Q3 2022 Paycor HCM Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to <unk> third quarter fiscal year 2022 earnings call.
All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end if you'd like to ask a question on today's call you can do so by pressing star one on your telephone keypad.
I would now like to turn the call over to Rachel White, Vice President of Investor Relations.
Good afternoon, and welcome to pay for the earnings call for the third quarter of fiscal year 2022, which ended on March 31st on the call with me today are Rob all the large junior <unk>, Chief Executive Officer, and Adam Anti <unk>, Chief Financial Officer or financial results can be found in our press release issued today, which is available on the investor.
Relations section of our website today's call is being recorded and a replay will be available on our website. Following the conclusion of the call statements made on this call may include forward looking statements related to our financial results products customer demand operations and the impact of COVID-19 on our business and other matters. These statements are subject to risks.
Ts and assumptions and are based on management's current expectations as of today and may not be updated in the future. Therefore, these statements should not be relied upon as representing our views as of any subsequent date. We also will refer to certain non-GAAP financial measures and key business metrics to provide additional information to investors definition.
non-GAAP measures and key business metrics and a reconciliation of non-GAAP to GAAP measures is provided in our press release on our website with that I'll turn the call over to Raul.
Thank you Rachel and thank you all for joining us to discuss <unk> fiscal third quarter results, we delivered robust revenue growth of 23% year over year, driven by continued client growth.
Was our highest recurring revenue growth quarter in more than five years.
Total revenue was a record $123 million exceeding the top end of our guidance by 4%.
We have now demonstrated accelerated revenue growth and increased profitability for three consecutive quarters.
Sustained momentum gives us confidence to once again raise our full year revenue and profitability guidance, which Adam will describe in more detail.
The labor market dynamics, such as the great resignation and increased regulatory complexity continues to drive strong demand for modern cloud based human capital management solutions, the $29 billion HCM industry is still in the early stages of shifting to modern cloud solutions.
With significant runway for sustainable growth.
Small and medium sized businesses are seeking innovative cloud tools designed to simplify the human capital management process for their industry and their leaders.
<unk> open extensible platform is purpose built for leaders and configured by industry and that differentiation continues to win in the market.
Our modern SaaS HCM solution automates routine management task. So frontline leaders can focus on the key elements that drive business performance and employee engagement such as goal setting coaching and talent development.
Furthermore, our vertical program resonates with clients as we align human capital management with their industry and providing industry specific product differentiation client experience and community.
During the quarter, we continue to make progress against all four strategic growth initiatives that we believe will enable us to deliver long term sustainable growth.
First our sales teams continue to successfully expand into tier one market.
Which we define as the 15 largest cities in America.
We have significantly expanded our tier one sales covered from the end of fiscal year 'twenty, one with established sellers in all tier one markets.
We are on track to expand sell it head count by 20% plus this year, which we believe is impressive given the tight and competitive labor market.
Tier one deal metrics remained strong with consistent win rates and higher deal sizes.
Our Pac 12 partnership as already started delivering encouraging results that support our tier one market expansion in the west.
The Pac 12 is a great strategic fit as our over 78000, Ceos and over 34000, HR and finance executives associated with the Pac 12 on Linkedin.
We're generating millions of views from Pac 12, marketing campaigns and are building our brand awareness in these large markets.
Second the broker channel continues to deliver outsized results.
When we revamped our sales strategy in 2020, we focused our playbook on brokers and established partnerships with five national firms that account for about a quarter of our broker revenue today with significant expansion opportunity.
Our broker strategy supports our tier one expansion by providing immediate access to our sales channel and new and expanding markets.
We have supplemented our broker value proposition of benefit administration platform flexibility and guidance implementation with a portal that provides our partners with thought leadership and co branded marketing designed to cultivate mutual business expansion.
Third our industry specific approach is one of the top reasons clients choose pay court.
We configure solutions for four key industries, which represent about 50% of our Tam.
Our unique value proposition is driving outsized win rate.
By understanding the requirements of healthcare manufacturing food and beverage and professional services. We have developed tailored solutions that help solve the most pressing human capital challenges for these industries.
