Q2 2022 Asure Software Inc Earnings Call

Good afternoon and welcome to assure second quarter 2022 earning conference call. Joining us for today's call or assures chairman and CEO Pat Gepel assures chief financial officer John Pence and head of investor relations Randall Burdnisky. Following their prepared remarks there will be a question and answer session for the answer.

dot usuresoftware.com, where you can also find the investor presentation.

During 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.

A description and timing of these items, along with the reconciliation of non-GAAP measures to their most comparable GAAP measures 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 use words such as expects, believes, and may to indicate forward-looking statements. And 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'd like to remind everyone that this call is being recorded, and it will be made available for replay via a link available on the Investor Relations section of our website.

With that, I would now like to turn the call over to Pat Geppel, Chairman and CEO . Pat.

Thank you, Randall, and welcome everyone to a sure stop where a second quarter earnings call.

I will begin today's presentation with an update on our business highlights and strategy, and then we'll turn the call over to our CFO , John Pence, for a more detailed review of our financial results and outlook for the remainder of the 2022 fiscal year. We will then conclude the session with time to answer your questions.

The second quarter was an active period for a sure and we made some significant strides in implementing our strategy. I'm very pleased with our progress in some of the key areas of the business, including new sales, development, product development, and our efficiency initiatives. I will address each of these items in a moment, but first let's recap the second quarter results. We grew our second quarter revenues by 18%.

relative to prior year and non-GAP EBITDA, 23%. That makes this period the fifth consecutive quarter we have grown revenues by double digit rates. We also maintained a healthy business mix with reoccurring revenues representing 94% of total revenues. In the quarter, our revenue growth was driven by acquisitions with organic growth.

being slightly positive as expected, led by our HR consulting and our tax products. As you can tell from our revenue guidance, we're expecting higher levels of organic growth in the second half of this year, particularly in Q4. Our guidance for that quarter implies approximately 10% revenue growth relative to prior year. Since we've not made any significant acquisitions in September 2021,

That growth is primarily organic. In other words, we're expecting a strong finish to 2022 driven by our recent sales successes and launch of our new solutions. We will still need to execute and deliver, but we believe we're on track to do just that. The acquisitions we completed in September of last year have met or exceeded expectations, and the integrations are now essentially complete.

on time and on budget. Despite having some expense headwinds, resulting from the reinstatement of last year's temporary COVID-related reductions, and investments we're making across the business, we managed to hold our EBITDA margin in the quarter. We continue to target a 20% EBITDA margin longer term and we believe we'll get there as we build scale in the business. As we build scale in the business.

roll high margin revenue streams, and enhance the efficiency of our operations.

Let me now turn to the progress we made across the business in the second quarter.

Beginning with sales development. In 2022, we focused on leveraging our unique strengths to bring value to existing and new customers while also enhancing our sales efforts by introducing new tools and investing in marketing to drive performance. These efforts have gained great traction in the market and helped drive an 87% increase in new sales bookings in the second quarter relative to prior year.

Importantly, growth in new sales was driven by reoccurring revenues, which we expect to have installed in generating revenue in the second half of this year. I previously highlighted the unique differentiation we have with our HR consulting and tax solutions. We have focused on these segments to enhance cross-sell activity, expand our addressable market, and enhance our resale revenues.

Our efforts in these areas are really paying off. And in the second quarter, we grew our HR consulting revenue by 19% relative to prior year, and we grew our tax revenues by 9%. Our cross-selling success is improving each quarter, and we see significant opportunities ahead within our existing base. These successes enabled us to penetrate 12%

of our base with ERTC solutions in the first nine months from offering. We think we have just scratched the surface in our cross-selling efforts and believe we can generate more reoccurring revenue from our existing client base. We're also seeing significant client interest in the integration marketplace, which we introduced last quarter. This API-led initiative sets the stage for new partnerships and new revenue streams.

such as our recently announced partnership with Equifax. It also provides a base to introduce solutions such as earn wage access, employer solutions such as benefit reconciliation, retirement solutions, and employee-focused solutions such as the Assure Wallet and tax preparation. We believe the integration marketplace will be a meaningful source of revenue growth for assure and we expect high costs in your organization and use it as an investment in your agency.

