that are available.
And also in the in the New E. R. R. Overall.
That's helpful. Thanks.
And my second question is around cash and liquidity position just curious about your comfort with the current cash and liquidity position and how you think about the path to cash flow positivity I think in the past the tiger when speak have a positive in the back half of next year just curious if that's still the case.
And and that is still the cases is cash flow positivity in the back half of this year D. The fourth quarter. Unfortunately didn't show all of the benefit of the cash flow being trade up because the actions taken late in Q3 and the redundant.
Then resourcing that we did in the fourth quarter to make sure that all clients service levels were maintained and in transitions happen appropriately meant that the cash was still going out the door in the fourth quarter, but the change that's only a one quarter lag. So when we think about 2023.
Each quarter as the expenses are materially.
As is the cash flow materially improved and so you know.
Feeling very confident about the improvement in free.
Free cash flow and liquidity and still confident that we will.
In the back half of the year attain cash flow positive.
Great. Thank you very much.
Okay.
Thanks, Stephanie.
Our next question, we have Kevin Mcveigh on the line from Credit Suisse. Kevin. Your line is open if you'd like to ask a question.
Hello.
Hello can you hear me okay.
Definitely.
Yeah.
Oh great.
Hey, good morning, I Wonder you talked about some new partnerships with leveraging the existing one with the NYSE and then.
A new one with E L L C.
Any way to think about what the potential wherever it can be I mean, I know, there's a little bit.
Maybe a little bit more abstract, but any way to think about what the potential revenues could be.
Associated with that and.
Really nice to see the buyback.
It is.
Two questions one was it increased confidence in the free obviously the valuation is.
The protracted but was it increased confidence in the cash where we gave you.
Because of the ability to do the buyback is it just kind of wondering about that the buyback and then just with those partnerships can bring as we think about the monetization of them.
Great. Thanks, Kevin maybe I'll take the question from the exchange partnerships and then Don and maybe if you can handle the take the <unk> question.
So on with the exchanges, where we're really pleased I mean first off the partnership with the NYSE has been just a really great partnership for us or for many years.
I think the way to think about that that partnership in particular is.
Although there are there are benefits kind of outside of the IPO market I would kind of connects our positioning in that program with the returning momentum to the market. So as I mentioned kind of earlier, Kevin was like we're looking at kind of be below mid teens in terms of growth in current market conditions. Once we see a return to kind of.
Normal IPO markets, we see that kind of coming back to kind of like a 20% growth rate or so something in that ballpark. So I think the net impact of that and a lot of that was going to come from the the positioning that we have with the NYSE because it essentially gives us a kind of a a preferred look our proprietary look and the ability to talk to.
Potential IPO companies much much earlier.
The similar with the LSC and and OTC markets is that having the relationships with the exchanges are very beneficial from a new issuer standpoint.
Having said that there are benefits in terms of us being able to market to LSC issuers in particular.
Through their issuer marketplace.
However, the way I think that would make sense for you to think about it is that really upon the return of market momentum. These partnerships position us very very well to benefit from that.
Yeah.
And then great.
I'll jump in just on the on the on the question on the share buyback and you are correct in and appreciate you pointing that out it was two fold we were looking at both evaluations.
And and being opportunistic on that side, but also we would not have gone into market and done buybacks without confidence that cash is.
That cash management and cash flow is has turned and that we.
So we feel confident in our cash balances center and being able to consume that the cash on the share purchase.
That makes a lot of sense congratulations again.
Thanks, Kevin I appreciate it.
And with that we have no further questions.
Okay fantastic well, thank you Sarah and thanks to all of our covering analysts for joining the call today and also thank you Donna for joining for calling in and this.
This concludes the question portion of the call and just thank you everyone for joining if we are unable to answer your questions. Please do submit those through our website and we'll do our best to get back to you. So thanks very much everyone and have a great day.
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Uh huh.
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<unk>.
Yeah.