Our industry program empowers leaders to develop winning teams through product differentiation client experience and community.
For example in manufacturing recruiting skilled labor is a big challenge through our product differentiation, we helped manufacturing leaders modernize their career pages in.
Increased visibility of job postings and incentivize employee referrals.
We also partner and integrate with third party technologies that manufacturers need such as ERP systems.
Our manufacturing customer experience starts with the industry skilled implementation experts and targeted training content such as how to set up shift differentials, how blended over time works and adding a union code, which further enhance our industry client experience.
We also help initially to stay on top of the latest trends and compliance issues and facilitate knowledge sharing and our communities.
Lastly, we continue to enhance our industry, leading functionality by expanding the breadth and depth of our ATM suite and have increased our pepam to $42.
Our modern software has a seamless user experience and extensible platform that enables us to rapidly add capabilities and integrate additional partners. It provides a time to market advantage to stay ahead of the dynamic and evolving needs of our clients.
This quarter, we released an innovative developer portal to enhance our interoperability, making it even easier for our clients and partners to seamlessly integrate and sync data between pay core and critical third party tools. The developer portal addresses over 50 points of integration and enables leader.
To access real time data and resources to support their teams.
The developer portal is beneficial all clients is especially relevant for our four verticals since they tend to have greater integration needs. For example, in food and beverage point of sale integrations are critical whereas in the healthcare scheduling integration is essential.
Since the launch in February we have received outstanding feedback from both clients and partners.
In addition, this quarter, we partnered with Equifax to provide automated employment and income verification services to clients at no cost further reducing leaders administrative burden. So they can focus on what matters developing their associates.
Companies, often verify employment and income history for current or past employees or applying for a loan or other financial services and this partnership will simplify that process.
We also worked with fidelity to provide an extensive 360 degree integration between the company's 401, K and ACM platforms to streamline administration for our mutual clients.
Furthermore, we recently launched expense management, enabling leaders to easily reimburse employee expenses utilizing the same unified pay core platform used to pay higher onboard manage grow and recognize talent.
By streamlining time consuming manual tasks like expense management, we empower leaders to invest more time and resources into developing their teams.
As a testament to our ongoing product development. We are proud of the nuclear research highlighted <unk> ability to deliver rapid time to value for its clients. Our platform stood out for its ease of deployment cost efficiency and strong customer support.
This year, we improved significantly and usability, which reflects the investments we continue to make to enhance our platform.
Calendar year end is our busiest period and I would like to thank all <unk> associates for their commitment to our client experience and delivering our strongest year end on record.
Over the last two years, we have made focused investments in technology and resources to enhance our client experience and we are starting to see the impact.
This is the first full quarter, our chat tool has been wide and we handle about 10% of our support volume through this new channel customers prefer the quick response time is this communication method.
And as a result of these enhancements, we had an 80% improvement year over year and client wait times during the second and third quarters.
Of 10 to 1000 employees is showing accelerating growth close to 10% and we are demonstrating outsize growth and 100 plus segment.
Our target market represents about 80% of our total revenue in just over 60% of our clients and contracts. The microsite mint of under 10 employees continues to contribute single digit percentage of revenue, while representing nearly 40% of our clients.
Overall, the labor market is still below pre COVID-19 levels and organic labor market growth remains in the low single digits consistent with historical averages are.
Our average customer size has increased to just under 75 employees per customer an increase of about 10% year over year as we continued to shift away from that microsegment and accelerate growth among clients with more than 100 employees.
Net retention also continued to train favorably and is in line with pre Covid levels. We attribute this to the rebound and our clients and police levels combined with investments we've made an implementation <unk>.
Just to gross profit margin with 69% down slightly from 77% a year ago and consistent with our expectation. This change is largely due to increased amortization related to capitalized software and contract acquisition costs as well as continued investments in our service organization to ensure a great client experience, while we are seeing some labor.
Cost pressure it has not had a material impact on our profitability tick.