That will begin to happen in the third quarter and more notably in the fourth quarter owing to the timing of product introductions.

Turning now to product development. Our company's goal is to provide best-in-class human capital management products. To get there, we are consolidating to a single HCM and a single tax engine to allow us to offer a centralized human capital management ecosystem for both the employer and the employee. Our efforts will bring new levels of efficiency and automation.

and we will drive high margin revenue streams for assure. I'm really proud of the great work that our teams have accomplished in this area. So far in 2022, we've introduced several new initiatives that we're incredibly excited about.

These include, number one, the integration marketplace, where we launched in the second quarter with 125 pre-built integrations to enable accelerated development with new partners.

our new treasury management solution that brings world-class automation for our clients. This solution is geared for human capital management providers and larger enterprises to enable them to operate more efficiently and reduce risk.

We also announced new product developments with Employee Navigator for benefits, Certigy for unbanked employees, and QuickBooks for accountants and payroll clients. Last week, we announced the introduction of a new industry-leading tax portal. Our new portal gives employers real-time access to historic and current tax data and all tax information, including liabilities, deposit records, and copies of actual tax returns.

It provides transparency and interactivity while making tax compliance easier for payroll clients. We believe this new solution is best in the industry and further demonstrates our leadership in the tax area. These initiatives are also expected to contribute to revenue performance in the second half of the tax year. For more information, visit www.fema.gov

helping drive higher levels of organic growth and improve client engagement.

Turning now to some of the enterprise efficiency initiatives we're working on. Our initiatives in this area are geared to enhance standardization and centralization of our operations while delivering exceptional client service. To get there, we're consolidating back office functions, creating centers of operational excellence with fewer locations, and improved efficiency.

Our initiatives also support our acquisition strategy and enable us to expedite synergies and timelines for integrating future assets.

As we centralize our model, it will result in fewer bank accounts with enhanced float revenue potential and deliver an expected $5 million in annual cost savings as the program is implemented to the end of 2023. Turning to acquisitions will continue to be opportunistic. While we've not pulled the trigger on any larger targets so far in 2022, we'll continually follow this all-new develop course and report back to date with

monitor the market. We will acquire assets that fit within our

M&A model and that will drive value creation for our shareholders. Finally, I hope my remarks give you a sense of the great amount of activity that is underway at Assure. We are making great progress in sales, product and operations. Our commitment to provide leading edge solutions that drive value for our clients and to be the most trusted partner for small businesses.

We are in a labor environment of almost unprecedented change from the perspectives of regulation, mobility and talent. Our innovative solutions will help guide our clients through this dynamic environment so they can focus on their core businesses.

Now, I would like to hand off to John to discuss the financial results in more detail. John ? John ?

Thanks, Pat. As Randall mentioned at the beginning of this call, several of the financial figures discussed today are non-GAAP .

You will find a description of our gap to non-gap reconciliations in the earnings release was made available earlier today.

The reconciliations themselves are also included in our most recent investor presentation posted in the investor relations section of our website at assuresoftware.com.

Now, on to the results.

We are encouraged with our financial performance in the second quarter. Here are some of the highlights.

Revenue of $20.3 million in the second quarter grew by 18% relative to prior year, with both recurring and non-recurring revenues having strong gains.

We had good cross-selling success with clients as we saw demand continue to rise for our HR consulting.

good cross-selling success with clients as we saw demand continue to rise for our HR consulting, tax and ERTC solutions.

Our non-recurring revenues increased by 200,000 compared to prior year.

As a result of the continued success of our

employee retention tax credit offering.

We have now delivered to our customers more than 300 million of stimulus through this government program.

We are thrilled with the strong demand it is generating, and we believe it will continue to contribute to our revenue over the balance of the year, albeit at lower levels, relative to prior year.

non-GAAP gross profit margin remains strong in the second quarter at 66% of revenues.

Non-GAF EVA-DA rose by 250,000 to 1.3 million, or 23 percent.

In the second quarter relative to prior year, and our non-GAAP EODOT margin remains stable at 60% of revenues.

