Wishpond Technologies Ltd. (WISH) Earnings Call Transcript & Summary

Hello, everyone. Thank you, everyone, for joining us today, and welcome to Wishpond's 2022 Fiscal Fourth Quarter and Full Year 2022 Financial Results Conference Call. My name is Angelica, and joining me on the call today are Ali Tajskandar, Chairman, Founder and CEO of Wishpond; and David Pais, the company's 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. Okay, please note portions of today's calls, 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 expectations 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 as is required by law. We use terms such 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 we define these terms, please refer to the definition set up in our management discussion and analysis. And 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. We truly appreciate everyone for joining us today. On today's call, I will first provide some general commentary and an update on the quarter and the full year ended December 31, 2022, followed by our CFO, David Pais, who will provide a financial summary of our results. I will then come back and provide some commentary on our outlook, and we'll go from there. 2022 was another extraordinary year for Wishpond, as we repeated the record financial results. The company had record revenue in the fourth quarter, and we continued to experience increasing demand for our products even during an environment of uncertain macroeconomic conditions. Wishpond also continues to maintain a strong financial position with a clean balance sheet. Our healthy balance sheet and market position allows us to be in an enviable position to maintain our strong organic growth while investing in R&D to develop and deliver innovative digital marketing products to our customers. We are especially thrilled with our fourth quarter and annual results, which were the strongest in the company's history with record revenue, adjusted EBITDA and cash flow generation. Wishpond achieved record revenues of $5.9 million in Q4 2022, representing approximately over $23 million annualized revenue run rate, driven by the company's focus on organic growth and successful market positioning. We are also pleased to report another quarter of record positive cash flows from operations of roughly $800,000. We believe that as part of the cost reduction initiatives we launched earlier in the year, we're able to drive profitable growth by scrutinizing all new expenditures with the intent of optimizing operations and achieving cost savings synergies. As a result of these cost optimization efforts, Wishpond was able to achieve both record positive cash flows from operations and record positive adjusted EBITDA in Q4 2022. We have now achieved positive operating cash flows for 3 quarters in a row, which allows the company to invest in organic and inorganic growth initiatives without the need to raise additional capital. Our outlook is strong and positive for 2023 with increasing sales, improving margins and positive cash flows. We expect to continue to grow rapidly as our sales pipeline remains robust with the launch of Propel IQ, our new next generation marketing platform and the introduction of artificial intelligence powered marketing tools. 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, who will review the financial results for the quarter. David? David, you're on mute.

