Hi, thank you everyone for joining us today. Welcome to Wishpond's 2022 fiscal third quarter financial results conference call. My name is Angelica. Joining me on the call today are Ali Tajskandar, Chairman, Founder, and CEO of Wishpond, as well as David Pais, the Company CFO. This call is being recorded. We will be having a question- and- answer session at the end of the call, which will be limited to analysts only. I trust that everyone has received a copy of our financial results press release that was issued earlier today. Listeners are also encouraged to download a copy of our quarterly financial statements and management discussion and analysis from sedar.com. Sorry. Please note, portions of today's call other than historical performance include statements of forward-looking information within the meaning of applicable securities laws.
These statements are made under the Safe Harbor provisions of those laws. Forward-looking statements involve known and unknown risks, uncertainties, assumptions, and other factors, many of which are outside of Wishpond's control, that may cause the actual results, performance, or achievements to differ materially from the anticipated results, performance, or achievements implied by such forward-looking statements. These factors are further outlined in today's press release and in our Management Discussion Analysis. We provide forward-looking statements solely for the purpose of providing information about management's current expectation and plans relating to the future. We don't undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions, assumptions, or circumstances on which any such statement is based, except if it's required by law.
We use terms as gross profit, gross margin, Adjusted EBITDA, Annualized Revenue Run Rate, and Monthly Recurring Revenue on this conference call, which are non-IFRS and non-GAAP measures. For more information on how to define these terms, please refer to the definitions set out in the management discussion analysis. With that, let me turn the call over to Mr. Ali Tajskandar, Chairman and CEO.
Thank you very much, Angelica. Good day, everyone. We hope that you're all keeping safe and healthy. I truly appreciate everyone for joining us today. We are very pleased with our third quarter results, which proved to be the strongest quarter in the company's history. Wishpond achieved record revenue of CAD 5.5 million in Q3 2022, representing approximately CAD 22 million in annualized revenue run rate, driven by the company's continued focus on organic growth and successful integrations of its acquisitions. I'm especially proud of our team for the cash flow performance in the third quarter, with the company generating about CAD 700 thousand of positive cash flows from operations.
As part of the cost reduction initiative launched in Q2 of this year to drive profitable growth, Wishpond continued to scrutinize all new expenditures with the intent to optimize operations and achieve cost savings synergies. As a result, the company was able to achieve record positive cash flows from operations and record positive Adjusted EBITDA in Q3. Wishpond has now achieved positive cash flows from operations for the second quarter in a row, a tremendous accomplishment allowing the business to further strengthen its balance sheet. Consequently, Wishpond can continue to invest in organic and inorganic growth initiatives without the need to raise additional capital. Our outlook continues to look promising for the fourth quarter and into 2023, with increasing sales, improving margins, and positive cash flows.
We continue to experience increasing demand for our products and have not witnessed any slowing down or negative impacts due to external macroeconomic conditions. Our outlook remains positive as we head into 2023 with increasing sales, positive Adjusted EBITDA, and positive cash flows. We expect to continue to grow rapidly as our sales pipeline remains robust and we begin to introduce bundled solutions to our customers. I will provide additional details on our outlook later on the call, but first, I would like to turn it over to our CFO, David Pais, who will review the financial results for the third quarter. David?
Thank you, Ali. I'm pleased to report that we had very strong Q3 results for the three months ended September 30th, 2022. Wishpond achieved record quarterly revenue for CAD 5.5 million during Q3 2022 compared to revenue of CAD 4 million generated during Q3 2021, an increase of 38%. Revenue growth in Q3 2022 is attributable to the company's expanded sales team, new product introductions, and acquisitions. Wishpond achieved gross profit of CAD 3.6 million in Q3 2022 compared to CAD 2.8 million during Q3 2021, representing an increase of 31%, driven by an increase in overall revenue. Wishpond's gross margin percentage in Q3 2022 was 66% compared to 69% in Q3 2021. The gross margins are within the company's historical average of 65%-70%.
The United States remains our largest and fastest-growing market, generating 68% of our total revenue in the quarter, with approximately 15% and 17% of revenue generated from Canada and Rest of World, respectively. During Q3 2022, Wishpond recorded positive Adjusted EBITDA of CAD 593 thousand compared to an Adjusted EBITDA of CAD 204 thousand in Q3 2021. The improvement is primarily driven by higher revenue and continued cost management initiatives and operational efficiencies initiated in the latter half of Q2 2022, that are expected to result in more than CAD 1 million in annual cost savings. In Q3 2022, Wishpond generated net positive cash provided by operating activities of CAD 671 thousand, compared to cash burn from operating activities of CAD 134 thousand in Q3 2021.