We accomplished this despite headwinds.

from higher headcount expense this year as a result of last year's suspension of some of our employee benefits that were made to mitigate the impact of COVID on our business.

That headwind was almost 800,000 in our year-over-year comparisons.

without which we would have generated even stronger EVA diode margin gains.

As stated before, in 2022 we are reinvesting our earnings to fuel technical improvements that support our product strategy, our growing list of partnerships, and increased marketing activity. As Pat indicated, it has been a very active year in this regard, and we believe these investments will generate high margin revenue activity in the second half this year in 2023.

As these investments take hold, they will fund themselves. Accordingly, the headwind from these investments.

we believe will be temporary.

and that they will lead to higher levels of value creation in the future.

We ended the quarter with cash and cash equivalence of $14.6 million.

We also had $35.9 million of debt, which is comprised of $30 million drawn under our Senior Credit Facility, with the remainder made up of seller notes from acquisitions.

Client fund assets were $184.7 million at June 30.

Turning to guidance for the remainder of 2022.

This guidance is offered with a backdrop of some continued economic uncertainty.

and the dynamic labor market.

We are pleased to reaffirm our guidance for full year 2022 revenues of $88 to $90 million.

with Q3 at 21 to 21.5 million.

and Q4 at 23 to 23.59.

We expect the third quarter revenues will show similar trends as Q2, with revenues being driven primarily by acquisitions.

to a lesser extent organic.

In Q3, we expect to make additional product launches and implement parts of our integration marketplace to begin driving new high margin revenue streams.

We expect a combination of higher interest rates and higher investable balances will together drive higher flow revenues.

As part of our centralization strategy, we have and are continuing to consolidate our banking footprint.

which we believe will enable us to enhance our investment returns in this area.

Our revenue guidance for the fourth quarter calls for approximately 10% growth relative to prior year.

Since we did not expect to have any significant contributions from acquisitions in the fourth that growth is anticipated to be primarily organic.

Organic growth in the fourth quarter is expected to come from continued strong performance in HR consulting and tax and improved float revenues.

and traction with some of the new partnerships.

We are in the process of launching.

For non-GAF EBITDA, we are maintaining our range of 8.5 to 10 million for 2020.

We expect EBITDA trends in 2022 to show the same seasonal variations as we've seen in the past.

First, quarter typically is the strongest quarter, followed by seasonally adjusted performance for the balance of the year.

Non-GAP Evidot in the third quarter is expected to be consistent with prior years of the third quarter.

We continue to invest in sales tools, marketing, advertising, and other initiatives designed to utilize our more robust technical platform and leverage the innovative partnerships and

We expect the cost of these investments will be offset by the savings.

via efficiency and centralization issues over time.

Overall, the initiatives we are putting in place around sales development, product enhancement, and centralization we anticipate will begin to bear fruit in our revenues and provide a strong base for 2023.

We will be diligent in evaluating acquisitions and will transact if the right opportunity arises to create value for our stakeholders. However, nothing is imminent at this time.

Looking into 2023 and beyond, we continue to focus on long term targets of 10% annual growth in organic revenues.

and 10% growth in organic revenue.

We also believe that as a business scales and benefits from our efficiency initiatives, we can deliver 20% non-gap EBITDA margins.

With that, I will turn the call back to Pat for closer remarks.

Thanks, John . In conclusion, I hope that today's call has given you a sense of the many initiatives that are underway to position Assure for sustained revenue growth and profit improvement. Our new sales growth has accelerated meaningfully as we have progressed through 2022 and we believe positions us for a strong finish to 2022 and great momentum heading into 2023. 3.

We have developed some really fantastic, innovative solutions that are creating strong client interest and demand. These solutions also create real differentiation and leadership for Assure as we strive to offer the most valuable products and become the most trusted partner for small businesses.

Our strategy is to move from the legacy transactional way the payroll industry has operated to a world where we provide new tools for employers and employees to connect and run their lives or businesses. Our efficiency initiatives are centralizing.

and standardizing our workflows and operations. We believe they will produce enhanced efficiencies and improve margins as we make progress. We're very excited about the progress we made.

on our journey to create leadership in our market using our unique collection of assets. We expect they will create meaningful value for our stakeholders.

create leadership in our market using our unique collection of assets. We expect they will create meaningful value for our stakeholders. So with that, I'll stop there.

