Q2 2023 Asure Software Inc Earnings Call
Good afternoon, and welcome to assure second quarter 2023 earnings conference call joining us for today's call are chairman and CEO .
Copel.
Chief Financial Officer.
Got it.
And head of Investor Relations randomly wouldn't escapes following their prepared remarks management will hold a question and answer session for analysts and investors.
I would now like to turn the call over to Randall witnessed before a introductory remarks. Please go ahead.
Thanks, operator, and good afternoon, everyone and thank you for joining us for <unk> second quarter 2023 earnings call. Following the close of market. We released our financial results for the quarter. The earnings release is available on the SEC's website, and our Investor Relations website at Investor that is sure software Dot Com, where you can also find our.
Investor presentation.
During our call today, we will reference non-GAAP financial measures, which we believe to be useful to investors and excludes the impact of certain items, a description 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 were.
To future events and as such involve some risks we use words such as expects believes in 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 that can be found 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.
Thanks, Randall and welcome everyone to the sure Softwares second quarter 2023 earnings call I'm joined on the call by our CFO , John Pat John and I will provide a business update for the quarter and our outlook for the remainder of 2023. Following our remarks, we'll be available to answer your question.
As you can see from the reported results our strong momentum continued in the second quarter with strength coming from solid execution across the business our revenue growth for the second quarter was 50% all of which was organic with reoccurring revenues growing by 21%.
It's up to the prior year and non reoccurring revenues up $6 2 million on continued strong performance of our E. R. T. C solutions. This topline growth also drove a significant increase in adjusted EBITDA, which reached $6 1 million in the second quarter when our adjusted EBITDA margin of 20.
Percent through the first half of 2023 we've generated 20% more adjusted EBITDA than we produced in all of 2022, showing a powerful operating leverage we have built in the business as we continue to grow revenues powering. This performance is our focus on delivery.
He got a unique value proposition for our target market that addresses the needs of our clients. This approach starts with identifying impactful solutions that we believe will make a real difference to our clients that is supported by engaging and efficient technologies. It also involves mobilizing our sales team.
Aims to make sure that our message and value proposition is well understood and providing prompt and reliable customer service.
Our sales efforts for the second quarter produced an 80% increase in new sales bookings, which also builds upon the 87% growth rate we achieved in the second quarter of last year, we continue to invest in the sales force expansion and been very pleased with the quality of new hires were making.
We're supporting our sales efforts with digital marketing, which is driving a higher level of sales leads and productivity in 2023 in the second quarter, our marketing source bookings increased by 227% relative to the prior year our selling.
Marketing activities have been underpinned by our focus on delivering excellent solutions that address specific client challenges of neat in payroll. Our focus has been on elevating the client experience by making enhancements to our platform and standardizing processes to produce sufficiency.
This client focus combined with our increasingly effective marketing efforts produced an 86% increase in new payroll client revenues in the second quarter relative to the prior year.
We've also had notable successes in the quarter with our HR compliant and marketplace solutions.
HR compliance revenues more than doubled prior year relative to the prior year with without an increase in underlying cost as we have automated our solutions in a manner that is duly efficient for our employees and our clients. The sufficiency has also met with opportunities for us.
<unk> to provide scalable solutions in the midst of an increasingly complex regulatory environment that poses new challenges for growing business says you Sir marketplace, which was launched in the second half of last year has contributed meaningful to our performance and we continue to believe this segment will reference.
That 30% to 40% of our revenues over time, we're developing new solutions that we will introduce later in 2023, and 2024, which will address a wide range of business needs through targeted integrations and more meaningfully support the next level of growth for our company.
More to say on that in a moment processing of employee retention tax credits drove upside in our non reoccurring revenues for the quarter. This activity is an example of effectively identifying and developing impactful solutions that make a real positive contribution to our clients.
SaaS is Furthermore, <unk> solutions have also been a helpful contributed two contributor to our bundling success, particularly with HR compliance interest revenues were also an important contributor to revenue growth in the quarter with the rise in the yield curve along with our success.