I would now like to provide some additional commentary on our recent cost reduction and optimization initiatives, which resulted in record cash flow generation for the company. During the second quarter, the company implemented several cost reduction and operational efficiencies designed to conserve cash, which have resulted in the company realizing more than CAD 1 million in annual cost savings. Some of the key cost-cutting initiatives were, we reduced the company's legal fees, professional fees, and corporate development expenses. We implemented a hiring freeze in most areas of the company. We implemented a number of optimizations and workflow improvements that allowed us to maintain our sales and customer acquisition costs while revenues grew. We implemented AI or artificial intelligence technologies to run certain campaigns, thereby eliminating manually labor-intensive processes and costs.
We consolidated some of our subscription and software costs across all our acquisitions and also optimized our AWS and cloud storage costs. Our commitment to having a focused mindset and realizing cost efficiencies while still achieving growth is what permitted us to generate record cash flow and EBITDA in the third quarter. The company's financial success is predicated on increasing our revenue while running the business cost effectively. We continue to have a clean and healthy balance sheet. As of September 2022, Wishpond had CAD 2.7 million in cash and short-term investments, and the company had no debt. Wishpond has a CAD 6 million secured revolving operating line of credit with National Bank of Canada's Technology and Innovation Banking Group, which remains undrawn as of today.
In summary, Wishpond is in a very strong financial position with a healthy balance sheet, solid Monthly Recurring Revenue, and very good visibility on revenue and cash flow for the current year. Wishpond is able to continue to grow comfortably from its cash flow from operations without the need for any additional equity or debt capital raises. I will now provide an update on our normal course issuer bid or share buyback program. On June 15th, 2022, the company announced the renewal of its normal course issuer bid, or NCIB, was approved by the exchange. During the third quarter of the company, the company purchased 22,500 common shares under the NCIB for aggregate consideration of CAD 17,685.
The Board of Directors of Wishpond believes that the recent market prices of the company's common shares do not properly reflect the underlying value of such shares, and that the purchase of the shares would be a desirable use of corporate funds in the best interest of the company and its shareholders. Hence, we will continue purchasing shares under the NCIB program in the coming months. This concludes my financial update, and I will turn the call back over to Ali Tajskandar.
Thank you very much, David. One correction, David mentioned this correctly, but on this slide it says 12,000 common shares under NCIB. As David mentioned, it's 22,500. Thank you very much, David. Moving on to the next slide. Well, I would now like to share with you some recent business highlights. On July 12th, 2022, the company announced the launch of our all-new website builder product that includes lead tracking and segmentation tools, personalization abilities, advanced forms and pop-ups, integration with Wishpond's email marketing tool, referral marketing, calendar functionality, pop-ups, and more. The website builder is expected to increase customer retention, reduce churn, and increase customer satisfaction. On July 20th, 2022, the company announced three new awards from Gartner, one of the world's most reputed platforms for business software reviews and research.
Wishpond received the GetApp Category Leaders award for content marketing, the Software Advice FrontRunners award, and was included in the Capterra shortlist for 2022. On October 3rd, 2022, the company announced that it had completed the integration of its recently acquired subsidiary, Viral Loops, resulting in improved growth in the combined business due to greater cross-selling and bundling opportunities with larger deal sizes. The complete integration of Viral Loops with the Wishpond platform allows contacts and data to be synchronized between Viral Loops and Wishpond, enabling Wishpond customers to grow their business with referrals and Viral Loops customers to use Wishpond's platform for their marketing activities. On November 2nd, 2022, the company announced that Lloyd Lobo had joined its Board of Directors as an independent director and member of the Audit Committee, effective November 1st, 2022.
Lloyd has over 15 years of experience building technology products and companies from conception to scale. His deep experience in sales, marketing, and scaling a business will be a valuable asset as we enter Wishpond's next stage of growth. We welcome Lloyd to the board and look forward to having him be a part of Wishpond team. Wishpond's outlook for fourth quarter 2022 and heading into 2023 remains strong and resilient. The business has felt no impacts due to recession, inflation, supply chain, or other macroeconomic effects. Instead, the company's performance is better than ever and extremely positive across all of its acquisitions and the entire company as a whole. Wishpond continues to experience strong performance across all its businesses with robust demand for its products.