Apologize for that. Okay. Thank you, Ali. And thanks everybody for joining us on the call this morning. I'm pleased to report that we had very strong annual and fourth quarter results for the year and 3 months ended December 31, 2022. The financial highlights for fiscal 2022 are as follows: Wishpond achieved record annual revenue of $20.5 million during fiscal 2022 compared to revenue of $14.8 million in fiscal 2021, an increase of 39%. The increase in revenue was primarily driven by organic growth resulting from strong product demand, an increase in sales and marketing activities, new product introductions. The company also completed its acquisition of Viral Loops in Q2 2022, which contributed to revenue growth over the past year. United States remains our largest market, generating approximately 70% of our total revenue in 2022 with approximately 14% and 16% of revenue generated from Canada and the rest of the world respectively. Wishpond achieved gross profit of $13.6 million in fiscal 2022 compared to $10 million last year, representing an increase of 36%, driven by an increase in overall revenue. Wishpond's gross margin percentage was 66% during fiscal 2022 compared to 68% in fiscal 2021. The gross margins were within the company's historical range of 65% to 70%. Wishpond achieved record positive adjusted EBITDA of $648,000 in fiscal 2022 compared to an adjusted EBITDA of $56,000 in fiscal '21. The improvement is primarily driven by higher revenue and continued cost management initiatives and operational efficiencies initiated in 2022. In fiscal 2022, Wishpond generated net positive cash provided by operating activities of $1 million compared to cash burn from operating activities of $1.5 million in fiscal 2021. In the second quarter of 2022, the company implemented several cost reduction and operational efficiencies designed to conserve cash. These changes have resulted in the company realizing more than $1 million in annual cost savings. Our commitment to realizing cost efficiencies, while still achieving growth is what permitted us to generate record cash flow and EBITDA in 2022. Our fourth quarter financial 2022 results are as follows: Wishpond achieved record revenue of $5.9 million in Q4 2022 compared to revenue of $4.7 million generated during Q4 2021, an increase of 27%. Revenue growth was positively impacted by seasonality in Wishpond's acquired businesses, the expansion of the company's sales team, and integration of our acquisitions. Wishpond achieved gross profit of $4 million compared to $3.2 million during Q4 2021, representing an increase of 27% driven by an increase in overall revenue. Wishpond's gross margin percentage in Q4 2022 was 68%, which is similar to the gross margin percentage in Q4 2021. During Q4 2022, Wishpond achieved record positive adjusted EBITDA of $687,000 compared to an adjusted EBITDA of $491,000 in Q4 2021, an increase of 40%. Adjusted EBITDA margin was 11% for Q4 2022 compared to 10% in Q4 2021. The improvement is primarily driven by higher revenue and continued cost management initiatives, and operational efficiencies initiated earlier in the year. During Q4 2022, Wishpond achieved record positive cash flow from operations of $803,000 compared to $406,000 in Q4 2021. We continue to have a clean and healthy balance sheet. As at December 31, 2022, Wishpond had $3 million in cash and short term investments, and no debt. In the prior quarter ended September 30, 2022, the company had cash and short-term investments of $2.7 million. Wishpond has a $6 million secured operating credit facility with National Bank of Canada's Technology and Innovation Banking Group, which remains undrawn as of today. In summary, Wishpond remains in a very strong financial position with a healthy balance sheet, solid monthly recurring revenue and very good visibility of revenue and cash flow. Wishpond is able to continue growing comfortably from its cash flow from operations without the need for any additional equity, or debt capital raise. I will now provide an update on a normal course issuer bid or share buyback program. On June 15, 2022, the company announced that the renewal of its normal course issuer bid or NCIB, was approved by the exchange. During the full year 2022, the company purchased 152,600 common shares under the NCIB for aggregate consideration of $166,570. 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 using some of the company's surplus cash under the NCIB would be in the best interest of the company and its shareholders. The company intends to do judiciously purchase shares under the NCIB program based on available cash. As of the end of the fourth quarter of December 31, 2022, the company had 53,705,324 common shares issued and outstanding. This concludes my financial update. I will turn the call back over to Ali.