Consolidated back office systems, and bank accounts, we have the opportunity to support higher investable balances and revenues internationally, we're continuing to invest in technology and product development to create new solutions for our clients and to proactively anticipate market opportunities.
In the future our partnership with Amazon Web services application modernization lab, which we announce.
During the second quarter is an important part of this commitment. This strategic initiative is designed to help spur innovation and to accelerate our platform development to ensure we can deliver the most secured advanced cloud platform in the industry, our collaboration with AWS will speed development.
<unk> well advancing our cloud optimization efforts and employing artificial intelligence to drive future efficiencies our technology investments will support the introduction of new solutions later in 2023, and 2024 that we expect to have meaningful impact on our topline.
Performance. These new initiatives will enable us to further leverage our core capabilities to address our clients' pressing business needs in a dynamic business environment.
One other significant opportunity I'd like to highlight is the vas revenue generating opportunity that has come from last year's passing of the secure Act 2.0. The original secure act made it easier for small businesses to set up Safe Harbor 401, K plans and provide some tax credits to do so.
Version two point all of the secure act aims to increase employee participation and retirement plans with updated rules and dramatically expanding the tax credits available to employers for plan setup administration and matching contributions Wow the federal government is incentivize.
As a small business retirement plans with the secure act 2.0, a growing number of states are now mandating small businesses offer report retirement savings to their employees as well many small businesses traditionally have not had the resources to offer such retirement programs, but now they have.
The mandate and the funding to move forward given our large base of small businesses. There is a unique and substantial opportunity to provide our clients with solutions that address these new business requirements, just as legislation created an opportunity for us with our Tc processing secure.
<unk> 2.0.
And the state mandates enable us to create compelling solutions to address this emerging area.
We recently announced a partnership with best well to use their advanced record keeping technology to help power assures new 401k, offering we're excited to work with them and deliver a great solution for our clients and because we've already develop scalable tax credit capabilities with E. R. T C where we.
We are uniquely positioned to help those same clients take advantage of the tax incentives available from secure Act 2.0.
Our efforts are focused on providing our clients with solutions that address the most pressing business challenges in that light, we released our small business HR benchmark report in the second quarter. This report identifies best practices in human resources based on a survey of more than two.
Hours and businesses across the United States. It also lays out a roadmap for success for business days to address HR challenges and positioning themselves for enhanced growth and success. Our benchmark report identifies eight areas in human resources across the employee lifecycle.
A critical for success exposing areas, where compliance with regulations is challenging or misunderstood. It also identifies ways of maximizing employee retention.
<unk> fashion to help fuel organizational success.
For small businesses there is nothing more important than linking employees clearly to the drivers of organization's success best in class businesses have best in class HR practices and assure it has the solutions to help a copy of our small business benchmark report is available on our website.
At its sure software Dot Com. In addition to the momentum we built with our HR compliance marketplace and ERP solutions, we are working on strategic enhancements to our tax platform to capitalize on our unique position in the market, we're consolidating to a single tax.
<unk>, introducing a new tax poodle portal and improving technology to facilitate integrations, we will have more to say about our development activity in the tax area in future calls, but we're very pleased about the unique and valuable asset and its ability to drive value for our clients.
And growth for us in closing I Hope my comments give you a sense of the opportunities that are ahead for sure in 2023 and 2024 based on our performance and our current expectations. We're introducing revised higher 2023 financial guidance. We are now guiding for a full.
Year revenues of $118 million to $120 million and adjusted EBITDA margin range of 19% to 20% our previous guidance was for revenues of $111 billion to $113 billion and an adjusted EBITDA margin of 17% to 18%. We're also introducing third quarter.
Or 2023 guidance of revenues of $26 million to $27 million, which is approximately 20% higher than the third quarter of 2022 for adjusted EBITDA, We're guiding a three and a half the four and a half million in the third quarter, which at the midpoint would mean adjusted EBIT is expected to more.
And then double relative to the prior year, we expect 2023 will be a strong year for revenues and adjusted EBITDA margins the midpoint of our revenue guidance.