Based on current MRR trends, Monthly Recurring Revenue trends, we are very optimistic about the outlook for fourth quarter and for 2023. Based on our progress thus far in Q4, we expect the company will achieve record revenue, Adjusted EBITDA, and cash flows in fourth quarter. These positive results are driven by the increased size of the company's sales team, positive contributions from its acquisitions, increased bundling of its products and services, new product-related revenues, and favorable seasonal effects in the second half of the year. Wishpond expects to maintain a strong organic growth profile into next year as its revenue and earnings growth are projected to continue in 2023, with further integration of its acquisitions and an increase in cross-selling opportunities, new product launches, and higher customer retention.
Wishpond's objective heading into 2023 is to continue growing its business, both organically and inorganically, and to continue demonstrating a disciplined capital allocation strategy to maintain profitability and increase its cash position while increasing sales. Wishpond has a robust sales pipeline and will look to drive revenue growth in 2023 by investing in the company's sales and marketing functions, cross-selling the company's products and services, and introducing bundled packages of its product lines to new customers. One of the reasons for our organic revenue growth is the success of our outbound sales team. Last year, we increased the size of our sales team from 12 to 24 account executives. This year, we are currently at 43 account executives, and we plan to have 45 account executives by year-end. The sales team's calendars are very booked for demos, and no slowdown in sales activity so far in Q4.
In line with the company's focus on profitable growth, Wishpond will continue to scrutinize all discretionary expenditures across the organization with the intent of optimizing operations and achieving cost-saving synergies. The cash flows generated by the company will continue to be reinvested in the business and allocated in a disciplined manner, which may come in the form of future acquisitions, share repurchases, or to accelerate organic growth. Wishpond has a clean balance sheet and can continue to fund the growth of its sales team and new product launches from cash flows from operations without having to raise any additional equity or debt capital. Now, an update on our acquisitions. We've successfully integrated all five of our acquisitions. We've created integrations between the different products across the acquired businesses, and we've implemented cross-selling capabilities. We've recently developed bundled pricing plans that bring the most value for our customers.
Our development team is working hard to build additional integrations, single sign-on capability, and single dashboard for all the products in one integrated platform. Going forward, we do not expect to be making acquisitions at the same pace that we have been doing in the past due to the current economic environment and the weakness in the capital markets. We are not expecting to close any additional acquisitions this year in 2022. However, with a strengthening balance sheet and improving cash flows, we anticipate the possibility of making additional acquisitions in the next year. We continue to remain in contact with several potential targets and receive new inbound acquisition opportunities on a regular basis. Wishpond is an elite software company with profitable growth. Technology companies are known to burn lots of cash for many years.
This meeting is being recorded.
CAD 22 million annualized revenue run rate that is generating positive cash flow from operations. It is also rapidly growing with a 30%-40% organic growth and maintains gross margins of over 65%. Wishpond truly is a unique, high-growth, profitable company, and we remain committed to delivering profitable growth in the future. Wishpond has the most complete and comprehensive integrated marketing platform available for small, medium-sized businesses. Our customers benefit from the range of online marketing options that we provide under one roof. We have a solution that is unique, integrated, and cost-effective, making it more appealing to small businesses than ever before. Instead of having anywhere between three to six different marketing-related point solutions, small, medium-sized businesses would rather have just one solution from Wishpond. Wishpond is also recession resilient.
In an economic slowdown, companies often reduce or freeze their budgets on their in-house marketing and sales staff or on individual fragmented marketing solutions. However, they still need to acquire new clients to keep their business afloat. Businesses looking to cut costs find value in Wishpond's all-in-one consolidated software platform, which costs a fraction of all the individual products it would replace. Furthermore, businesses keeping a close eye on their costs or looking to cut costs find Wishpond as a much cheaper alternative to an internal marketing person. Wishpond is an effective, low-cost alternative that is thriving in a recessionary environment. Wishpond's products are essential to SMBs. All small, medium-sized businesses, including e-commerce, business-to-business, and bricks-and-mortar businesses, need to have a digital marketing strategy to attract, nurture, and retain customers.
The, the success we are achieving indicates that our products and services are valuable tools for our customers who rely on Wishpond to generate leads and increase their sales, especially when operating in this uncertain business climate. Wishpond has a diverse customer base of more than four thousand businesses. Wishpond has very little concentration or financial dependence in any one industry. We serve a wide variety of industries which provides us with the ability to shift focus quickly if market conditions adversely affect any specific industries. Wishpond remains a low-cost culture. Wishpond maintains a low-cost culture. Wishpond embraces a low-cost organizational structure with a virtual head office and a remote team, which allows us to operate with lower overhead costs. We are scrutinizing all discretionary expenditures across the organization with the intent of optimizing operations, achieving cost saving synergies, and remaining cash flow positive.