Thank you, David. I would now like to share with you some recent business highlights, as well as our recent product launches. On November 2, 2022, the company announced that Lloyed Lobo had joined its Board of Directors as an independent director and member of the Audit Committee effective November 1, 2022. Mr. Lobo replaced Arinder Mahal, who resigned from the Board effective November 1, 2022. On December 1, 2022, the company announced that its wholly-owned subsidiary, Brax Technologies Ltd., launched Braxy, a new and easy to use AI-powered advertising solution for businesses. The company began cross-selling Braxy to its current base of more than 4,000 customers and believes that its customers can deploy this solution along with other Wishpond online marketing solutions to increase their conversions and sales. On March 9, 2023, we announced the launch of Propel IQ, Wishpond's next generation marketing technology platform. Propel IQ is our most extensive platform offered to date, combining Wishpond's award-winning software with its recent acquisitions to create one connected platform. In addition to Wishpond's AI-powered Website Builder, lead generation, email marketing, automation, and marketing technology solutions, Propel IQ includes SMS marketing from Winback, referral marketing from Viral Loops, AI-powered Braxy from Brax and sales engagement software from PersistIQ, all integrated together into one platform. With Propel IQ, businesses will be able to manage the complete customer life cycle on one platform, eliminating the need to invest in additional marketing and sales tools. Propel IQ offers customers an easy onboarding process, which includes creating a marketing plan tailored toward the business's specific goals, where Wishpond's team help set businesses up in the right direction before handing over the software to business owners. This ensures that the SMBs are set up for success from the beginning and can quickly start seeing the benefits of using Propel IQ. Furthermore, we will continue offering professional marketing services as well, so that businesses who need assistance with additional paths such as graphic design, copywriting, ads management or SEO, can simply access these services with a click of a button. Propel IQ allows Wishpond to truly capture the most value out of this acquisition. We've successfully integrated all 5 acquisitions that connected the products across the businesses to implement new cross-selling capabilities. Additionally, our development team has worked hard to build out the platform completely, incorporating features such as single sign-on capability, a unified dashboard for other products in the platform, which we demoed at our recent Investor Day event. We are also introducing generative artificial intelligence or AI technologies in this platform, beginning with the AI Website Builder, which will revolutionize the way SMBs approach marketing. And we're thrilled to be at the forefront of democratizing this change. Propel IQ is the future of Wishpond and we believe that the platform will give us deeper integration into the highest business and marketing systems, increasing our customer retention and long term customer value. Moreover, through the Propel IQ platform, we expect to further increase Wishpond's margins. Further, through our launch of Propel IQ, on March 30, 2023, we announced the launch of our new Website Builder, which is powered by generative AI technologies. The Website Builder leverages the latest generative AI technology to analyze users, user inputs and automatically generate website designs that are tailored to the user's specific needs. To create a website using the Website Builder, entrepreneurs and business owners simply enter a few details about their business, the systems AI algorithms will generate high quality content and imagery using the information provided. The Website Builder further allows users with the ability to edit and refine their website using AI technologies, including the ability to translate the website into multiple languages. This is truly a groundbreaking product because it allows people who are not tech savvy to create high quality professional and marketing optimized websites within minutes. Users can cut down on significant development time and save thousands of dollars on programming, design and copywriting services. Furthermore, we are very excited that the AI powered Website Builder marks the first introduction of generative AI technologies on Wishpond's Propel IQ platform. The use of AI technology is rapidly changing the digital marketing landscape. Wishpond is at the forefront of utilizing these new innovations, to provide SMBs with new advantages against larger competitors. I believe that artificial intelligence technology truly has the potential to disrupt much of the way people and businesses operate, and I firmly believe many AI applications are here to stay and will revolutionize the marketing industry. We are actively working on developing additional AI powered marketing tools for our Propel IQ platform. There are numerous use cases of AI marketing that we intend to launch and include in our products. For instance, an AI powered e-mail responder that can be used to generate responses to customer inquiries. AI can be used to generate personalized content on newsletters, websites, e-mails and SMS messages. AI can help small businesses provide more background information on the leads in their prospect funnel. And AI can be used to produce professional looking promotional videos that will otherwise cost a lot of money for the SMB to produce. These are just some of the exciting development work that is taking place at Wishpond. We are in a very fortunate position to be able to lead the charge in applying AI to marketing applications and to provide our clients with powerful tools that will help them grow their businesses more efficiently and profitably than was ever possible in the past. Management is very optimistic about the company's growth prospects, and I'm pleased to share Wishpond's key goals for 2023: 1, increased monthly recurring revenue through both organic and inorganic means; 2, significantly scale the size of the sales team to help achieve our organic growth profile; 3, remain adjusted EBITDA profitable by balancing aggressive growth with increased positive cash flow from operations; 4, invest in research and development so that we can continue to launch new AI-powered products and services to increase long-term value for our clients; 5, leverage the Propel IQ platform to further accelerate the company's growth, improve margins and increase customer retention and long-term customer value. Wishpond's outlook for Q1 2023 and heading into 2023 remains strong and positive. Wishpond's performance is better than ever and extremely positive across all these acquisitions and for the entire company as a whole. Wishpond is well positioned for continued growth and profitability. Wishpond expects to achieve record revenue and cash flow in 2023. This is driven by organic growth from ramping up sales of the company's new Propel IQ bundled product offering, increasing the size of our sales team and new product introductions. We continue to experience strong performance across all of our businesses with robust demand for our products. We expect organic growth in 2023 to be in line with historic range of 30% to 40% per year. Our organic growth rate does not show any signs of slowing down, and we are getting more new clients than ever before. We do experience lumpiness and seasonality, so the organic growth rate can vary from quarter-to-quarter. Last year, we experienced a significant decline in revenues from Q4 to Q1. However, with the launch of Propel IQ and the subsequent acquisition of Viral Loops, which has less seasonal sensitivity, we expect lesser impact in Q1 2023 compared to Q1 2022. We expect to be adjusted EBITDA positive in each quarter going forward. In line with our 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 company is reviewing strategic acquisitions again. Given Wishpond's strong balance sheet and management's successful acquisition track record, we are once again looking at acquisition opportunities and building our acquisition pipeline, which consists primarily of a small tuck-in acquisition. Wishpond has demonstrated disciplined capital allocation strategy, having successfully completed and integrated 5 acquisitions since the company's public listing in December of 2020. Our acquisition strategy has aimed to do tuck-in acquisitions of marketing and technology companies that offer complementary product solutions with small, medium-sized businesses. All our acquisitions have been capital generating companies that can benefit from our sales and marketing expertise and their products and solutions offer great cross-selling opportunities for our core Wishpond customers. Our acquisition strategy has worked to date and has added tremendous functionality to our offering, as well as complemented the company's organic growth very nicely. With the launch of Propel IQ, we are expecting higher customer retention rates going forward. Clients are increasingly signing up for annual 12-month terms. Propel IQ improves the stickiness of our platform and aids in retaining customers for longer periods of time. The bundled pricing of Propel IQ is expected to result in greater customer satisfaction, less churn and consequently higher customer retention. Wishpond is recession resilient. The business has felt no impact due to recession, inflation, supply chain or other macroeconomic effects. 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. And so businesses looking to cut costs find value in Wishpond's all in one consolidated software platform, which cost 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 than our internal marketing resource. Wishpond is an effective low-cost alternative that is thriving in a recessionary environment. Wishpond can continue to fund the growth of its sales team and new product launches from cash flows from operations without having to raise additional equity or debt capital. The cash flow generated by the company will continue to be reinvested in the business in allocated and disciplined manner, which may come in the form of future acquisitions, share repurchases or to accelerate organic growth. In closing, I want to reiterate that Wishpond is an elite software company with profitable growth. Technology companies are known to burn lots of cash for many years before becoming cash flow positive. Very rarely do you find a software company of our size with over $23 million in annualized revenue run rate that is generating positive cash flow from operations and is also rapidly growing with 30% to 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. We do not believe the company's current share price is warranted. We believe the general 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. Despite the poor stock performance over the past year, I strongly believe Wishpond has never been in a better position than it is today. Wishpond today is in a very enviable position with a growing customer base, increasing revenue, broadened product offerings, clean balance sheet and positive cash flows from operations. I'm extremely proud of what we have accomplished and I'm excited with our future plans. Finally, I want to thank all the employees at 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. Also, I'd like to thank you all for joining us today on this call. Please note, we recently hosted an Investor Day, including presentations from senior management team and product demonstrations of our new Propel IQ platform and our AI-powered Website Builder. You can view a replay of Investor Day video under Events in the Investor Relations section of our website. We look forward to providing you an update next quarter. I will now hand it back to Angelica for questions.