Range implies approximately 24% organic revenue growth and 19% to 20% adjusted EBITDA margins exceeding the rule of 40 for the year. We're also very excited about the portfolio of solutions, we are developing to drive value for our clients and growth for sure.
The long term 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.
Conciliations themselves are also included in our most recent investor presentation posted in the Investor Relations section of our website at Investor Dot assure software dot com.
Now onto the second quarter results.
Revenues reached $30 4 million in the second quarter rising by 50% relative to prior year.
All of which was which was organic.
Recurring revenues rose, 21% relative to prior year to $23 million.
Second quarter recurring revenues grew on the strength of our HR compliance solutions.
Sure marketplace and increased interest revenues.
With an average client balances exceeding $200 million in the quarter.
Okay.
Ear TCE revenues were recorded in the professional services hardware and other category in both the current and comparable periods nonrecurring revenues saw an increase of $6 2 million on the strength of ear T C processing activity.
Relative to the first quarter revenues declined in the period. However.
That is attributable to the normal seasonality of our business is recurring annual year end W. Two and ACA revenue is recognized in the first quarter.
Net loss for the second quarter was $3 8 million, a $2 1 million improvement over prior year's loss of $5 nine.
Gross margins rose by 12 percentage points to 72% in the second quarter relative to the prior period, while non-GAAP gross margins rose 11 percentage points to 77%.
It is notable that our revenues rose by 50% year over year in the quarter, our non-GAAP cost of sale rose by only 2%.
Which allow for almost 100% fall through of each dollar of revenue growth into the non-GAAP gross margins.
This operating.
Leverage reflects the high margin mix of our growth and our continued impact of our standardization and consolidation efforts.
EBITDA for the quarter was $3 3 million $3 4 million improvement from prior year's quarter.
Adjusted EBITDA rose by $5 5 million relative to prior year to $6 1 million and our adjusted EBITDA margin reached 20% in the quarter compared with 3% in the prior period.
In the quarter, we converted a little over half of each incremental dollar of revenue growth.
Into adjusted EBITDA.
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're making in the expansion of our sales and marketing activities. We continue to believe there's margin upside over the longer term as the business scales.
We ended the quarter with cash and cash equivalents of $21 6 million.
We also had $36 8 million of debt, which is comprised of $32 million drawn under our senior credit facility with the remainder made up of seller notes from acquisitions.
Yeah.
Now in terms of our guidance for the third quarter and full year 2023, as Pat mentioned, we are raising our full year 'twenty three.
Revenue guidance to the range of $118 million to $120 million, including our third quarter revenues of $26 million to $27 million.
Our full year guidance implies annual revenue growth of 24%.
While the midpoint of our third quarter guidance would yield revenue growth of 21%.
We expect our organic recurring revenue performance in the third quarter will be broadly in line with the results in the first half of 2023.
HR compliance sure marketplace and float revenues are expected to continue to drive high margin performance.
Our nonrecurring revenue performance year to date has been driven substantially by the success with our ear Tc processing activity.
While there's no sign of a significant slowdown in this area our guidance reflects a modest expectation for this revenue stream given its transactional nature.
We have also introduced 2023 adjusted EBITDA guidance for margins of 19 to clean percent.
And third quarter adjusted EBITDA to be in the range of three and a half to four and a half million dollars.
Adjusted EBITDA performance is expected to be driven by continuing strong revenue performance efficiency gains from our consolidation and efficiency programs, which will be partially offset by continued investment in sales and marketing activity.
In terms of acquisitions, while nothing is currently eminent we will continue to be prudent in evaluating targets.
If the right opportunity arises to create value for our stakeholders.
In conclusion, we are pleased with our performance in the second quarter and the momentum we have built on the strength of our product development technology and sales.
Our year to date performance gives us confidence in our forward looking guidance.
We think that we are continuing to build the foundation for driving sustainable profitable growth and value creation for the future.
With that I will turn the call back to Pat for closing remarks.
