Asure Software Inc. Q1 2023 Earnings Call
Okay.
Good day, ladies and gentlemen, and thank you for standing by walking through the first quarter 2023 assure software earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one.
On your telephone keypad at this time I would like to turn the conference over to Mr. Randall where they ask you Sir please begin.
Thank you operator, good afternoon, everyone and thank you for joining us for sure. Its first quarter 2023 earnings call. Following the close of markets. We released our financial results. The earnings release is available on the SEC's website, and our Investor Relations website.
The Investor Derbyshire software Dot 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.
<unk> and timing of these items along with a 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 it may.
Forward looking statements and we encourage you to review our filings with the SEC for additional information.
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.
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 <unk>, Chairman and CEO Pat.
Thank you Randall and welcome everyone to assure software's first quarter 2023 earnings call I will begin today's presentation with an update on our business highlights and strategy and then I'll turn the call over to our CFO John Pat for a more detailed review of our financial results and outlook.
For 2023, we will then conclude the session with time to answer your questions as is demonstrated from our results. The strong momentum we built in the business in 2022 carried through to the first quarter of 2023, our revenues exceeded 33 million.
For the quarter rising by 36% relative to the prior year's quarter, all of which was organic net income.
$300000, what is that $3.4 million improvement from last year, adjusted EBITDA more than doubled to $8 $2 million from $3 4 million for a margin of 25%. It is also notable that our first quarter adjusted EBITDA.
Was higher than we delivered in all of 2021, showing the growing significance of our scale and investments.
And our non-GAAP gross profit margin climbed to $26 million from $17 million for a margin of 78% versus 68% in the prior year's quarter. We believe these results are the product of a very strong client reception to the investments.
Some product enhancements, we made across the business. It also reflects our efforts to streamline and consolidate our business processes. So that we can take advantage of new opportunities such as those in the assured marketplace. The strength of client reception to our solutions is notable.
And our new sales bookings, which grew by 163% in the quarter relative to prior year. The enhancements that we've made to our sales programs are working and the upgrades to our solutions are attracting strong demand I also want to point out the growth we achieved this quarter.
It's over and above the 43% growth rate, we reported in new sales bookings in the comparable period last year, our revenue and margin performance, which was entirely organic driven by strong contribution from several parts of the business in the first.
<unk> the first.
Is the HR compliance our HR compliance solutions are resonating strongly in the market in the quarter, our compliance revenues more than doubled relative to prior year as our solutions continue to drive cross selling activity and attract new clients. These solutions ensure small.
Mid sized businesses can navigate the increasingly complex regulations and federal state and local jurisdictions, helping businesses to remain compliant and have very effective and scalable manner next is our share of marketplace solutions sure marketplace contributed.
Meaningfully to our revenue performance in the quarter, we lost a fair marketplace and 2022, and I believe that our data and automation will enable us to broaden the scope of our solutions. So we can offer new value to our clients and of course their employees share market.
This leverages the vast amount of data in our domain and allows us to explore test and create new sources of revenue. We continue to believe it could represent upwards of 30% to 40% of our overall revenues in the future. We are also continuing to expand in.
Number and types of integrations, we offer and expect to have further announcements in 2023.
Interest revenues were also a strong contributor to revenue performance in the quarter the rise and the yield curve has an important driver in this area. However, the real story is that the upside we're achieving as a result of our success in consolidating our back office systems.
And bank accounts. These efforts have enabled us to drive higher investable balances and revenues and John I'll talk more about this in his section lastly, I want to highlight the contribution to revenues from the processing of employee retention tax credits or <unk>, we have.
Leverage our differentiated tax processing capabilities to tap into this program on a very efficient basis, notably we converted 55% of each incremental dollar of revenues into adjusted EBITDA in the quarter relative to the prior year's quarter.
This high flow through is a direct result of our enhanced automation within our systems, our improved efficiencies via consolidation and increased penetration from high margin revenue segments now I will turn to the initiatives we have underway in 2020.
Three and our progress in achieving the milestones on our journey.
Let us begin with sales development.