Before closing, I would like to comment on the recent decline in the share price. Next month will mark our second anniversary as a public company. Since listing in December of 2020, we've achieved numerous milestones and growth that we are very proud of. For instance, Wishpond more than doubled its customer accounts from 1,700 at the time of going public to over 4,000 customers today. We increased our revenue from CAD 7.9 million in 2020 to our current CAD 22 million revenue run rate. We completed five acquisitions over the past two years, and now the company is generating record cash flows. As everyone on the call is aware, our share price has experienced a decline since the beginning of the year.
We do not believe this drop in our share price is warranted, given our fundamentals remain extremely strong, and we are very positive on our future outlook. We believe the general poor capital market conditions are the primary cause for the weakening in our share price, and small-cap tech stocks have suffered the worst in this market correction. We believe that Wishpond remains well-positioned for continued growth with increasing revenue and improving cash flows in Q4 and into 2023. Despite the current challenging business environment with high inflation, increasing interest rates, and recessionary concerns, thus far, we have not noticed any slowing down in the demand for our products. Our sales pipeline remains robust, and our revenue growth shows tremendous resilience despite the current uncertain economic conditions.
In closing, I want to thank all the employees of Wishpond whose hard work continues to elevate the company to higher levels. We want to thank our customers who rely on us to help them with their digital marketing needs. Also, I'd like to thank you all for joining us on this call today. We look forward to providing you with another update next quarter. Thank you. I will now hand it back to Angelica for questions.
Thank you, Ali. With that, we will now open the call to questions. Just a reminder that questions will be limited to analysts only. With that, we're gonna have the first question from Chris Thompson of PI Financial. Please go ahead, Chris.
Great. Thanks, Dave and Ali. Congratulations on a strong quarter. It's a two-part question, if you don't mind. My first one is just sounds like you're pretty excited with the visibility and just help us kinda gauge what's behind that. Can you talk about the trend of your revenue mix in Q3 in terms of self-serve revenue versus fully managed revenue and how that kinda compares to Q2?
Chris, thank you very much. Good question. The reason we're very positive about our outlook is that, obviously, we are already halfway into Q4, and we can see the demand for our products. We can see the health of our pipeline in terms of the demos that people are booking with our sales personnel, and it remains very strong. Our outbound team is doing extremely well. In terms of the mix between self-serve and fully managed, it remains mostly consistent with what we've seen in Q2. Now, heading into the future and next year, as we roll out more of the bundled packaging, all-in-one software platform that will gradually start to shift towards higher margin packages as well. David, if there's anything you wanna add to that.
No, Ali, I kinda agree with everything you've said. Chris, I think the business is just doing well overall. You know, both sides of the business are growing, and, you know, I think it's gonna go the same way in the next quarter as well.
Okay, fair enough. Just again in Q4, are you guys seeing an increase in demand for the self-serve solutions? I remember last year, the holiday period was really strong, and then we had a sequentially , lower Q1, 'cause Q4 was so strong. Are you seeing that same trend this year? J ust looking at consensus, the quarter-over-quarter growth is looking for 17%, which is a little bit higher than this year or this quarter, which is up 10%. Just wanna get a handle if you're comfortable with that outlook. Thank you.
I'll try to answer that. I mean, what we have most visibility over is the organic growth based on our outbound sales and everything else. The effect of seasonality, some of it is harder for us to predict up until the end of the , holiday seasons, and adding towards the end of December. It is harder to predict that. I'm not entirely sure if the positive seasonal effect will be as great as it was last year. We're more counting on our normal organic growth quarter-over-quarter that is gonna be very solid. Whether there will be any positive surprises that will make Q4 have as big of a jump as we had last year is harder to tell.
The other thing that I would also add is that we made an acquisition, for example, by Viral Loops that doesn't have the same seasonal effects. Going into Q1, we expect to have less seasonal negative effect than we did last year. Overall, my expectation is, and David, please correct me, if you see differently, but my expectation is smoother Q4 and Q1 numbers than the very high Q4 of last year and the very low Q1 of this year that we experienced. Anything you wanna add, David?
