Q4 2020 Asure Software Inc Earnings Call
Good afternoon, and welcome to <unk> fourth quarter, and full year 2000, and Suwanee earnings Conference call joining us for today's call are assurance, chairman and CEO, Pat Goepel CFO, John pants, and Vice President of HR, Cheryl Cibula. After the Speakers' remarks, there will be a question and answer.
Session I would now like to turn the call over to Cheryl for introductory remarks. Please go ahead.
Thank you operator, and good afternoon, everyone and thank you for joining us for our stores fourth quarter and full year 2020 earnings call. After the market close we released our financial results. The earnings materials are available on the SEC's website, and our Investor Relations website at Investor Day.
Sure software Dot Com, where you can also find the investor presentation. That's teleconference is also being broadcast over the internet and will be archived and available on our IR website.
Our call today, we will reference non-GAAP financial measures, which we believe to be useful to investors and exclude the impact of certain items.
Sure and timing of these items along with a reconciliation of non-GAAP measures to their most comparable GAAP measure can be found in our earnings release. Today's call will also contain forward looking statements that refer to future events and as such involve some risks. We encourage you to review our filings with the SEC for additional information on factors that could.
Cause actual results to differ materially from our current expectations. Finally, I would like to remind everyone that this call will be recorded and it will be made available for replay via a link available and the Investor Relations section of our website with that I would now like to turn the call over to Pat <unk>, Chairman and CEO, Pat Thank you, Cheryl and I'd like to welcome everybody.
Our fourth quarter and our full year 2020 earnings call I sure. Appreciate your interest, whether you're an employee and client and investor analyst or other interested third party and we'll start today's call with an update on some key metrics before review reviewing business highlights for the fourth quarter and John and Pat.
Sue will review our financial results and then he'll turn it back over to me and we'll update a little bit on our strategy and then we will take questions. Our increased focus on small business is really paying off as new customer additions.
Ceded losses with broader adoption of multiple solutions, we performed well despite a choppy economy. The high caliber sales representatives that we've added and the second half of 2020 also played a major role and contributing to fourth quarter's positive results compared with the third quarter revenue.
Non-GAAP EBITDA and non-GAAP EPS were all up sequentially small business bookings, where most other reps focused increased more than 100% year over year for the second consecutive quarter and more than 60% of new sales continue to adopt multiple solutions.
We also continue to add reseller partners and our total bookings year over year growth was 13%.
We believe that momentum with our business metrics will continue and that economic conditions will improve as national employment levels gradually return to pre COVID-19 levels and as a result, we hope to generate positive organic growth in 2021, and our strategic goal.
Is 10% organic growth, 10% growth generated through accretive acquisitions, and 20% EBITDA as per acquisitions and late December we purchased a small reseller base.
And in the northeast marketplace. This is in line with our partners for life strategy, where our partners can provide referrals white label and resell our solutions and then join the assured family.
We don't have any acquisitions pending but we do expect to be opportunistic and rolling up our reseller partners and white label solutions.
<unk> 19 pandemic is still a headwind primarily putting pressure on same store sales.
<unk> to the sustained level of lower client employees on our platform and continues to impact our top line, resulting and not a favorable year over year comparison drilled.
Drilling down into the Covid impact on a monthly basis of the 1050 of our 10000 direct customers that pause last March approximately 900 have returned through December resulting in about a 1% churn and our customers our pays per control.
Or what we call same store sales, which roughly tracks national unemployment rates was down 14% year over year in Q2 of 2020 and improved to down 9% in the third quarter and it remained at about the same level in fourth quarter.
2020. This has presented a headwind because in normal times pays per control typically increase above 2% year over year. However, since we've been adding more clients than we're losing as same store sales normalize overtime. This will translate into.
The increase revenue.
Lastly, new sales bookings at a dollar basis were pressured as many small businesses are still focused and surviving.
Cedar business models, accordingly, instead of changing payroll providers EBIT.
They are willing to do so however, we're pleased that the number of new clients book is increasing and with the broad adoption of multiple solutions to boot.
Our investments and sales reps is also bearing fruit as a reminder, we began 2020 is a transition year with 33 sales reps and we now have 65 as most of these new hires that are very experienced and bringing strong referral relationships.