Sales development, our focus in 2023 is on bundled offerings and new innovative products to drive value and diversify revenue streams behind these initiatives, we're driving performances by expanding our sales force and supporting our team with more effective marketing and say.
<unk> lead development are bundling success has been particularly strong in HR compliance where the value of the solutions is resonating with clients. We're also utilizing <unk> to cross sell compliance and other solutions, which we expect to drive future reoccur.
<unk> revenues are product initiatives have focused on the introduction of its share of marketplace and enhancements to our tax and treasury platforms. We believe that the assure marketplace has the potential to transform our business and significant and positive ways.
Our marketplace supports a wide range of business to business and business to consumer applications.
Applications can include income verification tax preparation retirement solutions and earned wage access. We're also developing consumer applications and I expect those to be part of these share marketplace in the future as share marketplace supports equifax as well.
Number of solution, where we work with equifax to provide data to help consumers with their mortgage applications car loans government benefits and other end users.
Earlier this year, we also announced our partnership with Zain zoned to allow customers to offer their employees earned wage access earned wage access allows employers to pay their employees and real time. This separates.
Alright, and differentiates employers and a competitive labor market and provides flexibility to employees. We believe earned wage access will be an increasingly common benefits moving forward and we're very excited about our work with <unk> zone and the opportunity in this area. Another key initiative we've been work.
Going on is our strategic enhancements to the tax platform to capitalize on our unique position in the market. We're consolidating to a single tax engine, introducing a new tax portal and improving technology to facilitate integrations, including ER Tc processing overall, we.
Anticipating this area of our business to deliver strong double digit revenue growth in 2023, reflecting the enhancements we have made let's now turn to the enterprise efficiency initiatives.
The goals of our efficiency plan and to create a leaner and more flexible organization to create a technology foundation to support our longer term growth and to reduce costs.
In terms of cost savings our plan anticipate approximately $5 million in annual savings, we expect to implement the plan by year end 2023, and we are on track to achieve this goal cost reductions have already begun from these initiatives.
The consolidation of human capital management platforms to reduce duplication of efforts and accelerate product development. The increase use of robotics to enhance efficiency and improve automation and standardization of processes and data to give us.
Greater flexibility in the operations and also to reduce costs beyond costs. These initiatives are expected to enable us to accelerate product development to enhance margins and to improve quality and service delivery with increased revenue retention the acceleration of our sale.
Activity and efficiency gains from our enterprise initiatives is a positive start to the year based on our performance and our current expectations. We are now introducing revised higher 2023 financial guidance. We are now guiding for revenues of 100.
$11 million to $113 million and an adjusted EBITDA margin of 17%, 18% our previous guidance was for revenues of $105 million to $107 million and an adjusted EBITDA margin of 15% to 17% or 2023 guidance.
Flex our organic performance and does not include acquisitions. We're also introducing second quarter 2023 guidance of revenues of 25% to $26 million, which is approximately 25% higher than the second quarter of 2022 all of which.
<unk> is expected to be organic growth for adjusted EBITDA, we're guiding to two and a half to $3 5 million in the second quarter. As you can see from our guidance. We expect 2023 will be a strong year for revenues and adjusted EBITDA margins.
We're excited about the year ahead and believe our investments in sales successes will drive performance in 2023 and beyond macro economic complexities continue to be on our radar, but we believe our expanding portfolio of growth solutions are highly targeted.
Sales initiatives and the business momentum will continue to drive performance in 2023 and beyond now I would like to hand off to John to discuss our financial results in more detail John .
Thanks, Pat as Randall mentioned at the beginning of this call several of the financial figures discussed today are given on a non-GAAP or adjusted basis, you will find a description of these GAAP to non-GAAP reconciliations in the earnings release that was made available earlier today.
Conciliation themselves are also included in our most recent investor.
<unk> posted on the Investor Relations section of our website at Investor <unk> assure software Dot com.
Now on to the first quarter results revenues reached 33 1 million in the first quarter rising by 36% relative to prior year, all of which was organic recurring revenues rose, 22% relative to prior year to $28 million, while nonrecurring revenues more than tripled to $5 1 million.
Our revenue improvement was broad based and was made up of similar drivers as the fourth quarter of 2022 revenue growth with notable contributions from.