Thanks, Sean we achieved a new milestone in the second quarter, achieving 50% revenue growth all of which was organic we achieved this growth by investing in products and technologies that will make a difference for our clients. It is very gratifying to see the positive reception.
To our solutions from our clients the feedback supports our view that by enabling them to focus on their core business says, we can create meaningful value for them. We're very encouraged by the early results are you sure marketplace, which we think is a game changer for sure. Its results to date have made a meaningful contribution.
<unk> to our overall performance and there are a lot more to come earlier I previewed our activity with retirement solutions under the secure act 2.0, and while we believe our initiatives here will be significant. They are just one example of the many ways, we can leverage our systems and knowledge.
They create impactful solutions for our clients. We're also leveraging our strengths and areas such as HR compliance our solutions address real business challenges basing Mainstreet America, we anticipate demand for HR solutions will continue to be healthy as businesses increasingly.
We seek to supplement their internal capabilities with external experts, who can help them navigate the increasing complexity of today's H R.
Investments in market, leading technology that support our client solutions is also a high priority at assure the partnership with AWS is an example of our focus on delivering compelling solutions. These efforts enable us to tackle the critical business issues, our clients are facing and.
Ports are efforts to maximize sales and cross sell our solutions supporting all of these initiatives our efforts to improve our cost structure and efficiencies via our consolidation efforts. We continue to be on track to deliver annual savings of 5 million annually once it's implemented.
<unk> is complete our upwardly revised revenue and adjusted EBITDA guidance reflects the positive momentum we have achieved with our expanding portfolio of solutions and continued strong new sales performance in conclusion.
We're very excited about the performance of the business and the direction. We're headed we are focused on creating value for our clients and delivering consistent positive results for our stakeholders. We look forward to speaking with you again next quarter, so with that I'll turn the call back to our operator for the Q&A.
Operator.
Thank you and at this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue you.
You May press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Our first question.
From the line of Ryan Bergan with TD Cowen. Please proceed with your question.
Okay.
Hey, guys. Good afternoon. Thank you I wanted to start off with the demand question here. So just any kind of any measurable change in client demand that you witnessed over the last three months, obviously bookings strength seems to imply a healthy continuation, but we know you've got a lot of moving pieces here as you're scaling a lot of the new offerings.
Just really curious have you seen any change of what clients are demanding in the current environment in nearly any change by client size, that's worth calling out.
No Brian Thank you for the question we.
We do not see any demand changes I mean, I think if you think about the early in the quarter.
July 4th week is always a vacation week et cetera.
Bookings events.
Solid demand spend a interest level has been really high.
Leads have been flow and we feel really good about our solution set.
Okay. That's good to hear my follow up and some margin expansion. So can you talk about how you found at a sustainable gross margin here just understanding you've had some higher margin revenue contributors like like the nonrecurring I believe here that support that.
Second quarter strength can you kind of give us puts and takes in that second half margin outlook and do we need to be mindful of potential grow over pressure. So as you go into next year as things like E RTC Sunset.
Yes, let me let me go off the first one Brian and then I'll, let Pat give his perspective on that I mean, I think in general what you can tell is that the cost of goods sold line is generally becoming a relatively fixed I mean, theres a little bit of a variable component to it like in the first quarter, there's more shipping, but I would say in general it's fixed to going down just based on it.
Again, the standardization and some arbitrage in terms of our offshore and some of those positions. So I think that's the way to think about it and from my perspective is there's relatively high fixed cost to doing business about once we add those incremental revenues, that's where you see the margin. So that's that's the way I would think about it in the back half of the year. So how we are.
Guiding revenues think about cost of goods sold being relatively consistent when I think about it.
And then you can talk about the kind of year over year kind of issues.
Yeah, Brian I think we've done an excellent job with the cost structure, John it's really.
<unk> done a nice job of budgeting that and then our our team is automated solutions in such a way where we can achieve those results where causes.
Roughly flat as we look and turned into page 24, we will we'll probably share 24 guidance next quarter, but just that all the RTC program, we put it in a one time item and we've done that all year.
No question that ER Tc.
