Cint Group AB (publ)

STO:CINT

Earnings Call Transcript 2022-Q3

[Operator]

Hello, everyone, and welcome to Cint Third Quarter 2022 Results Presentation. My name is Bailey, and I'll be your moderator for today's call. [Operator Instructions]. I would now like to pass the conference over to your host, Thomas Buehlmann, CEO. Please go ahead when you're ready.

[Thomas Buehlmann, executive]

Thanks very much, Bailey, and welcome. Good morning, everybody. Thank you for your time and for listening in today. As we start, move to the first slide, which is the agenda. Just by brief way of introduction, you've got myself here today in the Danske London offices. Thank you Danske and Viktor for hosting us today. And you also have Britta Mittler who you have met last time as our interim CFO.

But let's get straight into it. If we move to Slide #4, please. Just by a very brief way of reminder, this is us. You can see us represented graphically on the top part of the slide there. And really, what we do is the kind of brands on the left-hand side and companies want to ask questions with respondents on the right-hand side who want to respond to questions and apply to question is, in a fully programmatic and also way. As you will know, we are now the world's largest consumer network. We think of that as a major competitive moat, 252 million connected consumers at this point in time and growing.

Now just a little bit of history. I mean, you all know that historically, our ambition, in fact, both ambition was to be the #1 platform. Both companies has growth supported by some M&A in the years before the merger then, of course, with the acquisition of Lucid at the end of 2021, we did really create the #1 platform. And we really believe that we've got very strong growth and synergy potential of the much larger combination. So we are talking about Q3. It is important to go to that, obviously, but I do want to kind of just start by zooming out a little bit been talking about kind of the rationale for the merger and the direction travel, which we see is extremely positive.

Just a quick recap on the bottom right-hand side there. We have become a very much an Americas focused business, just a little bit over 60% of our net sales by region, with EMEA now a little bit over 30% and APAC at 8%. If we go to the next slide, please. This is our recap of the strategy at [indiscernible]. You'll be very familiar with these. You've got 4 kind of major sort of growth levers. We've got growing share with established inside customers. You will have seen in the numbers that we're going to show shortly, they have grown really well with us through Q3, growing with the tech-enabled inside companies as well, of course.

New customer acquisition that continues to be a really important and successful for us, growth lever and indicative of positive things to come in the future. And then, of course, we are constantly evolving software platform, product portfolio really important and we'll continue to do that. The M&A side, yes, it is there. We will continue to do it, but not right now and not for the time being, since we're still very much in the integration of Lucid mode.

In terms of financial targets, I absolutely, absolutely stick to what we said when we did the combo, 25% annual organic net sales growth in the medium term and an EBITDA margin also of 25%. I'm sure there'll be some questions and discussion around that, which would very much welcome. If we now move to the next onwards 2 slides and talk about Q3 specifically. And really, I would say here, for me, I'm really happy with our financial metrics, and I'm not happy with our organic year-on-year growth, right? So you'll have seen that earlier the Q3 net sales came in at 24% on a reported basis with 11% on a constant currency basis.

Now that by way of context, if we look at year-to-date, so first 3 quarters on a constant currency basis, we are still growing at a very nice 18%, but Q3 down at 11%. And that's a bit I'm not happy about. The real -- in my mind, there are 2 major drivers for that. One is the macroeconomic situation. It is making brands a little bit more cautious. We can talk about that a little bit later on in the Q&A session. But really, what I'm seeing is that it's a little bit a similar situation, if you like, as with COVID, where initially, when that started, it was a little bit deer in the headlights kind of situation where brands were immobilized, CFOs in many brands kind of took over control of discretionary spend and kind of froze it on a temporary basis. That's very much like -- and to me, what happened in Q3, it feels similar to the very early stages of COVID. And I think that's the -- that's one definitely one of the factors that influenced our organic growth.

The second one is platform performance. And frankly, that's a known goal, right? So we had -- we did have suboptimal platform performance during a very important integration project and kind of also on the platform side we had a delayed partner API integration, which impacted revenue. So the way I think about that, and we've done some pretty thorough analysis, those 2 factors, the kind of internal one, I would like, not the macro, the internal ones, I think, have probably accounted or cost us, if you like, 3% to 5%, I think, of growth in the quarter. So the way I think about it is we're somewhere in the mid-teens, which not stellar, but I think in the overall context, I still do think that's pretty good.

Gross profit, now moving more to the financial metrics. A nice increase on absolute gross profit and very encouragingly, we've got our gross margin, 63.4%, which is the highest level so far this year. And then as -- for us, this is a journey, right? And as we get a little bit of kind of external softness on the revenue side, we have focused very much on the second part of our financial commitment, which is the EBITDA margin, of course. And I think we've delivered a pretty good number here. We've done a whole bunch of measures around sort of cash focused initiatives and cost initiatives. And as a result of that, we are pretty happy to report 90% EBITDA margin for the quarter. And Britta's going to talk a little bit more about the sort of specific initiatives and metrics that contributed to that.