Ticketing consideration of significant amortization associated with our apacs acquisition and recapitalization adjusted gross margin, excluding depreciation and amortization was 78% for the quarter, an increase of 13 basis points year over year in both profitability metrics. We have delivered sequential margin improvements for the last three quarters as we continue.
To scale the business.
Sales and marketing expense was $34 million or 28% of revenue compared to $25 million or 25% of revenue a year ago in line with our aggressive go to market strategy. We continue to expand our sales teams and marketing programs, especially in tier one markets. Since this massive market is still in the early stages of transitioning to the cloud and we are.
Consistently generating strong returns are investments, we will continue to invest to capture market share and drive meaningful value for shareholders.
R&D expense was $8 million or 7% of revenue compared to 9% of revenue a year ago, and including capitalized development costs of $8 million, we invested $60 million and R&D or 13% of revenue similar to the year ago period and in line with our expectations are team continues to build new cases.
Abilities, and expand our product portfolio and pet them opportunity delivering insights for leaders to develop their teams and improve their business.
G&A expense was $18 million or 15% of revenue consistent with the third quarter of 2021. However, our goal is to continue to drive G&A down as a percentage of revenue and we have done so for three consecutive quarters. We also see a shift towards higher mix of technology related spin to drive future efficiencies as we continue to scale.
Operations overall, we're driving G&A leverage year over year, as we anniversary public company expenses and manage strategic investments.
This quarter as we've fully embraced our virtual first model, we recognize a 9 million dollar loss from exiting certain facilities leases I'd like to emphasize that this has no impact on our expansion strategy and will be accretive to earnings beginning next quarter.
Operating income was $25 million or a 21% profit margin compared to 21.6% last year. The modest change in profitability reflects investment in the growth drivers. I described we remained confident that are proven and scalable business model will deliver strong top line growth and attracted levels of profitability overtime.
Shifting to the balance sheet, we increase our cash balance by over $20 million ending the quarter with $134 million in cash and no debt.
This quarter, we generated interest income of approximately $410000 on average client funds of just over $1 billion.
Overnight interest rates remain the primary driver of our interest income and we have yet to see an impact to the rates banks are willing to pay.
Moving to guidance for the fourth quarter, we expect total revenue of $103 million to $104 million or about 18% growth year over year and adjusted operating income of three and a half to four $5 million.
For the full year, we are raising our revenue guidance to between $421 million to $422 million or about 20% growth year over year at the top end of our range and we anticipate adjusted operating income of $41.8 million to $42.8 million a.
A few things to keep in mind regarding our outlook.
<unk> and processing volume drove a few points of growth in the third quarter. Following this seasonal peak, we expect our fourth quarter revenue to declines sequentially without the benefit of those year in revenues.
Employment growth has remained steady in that low single digits and as such we expect marginal benefit from continued labor market growth.
And while interest rates continue to rise, we expect little impact to our fiscal year 2002 guidance, a 25 basis point realized increase in the overnight rate on our estimated climb funds would generate about half a million dollars of interest income and a quarter.
To wrap up we're pleased with the execution of our go to market strategy expansion of our ACM Sweet and early success of our customer experience investments, we remain optimistic about the opportunity in front of us and are enthusiastic about momentum in the business are unique focus on leaders and industries continues to meaningfully resonate in our mid market customers and we remain.
Excited about our ability to capture market share, while improving profitability longer term.
And with that we'll open the call for questions operator.
Thank you we will now begin to Q a session if you'd like to ask a question. Please press star followed by one on your Touchtone keypad.
If for any reason you would like to remove that question. Please press star followed by two.
Again to ask a question press star one we.
We will pass you briefly to allow questions to generated.
The first question is from the lineup Jeremy Solar with Jeffries you May proceed.
Hey, guys I'm on first and lots of <unk>.
Questions excellent Unplug income so I know last what are you mentioned that over 90 per cent of client plans or an overnight. It based on your commentary it sounds like that's still true.
You mentioned last quarter that you're waiting waiting for the <unk> like the right environment kind of pleasure out before you moved into longer duration securities.
Will change on that at all.
A slot.