And as an essential small business share remains committed to helping more than 70000, and indirect and 10000 direct small business clients grow and a challenging environment. Our COVID-19 Resource Center Webinars for example continue to help thousands of small.
And all businesses are product and operations teams quickly mobilized and December to react to stimulus and its impact on our clients and addition to changing legislative environment. The fourth quarter and is also a very busy time of the year for our operation teams as they were closed.
<unk> with clients on year end processing and payroll W. Twos, 10, 95, and annual tax form filings for federal state and local agencies.
Throw and Covid and the changes and the tax laws, we've had more activity this year than perhaps the next the last 10 years, we're extremely proud of our employees' level of commitment to our clients. During this very busy time of the year and during these unprecedented times.
While small businesses.
Experienced unprecedented economic headwinds due to Covid, we will continue to provide our clients with the service technology and support they need to survive.
And thrive when it's over before handing off to John to discuss our financial results in more detail I would like to take a moment to.
To match it.
That is with a heavy heart.
So we learned about the recent passing of former board member and friend, Charlie Lathrop, our thoughts and our prayers are with Charlie's family.
John.
Thanks Pat.
And as Sheryl mentioned at the beginning of this call a number of the financial figures discussed today are non-GAAP.
And you will find a reconciliation from GAAP to non-GAAP results as part of the earnings release made available earlier today and also included in our most recent investor presentation posted and the Investor Relations section of our website and ensure software dot com.
Consistent with prior presentations. This table also presents our 2019 revenue, excluding the workspace business as well as non strategic customer clients and non core HCM businesses that exited in 2019 and delivered 2019.
We believe that with a year behind us as a pure play HCM software provider. Following the separation of the workspace business is a good time to revisit the metrics we use to explain our business performance. Our goal is to simplify and that clarity to our reporting with the goal of making our progress of exit.
<unk> our strategy easier to follow.
This ultimately will require fewer GAAP to non-GAAP reconciling items to deliver that message more to come.
Our comparisons are down year over year.
As would be expected because of the comparison of post COVID-19 results with pre Covid results. While these clients have improved substantially over the last three quarters, we think that sequential quarter over quarter comparisons are more appropriate measure of our current business performance and indicator to near term future results.
Revenue for the fourth quarter increased 3% to $16 4 million from $16 million and Q3, despite a significant spike in COVID-19 infections, and resulting business uncertainties.
Recurring revenue continues to represent 97% of our total revenue and Q4, which was in line with Q3.
Interest on client funds was approximately 300000 and the fourth quarter up from approximately 200003rd quarter.
The increase was primarily due to a change and the average balance of funds held on behalf of our clients increasing from approximately $100 million and the third quarter to approximately $185 million and the fourth quarter.
Next I'll discuss.
Our profitability metrics.
And we were able to achieve sequential gross profit expansion and the fourth quarter of between 8% and 6% depending on whether you use GAAP or non-GAAP gross profit as a performance metric.
Q4, non-GAAP EBITDA was up 13% sequentially to $1 $1 million.
Presenting the 7% margin as I will discuss and a little more detail later, we continue to be very mindful of all of our operating expenses as we begin to emerge from the cloud of Covid.
Shifting gears to the balance sheet cash and cash equivalents were $28 6 million at quarter end up from $12 9 million at the end of the third quarter.
The increase was primarily the result of our successful you received secondary public offering of common stock in December we received gross proceeds of approximately $21 7 million before deducting underwriting discounts and operating expenses from the sale of approximately 3 million shares of common stock.
At December 31, 2020, we had.
$24 5 million of debt, which is comprised of $10 million term loans and $9 million PPP loans with the balance made up of.
Seller notes from acquisitions.
We are apply for forgiveness of the PPP loans and would expect to receive a decision from the small business administration sometime in the second quarter of 2021.
Concurrent with today's earnings release, we filed a form S. Three and form S. Four registration statement with the SEC, while we have no immediate plans to raise capital line under the universal shelf or to utilize the acquisition itself for any particular transaction. These registration statements once effective will benefit the company.
And our stockholders, giving us the flexibility to quickly and opportunistically consummate strategic acquisitions with various per structures.
As a reminder, these registration statements are not effective.
And we cannot sell securities were accept offers to buy securities prior to their effectiveness.
At this time, we have.
Still not providing specific forward guidance.
We do expect the generic positive growth in 2021, and although we are cautiously optimistic.