So in fact, if we could move to the next slide and talk about net sales development on a pro forma basis. What you can see here is the typical reporting that we do. We've got the business segments. On the left-hand side, media measurement is really sort of nice growth and really driven by our big customers, which I think is really encouraging. So big customers continue to spend and continue to kind of measure their online acnes, which is good. And then, of course, you can see then on the marketplace, which is the kind of the core of our business the growth there as well.

By region, it's a similar pattern, of course, Americas is kind of the leading the charge there, at least on a reported basis, but they've obviously also had a lot of currency tailwinds. We've got landed during Q3 and also right now in EMEA, some very nice large -- some nice large deals, which are nascent for the time being, but will contribute increasing revenue as we move forward into Q4 and into early next year. And then finally, on APAC, really, APAC is a story of key accounts, and that's really good. We've refocused or are focusing on the big key accounts in APAC, and that is yielding some really interesting positive results here.

I think for me on this slide, the really interesting pattern here is on the customer type. And here, we've seen a flip of growth rates from the tech enabled over to the established inside companies. And that's just by way of reminder that we saw something similar in Q4 of last year. And really, I think this is interesting for the following reason. I mean we've done a lot of digging and a lot of kind of market intelligence. And really, the conclusion we come to is the following is that when things get challenging and very complicated out there in the world, brands are resorting more to the established inside companies. And that's for 2 reasons.

Number one, it is the kind of spontaneous or ad hoc research that they are pausing or not running. So what they focus on is ongoing trackers, which if you remember is kind of measurement of certain brand attributes on a frequent basis, often multi-country over time. And that is a lot of the bread and butter of the established inside companies. So there's a tracker work.

But secondly, and I think this is the interesting point is on are looking for advice and consulting because they need to try and understand the very kind of convoluted things that are happening out there in the world right now. And that is, I think, a really, a really sort of interesting trend because what that is showing is that things really are complex for all of us out there, and brands are now going back to saying, actually, I need some help. I don't -- at this point in time, I don't want just a widget on my desktop to do some quick analysis, what I -- and a kind of a dipstick of what my brand or the competitive brand is doing, which is effectively what the [indiscernible] allow brands to do. What brands are now after, and that really is an indication of what's happening out there is kind of, yes, a consulting overlay to say, okay, the numbers about kind of my brand and how do I think about those. So that's kind of our conclusion and hypothesis around that, which is actually kind of underpinned by many of the discussions that we've had with both end customers and our market research. If to the next slide, and look at our operational KPIs, I think these are very solid. I'm happy about these. For convenience, I added in this time the respective numbers that we had at the end of Q2. So you can see there that we've got a very nice increase in number of B2B customers between Q2 and Q3, so from 4,660 to 4,840. And that really just kind of [ pride ] some data because I did say in Q2 that the new development activities were positive and that we were [indiscernible] that. So that's positive. And by the way, that is continuing into Q4 as well that trend. So [indiscernible] good. And then that [indiscernible] is a indication that we continue to gain market share over the years. So I'm really pleased about that metric.

On the connected consumer side of [ 252 million ] [indiscernible] again [indiscernible]. So good positive progress. And encouragingly, we -- in terms of annualized kind of surveys from 160 million, 159 million actually at the end of Q2 to almost 190 million. So again, ultimately, that is the measure of what we are doing in terms of activity. It's the throughput between the supply and demand on our platform. So 190 million surveys is really good. And again, it's -- this doesn't to me, smell like a slowdown on the activity side there as well.

If we move on to 2 slides, please, and talk about our integration. And really, I think we are in a really good -- and I got 2 slides here. I've got one on the sort of overall integration and then the next one, which we won't go to just yet is again about the headcount. So really, on the integration side, a lot a lot is happening. First up, I would say, in terms of people, process and systems, there's a lot happening. What we've done is we've launched an extended leadership team. So that is not just kind of the ExCo. A few of us in ExCo, we've now nominated and handpicked the kind of next-level leadership team to kind of both eyes and ears out there in the now enlarged organization but also to kind of input to strategy and to help communicate what we're trying to do. So that's really positive, and that's kind of a new step for both legacy companies to have that.

Secondly, we've now combined the EPL data into one HR information system, which is quite complex for those of you who've been involved in that, but we've now managed to do that. So that is now up and running. We are -- have done and will continue to harmonize a lot of the policies. I mean it sounds silly, but it's really important to have a common travel policy, common information deposits and so on. And so that is happening now, and that's going to make everybody feel much more part of one set. And then also importantly, a joint CRM system project has now kicked off. And that is really essential. We're going to be moving to Salesforce, which was what legacy list was using on the Sense side, we did not and having a common view of customers of leads and all the kind of important sales-related metrics is going to be really, really beneficial as we move forward.

On the -- next on the commercial side. We've now re-enabled a lot of the cross-platform integrations, which is great because that means that the kind of the supplier will continue to expand, which we can dip into as the demand comes in. And the go-to-market is One Cint is really happening now. So we are now presenting ourselves as One Cint, and that is kind of being positively received by the market.

And then, of course, also on the product side, integration work, last couple of quarters, I was talking about spending a lot of time on thinking this through and planning. That will obviously -- the thinking will continue, but now the integration work is actually starting in earnest. So on the product side, that is now happening as well. So that gives you a little bit of a flavor of what we're doing.