It hasn't really changed we continue to make small movements, where we where we think it's prudent.
Again, the biggest impact of the over overall interest income is going to be the it's still going to be the overnight rates and so those rates have just not move materially just yet.
We do have more than 80% still in overnight accounts. So I think I think we'll begin you'll begin to see a little bit of flow through there over the next couple of quarters, but again that the biggest driver is going to be the overnight rate for sure.
Gotcha that makes sense and one more quick while I'm I'm pricing Uhm I know you guys do annual price increases, but I guess it inflationary pressures are you considering any additional increases or maybe a change to the size of the next price increase.
No I mean, I think the way that we think about it still is really just be an intentional about creating value and adding additional products and expanding our our bundles.
And then as we launch those new products and improve functionality proving our support model.
We drive to take a portion of that portion of that through annual increases.
I wouldn't foresee that just because of inflationary environment that we're necessarily doing anything outside.
Other than continuing to invest in those those critical things that our customers need and then and trying to capture that value appropriately we have not done increases to clients more than annually. Thus.
Thus far.
Gotcha, Okay. Thank your time and congrats on about it.
Thank you thanks.
Thank you <unk>.
Next question is from the line of Brad read back with Stifel. You May proceed.
Oh, great. Thanks, very much a high level of question to start with rollovers, you think about your M&A strategy I know historically, it's been focused on smaller deals any change in philosophy there.
Yeah.
You know we don't we haven't had any significant change in philosophy, we have historically and focused on small tuck in acquisitions.
That would enable us to.
Leverage.
Vast distribution and sell a broader bundle.
And.
That's what we've been focused on Adam anything you want to add to that you know I mean, we focused the last couple of acquisitions really been advanced scheduling applicant tracking and just finding that world class technology, and then like Rolling mentioned is get an outdoor distribution. We'd have some success was with more like small IP only acquisitions as well.
And will continue to be opportunistic and when we take a lot of books, but that's really where we focus isn't that the product space for sure.
That's great and then switching gears real quickly.
The developer portal is there an opportunity there to monetize that directly or is it more indirectly via greater usage and higher retention rates. Thanks.
Yeah, it would be with the portal.
It's really.
Indirect modernization I mean, the the premise behind the portal as we believe that.
The future of ATM is around interoperability and the ability for our customers to be able to link HCN with any tools that help them run their business more efficiently.
So there may be some partners that we can my eyes.
But for US it's been about client experience and winning more client because we had the most open modern platform an ATM.
That's great. Thanks, very much guys.
Yeah. Thanks, Thanks, Brian .
Thank you. The next question is from the line of Terry Tilman withdrew a securities you May proceed.
Yeah. Thank you roll Adam and Rachel Congrats on the quarter I do want us just as an aside.
Say I'm, sorry to see that the Bellow Cincinnati lost the great thing about race. This week now moving on from the obscure reference of the year.
First question I had is just maybe for your Raul kind of micro question of our own recessionary pressures inflationary pressures.
Could you talk and say anything about kind of anything you are observing either in different regions of the country are those top 15 cities or just anything that's relevant from a demand jen or seeing folks pause or anything on that or maybe anything you could share about verticals because I think last quarter. You said healthcare was kind of coming back and I think you just launched pro service.
So just a little bit more on macro and maybe double clicking into vertical. Thank you.
Yeah, Henry without question by the way.
I know that the <unk> won the race, but it did finish last.
So.
Look at the details Sir.
So anyway.
But no from a macro perspective.
We haven't seen a big impact.
On recession or inflation today.
The overall market demand metrics.
Remains stable throughout the year, so we haven't seen anything there obviously.
Of any of the market that we deal in that.
Add more COVID-19 pressures.
We.
Experienced that when they closed the market are open the market throughout the year, but outside of that we haven't seen anything overall in the segment from <unk>.
Demand perspective, or delaying decisions based on inflation or recession.
Okay.
That's good to hear.
Maybe it's just a follow up question for animal or maybe well. It's just this is one of the first products I think you'll have launched kind of net new since you've gone public expense management. It seems interesting seems like cfos will be interested in that and just the leaders as you talk about survey how would something like this and how actionable is this in terms of affecting the motto positively.