Our recurring HR compliance business.
Which has seen success in their differentiated solution as well as being bundled with our ERP C offerings.
Increased interest revenues with average client balances exceeding $220 million per quarter.
And a contribution to revenues from mature marketplace, which was introduced in the third quarter of 2022.
Finally, we also experienced a nice uplift generating revenues from processing.
Retention tax credits.
And you can see that impact.
On our professional services revenue.
It's also important to keep in mind that the first quarter's results are seasonally strong as recurring year and Debbie to ACI revenue is recognized in this period.
We do expect our 2023 revenues to show normal seasonal fluctuations.
Net income for the quarter was.
$3 million.
$3 4 million improvement over the prior year's loss of $3 million.
This is a notable achievement and reflects our scaling of.
Of our business as well as our improved operational efficiencies.
Gross margins rose by 10 percentage points to 74% in the first quarter relative to prior year, while non-GAAP gross margins rose nine percentage points to 78%.
This reflects our strong revenue gains the high margin mix of our growth and the impact of our standardization and consolidation efforts.
EBITDA for the quarter was $6 8 million or four.
$4 3 million improvement from prior year's quarter, a $2 6 million.
Adjusted EBITDA rose by $4 8 million relative to prior year to $8 2 million and our adjusted EBITDA margin reached 24, 8% in the quarter compared with 14% in the prior year.
Margin expansion was driven by growing high margin revenue streams continued progress with our efficiency initiatives and scale benefits from our growth.
These gains more than offset the investments we are making in the expansion of our sales and marketing activities as well as the development of technology to drive revenue success.
We continue to believe there is substantial margin upside over the longer term as the business scales.
We ended the quarter with cash and cash equivalents of 21 4 million.
We also had $35 9 million of debt, which is comprised.
$35 million drawn under our senior credit facility with the remainder made up of seller notes from acquisitions.
Now in terms of our guidance for the second quarter and full year 2023, our guidance is offered with a backdrop of continued economic uncertainty and dynamic labor market.
We are raising our full year 2023 revenue guidance to a range of $111 million to $113 million and adjusted EBITDA margin to a range of 17% to 18%.
We are also introducing guidance for the second quarter Rep revenues of $25 million to $26 million and adjusted EBITDA of two five to $3 5 million.
Our revenue performance was strong in multiple categories in the first quarter with trends building on the momentum we developed in the second half of 2022. These.
These results are encouraging and inform our outlook for 2023.
We expect continued positive momentum in bundling success with our HR compliance and tax processing solutions, we believe our multi tiered HR offerings and automated <unk> finally capabilities are resonating with our small and mid sized business customers.
Sure marketplace is also expected to be an important driver in 2023.
We are growing our list of partners and expect strong momentum from the solution.
This is the result of a dedicated effort to enhance our technology and to leverage the data we have in our business further projects are.
Anticipating to go live in the coming quarters.
Regarding interest income we have enjoyed our best quarter, yet with float as our consolidated efforts have enabled us to take full advantage of rising rates.
We believe <unk> revenue will be a strong contributor to our revenue performance in 2023.
We have also continued to advance our product development sales development and our centralization initiatives as we focus on.
High margin revenue streams, and generating efficiencies and operating savings.
In terms of acquisitions, while nothing Thats eminent we will continue to be prudent in evaluating targets and we will execute if the right opportunity arises to create value for our shareholders.
With that I will turn the call back to Pat for closing remarks.
Thanks, John I'd like to conclude by saying we are very pleased with our performance in the first quarter of 2023 with notable successes in the following areas first we grew revenues organically by 36% year over year in the first quarter driven by new sales bookings growth of 100.
63% across multiple products. The successes that we had are the result of a lot of hard work over several quarters to enhance our products and our focus on our sales efforts and building out our sales team, we're continuing to invest in product and.
To create a foundation for sustainable growth and we made strides in enhancing our human capital management tax and Treasury systems. These enhancements will help bolster our suite of offerings and provide our sales force with increased cross selling opportunities. We also improved our core.
Structure at efficiencies by pursuing consolidation and standardization initiatives. As a result, we are on track to deliver annual savings of $5 million annually. Once the implementation is complete.