If you look at the kind of just by way of reminder, we absolutely stand by that we're going to have synergies -- annualized synergies of at least EUR 40 million. And that will continue to be driven by the OpEx side of things. We'll move on to that in a second. And the nonrecurring integration [indiscernible], we'll stick with the EUR 40 million that we've said. So far, the first 9 months, we've [ taken ] EUR 15 million of that. And so we're kind of -- we're spending -- I would say, we're spending appropriately on that as we move forward with the integration.

Now last time I talked about head count, and I'd like to move to the next slide, if we could, please. And as you can see here, we've helped -- we had a big step down in headcount from Q1 to Q2. I talked about that last time. And really, the message now is we are staying at the -- at this kind of level -- stayed at that level for Q3, and that's very deliberate. It doesn't mean that we've got the same [ folk ] and the same [indiscernible], absolutely not. We continue with the synergy delivery in selected areas. And of course, we are adding again in selected areas, notably commercial product engineering as well. So it's not the kind of -- we're not frozen in time, not by any stretch, and we continue to be thoughtful about how we reinvest.

Part of what is happening there behind the scenes, of course, is also process harmonization between the 2 companies, and we'll take decisions, continue to take decisions as we go in terms of kind of which positions we still need going forward, which we no longer need and which additional positions we need once the processes have been harmonized. But net, our approximately static overall headline head count between Q3 and Q2.

So I'll be back a little bit later on in this presentation. But for now, I'm going to hand over to Britta to take us through the financials.

[Britta Mittler, executive]

Thanks a lot, Tom. Also welcome from my side. Could we please flip to Slide 14. So as Tom already highlighted, net sales grew by 24% on a pro forma basis. Gross profit development was in line as gross margin almost stayed unchanged. But the focus on the profitability is clearly reflected in the development of our adjusted EBITDA, which is very favorable. So we increased the EBITDA by 58% on a pro forma basis, which is very impressive. We are very happy about this. So we have an adjusted EBITDA margin of 19% in Q3. The margin expansion was driven primarily by scale and synergy benefits in this case. We have a detailed slide on this as well. Could you please move on to the next slide? As you can see, we have strong OpEx control. So we have 3 quarters in a row with constant OpEx this was primarily driven by head count management. Also, as presented at the beginning of the year, we have seen the [ gross ] margin Q1, increase in Q2 and have another increase now in Q3, which is very favorable. We expect a further increase and improvement in Q4 as well.

Could you please move on to Slide 16 because there, we have the increased focus on the strong cash generation, as Tom already indicated. So last time, we got a couple of questions on our net working capital and on our cash generation. You can see that we have strongly improved the operating cash flow. And we have a material cash flow contribution from changes in working capital, that's correct. We also have a Cint slide, we will present to the next step. And net cash flow materially improved at EUR 50 million for the quarter.

Consequently, also the cash position improved significantly, which is a very favorable development and it's driven by a couple of entities we have taken. Could you please move on to the next slide. As already indicated in the Q2, we have launched a couple of initiatives that materialized in the Q3. So we have reviewed overdue customer invoices. We have harmonized and improved the payment terms for customers and suppliers likewise. And we have worked on the payment discipline and improved payment schedule for the payables. So we see a really strong positive impact by this, which is clearly affected the ratio. So what we did here was we had -- we calculated the ratio of the total customer spend to the net working capital. And you can see a massive improvement in Q3 for this. We also see improvement in the accounts receivable. This work still needs to be intensified, but this is a change story and it's a kind of also educational effort. So we are very positive that we continue in this journey. So overall, handing over to Tom for the wrap-up.

[Thomas Buehlmann, executive]

Yes. All right. Thank you, Britta. Yes, so if we're on the key attractions summary slide, what I really wanted to say here is we said when we talk to you guys about the combo, we want to be a Rule of 50 business, right? And so absolutely, absolutely kind of we're reasserting that. We've said that throughout, and we're reasserting that again today. I believe our trading fundamentals continue to be very strong, getting a lot of market share in a lot of areas, and we're doing really, really good progress. I think our underlying performance is very solid, especially in the context of kind of a lot of integration work that is happening right now. I think there are definitely macroeconomic and geopolitical trends that are impacting our industry.

And really, what we've decided to do is focus even harder, I would say, on the profitability and cash generation. I think you can see that reflected very much in our numbers. What we're going to do is keep a really close eye on the macro side of things and, of course, kind of continue to seize revenue and commercial opportunities, which we have done so far. But in the current very turbulent macro situation, which really is a little bit out of our control, what we are doing is doubling, tripling down on the financial metrics. Again, always with an eye on this Rule of 50. So that's kind of a little bit of context at the beginning of the end to kind of our numbers. And with that Bailey, we'll close the formal part, but very happy to take questions.

[Operator]

[Operator Instructions] Our first question today comes from the line of Predrag Savinovic from Carnegie Investment Bank.

[Predrag Savinovic, analyst]

Starting with the organic growth, if you could elaborate a bit on this and the drop. I mean, macro is obviously something you cannot control and the other 2 things on the platform side. And Tom, I think you said 3% to 5% drag from the internal challenges. So the underlying number could be up to 14% then on a like-for-like basis. Is that something we could expect comfortably for Q4? And then with what you know today, reasoning around the growth level for 2023 when you think of the macro headwinds and this API migration being done your current deal wins and customer discussions, et cetera. So not a firm guide but just a general momentum kind of expectation thinking for 2023.