As a program in the first quarter of 2025, so there'll be some headwinds into 2024, but if you think about kind of what we've done as a business.
We've got several early day products that we're working through that we're pretty proud of.
The secure act two point, all with 401, K will be a great extension and we're launching that as we speak so we think that'll be a good tailwind.
HR compliance there'll be a good tailwind for us the marketplace will be a tailwind our tax filing business in general will be a tailwind and what I'm proud about the sales organization is David achieve some outstanding productivity and what we've kind of locked into here is if you think about small.
Businesses in this environment.
Access to capital is probably their number one concern.
And then expertise around the changing compliance whether its HR payroll or tax filing is number two so to have a partner to be able to solve their problems.
Is really really important and that's really what we set out to do and we've automated the backend in such a way for that to be efficient. So.
There is no question there might be some one time.
Tailwind or excuse me headwinds going into 'twenty, four, but we have our share of tailwind going into it and more to come next quarter, when we announced 24 guidance.
Our next question comes from the line of Aaron.
Martin who is he with Lake Street <unk> seen with your question.
Yes, I wanted to.
Go a layer deeper on the guidance for Q3, if I'm looking at.
I know you characterize the expectation for E. RTC is modest but I'm trying to put a finer point on that if I take the growth rate that you just had in Q2, yeah on the recurring Rev Tsai and I apply that to Q3.
Okay, I'm backing into sort of.
A $2 3 million number for non recurring and I want to know if that's.
In the ballpark.
Yes, I think what we've been saying consistently as you know that's our typical range is in that.
If you try to put that were nonrecurring them back to a norm without the last couple of quarters, where we had the incremental success I think that's what we what we've been kind of.
Contemplating in the guidance so we've tried to put.
Nonrecurring as if we werent, having the extraordinary sales and the RTC. So that's that's kind of implicit in the guidance.
Okay.
And then the retention trends in the core HCM.
Just curious to know if we've seen an improvement there it feels like small business is doing better but.
Just wondering if thats, what youre seeing in the retention trends.
From my perspective, they are trending up from where we have been.
So yeah, I would say Eric just.
We've been one 2% up over the past year and it's been pretty consistent I think we've had good accountability good product rollout could solutions side good.
Good upsell capabilities. So if you think about we were probably at a low point around COVID-19.
We've achieved the improvement about one or 2% per year since COVID-19 and feel.
Like we have a good momentum there and I would say a.
Small business formation looks pretty strong.
Small business I would say access to capital is probably their number one need but as far as continuation in growth.
We feel really good about where we are.
Got it thanks for taking my questions.
Thanks, Eric.
Okay.
Our next question comes from the line of Richard Baldry with Roth Capital Partners LLC. Please proceed with your question.
Thanks Sheila.
If you look back a couple of quarters it looks like the sales and marketing lines up 50% in a pretty big hurry. He talked about how much of that is head count resource expansion versus just commissions on faster sell throughs.
And then you talked a little bit about that line continuing to grow and investing in that is there any way to sort of scale, how much numerical error even qualitatively.
Expect to keep adding to that organization.
Obviously, you're seeing some efficiencies, but that could argue that there's more to go after as well because of their successes.
Yeah, Yeah, no I appreciate it rich.
Just in general we add head count to our sales organization.
And.
We're somewhere around 100, and then if you play the tape forward will be about 120, so we're going to continue to grow head count.
As far as costs going up some of its headcount commission productivity has been very strong and and so naturally commission is up there is some referral.
Dollars that are also up and then as far as efficiency, we have a field sales organization and we have an inside sales organization. We've spent some more money on marketing leads and those leads have paid off very well we've spent some money on internal tools.
Really automate inside sales and so that's an expenditure we're really happy with the productivity of the sales organization in general will continue to invest in sales and if you think about our plan over the last couple of years, it's been to be more efficient operationally to automate I invest in some.
G and then grow the feet on the street or the sales organization and it's really starting to pay off China I don't know if you have color no I was thinking about the one slide that was in our board presentation out from about a week ago. We were looking at maybe not at the same time horizon you are rich, but we were kind of at an 18 month view and the shift.