These efforts enabled us to deliver margin expansion with quarter, one adjusted EBITDA margins, reaching 25% and non-GAAP gross margins, reaching 78%.
For 2023 based on our current outlook, we anticipate delivering double digit organic revenue growth and strong adjusted EBITDA margin gains are revised higher revenue guidance anticipates positive momentum with our HR compliance and our tax solutions.
Reflecting the upgrades we have made at leveraging our prior success in bundling. Our solutions. We also believe that share marketplace is a game changer for sure as it enables us to leverage our technology and data to deliver new high margin revenue streams interest revenue.
As also are anticipated to continue to increase due to the rise in rates and investable balances as we continue to grow in 2023 and beyond we expect efficiencies through the scale and consolidation to drive continued margin expansion ultimately.
Hey.
Got it to sustainable positive net income and free cash flow in conclusion, we're very excited about the performance of the business and our future direction, we're eager for the quarters and years to come and remain focused on delivering consistent results for our stakeholders we look.
Forward to speaking with you again next quarter or at one of our many investor conferences. We are attending in the second quarter. So with that I'll turn the call back to the operator for the question and answer session operator.
Thank you.
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Please standby, while we compile the Q&A roster.
Okay.
Our first question or comment comes from the line of Joshua Reilly from Needham <unk> Company. Mr. Riley Your line is open.
Hey, guys. Thanks for taking my question great job on the execution here in the quarter. It's on the Tvs. The other item layering in the model I guess just on the ERP.
And we and we see that coming through the rest of the year here. Maybe you can help me with how we should think about how the year is going to be.
Layering into pro services and other revenue.
Can you just review or some customers, bringing large batches at one and then there is a steady state amount after that did they bring you or how is that working exactly.
There is a lot of questions there, Josh I'll try to address them.
Cost factors into the balance of the year, we have not taken a ton of extra credit into the balance of the year for LTC, we think there'll be some but probably not at the same levels that we've had in Q4 and Q1 at least that's not what we model at this point and they are all different flavors, we have some where we do have these minimum relationships and then.
We have somewhere.
Where we are.
Direct directly contracting with our customers. So it's a little bit of all different flavors.
Got it and then.
Follow up on an EBIT guidance here and.
It implies a pretty healthy margins, which is great to see the nice uplift here.
Can you just help us parse out how much of the uplift specifically in this quarter in the EBITDA margin guidance for the year is from higher interest income assumptions in the model versus other sources of margin accretive revenue like <unk> in marketplace entering the model.
So I mean I'll take a shot and then Paddy can give you a perspective I think in terms of the model.
What we've tried to demonstrate both Q4 and Q1 is that as we add these incremental revenues to the top line. We think we've got a pretty efficient operating model. So it's kind of.
So like the FICO concept, which dollar contributes to that that incremental dollar to the margin I don't know I mean, its combination of marketplace high margin flows to high margin <unk> are pretty high margin right HR compliance at pretty high margins. So what we're really doing is adding a lot of different revenue streams that are high margins I wouldnt attribute the increased.
And the flow through to one specific revenue stream personally fast, but yes, Josh and I would agree with John I think if you think about the first quarter, we had approximately $5 million. So W. Twos compared to four two last year.
In itself is going to create some high margin in the quarter year to see if you look at the onetime revenues professional services. If you assume run rate usually it's about $1 five the rest would be <unk> T. C. We're guiding what we think is appropriately with the visibility we have in Q2 and the rest of the.
Year, where obviously the operational gross margin improvements we've made over the last couple of years are starting to pay off.
We believe the guide is appropriate and we do think we have some ups upside based on volume if it's there but right now we think that's the appropriate guidance. We're pleased that we're able to raise guidance now two quarters in a row.
Got it thanks, guys funded <unk> strong results.
Thanks, Josh I appreciate it.
Thank you.
Our next question or comment comes from the line of Bryan Bergin from Cowen and company Mr. Bergen. Your line is now open.
Hey, guys. Good afternoon, thanks for taking the question.