[Operator Instructions] Our first question is from Jason Zandberg of PI Financial.

I wanted to drill down on customer behavior, if I could. So you mentioned you don't see any impact of potential recession and so forth. But I just wanted to know if there's any change in terms of just the way that the customers are behaving in terms of longer sales cycle? Are they tending to look for a lower cost solution? Or are they still willing to open the pocketbook and spend for premium service?

As of right now, we haven't felt or noticed a negative impact in terms of lower willingness to pay or longer sales cycle or lower demand. So as of right now, no, it has actually remained steady. In fact, I think one thing that has been interesting though is that with inflation, a lot of other services have increasingly become more and more expensive. We haven't really raised our prices for some time, and there has been more innovation happening as well. So if anything, actually, our service has become cheaper in comparison, which is obviously a growth opportunity as well for us.

Well, that's great color. If I could ask another question. I just wanted to get an idea in terms of the size of your sales team. You mentioned that you want to continue to invest and increase that size. Can you just remind us what the number of sales reps you had at the end of the year, maybe what you have currently right now? And what's the sort of target for the end of this fiscal year?

I think end of last year, it was roughly around 40 account executives. And right now, I think it's around 45. So we didn't increase it that much from the end of last year to now. Now we're accelerating and our plan is to get to 70 to 80 by end of the year. The reason that we didn't add a lot of account executives from end of last year to now has been that as we were ramping up and rolling out Propel IQ and nailing really what the demo structure should be, nailing our training programs internally and resources and all of that, we wanted to make sure that our sales team is fully equipped and doing well, and our account management team on the onboarding side of Propel IQ, everything is in place before we add more headcount on the sales side and now that's what we're in the process of doing.

The next question is from Gabriel Leung from Beacon Securities.