I will send a call back to the operator for the Q&A session. Operator?

Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. If you wish to remove yourself from the queue, you may press star one again. One moment, please, for your first question.

Your first question comes from the line of Brian Bergen with Cowen. Please go ahead.

Hi guys, good afternoon, thank you. I wanted to start on the new sales, so your bookings here are up 87 percent. Can you just talk about some of the factors that are really driving that inflection and also just when you look at new sales, maybe the composition between new logo versus cross sell and just cadence of bookings. You went through the quarter, did it accelerate month to month and did you carry that momentum here in July ?

Thanks, Brian , for the question. What I would tell you, this has really been a couple years in the making. I think last quarter we announced the integrated marketplace where we're providing our customers with access around earned wage access and wage verification. Some of the bookings are related to that marketplace and we'll continue to see revenue in the second half. Human resource consulting, which is an add-on to our payroll customer.

maybe this quarter, a 60-40 blend around add-ons. You know, the marketplace drove some things as well as tax and human resource consulting. As far as momentum in the quarter, it was pretty steady. June was very positive. I would say third quarter looks like it's gonna bode well and we had a great start to the third quarter. So, all in all, very pleased with the sales effort. I would tell you, you know, our guidance.

in the fourth quarter is double-digit organic, 10% revenue growth. We think we're on track for that and that's an important milestone, so we think we've hit that inflection point.

Okay, that's helpful. And obviously we're not seeing it in the bookings, but just, you know, understanding you affirm the back half guidance here. You just, in an uncertain environment, can you just talk about, have you seen any concerns in the client base, anything in client employee levels, anything like that that's changed to the negative side at all? Yeah, Brian , the only thing I would say is, you know, if you see those help wanted signs in Main Street America, you can...

provide access to keep filling them. We'd love it. So our, you know,...............

When you look at pre-COVID, some people would say we're close to back to those levels. I don't think we're quite there yet in small business America. So any hiring is usually good for us. But what I would say, 94% repetitive revenue. We have some new products and services that we've talked about that we're launching. We think they're getting traction. 87% growth is positive. When I look at third and fourth quarter,

We'll have really strong numbers and repetitive growth in bookings, and then that will turn the revenue. And I think the inflection point we've been waiting for is within sight. So always have some concern with the economy, et cetera, but this business is getting more and more predictable for us.

Okay and just one last one for me here just on float how did that change or I guess did that change in your fiscal 22 outlook here I may have missed it but how are you thinking about flow contribution now versus what it was before?

I don't think we've added dramatic change in our view. I think we always expected some some improvement in our flow not only because of interest rates but because of some of the centralization projects that Pat was mentioning. We had in our plans that we were going to be consolidating bank accounts and with that consolidation we were going to be able to put more money to work at longer-term rates. So we had a little bit of that played in. Obviously with rates going up and that consolidation of bank accounts we're going to get a little bit more lift.

but not enough to change guidance. But we think it's going to give us pretty strong momentum into 2023.

Okay, thank you.

Thanks, Brian .

Your next question comes from the line of Richard Baldry with Ross Capital Partners. Please go ahead.

Thanks. Can you maybe talk about average sales tenure? You've been talking about that a little bit. I think that's been extending, so maybe that's one of the key drivers behind the booking success. And then, maybe also talk about plans for additional hiring to keep up this acceleration and how replicable you think the successes in more recent hiring has been that's helped drive this current bookings acceleration. Thanks. Yeah, Rich, I would say it's twofold.

is the average tenure in the sales team, we probably have about 75, we'll end the year somewhere around 90. You know, it's quality, not quantity. But I think one of the things that sometimes gets probably confused in the hiring of salespeople, we've done a lot of product development. So the marketplace that we introduced last quarter, the tax portal this year, the human resource consulting package and bundle, the three tiers that have

really well in the end of 22 here and 23 and will continue to pour gas on that fire.