With almost head for head from operations sales and marketing. So again, you see the overall spend not going down, but it's really that composition, whereas landing on the P&L and obviously, if we can take it out of our cost to serve and put it into the the tip of the spear. That's what we've been trying to do so again, we've got we've got that shift going on as well as again.
As Pat mentioned lead Gen and commissions and then again, we intend to continue to try to add to that group over the next thing you know half a year and then into next year.
And you've had a lot of new products launching but you're still holding the R&D, let's say first half of this year versus first half last year is also pretty flat.
Are you seeing.
The composition of that changing some leverage points on that that our new do you think that that'll have to start trending up closer to revenues.
Over time.
Just a little more color there.
Yes, I think actually it's probably up if you were to look at how much has been capitalized versus prior year. So I think in general what Youre seeing is the maintenance line staying pretty steady if actually turned down maybe a little bit.
Which means.
We're still spending more but we're capitalizing because it's all new and innovative.
<unk> versus just maintaining the old which is kind of how its delineated in terms of how we account for it so I would say we're investing probably.
Prior to a healthier rate than prior years, just not showing up in the P&L, it's getting hung up on the balance sheet.
Other thing I would add to that John is.
And rich is our partnership development partnership with AWS, where we really have a strong five year agreement and they've put some calories in and money into our development effort around a modernization effort of our payroll tax filing products and so theyre invest.
Sing along with us in that case and.
The spend is going up but the nice thing about it is going up in new products and services and new development, which adds to the capital line.
Last for me would be when you look at the marketplace side, you're obviously pretty happy with what's happening there could you maybe.
Break it into two pieces sort of the successes, you're having with people you've had as partners. There for a couple of quarters and then maybe.
More recent activities, how you're feeling about newer partners being added that'll be the fuel for the future.
Yeah, I think from the marketplace a couple.
Couple of things first of all our ability to find partners and have partners want to do business with US is high so really feel good about that I think.
The first partnerships that are alive, whether it's equifax or.
H&R block or into it those are really strong partnerships, what I would tell you a lot of them are multi year in nature. So we signed an agreement with 401K vendor vast as well.
Clearly this a zoom partnership is under underway you will see more partnerships being side I think all of them have a little bit of a different economics around it and then.
A lot of them have different lead times, where it might be.
You know a quarter or six months or a year as you layer. It in so long term feel really good about the partnership opportunities I feel good about the Biz Dev team and what they're putting together from a technology service organization, we kind of leg into each partnership in a different way but.
No.
Suffice to say the future's bright in that area.
Our next question comes from the line of Josh Reilly with Needham <unk> Company. Please proceed with your question.
I think guys nice job on getting these <unk>.
Deal through.
We've discussed this a little bit, but maybe could we get some more details on how the pipeline is shaping up for the rest of the year on the on the ear keeps a processing deal. Then obviously the guidance doesn't include much for Q3 or Q4, there and then along with that.
Can we get some are there any proof points or commentary you can share with us about how the <unk> have been leading to cross selling of other assurance solutions.
Yes, I think from first of all from a year TC solutions, we have bundled with HR compliance.
And payroll and and have some pretty good attach rates.
Probably the number one is HR compliance second is payroll so that's been very very strong.
We look at guidance for the rest of the year, we anticipate that ear Tc.
Backlog will turn into revenue and maybe not as fast a pace of second quarter, but will still be there we talked a little bit about 'twenty four and we'll we'll have more color next quarter.
As far as.
You know kind of our ability to execute what I'm really excited about is now that we've connected small business owners to government programs and access to capital and the secure Act 2.0, where you have.
Multiple states now requiring 401k plans and we sit on that data. So we can tell if theyre compliant or not we then have give them not only ability to set up 401 case, but also.
Allow them to get government credits on the matching and the matching of funds. So there again, we are not only helping them be compliant, but we're also helping them get access to money to start the program to be compliant. So that's a very strong trend. There was other tax credits that are tax engine.