[Thomas Buehlmann, executive]

Yes, Predrag. So I think you've given a good summary. I mean the way we think about it, I mean I told some of the numbers talking about 9% year-on-year. I mean we -- I think that's excluding Lucid mind you, that's not the right way to look at it. I look at it on a like-for-like basis, and that gets to 11%. So add 3% to 5% on top of that, you get to mid-teens. So again, it's not as I said earlier, it's not stellar, but it's okay. I think it's pretty good in the current environment. And I do think, I really do think we had a repeat or are having a repeat of this there in the headlights situation where CFOs are kind of taking over or controlling brand spend, i.e., cutting it in the early stages of big uncertainty, which is what happened in COVID.

And my instinct is it's exactly the same again now. So what I do expect I need to say, I mean, otherwise, I'll be told off after this. I have to say we're not giving quarterly guidance, but I will give some more commentary. So for Q4, what I do expect is to start coming out of the deer in the headlight phase and brands to say, actually, we need to know what is going on because they do. I mean that's just -- and that's similar to the pattern that happened last time we had a situation like this number were. Number 2, we saw a substantial uptick on political polling work for the Americas, obviously, at the end of September, and that is continuing into October, which is good as well. And then the third piece, I would say, is the headline increase in B2B customers, I think it's about 200 or thereabouts.

Those -- I mean, those guys are ramping up spending. As we've said in the past, you get a new customer, they try you out and then they start ramping up spending. So out of that cohort, we're starting to see some really good spend coming through as well. So all of that makes me despite the macro nonsense despite all of that, but that makes me very, very optimistic about in terms of '23, I mean that's -- I think that's going to be a story of the macro to be honest. From our own internal kind of view on that, we're getting really positive signals. So hey, I can't say the name, but a major customer, really major customer has just committed through a purchase order to double their spend in next year versus this year, which is phenomenal. Equally, our enterprise pipeline is really good. And as I said, the new B2B customers that are coming -- that have come and are coming on stream makes me really confident, but it is going to be '23 really is going to be about the macro in terms of what that is doing to overall sentiment, I think. Does that help?

[Predrag Savinovic, analyst]

That's very helpful. Very encouraging. Thanks for that. Then just one question also on cash flow, which obviously reverses very nicely this quarter. And I wonder if we some level that you would say is representative, and I'm thinking of the cash flow before the working capital changes. And any details you can give further down, of course, also interesting.

[Thomas Buehlmann, executive]

What I would say, and I'll pass on to Britta in a second, is, I mean, the sort of cash focused initiatives that we started, we're obviously not going to stop now. Now that we've got some very positive results. I mean it is early results, and we're going to absolutely continue doing that. I think I said in Q2 that we -- I think lost our eye off the ball is perhaps a bit harsh, but with lots of integration stuff happening, kind of the core -- some of the core sort of functions and tasks or maybe not as top of mind to us as they should have been, but they are now. And that absolutely is going to continue. But I'm going to give also over to Britta to give a more sensible answer.

[Britta Mittler, executive]

Thanks, Tom. That answers a large part of it already. Thank you very much. As you have seen, the accounts receivable, we managed to get down the overdue amount quite significantly. We are working on further improvements. We are not yet there, as Tom stated, so we are continuously working on this. We might have had some kind of slightly onetime effect with regards in the accounts payable with the reviewed the payment terms and align the processes and the terms among Cint and Lucid. So this might not be as massive in the following quarters. But overall, this will definitely be something you would see in the future as well.

[Operator]

The next question today comes from the line of Daniel Thorsson from ABG.

[Daniel Thorsson, analyst]

I think that you answered the first question I had very, very good here. I was just trying to understand how the organic growth developed throughout Q3 to understand Q4, but you helped out very well there, Tom. So I jump to the next one on the synergies here, the EUR 40 million. Can you give a ballpark bigger or just for us to understand how far you have come if you're annualizing the effects here in Q3? Are we like 25% through now? Or do you see it materially differing from that assumption?

[Thomas Buehlmann, executive]

So we did talk about that specifically, but I'll give you some directional guidance. What we said was -- if you remember, no synergies in the first 6 months and then pretty much linear from now through to the end of next year. And that's kind of what we said. I can say with high confidence that we're well ahead of that. We're well ahead of that. And so it's for now primarily driven by OpEx. We're obviously working a lot on the commercial synergies. We're starting to get a lot of the cross-sell that we talked about, principally on the measurement side. That is starting to come through, but it's not yet kind of -- its good on the customer on the contract side, but it's not yet translating into a very meaningful revenue because these things, they ramp up over time, as we've said. But it's -- we're very comfortably ahead on the OpEx side because that's something that we've been very focused on right since the beginning because it's directly in our control.

[Daniel Thorsson, analyst]

Yes, I understand.

[Thomas Buehlmann, executive]

Is that -- does that help?