I guess just wanted to start off at a high level on the demand environment. So you're clearly carried strong momentum here, but what value perspective on any changes at all versus let's say three months ago, just given the U S banking volatility since we last spoke.
Any any nuances in client behavior, that's changed and then anything you can comment on through April .
Yes, we haven't seen it I mean, I think volume has been really positive and the small business marketplace.
There is trepidation.
Obviously, the regional banks and some of that stuff, but as far as just creating buying behavior.
Just haven't seen it right now are.
Our clients still can't find enough employee.
Maybe when they would look for.
Theyre looking for three but they are still looking for employees I think the trepidation is more what will come in.
If two or three regional banks is that or is it going to be a more down the horizon.
Those are the questions that they have but as far as running their business growing their business, we haven't seen a great deal.
Of.
Behavior change lately, the only thing I would add potentially as you read the same stuff that we are I think just what goes on in cars with debt ceiling debate in fact create a recession by.
By their behavior I think thats. The other thing that's going on in the background, but again to <unk> point I think we've seen that manifest in our results yet, but I do think that.
It's always later by socket, often when we talk to people.
Okay, Okay understood.
And then pivoting to margin maybe margin progression. So it. So can you just talk about your investment initiatives as youre going to progress through the year, just looking at the EBITDA outlook and EBITDA margins <unk> and then the implied second half EBITDA margin any key considerations, we should be mindful of whether its revenue mix or timing of investments as you move through the balance of the year.
No I think John can answer as well I think just at a macro level, we're investing in product we're investing in salespeople.
We've made some healthy investments to date and we'll continue to invest in that.
Far as growths are growth drivers.
Our HR compliance the marketplace tax <unk>.
<unk> inflow. In addition to just driving more bundles of products and services. So we'll continue down that playbook. We think we have pretty good visibility in not only revenue, but also margin and we'll continue to make some investments to grow the business, Yes, I would just say that.
I mean, I think in general some of the employment environment helped us we've been able to opportunistically add some some people into the environment and also into the sales environment. We had a budget for the year, but we've been able to get a bit earlier I mean by that.
So I think we're actually.
We're optimistic with some of those hires that they'll start to contribute earlier so.
That's the only thing I would say back to touch points.
Does that go for sales as well or is that mostly dev.
We have some good sales hires as well this quarter.
Okay, great. Thank you very much.
Thank you.
Thank you our next question or comment comes from the line of Eric Martin I'm, sorry, Eric.
Eric Martin Nooney, Mark to Newsy from Lake Street Capital markets, Mr. Mark Newsy. Your line is open.
Yes, my congrats as well on the quarter and the outlook.
Just curious regarding the cost structure this $5 million of annualized savings by the end of the year.
Is there are there are people related cuts that are coming here is this all on the back of integrated systems and the elimination of maybe some consultants, whereas that savings coming from.
Yes, almost exactly.
Yes, it's a combination it's not been.
White switch event, we've been working on this for the last couple of years I'm trying to get the business more standardized nationalized. We're just starting to see some of the benefits of that both on the system side as well as on the operation side. So.
We're starting to realize some of the efforts that.
We have been put forth and again, we're putting those.
Back to work again in terms of putting it into the product and put it in the sales force that are hopefully start to create that momentum going forward for us and continue that momentum going forward for us aircraft give maybe an example.
I think it ties to your question.
Limited world, but but.
We put some calories and thought into a treasury system internally and what we were able to do is go from 125 bank accounts to less than 20. So from a systems perspective, we were able to make those changes same cost in the bank fees that we were.
<unk> to the tune of 800 Gram.
We were also able to do is build an automated or.
Or a more automated check reconciliation process as part of that so we were able to.
Do more with less and take some people out of that reconciliation process by making it easier and then as well as automate the process and then when you look at some feature functionality that we're able to build with some of the regional banks ran into.
Some potential issues, we were able to isolate those accounts right away and not have to really do a ton of manual effort. So that's one example, within about seven pretty big projects that we've been able to not only.
Get some savings and we will have some savings to come but as John stated redeploy them into development and sales resources.
Understand thanks for taking my question.
Thanks, Eric.
Thank you.