Whether it's the pep them and then realizing that on the quarter or just larger deal sizes, how how we should think about expectations of that filtering through the model. Thank you.
Yeah, Hey, Thanks, very you know the way that we think about it is really continuing to drive that peplum expansion and that sort of high single digits and the overall 80 S. As we add new business and crosses back into our our our base. So I think that's where I would expect it to show up as <unk>.
See nude growth and that type of expansion and that sort of high single digit range.
The it's not just additional products like this but it's definitely part of the.
The overall model as we continue to grow that.
Okay, great. Thanks.
Thank you Mister Tillman the.
The next question is from the line of Bob and Charlotte Deutsche Bank You May proceed.
Awesome. Thanks for taking my question, Thank congratulatory performance as well.
Can you please provide any insight and how your bookings that trended relative to plan at any specific market their customer sizes that are maybe tried any better than others.
Yeah, we we don't necessarily painted to share the bookings details on a quarterly basis, the not necessarily helpful. In terms of demand I mean, the way that we've seen demand work through the through the year is that the fundamentals of the business continued to remain strong.
We see the demand Jen continues to to be strong for us and we see that really across our markets.
As we've continued to expand it to those tier one markets across industries in our brokers those key strategies that were driving towards we continue to see positive momentum so.
One of the key drivers that we think about is really the wind right where do we how.
How do we see.
Winning in these new markets, how do we see is winning against competitors as we are going heavier into these markets and our when rates remained strong. So we continue to see the product play well.
And all the markets that we're operating in it including the ones that we've been expanding into specifically in those tier one.
In terms of the overall demand in those markets. We continue to also add or seller head count right and we've been driving towards this 20 to 25.
That growth for the full year and we're still on pace stay at that for the full year. So with the majority of those head count going into the new markets.
Okay. That's helpful.
Follow up question actually just in terms of just at a tier one hiring can you just maybe give us an update on what you see attention to productivity ramp up the fires tend to plan ahead of plan and that would be helpful.
Yeah, I mean, as we think about adding as many sellers in this year as as we as.
As we are we are definitely expecting that the overall productivity.
On a per seller basis is going to decline slightly relative to the overall portfolio.
And so I would say it's too early for the cohort as they come in you have a handful of sellers, who had sort of six months into the year, which is still relatively early.
But we continue to we continue to see the opportunity and the performance across these key measures, including average deal size and the size of the.
<unk>.
The size of the deals that we're actually selling in in the size of those clients.
The wind right. So we continue to feel good about the progress that we're making with the new seller cohorts, yeah, and one thing that.
Two.
Interject is when you think about that sell a cohort, we really expect them to get to their full rant by the end of their second year. So.
We will have nominal impact from new sellers in year that will be it will help us build our bookings growth rate for next year and is Adam said, we continued to execute against.
[noise] levers of growth that we've outlined which is really adding new sellers into tier one markets.
We are on pace to achieve 20 plus percent growth.
<unk> head count continuing the leveraged brokerage channel to win and Outsides right.
And the leverage industry to be a big differentiator in.
In the marketplace and they're they're all executing very well and so we feel good about our momentum into market.
Great to hear thanks for taking my question.
Thank you Mr shot. The next question is from the line that's Kevin Nick pay with Credit Suisse. You May proceed.
Great. Thanks, so much and congratulations on the results.
<unk> when you think about the 4% upside relative to expectations what drove that was that.
Relative to kind of where you initially got and what drove the outside.
Yeah, I mean, I think a big big over our big lift here that we saw during the quarter is the annual <unk> fees, an additional form filings just came in a little bit stronger than we had anticipated. So we did pick up a little bit more ups.
Upside in the quarter and what we had projected and I'd say those urine fees are back quite to where they were pre COVID-19 levels, but but they definitely improved beyond where we were anticipating I'm here for the quarter that that was the primary driver then we continued to see the upside and the client base.