[Daniel Thorsson, analyst]

Yes, absolutely. That's helpful. And then secondly, linked to that one, how important is it for you to come back to 20%, 25% organic growth again to be able to reach the 25% EBITDA margin midterm. I guess that is obviously a pretty large share of the assumption to reach that margin target. And we'll see if it happens in '23 or if it comes later, but how important is?

[Thomas Buehlmann, executive]

No, it is important because a lot of our -- I mean, the way our business model works, it's -- I won't say it's a fixed cost model, but there's a high degree of efficiency that comes with scale, as we've talked about in the past. And we always said, once we crossed the EUR 100 million threshold on a stand-alone basis, we started to kind of reap benefits -- and that is absolutely true. So yes, we do need actually, we want to, right? I mean it's not just a kind of a model thing. It's also a desire thing, right? I mean we were in a market of a directly addressable market of EUR 3.5 billion, as we've said, which is companies spending money to access respondents for market research, that's EUR 3.5 billion, we're maybe less than 10% of that. And it will be -- I mean, it would be unimaginable that we don't want to grow as fast as we possibly can to access that. So it's partly intent and desire and partly economics and business model. So yes, we -- it is important.

[Daniel Thorsson, analyst]

Yes. Yes. Makes sense. And then the last question is on the annualized completed service here, the EUR 190 million that you showed, that is growing 19% over Q2 on an annualized level. Does it mean that price per survey or the mix of longer shorter service has affected you negatively in Q3 here? Or is that a trend that you see or something that happened with the current measurement.

[Thomas Buehlmann, executive]

It's -- no, you're right. So what is happening or what did happen and I don't yet know because it's too short of period to be able to extrapolate is that surveys got shorter and in some areas, the price came down. So that is something that did happen. Yes, you're right. I'm sorry, you go ahead.

[Daniel Thorsson, analyst]

No problem. I just want to confirm that you were still able to defend your gross margins. it wasn't a problem to pass on the lower prices and lower cost for the suppliers anyway so.

[Thomas Buehlmann, executive]

Exactly. And I mean you mentioned pricing. So no one's asked you about inflation and what we're doing about that. But I mean, we do have, as I said, in Q2, we've got a very active pricing, a series of pricing projects now. We obviously don't want to price ourselves out of the market. But in selected areas and where we think we can, we are taking pricing measures absolutely. And as you can see in our gross margin, so far, so good.

[Operator]

Thank you the next question today comes from the line of Sarah Söderblad from SEB.

[Sarah Söderblad;SEB;Adviser, analyst]

I would just like to rest a little bit on the organic growth. So in terms of cyclical exposure, could you elaborate a bit on where you would expect a potential recession in 2023 to affect you most in terms of business segments, customer split and geography if you have a perception of that. And then I think tying into that question as well. I understand that 2022 will be a macro story mostly, but do you have an idea of where the sort of cycle bottom could be for your organic growth? Are we talking quarters with potentially negative growth because we've seen that in more traditional terms? Or do you have another view of that? So if you could elaborate a bit on that would be helpful.

[Thomas Buehlmann, executive]

Yes, Sarah. So I have to talk about that. So negative growth quarter-on-quarter, no. I don't expect that at all, no. I mean that's -- let me just knock back on the head. I can't imagine a scenario where that happens. In terms of kind of peeling the onion a little bit, which you asked about in terms of where the impact was or we expect that to be? I think the measurement business, just from a kind of business model context because the measurement business measures online ad effectiveness for brands. And as we've seen in some of the other big companies reporting at the moment, there is a pullback in online ad spend.

Now having said that, I mean, we are, for the time being, a tiny, tiny player in that. And as you can see, we still grew nicely. But to answer your question, I mean, the measurement piece is something we are keeping a very close eye on. The other thing that we do keep a very close eye on is new logos, new business development. And so far, that has not slowed down at all. Quite the contrary. It continues to be extremely robust because generally, what you find in kind of tricky times is that the brands kind of stick to people they know and kind of spend money with them just for reasons of trust and so on. And that was not the case for us during the COVID times.

We continue to land new logos, and it continues to be the case today. And I think that the reason for that is that brands when times are tough, they need to save money and become more efficient, and that is part of our value prop, right? It's a core part of our value prop. So that makes me kind of optimistic.

And the final piece is what I said is I do think we're in the deer in the headlights phase of this current crisis. And I think marketing people will convince their CFOs to loosen the purse strings as they've done in the past in the weeks and months and quarters that come. So your specific question was when can I call the bottom, my gut says it's probably around now because of the tier in the headline thing, and I think things will pick up from them for us, at least in our space. That is my personal view.

[Sarah Söderblad;SEB;Adviser, analyst]

Okay. That's encouraging. Then I had a more sort of specific question on this quarter. There's been some M&A activity in the sector on the supply side. And I was just wondering if it's possible to quantify if there's been an effect at all from that from the revenue streams pausing from those particular suppliers if that's -- if you're able to quantify it or not?

[Thomas Buehlmann, executive]

Yes, that was yes, good knowledge of our industry. Yes, there have been 2 particular M&A activities by -- with bigger market research companies buying smaller supply partners. Maybe they're taking a leaf out of our playbook that we started. But yes, we did have a short-term impact on that, the kind of, I would say, commercial agreements are reestablished now. So we're kind of back on track, but that definitely had an additional kind of a temporary negative impact on Q3, yes.