The potential tailwind.
The improving economy.
Given the uncertainty surrounding COVID-19 vaccine rollout and when there will be a return to normalcy and what that new normalcy will look like we want to be prudent with how we are running the business and describing our future prospects.
Get a little more color on this point.
As a result of the pressures placed on our 2020 revenue by Covid.
And we implement salary and benefit reductions across the entire company.
We reinstated pay rates back to normal levels effective January one of this year and we have told our team that we hope to reinstate all previously provided benefits and the second half of this year.
First I want to thank our team for the sacrifices they made.
To help assure through this difficult operating environment and second I want to highlight that we are applying the same prudence not only to giving investor support and guidance, but also around how we're running the business.
To provide a sense of how revenue was impacted by Covid and its resulting impact unemployment. We have included in our investor presentation Slide 24.
And again, it's located on our website and the Investor Relations section.
Finally, as a reminder, about our seasonality the first quarter of each calendar year seasonally strong for revenue and profitability as annual W. Two and ACA fees are recognized and this quarter.
The seasonal boost does not exist and the second and third and fourth quarters.
Now I'd like to turn it back over to Pat.
Thanks, John and.
I want to highlight job pads.
He and his team have done a great job John.
It has brought a level of discipline and then <unk>.
His resolute and.
And his work and has had a real impact on a share. So thank you John I also wanted to piggyback on some things that John has stated first of all we viewed a business is for we have poured constituents and we really make decisions based on those four constituents.
Shareholders are won and we take our shareholder trust very seriously the employees that serve us and the care of that only to employees, but their families is something that I try to look through and every decision from a client perspective, our clients are the reason we're in business and.
And we wanted to do right by them and then finally the communities. We serve these are unprecedented times and we think they're going to return to normalcy, but when we make these decisions, it's with those constituents and mine.
Talk a little bit and get away from a metrics for a second but talk about our strategy and as an investor why I think we're very well positioned as the macro environment and our client operations normalize and and first of all up I think about 2020, when we started the year, we didn't know about COVID-19.
But we said it was going to be a transition year. If you recall, we sold the space business for $121 million and December we had completed in June and transition services agreement. So really the second half of the year. We were normalized we also had some.
<unk> businesses, so we could focus on human capital management only.
And we now have a board of directors with deep domain and human capital management expertise. The real deal executives that are broad and these type of businesses or play key roles they've had very successful outcomes.
And having good board members has always been a hallmark of assure and now we have really good board members that have deep domain human capital management expertise, we brought on now and the fourth quarter and in addition to John Todd will lead ski and Who's our chief of staff and Todd was the former.
President of comp.
<unk>, which is a division of benefit mall, yes, that's being Rodriguez as senior VP of tax and compliance and Yasmin.
He has done an outstanding job as well and and what we put in place with John talking about the <unk> III and the <unk> four we're putting our capital structure now to allow us to grow and match our ambition we are in.
<unk> and the infrastructure and the business, including our employees that will help us grow and so we come out of Covid and we're building a sales team, where we doubled the sales team and 2020 to focus on organic growth and to be able to have that kind of success and amidst the COVID-19.
We feel very fortunate.
Our product and technology team is strengthening our solution upon.
Appointing Mike Benoit and industry veteran who has worked with me at Ceridian and and other places and Brian and worthy formerly of GE I feel like we really have a team that's focused on bringing the right human capital management systems to market and delivering and we have a unique acquisition role.
Our strategy of our resellers, where we already have the technology, we can penetrate markets with the reseller. We can help grow those resellers, we can grow relationships through our affinity sources the banks the brokers the cpas and then they can join the assured family and when they.
Joining their profitable on a recent example is the acquisition we did in the northeast and finally, we are well positioned for success, we are positioned well for the nation opening back up it's not a question of.
It's a question of when and when we do open back up and opened back up per guidance.
With all constituents develop and.
Share the results of that strategy and our go forward basis.
Do you feel and.
And I've been here 12 years, we're absolutely on the right path with that we'll open it up for questions operator.
Thank you ladies and gentlemen, if you have a question at this time. Please press Star then the number one key on your question and telephone and just a question has been answered or you wish to remove yourself from the queue. Please press accounts.
Your first question comes from the line of Ryan Macdonald from Needham Your line is open.
Hi, Thanks for taking my questions.