<unk> process on behalf of small businesses. So we'll keep connecting there. So we have a multi year strategy around this we're just getting going clearly RTC in the second quarter, probably over exceeded expectations a bit.
But the way we're setting this up we're.
Early early innings to a multiyear growth plan.
I'll add one thing too just in terms of the mechanics.
We don't have a lot of <unk> that sits in languishes right because of the nature of our engine and what we've built we're very efficient. So once we've got it got it.
The closing it turned around pretty quick in terms of our ability to process on behalf of the client. So that's one of the things I think our advantage is once they get into the funnel.
I'll go through it pretty quick.
Got it that's helpful and then on the digital marketing that you mentioned that youre doing a little bit more of now what exactly are you doing differently, there maybe and.
Any proof points there on what that's been driving for you guys.
Yeah, a couple of things first of all our HR study that we announced.
That's.
An example of our thought leadership and even though we have a study here in <unk>.
And our survey and then we linked small business success with best in class HR practices, Oh by the way we can offer that that gives us content for almost a year.
And it allows us to have the messaging and then when you think back.
Before 'twenty three here our investment in sales loss.
Sales force zoom Imphal it gives us contact gives us repeatable marketing.
So now it's best in class content management, we also do some other <unk> marketing or digital marketing based on keywords et cetera, but we're driving people.
To have engagement with assure the other day, we had our sales kind of quarter to quarter, two and review and the average customer.
In some cases is engaging with the 678 times, where they're looking and consuming our content and then making decisions to go with us around a program. So that's the kind of engagement. We want the old days, you were knocking on doors or you're doing telephone calls here.
The client gets to try you out on various thought leadership pieces or the website and then when they're ready to buy were there for them and where they're in an automated way. So we've just been more efficient and continuing.
To drive new clients and when you think about it our productivity.
In the quarter, we had a very strong quarter and that's coming off an 87% compare so I couldnt be more pleased with our marketing sales efforts.
Got it that's great and then maybe one just flat housekeeping question for me well how is the sales head count trended year to date I think you mentioned that around 100 now does that 190.
Josh I think we're 98 as we speak.
At the beginning of year Randall, maybe we were somewhere around 88, or so so we probably trended up 10, I anticipate we'll be closer to 120 sometime in 2004, So we're continuing to look.
Higher end, but at the same token we're not just chasing a number we're chasing quality in <unk>.
We fall a little short in that area and get better quality, that's right, where we want to be.
Got it great. Thanks, guys, we will see Ya.
Thanks, Josh.
Our next question comes from the line or Jeff Van <unk> with Craig Hallum Capital Group. Please proceed with your question.
Great. Thanks for taking my questions I appreciate it and really nice quarter here guys a few questions.
Pat on the on the unique tax I'd numbers just what.
What are you growing there in terms of Tia.
<unk> on the on the payroll platform and then does that mark acceleration or steady growth over the maybe the past couple of quarters.
Yeah.
We.
We will publish unique identifiers I think once a year, what I would say, it's probably steady growth I think retention has been very positive as far as new sales I know, we're adding more customers than we're losing which is a very positive side and then we're getting better attach rates in HR compliance obviously.
You've talked about tax the marketplace et cetera, but I would say, it's steady growth I do think from a new product perspective, our partnership with AWS et cetera will continue to grow but once a year, we published the yeah, Yeah, and I would say we'd have steady growth.
Okay.
Very helpful and maybe just explain in a second on HR compliance a little surprised given the at least the manual component of that that it levered to the degree it did maybe expand on that a second.
And when I say leverage I mean, the operating leverage.
Yes, Jeff one of the things that I think is a misnomer is you know there's not a.
A ton of manual effort. When you think about let's say a handbook, we automate past practices within the handbook. So it is a lot of it's a rinse and repeat some of that government legislation et cetera is pretty automated.
Some of the best practices are and then we have kind of a use it or lose it philosophy, where in some cases its almost a insurance policy, where you have small businesses that they want somebody in the huddle and it's a long way from HR professional to employment attorney So what they're looking for is sometimes.