[Sarah Söderblad;SEB;Adviser, analyst]

Is it possible to say how much at all?

[Thomas Buehlmann, executive]

Probably EUR 1 million to EUR 2 million, I would say, revenue.

[Sarah Söderblad;SEB;Adviser, analyst]

All right. All right, cool. And then in terms of just what you're seeing so far in the quarter and also what you saw, you tell us anything about exit rates in Q3 and October because I'm thinking usually, there's a budget flush during Q4. So I was just wondering if you have any input on that.

[Thomas Buehlmann, executive]

Sorry, what do you mean by exit rates? Sorry, not understanding terminology.

[Sarah Söderblad;SEB;Adviser, analyst]

So are you seeing sort of people dropping off on the platform or any changes tied to -- so far in the quarter tying into the fact that usually, if we go back to the whole CFO spending, the pattern is that there's usually sort of a budget flush at the end of the year. So if you expect to pick up from that?

[Thomas Buehlmann, executive]

Yes. No, definitely. I mean, Q4, as you might -- as you well know, is kind of 35-or-more percent of our annual revenue. So we have a big spike in Q4 historically, and I fully expect that to repeat. I mean it's partly driven by just -- there's a lot of seasonal events, Thanksgiving, Christmas, New Year sales already starting in December and so on. So there's a lot of retail-driven activity, consumer-driven activity and seasonal festivities.

There is absolutely the kind of spend it or lose it phenomenon that a lot of brands still have. And historically, at least, the result has been that Q4 has been very, very good for us. And there's the -- on top of that, if we're talking on the positives, we've got the midterms in the U.S., which I talked about earlier, which are giving us tailwinds. Then the only thing what we've -- and obviously, the temporary platform issues, we've addressed those goes without saying, but I'll just say it. Then the only kind of the headwind, if you like, is this is the macro, right, which is really hard to predict to say.

[Operator]

The next question today comes from the line of Charles Brennan from Jefferies.

[Charles Brennan, analyst]

Just a couple of questions from me. Firstly, can you talk about the level of visibility that you've got into your business back at the Q2 stage, I think you were optimistic that growth was going to accelerate in Q3. That's clearly not happened. So can you just talk about the visibility that you've got? And in light of that visibility, can you just run through the building blocks of your confidence for Q4. You've talked about the midterm, are you able to quantify the benefit you're going to get from that in Q4.

And with the platform performance issues, has that just lost revenue from Q3? Or do you get a catch-up effect in Q4 that supports your optimism. And then unrelated matter, can I just talk about the competitive dynamics? I was looking at one of your customers, you go for the other day. They talk about a lot of similar terminology as you do with a connected data platform for market research. To what extent are they referring to capabilities that you provide them and to what extent to customers like that developing their own competing capabilities?

[Thomas Buehlmann, executive]

Thanks, Charlie. Let me start with the final piece in terms of -- so you got the customer -- and the -- so the way we sit in the middle of the qualitative market research ecosystem. So in other words, we don't do any advisory on how to set up questions and questionnaires and nor do we do any kind of, yes, consulting around that. We do the next stage, which is then linking the right questionnaire to the right respondent. And then again, we do not do the final stage, which is electing and analyzing the results and advising the brand. So you got a much more on the provision of services to the end client stage or part of the ecosystem, whereas we're just very narrowly focused on the middle kind of linking the right response to the right question here. So YouGov is a customer, I mean [indiscernible] just on the more tech-enabled side, we've got SurveyMonkey. We've got Motive. We've got load to customers on the kind of delivery side.

On the tech-enabled, equally, we've got Kantar and GSK and Ipsos and all these valued customers also on the more traditional side. So I see YouGov, to answer your question specifically, as they're an important client. That's what they do. And a lot of these folks, they decide what they want to be the best in the world at. And it's often either developing kind of the software that sits on a brand desktop think Qualtrics, think Zappi or providing very smart consulting overlays in terms of designing the right question as and then interpreting the results in a smart and effective way, neither of which we want to get into, right? So I see that as a -- we're a complementary part of the ecosystem, in fact, in the central part of the ecosystem for YouGov and others to do their thing. So that's on the competitive side.

Then you talked about a catch-up or not from the platform issues. Unfortunately not, no. That is the way the research often works is brands want to do it in a certain time. And if we, for whatever reason, can't serve them with the right respondents at that time, that is unfortunately, that is lost revenue, which is highly irritating, but that's the way it works. Next question.

[Charles Brennan, analyst]

I was going to say just in terms of your general level of visibility though, because you are optimistic about accelerating growth in Q3, and that hasn't materialized. Like what are the tangible building blocks that we can hang a hat on for your Q4 performance?

[Thomas Buehlmann, executive]

Yes. So I mean -- so first of all, in terms of well, on a specific point, I mean, in my opinion, the world has changed since Q2, right? I mean it really has. So I mean, not trying to hide behind the macro, but I really do think the world has changed dramatically. And so I stand behind what I said in Q2 based on what I knew then, but the world really has changed now. But to get more specific, you said visibility. So there are 2 kind of levels of visibility. There's actual bookings in our platform. which is customers saying I want to do this project there and all the rest of it. That is relatively short, that's sort of 6 to 8 weeks, I would say. So that is pretty short in terms of very tangible outlook.