Just a couple of things. First, just going back on the cost side of the equation, Ali, you talked about potentially doubling the size of the direct sales rep team this year versus last year, while still remaining sort of positive EBITDA over the course of the year. So how should we think about EBITDA margin and operating leverage in calendar '23 relative to the sort of 3% you reported last year?

Yes. So I'll share my thoughts. I think David should also add some color on it from his point as well. Actually, in fact, David, you want to take it first and then I'll fill in?

Sure, Ali. So thanks for the question, Gabe. In terms of our EBITDA margins, I noted in my comments that the Q4 EBITDA margin was like 11%, and that was really good, and like we are quite happy about that. But going into 2023, we're projecting anywhere from 5% to 6% all the way to 9% to 10%. And I know that's a large range for you. Like if you want to just take anywhere between 5% and 10%, I know that's a large range, but at the same time, there's a lot of uses of cash that we can spend on every day, whether it's developing new AI products, whether it's increasing the size of the sales team like you point out, and so on. But it also depends on how fast we accelerate revenue. So in some of our investor decks, we've talked about our LTV to CAC ratio and it's anywhere from 3.4, 3.5:1, which obviously means we have a little bit of runway to spend money on growth initiatives, especially sales growth initiatives and still generate positive cash flows. So I think I gave you the longer answer to the question. The short answer is we're going to be judicious, as Ali mentioned in his remarks, and we're going to be very careful how we spend our cash. And at the same time, keep an eye on the bottom line.

Yes. Thank you. Exactly. And the only other comment I would make is that I think longer term, I don't see a reason why our EBITDA margin wouldn't be above 20%. But for the current year, 5% to 10% is probably what we're going to aim for or what we're going to see given all the growth plans that we have.

That's helpful. And just as it relates to Propel IQ, are you able to share with us any early data points you've got in terms of what the pipeline is looking like for that particular product as it relates to the type of customers that you're seeing and the sort of bite size, dollar size that you're seeing with -- on the pipeline for that product?

I think what we've seen so far indicate a few things. One is that we're seeing early -- very promising early signs of significantly higher retention rates. Monthly subscriptions are lower, but there's also set up fee. But all in all, LTV for Propel IQ seems to be quite a bit higher than the packages we've showed in the past. And what's also very interesting with Propel IQ is that if you think about the previous packages that we sold a lot, the $500 per month, it was kind of -- that was more or less what we would actually get from that deal, from that subscription. Now with Propel IQ, there's multiple layers to it. One is that it is higher LTV just for the base software package. But on top of that, we can also have upsell for extra services for 3 months, 6 months, whatever the clients need to help them get ramped up in certain aspects of marketing. So that actually pushes even higher. And the other element, the third element that is also very, very interesting in that is that there is usage-based pricing built into it that we didn't have before as well. That -- as Propel IQ base package comes at, let's say, 1,000 leads included for $300 a month. And then above that, you would pay more per lead. So we already are seeing clients that maybe the base package is $300 a month, and their lead overage cost would be more than $2,000 a month. So some of those dynamics are going to be quite helpful as we ramp up and push Propel IQ further.

Got you. That's helpful. And just one last question for me, and maybe for David. On the revenue side, I guess a 2-part question, first, do you have a guesstimate of what the organic revenue growth would have been for Q4? I guess that would be stripping out sort of win back in the Viral Loops, that's the first thing. And the second thing is you kind of talked about it, but should we expect any sort of quarter-over-quarter seasonal impact going from Q4 to Q1? Or do you expect there to be a sequential decline? Or do you think it would be flat to maybe up just given the strength you're seeing in the business?

So in terms of Q4 and Viral Loops Winback, first of all, Winback is a very small acquisition. Viral Loops a little larger. But if you recall, when we announced Viral Loops, it did about $800,000 in annual recurring revenue. So if you look at our $5.9 million quarter, and you divide up that $800,000 in Viral Loops revenue by 4 and add a little bit of growth rate, I mean it's not a huge component. So my response to you is it's mainly organic growth. Yes, there is a little bit of inorganic, but it's mainly organic. And in fact, going forward, as we get more into Propel IQ and so on. First of all, we never broke down these individual subsidiaries in the past. We certainly don't intend doing that going forward. And the main reason being is we always intended to integrate them. And as you integrate them, it sells more as a bundle and then you start focusing a little less and what the individual group's revenues are. So I would actually focus more on the overall growth rather than any independent unit growth.