Just first one for you obviously were not going back to specific guidance, yet, but you obviously have a sort of a goal of returning to positive organic growth and 21 can you give us a sense of sort of how and how you see that playing out as we progress through the year and and I guess, specifically in Q1 on seasonality are you seeing any impact from.
Fewer tax form filings, we've seen that I think phenomenon with a few other payroll vendors recently as well thanks.
Yes, Ryan I think couple of things one.
And I think the big thing on organic growth.
As we keep what can we control and we can start selling and start more customers and we're losing and we're doing that since July so I think that bodes well as increasing our performance throughout the year in 2020 want and.
And then secondly, as far as Covid reopening.
It kind of happen quickly or is it going to happen slowly I've seen macro forecast that says we will return to normal and 2024 and I have seen.
Forecast and we're going to return to normal and second quarter.
I think the truth is probably somewhere in between but I will tell you that at our same store sales or national unemployment starts to return to normal that's only really good news for US I think as a small medium sized business provider, we've been hit hard with Covid by the same token as the economy snaps back and.
Stimulus and some other programs that they are doing for small businesses.
And we should do.
And do well when those headwinds become tailwind. So we're focused on what we can control, which is starting more and we're losing.
The second point of that question and I'm, sorry, there was organic growth and there was something else Ryan.
As we look into the seasonality for Q1, typically that's a bit of a stronger quarter given the tax form filing it we've seen a bit of a phenomenon.
In verticals that have heavier churn in 2020 since there was less hiring and maybe thats had an impact on the number of forms you might file W. Twos.
And one.
Yes, right and I apologize I should add that I was focused on your first question, but what I would tell you is what I would tell you from a company level perspective.
We're filing more tax returns.
And then we did last year for example, because we're processing for more companies, but there is no question that there's less employees because there was net less.
Less employment throughout the year second quarter was something like 14% less employment and our same store sales and improved somewhat through the year, but there is no question, our employment levels are down, but I would say.
And that's partially offset by the companies because we are processing for more companies than we did last year.
Excellent and then my last question and ill hop back in the queue and earn.
Around sales productivity, obviously, you've you've hired some additional reps this year and made good progress. There just just curious what youre seeing in terms of improving productivity with those new reps, particularly.
And particularly since you mentioned, you've been adding more new customers.
And then you've been churning us and since mid 2020.
And to know how you are feeling about that going into 'twenty, one and maybe plans for incremental hiring and 'twenty one.
Yes, Ryan.
And I think first of all I think the new sales reps got off to a good start.
Think they're.
Syrians and opt where they could sell face to face and they can sell digitally because they have good relationships, what I would say the second wave of Covid, probably muted the sales performance a bit in the fourth quarter as we had the election and then.
Now we are starting to see hopefully some signs that we're.
And we're getting vaccine stimulus, we're starting to open up but it's too early to tell there, but I would say on a whole.
You asked me again, if I would double the sales force and a year with Covid and I would double down and say, yes, we would we have been able to get the right reps at the right time to take advantage of this what I would say from a productivity perspective.
We had a strong.
Third quarter, I think fourth quarter was okay, the only reservation or muting wise.
Some areas, specifically, the west coast and and even in New York were somewhat muted with the second wave of Covid and and that probably delay and some sales.
And where we where we potentially we're hoping to be.
And then as far as going forward. It will we're at call it $65 66 reps now.
Youll see us average somewhere around 75, I would like to and the year.
Over 80 sales reps, because we continue to see success and.
And believe we will on an ongoing basis.
Yes.
Excellent. Thank you and Ryan Thanks for your questions I appreciate your coverage.
Thank you and your next question comes from the line of Derrick Wood from Cowen Your line is open.
Great. Yeah. Thanks. This is actually Nick altmann on for Derik, Thanks for taking our questions.
Maybe for starters can you guys just talk a little bit about the bookings mix just in terms of <unk>.
King's from channel partners versus direct sales.
I know the channel side of the equation has been a bigger focus as of late and.
And and.
And just kind of following up on the last question can you just maybe parse out the bookings mix there versus channel versus direct.
Yes, we're not going to go too granular on this but what I would tell you is our focus has been on small business and.
And really selling through the channel so that brokers have bankers. The CPA is in addition to the client base and direct sales what I would say is going up over 100%.
We were really pleased with as far as the reseller model.