The company growth coming in January as well as continued personal experience and so just across the board. The performance was really just a little bit tighter a little bit better reach to the top into that 3.9 or 4% lift.
That's great and then you continue to do a nice job of expanding the <unk> like the partnerships with Equifax that continues Peggy Annapolis quarter is it <unk> is that in that pipe bomb or would that be outside of it and edited that as you think about additional solutions kind of beyond the traditional scope.
<unk> been providing.
Yeah, there's a couple of dynamics to it I mean, the way that we share the <unk> on the P&L or the surface here is really just the total reoccurring revenue.
Over the number of employees on our platform brightened. So equifax revenue for example would be included in that or other partner revenue would be included in that and it's a blended number I think in terms of our actual pricing strategy. We wouldn't there are some of those partnerships that we wouldn't necessarily price to the clients. So equifax. For example, does not have a pricing strategy that goes back to the <unk>.
<unk> clients.
So it's a little bit of a mix in terms of how we think about our go to market and the overall $42 <unk> suite that we that we offer as well as expanding the additional suite of services from partner, specifically like like Equifax creates some additional opportunities.
<unk>. Thank you.
Thank you.
Thank you Mister Mcveigh. The next question is from the line of Brian Bergen with Cowan you May proceed.
Hi, This is actually <unk> for Brian today based on your confidence over the past few quarters Pier one marked attraction improving the overall demand environment can you give us a sense of early goalposts and how you think about F. Y 23 growth is there the potential to see 20 per cent plus growth potentially sooner than you are longer.
<unk> aspirations why or why not.
Yeah, Hey.
We're excited about the growth and we've been really driving towards this 20% sustainable growth you can see in the guide that we're not quite ready to guide.
To the 20 per cent growth, but we feel good about the trajectory and it is a long term game around continuing to drive additional bookings accelerate those bookings and <unk> to the to the platform.
So will intend to share guidance updated.
Following the close of our FY 2002 year for full year 23, So we feel good about the progress feel good about the execution right now will continue to press in and almost here that guidance in the in the queue foreclose.
And then in terms of the competitive environment have you noticed any differences rather that'd be based on employers size segment or market too.
Yeah, we haven't seen any differences.
In the market.
Either on who we're competing with.
Or.
We're we're winning from they've remained constant so we compete with ADP palazzi and pay con.
On those transactions and we.
We take 80% of our wins from the legacy providers, which we define as in house ADP Paychecks and regional service bureaus. So that's been consistent over the past few years.
And we haven't seen any real differences.
And they go to market strategies.
Of any of our competitors.
Great. Thank you.
Welcome.
Thank you the.
The next question is from the line of Scott Berg with need them you May proceed.
Hi, everyone. Congrats on the quarter. This is microreactors on for Scott today.
Just one quick question for me I know you've talked a lot about the talent management opportunity in the past.
Can you go a little deeper on.
Adoption, there and then maybe some other modules you're excited about longer term. Thank you.
Yeah.
We're really excited about talent management.
And we're seeing.
Our highest attach rate than the new product and we're seeing.
In the mid market space.
Upwards of 35% attachment.
At point of sale with talent.
And we actually charged for it so I think that's a pretty exciting.
And it really demonstrates the value of.
Of the product and what we're trying to accomplish which is empowered leaders to build winning teams. So we enable leaders to coach and.
And inspire and motivate engaged our employees. So they can drive better outcomes for their end clients. So we're excited about it the market's excited about it and we're going to continue to <unk>.
Talent is a differentiator.
Great. Thank you.
You're welcome.
Thank you. The next question is from the line of Brian Peterson with Raymond James You May proceed.
Hey, Thanks for taking the question is chase Orange for Brian .
You had mentioned the strength binational partners. It now account for about 25 per cent of other partner revenue just curious how do you see the opportunity to go with those five national partners, but also the ability to kind of grow the broader.
Program.
It kind of small cars yet.
Yeah, it's a huge opportunity.
Obviously, the five natural partners contribute.
A little over 25%.
Of our overall.
Contribution from the broker channel.
And we have.
Over 1500 partners.