I think the second part of Gabriel's question, just as a reminder, David, was going from Q4 to Q1 and what we expect seasonality.

Yes. So the -- obviously, between Q3 and Q4, we had a little bit of benefit. So we obviously saw some growth. Our Q1 numbers, we haven't put out our numbers, we haven't finalized them either. And we typically don't give guidance. But maybe I should maybe pause there and just say we're not giving guidance, but...

I think to the extent that we've already shared, and I can reiterate is that Q1, we have a little bit of headwind when it comes to seasonality, but we expect it to be not like Q1 of last year. Q1 of last year, I think the dip was relatively large. We expect it to be more -- yes, maybe I shouldn't say more, but not as pronounced as it was last year.

The next question is from Neehal Upadhyaya from iA Capital Markets.

Congratulations on the quarter and the year amidst the challenging macro backdrop. One of the questions that I had was you're looking at M&A again. I was just wondering if you would consider tapping into your credit facility to facilitate an acquisition, if you saw something that was suitable? What are your thoughts on the use of that credit facility? And then my second question was in regard to gross margins with Propel IQ and other growth initiatives. When do you think we could see margins past that 70% threshold? And then what do you think the long-term sustainable margin level is?

Yes. Great questions. So let's start with the second question. With Propel IQ, what we're seeing is that we expect margins to be significantly higher. Now I would be hesitant to give specific numbers right now because some of it is obviously a dynamic situation, and it will take some time because we're going to have a mix of clients that are on older packages and as we're selling more of the new Propel IQ and what that looks like, it could take some time. But I think long term, and I don't know exactly what long term in this context would end up being. But long term, I don't see a reason why our margins wouldn't be above 80%. And we're putting all of our efforts in that direction. And so far, based on what we're seeing from Propel IQ that seems to be quite achievable. So we'll go with that. Your first question, can you remind me again? Now I forgot after the second one.

No problem, Ali. I was just wondering if you would tap into your credit facilitate any M&A?

So again, they'll be opportunistic. So if there's a deal that on a cash flow basis looks so good, that is a no-brainer for us to tap into line of credit, we would consider it. But we will never tap into line of credit for something that on a cash flow basis wouldn't be amazing. And also, we would, I think, be more on the cautious side. I think these days you can look around and see a lot of businesses that are in big trouble. And usually, it has to do with debt. So from that point of view, we are more debt averse than maybe some of the other companies. But again, if the deal is like that, it's a no-brainer and there's good margin of safety, yes, for sure.

Perfect. And then maybe one last one. You spoke about the product road map and the use of AI. And then once you launched some of these tools, would it be fair to say that you're potentially positioning yourself to compete within the enterprise and larger businesses within that SMB segment?

We do. I mean, for sure, for sure. And already, as I mentioned previously with PersistIQ, for example, we're selling to a bit larger clients and now as part of Propel IQ and other being exposed to the whole platform. So I think we're going to see some of that. But still, our DNA, first and foremost, is serving entrepreneurs and small businesses, and that's where we see the biggest gap in the market. And we -- the competitors that we have, a lot of them are serving the enterprise environment. And I think it's quite advantageous for us to have a blue ocean of millions of SMBs that we can serve and have very sticky offering for them, that integrates into their business processes. So from that point of view that I think that will continue to be our bread and butter and our focus. But when you say SMB, obviously, it's a big range. So I think we're going to probably move around in that definition, and there will be some larger ones that will be part of the package as well.

The next question is Dan Rosenberg of Paradigm Capital.

Ali and David, my first question was around the outlook that you provided, and so you gave a positive outlook, but highlighting that it'd be driven by both organic and inorganic growth. Around the inorganic, I was just curious how you envision the pipeline growing, understanding that it's just ramping up now. But any characteristics around size and of what you would like to see in that pipeline or capabilities of what you would like to see in that pipeline?