First of all we had an outstanding 18.
And 19 and sales of resellers.
Some of those were getting in line and in 2020, I would say from a new sales perspective.
We're probably behind where we want to be but that being said, we view it as a function of COVID-19 what we.
When you are providing.
Essential services of payroll and HR for other small business says you're it's all youre going to do to make sure you take care of them and take care of their needs before you switch a book of business to another provider. So our retention has benefited from it but I would say from our sales perspective, we spent more.
Time nurturing.
And those customers stabilized reacting to for example tax law changes and that helping them really take care of their clients. During this tough time I do think youll see as 2021 unfolds and we returned to normal I think youll see some of the bookings around the indirect and the REIT.
And so our channel continue to grow but I would say that part of their business right now from a new sales perspective is probably the most heavily impacted by COVID-19.
Okay got it yeah that makes sense.
And then I guess, you guys mentioned winning back some customers who have churned and.
And your prepared remarks, and you guys also mentioned that last quarter. So.
I'm curious just looking into this next year.
How meaningful of a growth driver or do you guys and that could be just winning back some of those customers that had previously churn.
And <unk>.
First of all there is a difference between churn and pause churn means that they have gone to either another provider to taking payroll in house or potentially they have gone out of business for good the ones that we're talking about our business is that a pause maybe that restaurant.
Instead of going to a 25% opening.
Pods business still through as some normalcy and now they're coming back I think the key metric wont be the companies that pause we did have probably a 1% churn we may call that a day, maybe we'll get a little bit.
Extra companies coming back is as Covid normalizes, but I think most of them now have dealt with opening but I think the real benefit here is we were down 14% from an employee count.
The restaurant, that's opened 25% maybe they have six people and a normal environment they'll have 20. So we're anxious to see is abnormal time does that six employee company go to 'twenty.
The Barber, who has four barbers and they used to have 12 do they go to eight.
When do they feel comfortable hiring when do the workers feel that theyre, either vaccinated or feel safe to work within our clients and I'll return to normal those I think are visa and metrics that will start to focus on in 2021, and we'll give you kind of what we see and hopefully we will give you guidance.
And as we return to normal.
Got it thank you.
Thank you.
And <unk>.
Failure, Compadre, I'd say hi.
Eric moving.
Moving on your next question comes from the line of Eric Martin Mucci from Lake Street. Your line is open.
Yes, I wanted to dive into the pays per control color that you gave us that you talked about the dark days and Q2 at the minus 14, and then a recovery in Q3 at minus nine minus nine and again in Q4 and I.
I think you laid out a good explanation as to why that the recovery sort of still a little bit we got that second wave and the November December timeframe and that really impacted Q4, but I'm just wondering.
As we stand here.
Those two the second week of March here in 2021, do you have any indications that there was relief and January or February versus Q4.
Eric I don't want to put too fine a point on and what I would tell you and.
I think if you think about it. We're finally talking about completing a stimulus of big time stimulus right now I think over time and that will help but the reality is that's March.
<unk> or what have you. If you also think about kind of these reopening kind of mandates and whether and.
Politically neutral and this comment but when do you think about it if you do hire a couple people as a payroll company. We see some of that benefit 234 weeks later, because sometimes there's a delay and paperwork or delay and.
Laggan and getting cycle, if maybe they pay every two weeks with the week lag such like that so I think we're hopeful but really and see a mass improvement I think.
Couple of things first of all stimulus is coming right now.
Vaccines are starting to get mainstream, but we're probably a little bit early so I wouldn't I wouldn't go crazy and modeling and a lot of improvement quite yet.
I think the best answers were hopeful and.
And if we beat that great but.
We're still cautiously optimistic.
Okay, and Ive got my own obviously there'll be working with after this call, but you talked about the.
Hoping to generate organic growth.
Is it safe to model that for <unk>.
Stick with kind of a Q4 for the bulk of that growth or is there a sense. If we could see something maybe as soon as Q3.
What I would say and I'll, let John jump in here too because he's done a lot of good work here.
The biggest thing for us and and I know.
As far as guidance. We're just the biggest thing is what we can't control and these pays per control our same store sales and.
And it's a big difference if America reopens and normalizes or gets a big improvement do you model, a J a V or U or what have you what I would say for us and we're just focused on starting more customers and we're losing and we think good things will happen I personally think payroll and so.