But what we do have is we have a kind of business meetings with our customers, many of whom have been with us for years. The average is 7 years, I think, now. And so there is a cycle of research that these -- that our customers go through every year. We know what that is, and we're talking to them about kind of providing the respondents for that on a regular basis. That then gives us not contractual visibility, but it gives us kind of outlook visibility, I would say. And then the final piece is our multiyear contracts with our larger enterprise customers.

That is -- as I've said in the past, it's multiyear agreements with typically with a minimum spend agreement. And so that obviously is it doesn't say exactly which quarter that will fall into because we don't specify it on an annualized basis. But there, we do get some sort of comfort around that. But generally speaking, it's a potential kind of booking visibility, it's relatively short. It's relatively short, which is why it makes -- it's quite challenging to give a prediction for a quarter when things are really topsy-turvy, as they are at the moment.

[Charles Brennan, analyst]

But then just lastly for me, and I'll let you move on, but that makes it sound as though July must have been a decent month because you at least have some short-term visibility. So the exceptions through August and September must have been materially weaker. And I guess that's why a lot of us are asking about the exit momentum into Q4.

[Thomas Buehlmann, executive]

Yes. So look, I think the situation did change substantially between Q2 and Q3, right? So as I said, it's the macro is definitely impacting the industry. It's -- to me, the biggest indicator of that is the flip in growth rates between tech-enabled and established because that is the -- yes, we saw a similar pattern in Q4, but it was much less pronounced than it is now. We're really seeing a pullback of spend by brands in the -- for the tech enabled guys. And as a result, kind of then the more established guys doing their consulting and doing well with that. That, to me, is a real indicator of how turbulent brands feel things are out there.

[Operator]

[Operator Instructions] The next question today comes from the line of Viktor Högberg from Danske Bank.

[Viktor Högberg, analyst]

So could you help us with deciphering the gross margin and EBITDA margins between Cint and Lucid. And the gross margin was strong now in Q3. Was that more of Lucid being a higher revenue in the mix? Or anything positive on the supply squeeze which have affected you in the past couple of quarters? Just a bit more granularity between the 2 assets that would be perfect.

[Thomas Buehlmann, executive]

No. So we don't split out Lucid-Cint and it works -- as we're now one business. What I can say is that we have been focusing on the kind of gross margin side pretty actively. And it's a result of kind of all bits of work that go into that. But it's not a -- we don't split out kind of Cint and Lucid separately.

[Viktor Högberg, analyst]

Okay. But the performance was decent in both I would assume?

[Thomas Buehlmann, executive]

Yes. Absolutely. Yes.

[Viktor Högberg, analyst]

Okay. You also said you then actually upgraded contract with 2 of your global customers. I think you might have alluded to one of those now during the call with one of those customers doubling their committed volumes for next year over this year. What does this mean in reality in terms of numbers, if you could quantify it a bit? Did you see any effect now in Q3? Or will that come -- will it come in Q4 already? Or would it be more in 2023?

[Thomas Buehlmann, executive]

No, it's going to be '23, but it's millions. It's multiple millions. So the increase, I mean, it's big. So -- but it's -- they're a customer already now, and they're ramping up their spend as well. But the kind of specific kind of commitment was for 2023.

[Viktor Högberg, analyst]

What kind of work does it entail? Is this something you worked on for a long time? Or were you approached by them -- just to get a feel for...

[Thomas Buehlmann, executive]

No, they're an existing customer where we are in -- have been in discussion with a new division, which started off giving us work for a couple of million this year and now dramatically increasing it next year? So it's a new division that we've been that our sales team have been knocking on the door on and getting some success in, and now we're really through that were in there.

[Viktor Högberg, analyst]

Just within the established or the tech-enabled customer?

[Thomas Buehlmann, executive]

I'd rather not say because it's going to narrow it down, I'd rather not. So it's -- I want to be cautious.

[Viktor Högberg, analyst]

And in terms of OpEx, been rather flat in the past couple of quarters. Is that to be expected in Q4 as well? Any seasonality balance with the cost measures that we should think about?

[Thomas Buehlmann, executive]

No. I mean we're keeping -- continuing to keep a really close eye on that. As I think I said in one of the earlier calls this year, OpEx will be reasonably flat for the year, and therefore, we expect to be kind of in really good shape on the EBITDA side in Q4. That's the plan. I think we will hire a few more people, just to kind of prepare for next year, but we'll be very thoughtful about that.

[Viktor Högberg, analyst]

And on the new logos added 180 customers, it seems like a very high number -- if I recall correctly, your previous rule where when you didn't own Lucid was roughly 500 new customers per year. That will be a good development as a rule of thumb. 180 now. What would you say the new rule of thumb would be, give or take, to keep the business momentum and come up to the target level of growth?

[Thomas Buehlmann, executive]

Probably say 800 to 1,000 on a combo basis per year.