Thanks. There's a one-time, or it looks like a one-time item, a gain on the P&L. Can you talk a little bit about what that is, whether that is just one time or if it's the beginning of something else that's happening? I think it's pretty straightforward. We had some cleanup with regard to some of our seller notes and some contingent obligations. We had some going, I think we had three different transactions where we were kind of settling up and cleaning up the balance sheet after this quarter.

it is literally kind of just clean up of acquisition accounting. Okay, and lastly, the R&D number was a little high in the first quarter. It's come down to what was more in line with prior quarters. Do you think this is sort of a good run rate level to look at or is this somehow dampened in the first quarter is more what we should be thinking about?

It's probably the composition, right? I think as, you know, the accounting model that the company's been operating under is kind of a capitalization of new. And so I think what you will see is we'll probably actually start spending even more on R&D, but we'll probably have more new as opposed to maintenance. And because of the accounting model that we're under, that more will get capitalized and amortized over a longer period of time. So I think what you actually see quarter over quarter is probably more capitalized software, probably not less spend, but probably more of this hanging up on the balance sheet.

Yeah, and Rich, just to that point, what we saw with COVID and with some of the tax law changes, a lot of focus on maintenance. We're now into a different phase. We're really focused on the new and the API First strategy. So I do think you'll see more capitalization in the maintenance, while be steady, won't be as much as a percentage as where we were over the last year.

Thanks. Last for me, again, back to, not to beat the same horse, but the 87% bookings increase. You talk about how close to capacity your current teams are. So, like that's a pretty big number year over year. So is that most people firing on all cylinders or you still feel like there's a lot of room to keep deepening that productivity with your existing team before you're adding additional heads?

Yeah, no, that's a great question. And Rich, you know, we've been accelerating headcount in this environment. You know, we've been focused on quality and numbers. What I would say is we have a good cadre of folks that are now hitting their third year that are getting very, very productive. Some of the product lines that are getting productive are tax, the marketplace, as well as human resource consulting.

General new logos and payrolls through some of our partners are growing. So I think we have plenty of room to grow, you know, organically speaking within the sales team in addition to we're going to look to add more people and more focus to continue to drive that productivity, because we think we have the ability to do that. And then I would say our technology and implementation has made it easier to stand up these clients.

quicker and with a good amount of quality. So we're going to keep using those productivity gains to help our salespeople and our product lines grow.

Great, thanks.

Your next question comes from the line of Joshua Riley with Needham & Co. Please go ahead....

Hey there, thanks for taking my questions. Just kind of building off the sales dynamics there, how should we think about the balance of time sales reps are spending right now on organic net new customer acquisition versus upselling the ERTC opportunity and cross-selling customers that you've acquired through the fall 2021 acquisitions? And what do you think offers the highest ROI over the next year?

Yeah, I mean, I think the one thing that we'd like to highlight is the RTC is important, but really it's the marketplace that's really important for us. So the ability to partner and get the broader ecosystem, whether it's earn wage access, whether it's 401K, whether it's W2 processing, whether it's wage verification, the marketplace has a lot of legs for us and we'll continue to drive that.

within tax and human resource consulting. It's not only cross-sell, but in many cases, it's new services. So we'll continue to drive new logos at a nice pace, but there's no question with an API-first strategy, we can integrate more product lines quicker and that will lead to some real good benefits for us. Not only in the second half of the year, even second quarter, we continue to have and expect...

good productivity within the sales force in the second half of the year in 2023. So we have the ability to grow incrementally within the sales team that we have, but then adding some new folks to take advantage of the product enhancements.

Got it. That's helpful. And then can we get some more color on both the savings and investments over the next year? How much are those offsetting in the current year? And how much does the higher interest income that should be coming into the model help offset the impact of the increased investments? Thank you all for Community Law christening...

Yeah, I don't know if we have that much detail to give to you on this call. I would say that just order magnitude, I think if you look at the financials, we had 30 million dollars invested long term at the end of the year. We closed up this quarter at 50. We think that we can probably add kind of that same level over the balance of the year. So that gives you some sense of kind of long term what we think we can do in terms of longer term investments on that flow. So that gives you.....................

