Paul Walker: Yeah, it’s a great question, Samir. So maybe just let me — we were spending a fair bit of time thinking about how to utilize our excess cash and what role M&A might play in our utilization of that cash. I’ll tell you what’s — so the short answer to your question is I think that there will — that it’s likely that M&A will play a bigger role in the future than it has in the past. And I think we have some opportunities there. We’ve been a little bit careful over the past year or year and half or so because many of the companies in our space fared far worse than we did in the pandemic and coming out of the pandemic for a couple of years there, started to put up pretty significant growth numbers on a percentage basis, but that growth was just getting them back to their pre-pandemic highs, not above.
At the same time, we were also hit a little bit in the first couple of quarters, but our business did quite well during the pandemic and then has grown substantially since our — over our pre-pandemic highs. And recognizing that companies you might want to look at acquiring out there are — they’d like to sell based on the growth rate they’ve achieved getting back to where they were, we wouldn’t want to probably pay based on that. And so we’ve been just kind of watching and waiting and we’re starting to see what you alluded to in your opening comment there that those growth rates are kind of coming back down to where we thought they might. And so there’s — I think there are opportunities as we talk as a team here, and we’re investigating those and looking at those as you would imagine.
Samir Patel: Okay. And then on the other uses of cash, I mean any reason it slowed down in the quarter, I mean, kind of the outlook for — I’m sorry, when I say use the cash, I mean on repurchases and the outlook for that. I think your stock is down double-digits after hours, you have $40 million in cash. You implied you’re going to have record free cash flow this year, which suggests another $20 million free cash flow generation in the back half plus the revolver, I mean, that’s a lot of liquidity. So any thoughts on further share repurchases? And like I said, maybe considering a tender or something more aggressive to retire a much larger percentage of the market cap?
Paul Walker: Thanks. Steve, do you want to take that?
Steve Young: Yes, Samir, nice to be talking with you. So yes, we see the situation the same as you do. Look at this the same as you do. As you know, we generally don’t commit to what we’re going to do, but we do see it the same as you know.
Samir Patel: Okay. Thanks, guys. Appreciate it.
Paul Walker: Thanks, Samir.
Operator: Thank you. One moment for the next question. Our next question will be coming from Nehal Chokshi of Northern — excuse me, of Northland Capital. Your line is open.
Nehal Chokshi: Yes. Thank you…
Steve Young: Hi, Nehal.
Nehal Chokshi: Hey, Steve. What at this point in time more currency rates are, as your expectation on currency headwind on both top-line and EBITDA at this point for the full year?
Steve Young: The FX impact. So we’ve had an impact of just about $200,000 on revenue and about $200,000 on adjusted EBITDA so far this year.
Nehal Chokshi: And what is your expectation as far as how much were currency rates right now? How much would that impact for the next two quarters here now?
Steve Young: Based upon the current rates, we’d have about 200 adjusted EBITDA, about $200,000 adjusted EBITDA in Q3 and $200,000, again in Q4 at the current rates compared to last year.
Nehal Chokshi: Great. Okay. Thanks. Paul, what’s the time to deliver the value on the three projects that you have discussed?
Paul Walker: The time to deliver value. I think there’s actually — so because we’re already — so take each — each of the three, starting with the third one I talked about project impact. We’re — we’ve been in the middle and are in the middle of that. We have a multiyear road map. Our product and technology team has been doing a fantastic job delivering against that. So we’re right in the middle, and that will be something we continue to do, and we’re seeing the impact of that every day. The other two projects, project penetration projects, speed to ramp. Again, as I mentioned, we’ve already been testing those were ready to move to more wide scale. We’ll do that over the coming couple of quarters. And I think we will see the impact in — later this year and into next year on both of those projects. As far as getting them completed and kind of stood up and the configuration changes and all that, that will happen in the coming couple of quarters.
Nehal Chokshi: Okay. And I think you did get some penetration numbers of both the Impact Pod penetration rate as well as the penetration of the improved selling structure here?
Paul Walker: Yes. Let me just go back and — so the penetration rates for the Impact Pod, first of all, there’s service attach rate, you didn’t ask about that, but the service attach rate is 67% versus 50% for the others. Their average revenue per client is $132,000 versus $63,000, and logo retention is about 500 basis points higher. And as it relates to penetration, the average subscription size is $80,000 versus $45,000 for everybody else. So they’re penetrating their clients further is what we’re seeing right now.
Nehal Chokshi: I’m sorry. I meant like what percent of your subscription revenue is being addressed with the Impact Pod versus the Standard Pod? That’s what I meant.
Paul Walker: What percent of the overall revenue? I would — hang on. About 20% of the overall subscription, subscription services revenue is represented by the Impact pod — the test of the Impact Pods.
Nehal Chokshi: Great. And then as far as the improved selling structure for ramping client partners, what percent of client partners already have this improved selling structure?
Paul Walker: Yes, that’s the other kind of end of the continuum. I’d say it’s about the same. It’s a different set of client partners, but I’d say it’s maybe in that group, it’s maybe, let’s see, probably 10% or so today, 10% or 15% are benefiting from that, which will roll out to the rest in the coming quarter or two.
Nehal Chokshi: Okay. And I’m sorry, functionally, what is the difference between an Impact Pod and Traditional Pod? I get that you get all these different results, great results, but functionally, what is the difference between an Impact Pod and a Traditional Pod?
Paul Walker: Yes. So the difference is the amount of support provided to that client partner, the infrastructure around them to help them better engage those clients post sale to uncover and lead to expanded subscription and services sales. So, it’s more intensity of implementation strategist support and more intensity of consultant support per client partner.
Nehal Chokshi: Okay. Great. And can you share the consumption characteristic to the new and refreshed pipeline at this point in time?
Paul Walker: Explain that the consumption characteristics of the new and refreshed pipeline. I’m sorry, product pipeline?
Nehal Chokshi: Let me rephrase it, stated it incorrectly. What are the consumption characteristics for a new and refreshed content pipeline?
Paul Walker: And by consumption characteristics, do you mean by modality?
Nehal Chokshi: I mean like number of hours that are being consumed of the new content relative to the last time when they were refreshed.
Paul Walker: Okay. Okay. I got you. Yes. So as I mentioned — sorry, sorry for not understand the question fully. As I mentioned, so just take a couple of examples. So we launched our new Leading at the Speed of Trust and Work — and a brand-new companion module we’ve never had before, which is Working at the Speed of Trust as mentioned to scale to individual contributors. And that’s now on our Impact Platform as well. And in the first three months, we’ve had 10 times more usage of the on-demand module of our Impact Platform than we had in total from the previous version, so significant increase in consumption around that new solution. And we’re just in the early, early days of narrating difficult conversations, but the client interest has been very, very high, and so we expect to see significant increased consumption of that solution as well.
And then overall, what we hoped would happen and expected would happen when we acquired Strive, and we eventually got all of our content on to Strive, and we created the ability for Strive to integrate into clients, LXPs and LMSs and their technology infrastructure. We’re seeing significant increases in usage across the board of our content by clients, which we believe is — that’s part of what’s driving higher logo retention, although also, by the way, back to Dave’s earlier question is that our solutions are becoming more sticky because utilization is becoming much higher by clients across the organization.