Little bit of a lagging.
Opening and a sense that you pay for the.
Small businesses will pay over time before they commit the hiring and then when they do higher usually there is 234 week lag.
It's probably.
And the share compares right of second quarter being such a shock to the system.
Would lend itself to second quarter or third quarter, but the big driver here is that same store sales and the approved but John I don't know if you have anything to add yes sure.
Eric.
Obviously, I'm still relatively new to the company and and I've been trying to educate myself on kind of the.
The macro trends and kind of the.
Drivers to help.
And make decisions and so it just when I look at it.
It will sound very similar to what Pat said, but when I look at the business. There are a lot more customers and they were last year, but I can tell you that we're serving less employees. Okay. So there is probably two things that are going on maybe we're adding customers that are smaller than typical but I really do think the stories and the fact that there are less employed at those customers. So what does that mean.
Good news Bad news I think our customer base, probably got this growth disproportionately hurt more by COVID-19 than large employers large multinationals, we're able to weather. This they have the same power small businesses had to really shrink or survive. So good news bad news is our customers are surviving and hopefully when we get back to normalcy, we will see.
And we have a stronger tailwind, but again back to back to some of our earlier comments in the past comments, it's just hard to predict when that comes about and then what does it really look like when it does come about so that's why we're cautious but again I think from a macro level, we have offset those lower employee counts with having more customers. So again that portends well.
For the future. So that's my perspective on on where we're headed but again, it's predicting when we start to see that turnaround.
And with the stimulus helped but okay and then.
<unk> regarding the 80 reps by the end of 'twenty, one should we expect it to be.
And kind of.
A byproduct of the top line recovery or is that kind of straight line from here to December I think again, it's not a function of either it's when we can find the right people I don't think we have a set determined we have to get this maybe people and by this state or we cant prior on this this metric. So it's really when we were and the market.
And looking for people all the time and when we get them. If we find the right people will go quicker and if we can't find them. We'll go slower it's not a it's not prescriptive and that we have to have it on a certain date, we're more after quality and quantity.
I understand thanks for taking my questions.
Thank you.
Thank you and your next question comes from the line of Richard Richard Baldry from Roth Capital. Your line is open.
Thanks, I'm sort of curious.
Very high level and.
And any discussions or even broad discussions.
Acquisitions.
Has there been any change and sort of expectations terms.
With the people their willingness to evaluate and a post COVID-19 world I think thats, what traditionally would have been viewed as a pretty stable industry saw some pretty heavy volatilities and just wondering what that how that impacted some of the companies that you've worked with.
As resellers and and whether that.
Had the chance to increase your acquisition pace in 2021 and beyond.
Yes, no I appreciate the question and rich and I would say the second and third quarter as Covid hit.
As we all know Covid was a shock to the system and I think what.
And I saw was a lot of activity and the second and third quarter, but I would say I don't think there was a lot of conviction.
So the question would be there and some people were and denials and some people were saying Oh, my gosh, eight and a funding or I got to find a favorite uncle I got to find a bank, but maybe there is not a bank thats willing to lend me. So I think there was a lot and almost like Kid and garters running around at recess. There is a lot of activity, but im not sure a lot of purpose and.
And I would tell you is I think people now are getting our arms around okay. Here's how we are going to start to operate in a post COVID-19 world and.
And now boy did did I want to go through this shocked again or or and so.
I look at my new normal and what do I want to do.
So I do think you will have the opportunity and we will have the opportunity to have and have had some very meaningful conversations.
We are selective about what we want to do there is a sequencing here.
Building a business for scale and we are building a national business. We spent some time building out infrastructure across the country and now there's areas that are desirable for us going forward I wouldn't anticipate us being too aggressive in the first half of the year I think we'll be opportunistic and I.
Thank you.
The resellers that.
Have come to a conclusion and.
I would say expectations have been come in a bit.
But by the same token for us it's more a question of sequencing and doing it right I think we're going to have some at bats, and then if you think about what we're doing from a filing perspective, we're really setting up our capital structure to have an appetite.
That matches kind of our ambition.
But it is a thoughtful sequencing through multiple years and.
And we feel we have a huge opportunity to deliver on we're putting that structure in place.
We think coming out of Covid and there'll be some good opportunities, but we want to make sure they are predictable and and they are beneficial to the shareholders and our company.