Our next question or comment comes from the line of Jeff Van <unk> from Craig Hallum Capital Group. Mr. <unk>. Your line is open great. Thanks. Thanks for taking the question guys. Congrats on a number for me first obviously, Pat you've done a lot on the product side, you've got a lot of capabilities I think the pace of innovation is probably the highest I've seen have you seen.
Really as it relates to new customer capture changes in win rates to the degree that you subtract them and measure them.
We definitely have seen the volume go up quite a bit our pipeline is very strong when you think at a pace of change it's almost in every area of the business.
<unk> software tools around marketing.
Getting lead sources are up over 40% of our new sales is a marketing lead.
Process that was probably 18% a year ago, so continuing to drive results in that area, we're getting more at bats.
Due to <unk>.
Kind of the pipeline our win rates are going up and they are increasingly going up in a bundle when we lead with.
Either year Tc HR compliance.
We have higher win rates and enable to capture the business owner as opposed to perhaps a functional leader. So those are the reasons why we've been able to win in that kind of continuing to drive a more modern UI and a modern system we're gaining.
Kind of win rates as we speak but we also think we have a number of.
Items that we're early in this journey.
We will get those breakthrough results continuing all throughout the year and early next so.
It's a journey and it's a series of small differences on all aspects of it but really really pleased where we're at.
Uh huh.
Makes sense I mean, obviously youre seeing good cross sell up sell and presumably larger deal counts what about the seats the tax I'd numbers being processed on a weekly or monthly basis, what kind of tuna and.
Growth have you seen kind of year over year recently, and how does that compare to three six months ago.
I mean, I would say W. Twos, I mean, we did $4 two.
<unk> million dollars in W. Two revenue last year, we did close to five this year.
They're clearly that.
Means.
We're getting more revenue per W twos and in effect a good proxy for.
For people that we produce payroll in but.
But it's not just payroll right. Our HR compliance line has more than doubled and so not only to companies that are using payroll, but also using HR compliance has gone up dramatically and we are still at relatively low penetration rate. So for us it's about the marketplace. It's about.
More people on the platform are companies on our platform in a really good cross sell component that allows them to use more and more products and services.
Okay. Just two other quick ones from me then just sales head count now and goals maybe by year end and then the last would be.
Pat you mentioned, some consumer apps that you're thinking of with respect to marketplace. I don't know if you will.
Want to tip, your hand, but even giving us a broader sense of what might be to come there would be interesting.
Yes, I think first of all sales head count I think March 31, we were at 94 will be over 100 here in the second quarter.
Will will give you.
And have a proxy in the third and fourth quarter, but I would assume will be in the low hundreds.
The rest of the year.
As far as consumer apps et cetera, I think one of the areas, where we rollout the <unk> June relationship, which has earned wage access.
Obviously are our employees now have access if they want to.
Get paid on an off cycle.
At 12 times, a year to deal with rent they have the opportunity to do that maintain.
Do that wasn't clicking a button. That's an example of it I think you'll see a more formal rollout of the employee and employer portal that really addresses that but that's probably the second half of the year. So.
I'll raise added one of the future earnings calls, but that's kind of a tip to where we're going.
Fair enough real nice work thanks.
Thank you appreciate it.
Thank you our next question or comment comes from the line.
Greg give us from Northland Capital Securities. Mr gave us your line is open.
Great. Thank you.
Afternoon, Pat congrats on the quarter.
Im wondering when do you expect maybe the marketplace to contribute to the top line this year as a percentage of the total.
Yes, Greg first of all welcome to our coverage universe. We appreciate you.
Northland covering us and Northland has a great firms. So thank you.
What I would say in the marketplace, we announced.
A couple of press releases here with harbor compliance in say June .
I think the rollout of the June is just starting to happen I think youll see more revenue in the back half of the year.
Our rollout of the marketplace.
It is company specific.
A technical interface as well as in some areas like say June and consumer adoption. So it takes some time I think it will be more meaningful in 2004, but it will continue to be revenue in 2023, I think you'll see announcements at the pace of about two a quarter.
After throughout.
2023, and more to come in that area.
The marketplaces. The idea is strong we see some really nice opportunities.
It does take a while to set them up but once you do.