No, I kind of agree. Like, internally, what we're projecting is somewhat flat Q1. Definitely no growth in Q1, but flat Q1, not so much negative downtrend as we saw in Q1 of 2022. That's right.
Okay. Great to hear. Very helpful. Thanks, guys.
No problem. Thank you.
Thanks. Great. The next question is from Neehal Upadhyaya of iA Capital Markets.
Yeah, thanks, guys. Congrats on the strong quarter, and thank you for taking my questions. What are some of the growth levers that we can expect Wish to pull beyond M&A? Including M&A, what does the next target look like for you? Is it more about acquiring tech that you currently don't have in your solution suite, or are you looking more on acquiring a larger customer base?
I'll start with the first part of that question. In terms of levers for growth, it is similar to what we've had before. Not as much on the acquisition side, but on the organic side, our outbound sales engine is a substantial part of our revenue growth, and that's what , we were talking about that last year. We grew from 12 salespeople to 24, and this year from the 24, we're heading towards 45 by end of the year. As we add more salespeople on the team, the organic growth continues quite strongly. Similar to that, we're investing in our inbound marketing and demand generation as well. Those are two of the major points.
Increasingly, with, the bundled packages that we're creating, where it is including all the companies we've acquired under one umbrella, we're able to charge higher self-serve prices and have more sticky product offering. That increasingly improves churn and increasingly makes it easier to grow even faster. I would say those are some of the top ones that I would mention.
Perfect.
Yeah. The second part of your question was related to acquisitions. f you look at the past five acquisitions that we did, I think it paints a pretty good picture of what we would look for. We want to have a margin of safety. What that means is that we want it all actually. We want companies that are profitable, that are recurring revenue businesses, that do fit and fill certain product gaps that we have, that we wouldn't overpay for them, and financially, they would be good investments. We want the strategic value as well as financial. Now, at the same time, we're opportunistic. If we come across certain opportunities that maybe it has less of the strategic value but a lot of customers and the cash flow is great, then we'll look into that.
It's really a case-by-case situation. I think the criteria that I've mentioned probably is more or less what we're gonna continue operating with into the future.
Perfect. Thanks. Maybe just one last one for me. In terms of gross margins, how do you see that profile playing out over the next year? What range do you think you can get that to in the long term, especially considering the focus on providing additional managed services over self-services?
David, do you wanna take that one?
Like, over the next few years, like as revenue gets to much higher levels, we expect to break out of that 65%-70% gross margin band. In the near future, like, you know, we're already at CAD 20 million-CAD 22 million annualized revenue run rate. You know, next milestone that's soon looming is the CAD 25 million revenue run rate, then CAD 30 million, and so on. You know, I guess what we see in the next couple of quarters is to stay within that band.
You know, in the longer run, just because of economies of scale and so on, and the way we actually wanna move the business towards people, you know, using our bundled services and, you know, we can actually realize higher price points as we get to selling bundled packages, we expect the revenue and the gross margin to improve at that point.
Yeah.
Okay, perfect. Thanks, guys. I'll pass the line, and again, congrats on the solid quarter.
Thank you very much.
Thank you. The next question is Daniel Rosenberg of Paradigm Capital. Please go ahead.
Thanks for taking my questions. Hi, Ali. Hi, David.
Hi, Daniel.
My first question is a continuation on that M&A theme. I was wondering if you've seen valuations change in the dialogues that you're having in the market. Secondly to that, just given where the share prices are, have your thoughts around use of capital changed because it's just quite accretive to buy your own shares rather than another company? Any color there would be appreciated.
Yeah. Daniel, good questions. There are multiple elements in that. I'll try to touch on them. David, please add anything if I miss them. You know, in the private markets, we do see some of the expectations have, you know, been lowered, but I would say not to the same extent that we've experienced in the public markets. That creates a bit of a gap between the expectation in the private market, you know, in terms of acquisition opportunities and ourselves. Our stock price is not trading at a multiple right now that would make it easy for us to have accretive acquisition opportunities, and that's part of the reason that we're holding off right now.
You know, I think no one really knows when the market will turn around. When it does and the stock price corrects itself, then it will be easier to go back, you know, potentially even raise some money for the purpose of acquisitions and make more of those acquisitions. Currently, with the current stock price, you know, those larger acquisitions would be harder to justify for sure. In terms of share buybacks, yeah, it's definitely something that is available and top of mind for us. We're not in a hurry to buy back substantial number of our own shares right now. I think, more than anything, you know, the market has to correct itself, and we're more than happy to reinvest in the growth of the company.