Across the U S that we work with and there's 14000 plus opportunity. So we have a long way to go and it's really exciting channel that has a significant impact in the mid market segment and so we're going to continue to depressing and it's really helpful. Because as we add sellers.
In the.
The tier one markets, obviously brokers are located in.
Intense markets, which are it came to our tier one markets. So it's a great place for our new sellers to start and build relationships that out of that so we're going to continue to press in we're excited about the progress we've made and.
It's a great channel for <unk>.
Ah very helpful. And then just to follow up on that the sales hiring.
Kind of theme some some broader wage inflation in the marketplace. How're you guys kind of thing that is you can do to.
I believe that's in the south of account.
Yeah, I mean, we see.
Wage inflation across the board I mean, primarily and some of those key roles like development or engineering and implementation I'd say.
S lesser in sales across.
Across the country I mean, there was a little bit of a natural hedge for them and just the the commission side or the or the variable comp side, but there has been a little bit I I'd say broadly it is not.
Impacted are materially impacted our overall business and it has an impact our guidance per se. So there has been a little bit of it for sure.
Not immune to it but in fact, it's it hasn't been material just yet.
Alright, thanks, and congrats on a great <unk>.
Thank you.
Thank you. The next question is from the line of Mark reckoned with Bird you May proceed.
Oh, let me add my congratulations on a terrific quarter wondering can you talk a little bit about.
What you ended up skiing with regards to the client retention and the key January Bruno.
November time period.
That trend relative to your expectations what sort of.
Changes have you seen.
Yeah, I think the way that I would say a mark is retention is there was a really long tail to it. So we had certain expectations is coming off the service here in in 2021, but we made a lot of improvements in inverse of its own and the service models invitation in product through <unk>.
21 that has shown as demonstrated some really positive momentum for us. So you can see it clearly reflected that the net retention improvement in the revenue and.
And you are seeing that play all the way through grocery attention in terms of just.
The longer tail longer nature of that just take some more time for it to fully fully come through but we're seeing continued positive trends around the the customer experience shows up in the product that shows up in the the service time in January or since a big victory for us.
[noise]. So we felt we felt good about coming through the year and when you can see it reflected in the overall revenue growth for sure.
That's great and then you rolled.
<unk> you mentioned you know a number of initiatives.
<unk>.
Developer portal expense management solution.
All the initiatives that you mentioned, which ones are you. The most excited about which ones can be you know the most impactful over the next year or two.
Yeah without question the developer portal I mean, it's the gateway to.
The future of ATM and it's about if.
If you believe in the power of modern API and you believe in the power.
Developer portal like we've delivered and it's about us enabling.
Our clients and our partners to integrate seamlessly with our platform and able to expand the reach.
Of what we do and so we believe.
The most important thing that we can do for our customers as has an open extensible platform that enables them to manage their business specifically the way they want to and.
And so being open.
With the power of the technology that's available today without question is a game changer.
That's great and.
When would you anticipate that we actually see the real impact from that coming through.
Well I think I think we see it in our wind rates today.
So as we continue to.
Pressing it supports <unk>.
Seller expansion accelerating bookings, which is driving a R accelerated revenue growth and I think I think you're seeing it.
It will continue to drive forward, obviously, we're building out a partner ecosystem.
Over the next 12 to 18 months that will continue to help supplement that so I think we're in the early innings part, but I think the the.
The potential the continued to layer on top as exciting for us.
That's great and then you also talked about you know increased success with regards to larger clients and particularly the wind right with companies that are over 100 employees can you talk a little bit more about that in terms of what you're seeing.
Who are you.
Are you taking away those hundred plus employee clients from this pain.
That you were previously taking smaller clients away from her how should we think about that.
What are the features and functions that are the most attractive.
Those clients that are driving that that's what you behavior.
Yeah I think.
Mains consistent 80% of our Windsor coming from the legacy providers.
And so I think.
What we're seeing is an expansion of our salesforce. So we're getting more of that.
In that segment.
We've expanded significantly over the last few years and what we're winning with is.
A modern HCM platform and had.