Yes. So first of all, let me clarify. I think the outlook that we gave that we expect 30%, 40% growth had to do with organic growth. Because with acquisitions, obviously, it's always difficult to know which ones will end up being the ones that you execute and what their contributions will be. So we're saying we expect very positive outlook and record revenue and profitability this year just organically, forgetting about acquisitions. Now turning back to the subject of acquisitions. Right now, all things considered are cash balance, let's say, the $3 million and our own growth initiatives doesn't leave a large room for us to make larger acquisitions because we also want to be very careful what happens in the market. We don't want to be at the mercy of external factors. And because of that, I do expect that the next few acquisitions will probably be on the smaller side, unless the equation changes in a way that it will make sense. And I think in terms of our capital allocation strategy, the way we're thinking about it is that we want to further reduce our costs, accelerate sales aggressively, when possible, actually do more active share buybacks. And get to a point, actually, at some point, maybe it's not today, but at some point to get to a point where we're producing enough cash flow that we can even make more and more acquisitions through the cash flow that we're generating ourselves or when it is warranted based on the share price rates on to make more acquisitions. So I think the short answer is that we're going to walk before we run in terms of further acquisitions this year. It's going to be more cautious exercise than maybe 2 years ago.

Got you. And then on the rapid sales acceleration that you mentioned. Could you share how the sales team, how you envision it growing, whether it be by geography or sales type, just to kind of understand the dynamics of how you're building that team?

We are still focused on North America mostly. I mean now we're selling some to European countries as well for sure. So I think it's going to be, again, adding more sales development reps and account executives serving the same geography. And in terms of the verticals, e-commerce continues to be a large focus for us. B2B businesses is going to be an increasingly important audience for us, is one of the fastest-growing ones. And we're diversifying and adding more verticals, a lot of local service providers and those types of businesses are being added as well. So our sales occupation is actually quite diversified and it's going to continue to be like that heading into the rest of the year. I think e-commerce is very important, but as a percentage of new outreach it might start becoming smaller.

Okay. Lastly for me, I was curious around AI. Obviously, it's early days, but it's nice to see you putting tangible products and features already in market. I was wondering, as you think about the future, how big a part of Wishpond do you think AI becomes? Is it too early to say, but perhaps, but any thoughts around how you see AI as a part of Wishpond in the future?

I think it's huge. And already, we're seeing that is helping in multiple fronts. So one, in terms of back office and our own internal resources, we're using very AI very actively to find cost efficiencies, and we're actively every day doing that and improving on that. So that's something that we're going to continue. In terms of our product offering, we saw the AI Website Builder. And as we announced initially, it's been available to all the Propel IQ clients and everyone else that wants to have access to the free version to be able to test it out, and see more limited capability would need to be part of this waitlist and already, we're approaching about 2,000 businesses that have signed up to be on that waitlist to get access to the AI Website Builder, which we're going to release in the coming days to the public actually, so they are part of that waitlist. And just thinking about that, not only is it a very important capability, but it's also a very important marketing channel for us, right? So you can think of all of these businesses [Technical Difficulty] Kind of you can think about in terms of, let's say, Apple, Apple's turnaround into becoming again such a major player in the market started again with iPod and iPhone and iPad and all that. And then people as they got more comfortable with those capabilities and those products, then they started actually buying the MacBooks and all of those things again. And to some extent, our -- the pre version of the AI Website Builder is going to do that for us. That's one side of it. The other side of it is these capabilities actually give ability to small businesses that otherwise, they would have to hire teams for and pay a lot of money for and take a lot of time on. And those are very appealing for our clients and to our own internal resources. So I think it is something that is going to be an increasing focus for us. We're going to continue innovating in anything AI. And initially, I think we're going to do some of these more siloed approaches of AI Website Builder, e-mail responder with AI, newsletter, creation with and AI and all of that. And at some point you can actually expect even deeper AI integrations where we have billions and billions of data points from millions of leads from all of our clients from SMS messages, based on the e-mail they send or the browsing history, the videos from the landing pages and websites that they watch, that all of those can become part of the AI algorithm to help our clients have a more personalized front to their clients that would be more likely to convert and return into a profitable undertaking for them. So yes, it's going to be a major focus for us. It's priority 1 in terms of our product development.

Okay, the next question is from Neil Bakshi of Canaccord.

I guess the first question I had is with respect to -- with AI becoming, as you've spoken about it, it's really kind of become a core focus for the company. I'm wondering if it has, in any way, shaped some of the kind of evolution of the M&A pipeline for the coming year as you look to kind of talent acquisition or product acquisition. Just wondering how it fits into kind of the pipeline of potentially smaller deals, but looking at teams that have been leveraging it more so than others in a very burgeoning space?