[Viktor Högberg, analyst]

And you think that customer potential is there or over time to unlock by yourself? Or if the opportunity is there for you to grab? What do you need to do in order to run those numbers?

[Thomas Buehlmann, executive]

It's sales people on the ground. So no, we absolutely -- the opportunity is absolutely out there. So if you look at market share, we're 10% or less. Now we are obviously going after the bigger customers. So it's not linear in terms of our customer market share, but I mean there's a ton of opportunities. And what we've actually done is in both EMEA and the Americas, given our kind of bigger size now in the combo, we've got fully dedicated new biz teams now. that are really kind of incentivized according to that and let according to that and act according to that to really go and get new logos in and it's working, so which is great.

[Viktor Högberg, analyst]

Okay. And just to repeat on the receivables side because the major thing in the working capital release was on the accounts payables. Should we expect a sequential improvement in Q4 on the receivables side or anything that could mask the underlying development you're doing in the over dues so that we get the level of the ratio of receivables to sales to come down is that to be seen already?

[Britta Mittler, executive]

Yes, of course. So as we just shared, we just kicked off all of those initiatives. And we see that the collaboration between the sales teams and finance is increasingly progressing and getting better. So we would expect a positive impact on this side as well.

[Viktor Högberg, analyst]

In Q4 already?

[Britta Mittler, executive]

Yes.

[Operator]

The next question today comes from the line of [ Sam Modesta ] from [indiscernible] Industry.

[Unknown Analyst]

I wonder, there's been news that Google Surveys is folding, they're closing their operations side. I wonder, does that affect the competitive dynamics for you? Or are they in a different segment? Also, I'd like to know what -- if you can elaborate on the accounts payable, what specifically happened there in the quarter.

[Thomas Buehlmann, executive]

Sure. I'll take the Google Surveys one, then I'll pass on to Britta. So yes, Google Surveys has been shut down. It was one of their sort of trial initiatives that Google do in all sorts of different areas. So what I would say is Google are a client, as you know, and they are a very valued client. We've always said that what brands are after are is kind of impartial research in the sense of nobody affiliated to any kind of big marketing services institutions. So we provide those in partially sourced respondents from lots of different areas. So I mean, we think that is an opportunity. So and we'll kind of treat that accordingly. I mean Google Surveys, to be fair, it wasn't a major force in the market. We rarely I think I can ever recall hearing about coming up again our sales teams coming up against them as a customer saying, well, we're going to choose you or Google Surveys. But it is kind of -- we read that as kind of the market wants a independent providers in the marketing service space. So we see that as positive. And I'll pass on to Britta -- sorry.

[Unknown Analyst]

Sorry, can I just ask a follow-up on the business? I was also curious to hear about this client intended to double to spend. I wonder maybe you have that information somewhere, but could you say roughly how large a share or your revenues that your X largest client account for? Like your 5 largest customers, how much sort of revenue they account for?

[Thomas Buehlmann, executive]

Yes, I think we did talk about that in -- let me just check, while Britta speaks on the accounts or receivable. I think it's something just over 20% for the 5 largest, something like that. But let me check that, and I'll come back to you at the end of Britta's this question.

[Britta Mittler, executive]

Yes. Okay. Now to the APs to give Tom the time to get the numbers retrieved. So as we said, as part of the integration process, we have reviewed the processes and the procedures within Cint and Lucid. We have improved payment patterns. We are more disciplined. So in the past, we had a tendency to pay upon receipt of the invoice. So now we are paying the invoices on the right day. This will mean that in the upcoming quarter, we will have some kind of normalization effect. So it was definitely some kind of onetime effect in this quarter. But overall, this disciplined approach towards paying as well will also continue.

[Thomas Buehlmann, executive]

Sorry. And just to come back on the -- Sam, on the -- yes, I was right, 22% of the 5 largest, so.

[Unknown Analyst]

Okay. That's great. One question, and that might be a silly question. Do accounts payable, does that include payment to respondents, right, panelists as well?

[Britta Mittler, executive]

Let's check and we get back to you. But yes.

[Unknown Analyst]

Okay. Thank you.

[Thomas Buehlmann, executive]

Sorry. Yes, just to -- so just to kind of elaborate on that a little bit because Britta, as you know, is interim. So panelists are paid by suppliers for the most part because we don't contract with panelists ourselves in general. It's -- we work through panel companies. And it's the panel companies who -- and the panel owners who pay the respondents. So yes, that is included in what you asked about.

[Operator]

There are no further questions registered at the moment. So I'd like to pass the call back over to Thomas Buehlmann for any closing remarks.

[Thomas Buehlmann, executive]

Thanks, Bailey. So thank you all for attending. I totally get the acute focus you guys have on kind of organic growth and outlook, trying to kind of really share what my views are on that as best I can. But as I said, and I don't want to hide behind this, but I think our fundamentals are definitely there. We will continue to grow as best we can, but I think '23 year is going to be the year of macro. So -- but as we go through this, I'm absolutely convinced we will continue to our journey towards the Rule of 50 business. So thank you very much for your time and attention today. And I know we're going to be speaking to several of you in the coming couple of days and look forward to that as well. Thank you. Bye-bye.

[Operator]

This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.