You have some meaningful revenues. So we're excited about the model and Youll see some activity in well telegraphed that and then over time, you'll see.
More revenue and we'll provide updates quarterly on that.
Okay sounds good.
Wanted to follow up on kind of the increased margins great to see the expectations for the year going up.
I'm wondering how much of that improvement is a result of increased scale from revenue growth versus maybe the improving operating efficiencies you've been talking about.
Yeah, I think it's again.
Try to address this comment again I think it's.
A combination right. So the revenues that we are adding incremental are very high margin and have a pretty solid fall through so I think it's taking cost out of the structure and redeploying those into the R&D and sales areas.
But then some opinions, we adding revenue streams of the top line that they have a pretty healthy fall through because I think it's a combination of both of those.
The only thing I would add is I think we've talked about this before but it's a high fixed cost business with the platform investments.
For example, you have a tax change the programming of the tax change whether you have one client or 100000 clients. It's the same amount of work we feel like we've gotten through the high fixed costs and we're getting into.
And a rhythm of some incremental fall through in <unk>, and we're pleased with that fall through.
As we get scale the benefits of scale. If we do this right every piece of work.
Becomes a little bit cheaper at scale than the previous and we believe we're on that track and as John said the mix has been favorable as well for us where we've been able to layer in higher margin products. So really excited about the opportunity and where we could go we're just getting started and to be able to.
Right.
Margin again, it's very rewarding for us.
Got it helpful. I guess the last one from me just relating to that recurring revenue growth nice to see it up 22% year over year noticed it was a little bit lower than the 25% growth you saw last quarter.
Just wondering if you can give.
Give a sense of maybe what that driver was.
Yes added up quarter over quarter, I mean that sales have been very strong bookings have been strong retention was a little bit of add.
I don't think there was anything Super notable I think for US we're happy with the results and happy with the growth maybe there was a little anomaly in the compare but I don't think there was anything that stood out that we were concerned about.
Okay fair enough.
I appreciate it guys. Thanks.
Thanks, Greg welcome.
Thank you again, ladies and gentlemen, if you have a question or comment at this time. Please press star one one on your telephone keypad. Our next question or comment comes from the line of Rich Baldry from Roth empty K M. Mr. Baldry. Your line is open.
Thanks.
Could you maybe talk about the growth in the new sales bookings I think he said it was 163% on top of a pretty tough compare year over year. How do you feel about your ability to keep growing that and you know it's not an area, where maybe you're understaffed are stressed star.
And maybe you could talk about sales tenure in that area is that one of the things that's helping you.
I'm trying to get a gauge for how much capacity you have to keep that up and then maybe tag that with how broad you saw that our new sales bookings was it concentrated around verticals or geographies or an enterprise partner side are you feel it was pretty broad based.
Yeah. Thanks rich.
Thanks for the thoughtful question first of all I think from a numbers game, we're going to continue to invest in sales to the numbers, but what I'm. Most pleased with from a sales perspective as our marketing programs are really starting to pay off.
Our cadence is really get our pipelines growing and then what I would say the investment we made really since December of 19.
Our turnover has been low people are successful they're achieving we just came off our summit awards meeting.
People are starting to talk about that theyre going to reach the next summit Awards next year.
Potentially.
Early second half of the year. So people are winning they're excited they're winning.
And they have visibility and as you know from covering this space.
There is two and years three.
You get exponential productivity improve bed is once you understand the space.
You are able to really drive results.
I would say it's been a broad swath of sales reps that have led to this performance really good marketing really good bundling activity and an excellent leadership.
Combination available seen our president and Chief revenue Officer, and Mike Benoit.
Marketing lead they've really got a nice rhythm going to people are excited and find a way of next level management is recruiting really good people. They are seeing the results. We're seeing success. They are bigger territories than most of our competitors they have bigger bundling opportunities and more.
Certain competitors and people are gravitating, where they can win so I think it's a series of keeping our people with us engaged they're getting good leadership. They are getting a good bundles are getting good tools to be successful pipelines are strong and we're having success. So we don't want to mess with that.
We're happy we wanted to continue to drive excellent results and we see that for the foreseeable future.