You know, in the future, there could come a time where we're producing so much cash flow that it just makes sense to do a more aggressive buyback.
Yeah. I would agree with everything Ali said. You know, if I can emphasize a couple of things, just looking at our history, you know, the five acquisitions we did since we went public, you know, I think it's important to emphasize Wishpond's been extremely disciplined. You know, it was not any one thing that made us do an acquisition. We actually had to check a number of different boxes. You know, being accretive being one. You know, obviously we wanted product, we wanted EBITDA positive, we wanted a company who come with an established revenue stream and customer base, you know, all that stuff. It was, you know, not easy to find those deals, but we did, right?
Right now, even though we're not actively looking, we still get a lot of inbound companies that come in or, you know, we have a network that sends us leads. We're finding a little less of those opportunities to check all the boxes. Obviously if we do find them and we really get excited about them, you know, we might come back, you know, to the market and say, "This is something that we might wanna raise capital on," or whatever. Having said that, you know, there's nothing, you know, right now on the radar that's making us do that. We are looking, but we're being very, very disciplined.
In regards to whether we spend our money on NCIB, I mean, my opinion is that we're still a growth stage, you know, software company, so, you know, we'd rather just invest in growth rather than our stock. Yes, we are buying back stock, but at the same time, our growth is very important as well.
Thanks for that. M y next question is around the sales force. It 's nice to see you guys kinda-- you're doing more with less in this quarter. So I was just wondering if you could comment around the sales strategy, how you're organizing things. And you mentioned a bundled product offering. Um, does that change h-how the sales force is trained? Is it by the customer base? Is it by the product base? and then if you're offering a suite of solutions, how would that work?
I think the sum of those questions require at least an hour discussion. Very good questions. I'll try to answer the best I can. We are definitely trying to do more with less, so that goes across the board. In terms of lead generation, for example, in Q2 one of the things that we did was a lot of automation, use of artificial intelligence in, you know, generating the leads and generating the personalizations and everything that we need, and that resulted in a lot of cost savings as well as improved performance.
In our sales development team or some companies called BDR team, where they're booking the demos with our salespeople, we also brought a lot of optimizations and helped our SDRs be more empowered and one of them to be able to, you know, do as much as, you know, maybe one and a half or two in the past used to, and not have to constantly add more headcount to that. A lot of automation, a lot of, you know, optimizations that we've done there.
In terms of our sales resources also, we are very actively right now working on improving closing rates that they have beyond the historic numbers that we've seen, so that, you know, one Account Executive, one salesperson can do as much as maybe, you know, 20%-30% more Account Executives so that they themselves benefit from that obviously as they bring more, but the company also benefits, and we don't have to have as many Account Executives and, you know, the base salary savings would be there as well. Some of those are the things we're doing. In terms of the bundled packages, one of the initiatives that we've been working on and now we have enough traction actually on, we're gonna release some more information about soon actually. High level of it is we're creating this.
We have created this bundled offering, you know, of, you can call it, you know, Wishpond's all-in-one marketing platform or all-in-one package, where it is all the software packages that we've acquired. Wishpond, Viral Loops, PersistIQ, Winback, and so forth, so that when a client comes to us, we can say, "Listen, your website will run on Wishpond." Anyone who wants to book a appointment with you, the calendar functionality is using Wishpond. The emails that are going to them, newsletters, all of those are through Wishpond. Any pop-ups and forms are through Wishpond. If someone leaves without making a purchase, SMS marketing that goes to them, shopping cart abandonment is through Wishpond.
You wanna get more referrals through the customers that you already have, that referral marketing is through Wishpond and by Wishpond, in that case, I mean, Viral Loops. We set all of that up as part of the onboarding in the first month, and then, you know, the whole system, your whole growth engine when it's set up, we then pass it on to you and train you so that you can continue with it. That's more of a self-serve offering, and that is gonna be more of the future of our sales team. You know, price points are gonna be comparable to our fully managed, but the margins are gonna be greater, and the stickiness would be greater.
The way currently we're thinking about structuring that, and we've done that, has been a mix of some of our salespeople will continue to sell the packages that they've sold in the past, and some of the newer additions to the team would be trained on this bundled offering. So far it's looking very, very promising.
Thanks for all that detail and congrats on a good quarter in a tough macro. I'll pass the line.
Thank you very much, Daniel. I appreciate it.