Let's say rough numbers, we're able to put new money to work based on the current rate environments probably in the neighborhood of 3.5 to 4%. So that gives you some sense as to the order and magnitude of that opportunity just on the longer term. I would say the bigger upside on the back half of the year and in 2023 is really, you know, when you have cash that's not invested long term and interest rates are at zero, you're getting zero on them, right? Because, I mean, the money markets and the kind of overnight rates are not giving you much.

What we really see a lot of opportunity on is in that balance is not invested long term.

you know that's a pretty healthy balance right so if I I'm telling you that we're going to get to 70 ish by the end of the year that's a long term you know right now that gives you another hundred that's kind of sitting there every day so if you're able to get some return on that that's where we really get excited about it from our perspective and so that is back to your your question and a hundred percent fall through right that really does help afford

some of the investments Pat's been talking to. So I think it's really additive to the model for our perspective................

So I don't know if I answered your question correctly, but I think I'm trying to give you some direction as to what it could be.

Yeah, and Josh, the one thing I would add, I think John's answer around the flow is spot on and I think that those are some of the opportunities we have at the second half of 22 and 23. As far as some of the efficiencies we spoke about with operational efficiencies, et cetera, you know, my sense is we have, you know, four or five million dollars of savings, but we also have some expenditures around.

technology and sales. I think, you know, from our perspective, you know, we can hold expenses relatively flat, you know, we'll still grow probably a little bit, but the key here is coming into 23 with a double-digit revenue growth while having some slowdowns in the market as far as expense and then investing in products and salespeople to continue to grow.

and also to grow and float. We think we're set up really nice for 2023. We won't give guidance on this call, but as we get further along the year, we think that this is an inflection point and an acceleration, and we'll let you know how that plays out with next call and calls after that.

Got it. Thanks guys.

Got it. Thanks, guys. Thank you, Josh.

Your next question comes from the line of Vince Colicchio with Barrington Research. Please go ahead.

Yeah, good afternoon, Pat.

Curious if you can give us an update on your progress in the mid-market.

Yeah, you know, Vince, I think we're doing an okay job in the mid-market. We have a couple years of leadership changes that have worked out, I think, well for us and will continue to work well. We have a couple reps that are doing really, really well and, you know, going to have really nice years. I think as we package some of these initiatives that we're...

speaking about in the mid-market, well, we'll do fine. As you may remember, really it was a little bit of a rebuild in the fourth quarter, first quarter of the year. And I think you'll see some acceleration in the back app. I really expect a good 2023 as the investments in people and technology will take hold. So it's probably about three months or six months behind the core business.

No reason why we can't achieve some pretty nice stuff in the mid-market. And there's some green shoots right now. I'd like to get a little bit further along as we head in the second half of the year.

And on the acquisition side, it seems like you're taking a more measured approach. Curious what valuations look like. Are you waiting for them to come in? Or is it just simply lessons learned and, you know, being a little bit less aggressive in the past?

No, I think a couple things one first of all I do think valuations have changed a bit and perhaps there was

I think there's some really nice targets that we have that we believe would be a good fit. We wanted to see the market reflection on the seller side match the buyer appetite. And we think that'll happen over time. As far as the model, we feel really good about the model. I think the acquisitions we did last year, it performed really, really well. And then our leadership has been excellent in integrating acquisition.

that we spoke about today, primarily the 87% sales growth. But if you point to a fourth quarter, you're somewhere around 10% organic with a 14% non-W2 EBITDA. That's pretty exciting, because we're getting there and then we have some jumping off points that we've already talked about for 23. So it's not if, it's when, and we think we're really poised for a very strong 2023.

Okay and last question for me, any changes in wage inflation?

slowing or status quo with last quarter.