And talk to learn about the sales head count, which has come up a lot, but can you maybe again, whether it's qualitatively talk about that.
And that's what you see at the top of the funnel.
The marketing side.
And Thats web traffic leads generated how has that changed sort of first half 'twenty versus second half 'twenty and.
And do you think that that is that one other reason that you feel confident and adding more heads of 2021 rolls out.
First half 2020, as Covid and like we talked about it was people scrambling right day first of all what is COVID-19.
Is that the flu is that whatever it is these are even COVID-19 when sort of conspiracy. There were a lot of questions right, depending on where you had your point of view and then and some.
Small business it says wait a second I got it.
Shut down and what does that mean for the business and by shutting down permanently et cetera, So sales pipe and and all that.
It was really low and the second quarter, it started and improved third quarter with stimulus, but by the same token and there was no vaccine. So it's definitely gone a little bit more the acceleration of digital sort of digital leads et cetera. If you have good relationships and that's why we focus on salespeople that have.
Good relationships with trusted advisers like brokers banks and CPA, whether it's digital whether it's over the phone whether it's a zoom call whether it's E mail those relationships are gold and this type of environment because people still have to do business now and the willingness to.
Change providers at a time when there is a lot of other areas to focus on and quite honestly, probably some higher level areas is tougher what I would say is the pipeline is steadily kind of growing I think the fourth quarter, probably with the lack of stimulus and the SEC.
And wave it probably was muted a little bit now the key thing to watch here is I think you'll see a digital pipeline and increase where we have webinars, where we talk about the opening and the economy getting money to small businesses working through the stimulus applications et cetera, our webinar.
Traffic has never been higher so that's a real positive development for us the ability to refer business from our trusted advisors has been high I've seen some data around the U S chamber of Commerce that new business formation is starting to get in place. So the businesses that did close.
They are starting to get a second wave of either a person reopening of business or going into a building that was not there. So.
And how you're selling differently, but it comes down to compliance and it comes down to.
And I attentiveness, it comes down and relationships and then it comes down to how do you.
How do you get.
Net to get to the prospect, whether it's a trusted advisor and digital so I think our best people always adapt I've been very happy with some of the tenor of the people that we've hired and and their relationships and we'll continue to invest and quality and and we think we're in a.
And part of a pretty good cycle as we have a footprint now of a national business that we can serve all 50 United States.
Of America.
Great. Thanks.
Thank you. Your next question comes from the line of Jeff Van <unk> from Craig Hallum. Your line is open.
Great. Thanks for taking my questions.
Model questions maybe to start.
And given given where good chunk through March at this point and I know you won't give the guide but at least maybe you can help us in terms of the sequential behavior of the numbers what kind of uplift do you think youll see from HCA and <unk>.
<unk> is that kind of thing and and then along those lines the acquisition and Q4, what's the.
Trailing revenue and what's the expected revenue from that for 'twenty one.
And I think we expect approximately $3 million contribution from that acquisition throughout the year, obviously is going to probably be weighted a little bit heavier into the first quarter.
The Street.
Yes, we're not giving guidance but.
The street is kind of modeled the sequential nature of the business already and kind of I think probably accurate reflects that kind of deviation and quarter to quarter. So.
And Thats helpful.
So the street just to be clear the acquisition is new news and so you think the acquisition brings $3 million for the year, but heavy in Q1. So the street was correctly adjusted.
Prior to that acquisition just to be clear zone I think that's right I think it's fair and again, we haven't given specific guidance, but you arent directionally off.
Okay and then.
From a cost standpoint operating expenses in particular.
Obviously, you took some cost out whether you go off and GAAP or non-GAAP, how do you think about.
Maybe you can just put a little finer point on what we should be thinking about sequentially for.
You pick it opex GAAP or non-GAAP from from the baseline of Q4.
And I think it's tough from the standpoint of it really is not going to trend appropriately because as I mentioned and some of my prepared remarks the company.
Net.
Held back some of the pay and benefits to the rank and file actually to Alton.
And our company so we put back in place on January one.
Regular pay and so the transitions are going to be a little heavy even though the employee count is going to probably stay relatively flat.
But we will have some negative impact because of that reinstatement.
Right.
Okay.
And you could go back and look at kind of some of the transitions.
From first quarter, and a second quarter of last year.