Thank you. The next question is from Neil Bakshi of Canaccord. Please go ahead.
Right. Thank you for taking my questions, and congratulations on the quarter.
Thank you.
The first question, just building off of the discussion around the sales team, I guess given these investments in kind of optimization and training and using AI, has there been any change then to the expectation around kind of future hiring cadence, looking into 2023, you know, above or below than where it was before?
Currently our expectation is to go from the 45 or so salespeople that we will have by the end of the year to, you know, 60-70 by end of next year. Now, as we continue to optimize, we'll see where we end, but currently that's where we expect to land.
Okay. Very good. Just a question with regards to, you mentioned before the Viral Loops acquisition has smoothened out some of the top-line profile. Just wondering then, looking at conversion down to, you know, cash flow from operations and free cash flow conversion, should we expect, you know, looking into early next year, if there's not necessarily a big step down on a sequential basis in revenue, should cash flow generation be pretty kind of stable or how should we be looking at that kind of conversion to free cash flow next year?
Is your question mostly around, you know, kinda Adjusted EBITDA margins, those kind of things?
Yeah, we could look at Adjusted EBITDA margin. Just like are we seeing the earnings profiles, you know, smoothing out commensurate to how the top line seems to be smoothing out a bit?
David, you might wanna take a stab at that first.
Yeah. You know, I mean, at a fairly constant revenue base. You know, there's a couple of different ways I can answer that question, Neil. Obviously, you know, we are planning to grow, right? Like Ali did mention that we are, you know, we've raised the number of AEs from the beginning of the year to today. In fact, between Q3 and Q4, you know, month-to-date, quarter-to-date, Q4, we've already added some headcount in our AE component. You know, so if you go to Q1, I can foresee that we're probably gonna keep adding some AEs. I think it might be safe to say that. Maybe if you're saying that if revenue doesn't keep up, will that impact our bottom line? Yes, perhaps.
Well, I think the question was more if revenue is gonna be less choppy quarter-to-quarter, is profits all gonna be more smooth as well?
Yeah. I mean, I think that would be safe to say that, you know, as the revenue line smooths out. Yeah, we've always kind of matched, we've walked that fine line matching costs or additional costs based on the revenue growth or the forecasted revenue growth. So long as we see revenue at a certain line, we're not gonna overstep, or we'll be very, very careful to overstep. We just kind of see that bottom line smoothing as well.
Yeah. I think, Neil, you know, the guiding philosophy that we're operating with is we want to have profitable growth. Going into the future, I think the profits that you saw for this quarter and, you know, cash flow positive from operations last quarter are not one-offs, but they're more of part of our disciplined approach going forward as well. Now, if this quarter was 10%, you know, Adjusted EBITDA margins, is it gonna grow or not? I think you're gonna see some up and down, you know, maybe around 5%-10%, and long term, we want to get that to above 20%.
I think based on the performance you saw in Q3, it is easy to envision that even that 20% Adjusted EBITDA margin, it is within our reach. As David said, we are walking that fine line between growth and profits. We wanna grow profitably but invest in the growth of the company. Probably around that 5%-10% would be where we would be looking at.
Okay, thank you. I really appreciate the color. Just one quick question just about the customer mix. You know, e-commerce, B2B, kind of the split. Just wondering if there's any kind of changes in the last few months as part of the outbound sales, any impact on that mix, more towards B2B?
It has been mostly consistent and similar to Q2. It hasn't really substantially changed.
Okay, great. Thank you, and congratulations again.
Thank you, Neil.
Thanks.
Okay. The next question is from Gabriel Leung from Beacon Securities. Please go ahead.
Hey, guys. Thanks for taking my questions.
Hi.
Hi there. Just a couple of things. First, a question of clarification. Ali, did you say, in terms of organic growth, you started targeting 20%-30%? Was it 30%-40%? I just missed that.
30%-40%.
Gotcha. As it relates to the additional sales reps you plan to hire I guess over the coming year, I guess let's call it rounded about 20 additional sales reps, you know, you did a similar sort of strategy this past year, and it led to sort of negative EBITDA contributions in the first half of calendar 2022. Would you anticipate, you know, maybe going back to a negative EBITDA position in the first half next year as you ramp up these sales reps?
We're not planning for that to happen. We're planning for each quarter to remain profitable and positive. You know, it might shrink a little bit and then expand. Currently, you know, barring anything unforeseen, we don't anticipate that there would be a bigger investment in sales growth in the first half and less in the second half. We expect it to be a smoother addition to the team.