I think from, and I'll let John speak as well, you know, internally, you know, we always have a little pressure. We want to make sure we take care of our best. And you know, especially Middle America, you know, with inflation, you know, their real wages are under pressure. So we want to be sensitive to that. You know, we think we've, you know, done a good job of listening to people and really making sure.

that we understand that pressure. And then from our client perspective, we do believe that that will enhance float over time, and so there's some really good elements of that across small business. As far as it worsening or lessening, I think there's some more measured approach across the base, but I think some of this is a realization in my team that matter most, and our project is to say, I think we need to push that work forward travels that continue this hospitalization journey, we'll see how it allows us to build the overall health of a pedicuric family, clearly aAnd it's what I'm saying. And I think at the end of the day that our base is European Seaside, that nation is a perfect place to live,

that you had some pent up demand. Now you have maybe some steady kind of data, but some of the leading indicators around lumber, gas, et cetera, are starting to go down. But I would say inflation is there. Maybe not as on top of everybody's mind a couple months ago, but it's still kind of a worry point and make sure that the policymakers get it right.

We tried to get ahead of it at the beginning of this year. We changed the compensation structure for that group. We used to have a variable component and we actually just kind of front loaded it and kind of gave that to them up front. So we kind of we tried to get a little bit ahead of this, whether that's going to wear off in the back half with the with inflation still kind of going up the way it is. I don't know if we'll get we get additional pressure, but we did try to get ahead of it. And I think we did a decent job of kind of, you know.

not waiting for it and reacting, we try to do a little bit more proactive.

take a look at it.

Thank you for answering my questions.

Thanks, Beth.

Your next question comes from the line of Jeff VanRee with Craig Hallam. Please go ahead. You're welcome.

Hey, this is Daniel Hipschman on for Jeff. Just two questions for you. First one, just on churn in the base and retention and both net and gross, just wondering if you could give us any color there on anything you've been seeing changing on retention.

You know, Daniel, thanks for the question. Our unit retention year over year is, you know, we've done a really nice job and, you know, that has improved year over year in a pretty measurable way. As far as revenue retention, you know, we're not quite as strong as the units, but still, you know, some good improvement throughout the business in revenue retention as well.

And then as we look at the second half of the year, there have been some things that we've worked on. One of the things around the tax portal that we announced this quarter. And when you look at some of our notices and some of the kind of key leading indicators, we're way ahead of where we expected to be and the improvement has been remarkable. So we believe that'll set us up nicely for 23 as well.

Thanks for the caller. And then just my second question.

guidance and outlook for the quarter and sort of month over month. This was very touched on a little bit, but the macro just kind of month to month. And then what you have sort of

and your assumptions guided for the back half in terms of macro.

Yeah, I think again we've tried to play in the macro level environment. We've tried to keep it consistent with that as a backdrop. So we put this out there I guess.

We've tried to play in the macro level environment. We've tried to keep it consistent with that as a backdrop. So we put this out there, I guess.

three months ago when we gave full year guidance and kind of tried to execute. I think we took it up a little bit back in that period. So we feel like again with we've got execution with some of these initiatives that are played in to what we've guided towards and if we're able to execute the way we think we can we're pretty comfortable with what we've done, especially with even in light of the current economic backdrop. Yeah, Daniel, I would just say from a hiring perspective we didn't expect crazy hiring in the second half more of a

steady state improvement and then as far as the float I think you know we kind of expected a couple of.75 increases by the Fed so you know I think that will have more of an impact in 23 but you know I think the macro environment we expected flat to steady improvement is kind of how that was implicit in our guidance..

Okay, thanks.

This concludes the question and answer session. I will turn the call to Pat Geppel for closing remarks.

No, thanks for everybody being on the call today. We felt like the quarter was a very solid quarter. It was as expected. We have a lot of visibility in the second half of the year and feel like this was an inflection point that sets us up for the second half of the year in 2023 and beyond. And we feel really good about where we are as a business. And we think it's likely that growth will open the door, and we can again reallyeries correctly and we absolutely and respectfully Drugs us through any predicament, they obviously get away based on what we see to be similar things

You know, we took a little bit longer today to talk about our operational efficiencies, our product, our enhancements, some of the marketplace initiatives, tax initiatives, and we're doing so for a reason because we think we have the opportunity to do and transform this business and really set ourselves up for a good, strong multiyear run. So appreciate your interest, whether you're a shareholder, an analyst.

or a client or an employee. And we'll see you next time. Thanks.

This concludes today's conference call. You may now disconnect your lines. You may disconnect your lines. You may disconnect your lines.

you