There you see some of the transition in terms of the reduction so you'll kind of through the opposite effect kind of coming in.
This year in terms of our transition.
Okay.
And then one.
And maybe higher level question and then as it relates to the.
The cross sell it sounded like you are calling out a bit better.
Cross selling of the additional solutions, particularly the HR and maybe time and attendance and maybe just talk about the improved attach rates and things beyond just payroll and specifically what.
Are you attach and when are you seeing that attach and what's it doing to the RPC. So let me tell you real quick for spectrum and I'll, let Pat kind of give more color, but in general I think most of the new sales are having multiple product bundle being sold with it.
I would say that the kind of going back into the installed base that we're still kind of and the nascent stage of that side of the cross sell business and Val.
Like I'll give Pat a and work time to get far enough.
And I think John is exactly right.
Our president and.
<unk> is really working on a strategy, where we have programming.
Cross sell so that debt.
Kind of automated bundle.
Technology easy to use and bundle appropriately I think youll see us with a simplified set of metrics around kind of this.
Bundling and cross sell and 2021 and <unk>.
And in line with the first quarter call.
But what I would say.
And we're really we've made a difference here and a new sales with the bundle while we want to make sure is as we have some small businesses, we want to make sure. They all adopt as opposed to we sell one at a time, so what I think youre going to see US do is highlight some of the efforts around time and attendance.
And <unk> around.
And of the HR consulting tier one tier two tier three which is basically automating a web delivery tool with employee Handbook et cetera, and then I think our HR, whether it's HR essentials and our share of cloud I think you'll see more to come so we'll highlight that and the first quarter call.
And.
And I think you'll have some metrics that you can kind of to our aspirational.
We'll talk through but the base is less about this one by one but more of our programming cross sell and and bundling approach and Jeff One other thing since you were asking about modeling and I think I'll just make a point that I think probably picked up on but obviously with the equity raise in December.
Need to adjust the denominator in terms of EPS calculations and models as well.
Got it okay. Thank you.
Thanks, Jeff.
Thank you. Your next question comes from the line of Vincent Colicchio from Barrington Research. Your line is open.
Yes, most of mine were asked Pat I just.
And last year, you did a nice job expanding sales force with some experienced people you benefited from the situation.
Just curious what does your pipeline look like is it getting any more difficult to find these.
And these types of people.
I think actually success breeds success I think.
We're now have a management team with a lot of deep domain, HCM or human capital management expertise.
We have people that have done it before.
Strengthening.
The management team et cetera, and when you have good people and you have good results and attracts other good people and so while we don't have.
Eight of that like the comp you pay.
Acquisition and the second quarter, we were able to get up we'll get some.
And some pretty good sales reps, what I would tell you is I think where it is getting out that they can be successful and and make some money and and really build their own legacy and then as far as.
Leaving footprints and our sand when you have a chance to build a company like this in a marketplace, that's evolving and pretty exciting and and you can partner with brokers and bankers and CPA is where the competition is competing with them and you have.
Once in a lifetime opportunity. So we think attracting really good salespeople and have fewer sales per se and youre on this call and Youre successful.
Come see us, but we think we can do that through this year, we might not have the big Bang approach of what we did and the second quarter, but we're pretty confident that we can attract the right people and anecdotally again.
Suffolk and this up.
From my perspective.
Good sales people are waiting around for their bonuses and so theres a little bit of a lull and the first couple of months.
It was settling up on their prior year performance.
I would expect a little bit of loans. The first couple of months.
Top performer start to get paid out that we were going to go after.
Yes.
Okay. Thank you.
Thanks, Vince we appreciate it.
Thank you presenters I'm showing no further question at this time I would now like to turn the conference back to RSV and Mr. Pat Goepel for any closing remarks.
Yes, no I really appreciate your time today, and we had a longer call than usual just there were a lot of stuff to talk about with year end and and year began and then obviously everybody is interested and the economy and the stimulus and and.
And Covid and returning to normal I want to thank everyone 2020 was a tough year I think it was a great year with a foundation year for us.
We've made some improvements will continue to make some improvements we will continue to get better each and every day and we appreciate your investment and US we treated really seriously and.
And we will continue to improve for you through 2021, so till we meet again, thank you very much.
Okay.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you all for joining Jim and all disconnect.
[music].
And.
[music].