A simple easy to use you know <unk>.
Experience for them and then the talent <unk>.
Component, coupled with industry differentiation of the reasons why we're winning so when we look at a win loss report.
The first thing is we win because of industry. The second as we wind because of talent and the third is we win because our products the easiest to use with the most functionality.
Thank you Mr. <unk>. The next question is from the line of Mark Murphy with J P. Morgan you May proceed.
Yeah. Thank you very much.
Joined slightly late please forgive me if you're covered any of this but the first thing I wanted to ask is just whether you might be something any more urgency or any more demand from customers on the employee engagement a side of the product suite or the or the talent management side.
Just as they try to grapple with this shortage of skilled labor out there at all in all the wage inflation that that they might be.
Yeah, I mean, I, we have seen significant excel.
Acceleration in both those categories talent management, which enables us to.
Coach and develop into one on one and really connect and engage with an employee.
Is we're seeing a tax rates.
Between 3500, 40% were up seeing strong attach rates of engagement.
Whether it be recognition.
And the ability to chat between each other and that's within our core bundle.
So that kind of is included with all of our clients that we're seeing strong demand for all of those.
As we think about why customers.
Select pay corps, it's because we deliver all of these and this unified experience.
It's really easy for someone to.
Undertake and so for us it's been a game changer very powerful.
Okay, great to hear.
The second question that I had is are you seeing any flow of customers that.
Might be forced for some reason to move off of UK G. Just in the wake of that did that unfortunate.
Outage that this ever suffered I think back in December and January is there is there anything happening there or not a real important effect.
Yeah, I mean, I think I mean, we had.
We get a few wins.
In the end of the.
The calendar year.
Well, our clients had to process payroll and we were able to get them started in.
In a week or two.
But I would say that the majority of that target market is slightly outside of where we compete.
So a lot of those clients, maybe you know 5000 employees and above which isn't really were hunting.
On the day to day basis. So the clients that we were able to win we we can easily go up to 2500 until we were able to win clients and that pay range and help them convert over.
I see okay. One last one can you just remind us in terms of your contract with customers is there a standard pause in there for a cost of living increase annually or upon renewal just something that would would allow your help them pricing to kind of keep pay.
<unk> with what they're seeing in terms of inflation.
Yeah, you know most of our our contracts are greenfield right. So they don't necessarily come up on a term and we do reserve the right to change prices.
It has been our practice to do that annually and I'm.
I'm not sure that you are going to be any significant change our strategy. The way that we just talked about it is is around.
Creating value for the clients and capturing that value where appropriate and so we're going to continue that strategy, but there's there's not really a forcing mechanism.
Like a like a cost of living increase that you mentioned.
Understood. Thank you and congrats on a great results.
Excellent.
Thank you. The next question is from the line of proper Timmins with da Davidson You May proceed.
Hey, guys. Thanks for taking my questions.
I was wondering what is a typical real time for your new songs are we talking a quarter.
Two or.
More of a year for them to get.
[noise] productive.
Yeah. So so that was the way to think about it as a ramp.
Through the first six months.
And full productivity.
Comes after the second year, but take stair step up throughout the month to month.
Through the first 24 months, so they'll they'll continue to accelerate to that 24 month period. The end of 24 months the hit full productivity.
In there so I think about three months they started selling.
And producing and then they increase productivity throughout the next 21 months.
That makes sense.
How much of your proceedings and a quarter are typically back to base on.
I'm, sorry could you ask you to debate Oh back to the base about.
About 50% of.
The bookings are back into the base mhm.
Got it.
Thank you very much.
Yeah. Thank you.
Thank you.
That concludes our question and answer session I'd like to turn the call back over to <unk> for closing comments.
Thank you again for joining US Tonight, we appreciate your interest and pay core we're excited about the trajectory of the business heading into our fiscal year and we look forward to staying in touch and hope to connect with many of you in person and upcoming J P. Morgan bird insightful conferences this quarter.
Have a good night.
And a great Cinco de Maya.
Thank you for joining today's call and enjoy the rest of your day.
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