Thanks.
Maybe when you look into the M&A pipeline do you feel like there's been some softening of expectations from the other side and then maybe contrast that to your internal efficiencies are improving so does that.
The hurdle to what you could acquire because you can make it more accretive quicker faster.
Then you might have thought previously.
Yes, so first of all I think there is no doubt.
I think there is a little bit of a softening of expectations. We've been really heads down on growing our organic revenue and getting.
The operational efficiencies as well as the growth engine in place I will turn to the second half of 'twenty three 'twenty four to look at acquisitions. There is nothing eminent here because we've been really focused on eliminating distractions and just growing.
Our business and growing our revenue I do think as we look to pop out and we've been engaged in some conversations I do think expectations have changed a bit and then as far as integration of.
Any potential acquisitions, we're really confident that we can get those integrated.
A very short order and that's all really due to some of the system changes we've made some of the operational efficiencies.
So our people are ready to digest business when the tax rate I think the market is starting to come to us as far as future targets, but.
That'll be a second half really 2024 conversation as opposed to right now but.
When the time is right, we're definitely going to strike and we.
We do think expectations are starting to come in a bit.
Thanks, Congrats on another great quarter Pat.
Hey, rich. Thank you appreciate it.
Thank you. Our next question or comment comes from the line of Vincent Colicchio from Barrington Research. Mr. Colicchio. Your line is open.
Yes, Pat congrats on the quarter.
Just a couple for me most of mine were asked.
Curious about the bookings growth breakdown between new and existing clients.
Yes, I think we're about 50, 560% exists.
Existing clients 40 to 45 new business.
Maybe it's ticked up a little bit on existing clients, but but pretty pretty good overall.
We are pleased with the mix.
And.
You had mentioned a couple of times that you are happy with the marketing programs. They told maybe you can give us more color in terms of which programs are working best.
Yes, no we implemented sales loss, which is.
Kind of an auto dialer tool.
A while ago I assume it fall, which has been very successful. So the tools are in place on a thought leadership, Mike <unk> team does a really nice job with that but it's not just Mike Murray Simmons and the HR compliance area. There is a really good job of spelling out.
It means to be compliant in HR.
So we have some good campaigns, we have a good cadence.
Just on sales and marketing.
Really every day to talk about the cadence and the messaging in the scripts.
Our go into market and we put that in place and then finally from a systems perspective, we have rolled out the service cloud of Salesforce across the whole organization. So everybody is on a common foam. So some common chats as some common service cloud comment.
Salesforce. So the tools are in place and then the leaders and.
The individual contributors are executing in a big way and so the focus has been there and success breeds success. When you have success in.
You can build on it.
People have the opportunity with the comp plan to make a lot of money and we've gone to quarterly attainment. So they.
See line of sight in a very short period of time, where they have ability to blow it out.
It really aligns with the four quarters of the year so.
And then it goes back to what I'll call our.
Sure.
Rainmaker, but <unk> seen us put this program together has really done a nice job.
And the last one for me I missed what you said earlier in response to an earlier question about RTC what is your growth expectations for the balance of the year.
We don't have a lot of obviously, we have a little bit played in for the balance of the year, but not having a growing off of this quarter or the fourth quarter, obviously, when we put out our guidance.
At the end of Q4 for Q1, we exceeded it in terms of what our expectations were but we have not played in a ton of growth.
Relative to this quarter for the balance of the year on ARCC specifically, okay. Thank.
Thank you.
Vince Thank you appreciate it.
Thank you.
Showing no additional questions in the queue at this time I'd like to turn the conference back over to management for any closing remarks.
No I appreciate all of you joining on our call today, whether you're an investor or third party analyst.
Current client employee.
<unk> been on this journey for a long time.
Really excited about the momentum that is happening here, we're doing all the right things, we're starting to get rewarded for it but I still believe the best days of assure software to comment there.
Are there that way because the people that are along for the journey and have done all the hard work. So I appreciate each and every one of you and we look forward to seeing you at one of the conferences that were added in the second quarter or in the second quarter earnings call. So thanks and have a great day.
Take care. Thank you.
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day speakers standby.
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