Gotcha. Maybe one more question on the sales team. You know, I appreciate that, you know, they're being offered more products to sell now, and it takes time for reps to ramp up. I'm curious, with some of your more mature, I guess, sales reps, guys who've been with you longer, are you able to quantify, you know, what's their revenue expansion been like? I mean, just in terms of, you know, on an annualized basis, how much more revenues are they able to bring into Wishpond versus when they first started? I'm just trying to think of operating leverage amongst the sales group.
David, do you have anything on that? I definitely know anecdotally that the salesperson that starts now, after three months, is fully ramped up, but there's a big difference between their performance and closing rates. You know, one of the things that we track internally is average value of each demo they hold. You know, between that person that is just three months into the role and, you know, one year, two years into the role, there's a difference. There's a big difference. You know, I don't know if we wanna quantify that per se.
Yeah. I agree with what he's saying. I think the only thing I would add to that is, you know, irrespective of whether they're new or even if they're more experienced, there still is some month-to-month variability, perhaps in close rates, you know, the average dollar volume of each sale and stuff like that. Even, you know, an experienced sales guy may have variability up and down. You know, the newer one's a little bit lower, obviously, in average revenue per month, but there's that same variability. The new guy, we've been surprised with new guys having great months as well.
Yeah. Gotcha. Maybe I'm gonna ask another way. Could I say that, you know, someone that's been there a bit longer and has all the tools and the belt, are they able to double their revenue generation, or is that too aggressive a way of thinking about it?
I would say that might be a little bit too aggressive. You know, probably 30%, 40%, 50% more in their ability to generate revenue would be more in line, I would say.
Gotcha. No, that's super helpful.
If you wanna use that to update your models, keep it more conservative.
Gotcha. No, I appreciate the feedback. That's it for me. Thanks a lot.
No problem. Thank you.
Thank you. The last question is from Christian Sgro of Eight Capital. Go ahead.
Hey, good afternoon, Ali and David, and thanks for taking my questions.
Hi, Christian.
Yeah, Ali. The first one I'll ask on, it's similar to Neil's question. He asked on strength by verticals. Maybe what I wanna ask is, across your customers, are you seeing the size of customers change at all? Are the average contract values, you know, changing, maybe moving up with newer bundled offerings? How do you see the size of customers and the contract sizes changing?
I think we see two trends. One trend that we see is B2B businesses generally have higher average revenue per month and LTV. You know, especially PersistIQ does more selling to B2B customer base. That has been one trend that is going on, and we're gonna invest more in that in the coming year. There's gonna be more push towards B2B businesses. Generally, they're more established businesses compared to some of the business-to-consumer, you know, or e-commerce kind of players. There will be some push towards that. The bundled offering, it is less of increase in monthly average revenue that they would pay us and more of an increase in long-term value.
The LTV would be what we expect to be substantially higher because of increased stickiness, and also the margins are gonna be greater because there's more of a self-serve element to it.
That's helpful. I'll follow on there with your comments on stickiness and retention. Are you seeing contract lengths increasing? Are there ways to get customers to subscribe to a one-year minimum as opposed to a month-to-month? Has anything changed that way, or is the sales approach evolving that way with the length of the contract?
We have been pushing successfully towards annual contracts. That is, you know, more or less the norm that we have right now for majority of the cases. In the bundled offering, it is pretty much, you know, kinda required to go with annual contracts. You know, it's working quite well. We're not really getting any substantial, you know, objection to it either.
That's all helpful, Ali. It was just those two questions from me. Congrats on the momentum, and thanks for taking my questions.
Thank you very much. Thank you, Christian.
Thank you, everyone. There are no further questions. I'll now pass the call back to Ali Tajskandar for closing remarks.
Thank you very much, Angelica. I think in closing, I wanna, you know, just thank everyone for being here. Really appreciate your time. The capital markets have been very supportive of us. The team has done a tremendous job, and we're gonna continue executing in a disciplined, responsible fashion, you know, with aiming to, you know, do that 30%-40% organic growth going into the future and do that profitably. Our balance sheet is strong. There's tremendous opportunity in the market in terms of the, you know, the size of the audience of millions of small businesses that we can serve.
We have a profitable way of reaching them and a strong solution that is really the best in class for small businesses that we cannot wait to put in the hands of our customers. You know, we're gonna continue on that, and we're very appreciative of the support that all of you here on the call as well as the markets have provided us. Thank you and stay healthy and safe. Take care.