It's a good question. I mean I think each opportunity will look at them in their own lights. And obviously, in an M&A opportunity, we look for several things, we look for them being profitable, similar kind of customer base for us not to have to overpay for them and the strategic value. But ultimately, we want an acquisition that gives us a multiplier effect that with them, we can grow faster than we would have otherwise been able to do. And AI would put a check mark around that in a lot of cases [Technical Difficulty] will be the only criteria. So I think we'll see. We'll deal with them one at a time based on opportunities. It would make a deal probably sweeter, but I wouldn't say it's a requirement.

Okay. And then just a question with respect to -- you mentioned a bit about the seasonality impact not being as pronounced for Q1. But just from an MRR perspective, is it fair to say that kind of the run rate of $23.6 million entering the year, should we see kind of a bit of a -- maybe a small drop down or just kind of look -- I know you've talked about on a month-over-month basis, improvement in Q4 over Q3, to Q1 still be a little bit of a drop-down over Q4? Or just wondering how we look at that kind of annualized recurring number in the context of the seasonality?

I'll let David answer that.

Neil, I think the overarching point is we don't typically give guidance. Like just as in last year, we did see a little bit of a dip, but it's not a significant dip. I think Ali mentioned that the dip wasn't as much as we saw last year. But when you're looking at the entire year, you're looking at $26 million, $27 million. If you look at last year, if you look at our quarterly revenue last year, Q1 through Q4, each of Q2, Q3 and Q4 showed growth over Q1. There's nothing right now in the forecast that makes us think otherwise for '23. So we fully expect between Q1 and Q4 of this year, we're going to see growth in each subsequent quarter. If anything changes, obviously, that we can't foresee right now, then we'll deal with it at that point. But Q4 is look -- sorry, Q2 just started. There's nothing that seems to concern us on the horizon. And I think we would stick by a forecast at this point. It's really not our forecast. It's yours.

The last question is from Christian Sgro of Eight Capital.

So the first one I'll ask today is on the migration process to Propel IQ. It sounds like it's being sold to new customers as the new wholesome Propel IQ product. But some of your older legacy Wishpond customers, do they have to migrate over? Is there like a migration process that your sales team is working through? And does that represent an upsell opportunity maybe as you cross that bridge?

It is an interesting opportunity for us for upsell and cross-sell, but it is not super straightforward in all honesty because that client that got, not Propel IQ, was presented something different. And that's what they agreed and that's what they liked and maybe their circumstances mandated that that's the approach that they want to take with us. And because of that, to a large extent, we look at them case by case, but we're not actively trying to migrate all of them to Propel IQ. And instead, we're kind of looking at, well, the new businesses that we're onboarding, that is the best opportunity for us to increasingly put all of our sales resources on pitching and selling Propel IQ. But there's definitely some opportunity in the future there.

I understand. And then a related question, maybe more broadly across all offerings. Do you expect more growth this year to come from new logos, new business? Or do you see a big opportunity to expand within your existing customer base? Which -- when do you think is larger or maybe more achievable way, here with you?

Yes, for sure. So I mean, I think it's going to be mostly from new logos. And as I mentioned before, that was -- I would say one of the shortcomings of the old model that we had that regardless of how much success you have with the platform and so forth, you would still continue to pay the same and the packages, a lot of times had a lot of capabilities that left it in a difficult situation for upsell opportunity because a lot of things were already crammed into it anyway. Now with the Propel IQ packages, we already see, as I mentioned, those cases where some clients that are starting at $300 a month are already going to a place where they have to pay $2,000 a month based on usage and the number of leads and so forth. There are going to be some elements of paying as a percentage of the payments that they're collecting through Wishpond and so forth. So I think -- I don't know to what extent we're going to see that in 2023. But in the future, we're going to get in a place where a larger and larger percentage of the revenue growth will come as a function of the existing clients doing well and bringing more leads and continuing with the business or upselling and using some of the extra services that we have. One example of that, that we're already -- we've already rolled that and has been great also is Propel IQ, for example, if someone is using it, and they say, well, I want to actually advertise and bring more businesses in, then Braxy would be something that they would pay additional fees for that. And that has been a very easy upsell opportunity for us as well.

Clear, Ali. Congrats on the launch of the new platform.

So there are no further questions. I'll now pass the call back to Ali Tajskandar for closing remarks.

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