We get very sticky situations and if you think about even coming out of Covid.
People working from home Hi, Brad.
Do they have to come into work how to what if they don't do I have separate rules for separate people.
There's all kinds of complexity and then some of it too is just if you think about minimum wage 10 years ago, We had one minimum wage and was at the federal level. We'll know there's places in California, you have four levels of minimum wage whether it's the city the county to standard of federal government and the small business.
This owner is throwing up its hands and saying Hey help me so.
We have been able to automate in such a way where there's a lot of leverage to that model, we have pretty good pricing power.
And we've set it up a way where we're very pleased with the results top and bottom line.
Mhm.
Fair enough one last one just on the competitive landscape. The pes have talked a lot about coming down market is that you see more of that group or any changes in particular for what youre seeing.
No, we see gusto paychex ADP and <unk>.
<unk>, we will see the pace, but I don't I don't see those companies on a regular basis.
Okay, great. Thanks for taking my questions.
Thank you Jeff.
Our next question comes from the line of Vincent.
<unk> with Barrington Research. Please proceed with your question.
Okay.
Yes, nice quarter, Pat curious about the bookings growth break down between new and existing clients.
Were pretty strong I knew we're probably about historically about 60 40.
We were right in line with 60, new 40 existing.
So we've had some really good growth in new logos. We also had very strong growth in our additional products and services, especially the introduction of some of the products I mentioned around.
Whether it's tax or a marketplace or HR compliance.
How was the tax product revenue versus your plan and when do you expect.
To make the improvements you are currently working on.
When do you expect to complete that.
Yes, I don't think we had a ton built in up to this stage I think that youll start to see it become more meaningful.
Second I mean, probably fourth quarter 'twenty, four but again, we werent playing a ton end of this year, but trying to build the foundation. So I think it really starts to kick in as we talk about next year.
Yes, the John's point, Vince a lot of.
Youll see very strong bookings in tax, but because of the nature, whether it's workday or some of the books of business attacks. The install times are a little bit longer than 10 employee payroll. So you'll see that play in in a meaningful way on revenue in 'twenty four but we're real excited above market.
And our booking potential.
And then I was trying to what I was trying to ask is the current improvements you're making to the tax product.
When will those be complete and do you expect that the significantly improved traction.
I don't think its ever completed right, because I mean, especially as youre going up market to some of these enterprise accounts youre always going to have to be.
Investing in it so I don't think it's a it's not.
A big Bang Theres not like this one.
Day that this thing is going to be completed so it's just it's an ongoing process from my perspective.
And then lastly on acquisitions.
Is this something we should see happen in the next six months or so.
I think so.
We've been pretty consistent on this one since the beginning of the year that we were going to take a hiatus trying to focus on the core business.
But it's clearly part of our model I mean, it's something that we think it makes a lot of sense in terms of.
Being very accretive from a cash generation perspective, so it's something that we think we've perfected.
But I think.
Opportunistically look and see if we can find some stuff back half of this year and going into 'twenty, four but theres nothing imminent, we don't have anything under a letter of intent at this point.
Thank you.
Thanks Vince.
Our next question comes from the line of Greg.
<unk> with Northland Securities. Please proceed with your question.
Great, Hey, Pat and John Thanks for taking the questions. Congrats on the strong results.
Wanted to get a sense, because I think the ER Tc solutions activity was provided some upside relative to expectations.
I guess just weather.
Maybe full year outlook.
Just trying to get a sense of how much of that strength in the professional services and other continues into the back half what's kind of implied in your in your outlook for the year.
Yeah, I think what I was but I think that was question earlier I try to answer it the same way hopefully I'll answer it the same way, but I think we were when we look at kind of our guidance in the back half of the year, we look at it being kind of back to normal in terms of that line item and historically, it's been a couple of million dollars over the last few years in that line and so we.
We didn't forecast implicit in our guidance huge numbers.
For that but again, just because of the nature of the pipeline and how quickly it turns through in fact that it is nonrecurring in nature, it's just not as predictable as the recurring line item, obviously, yeah, Greg what I would say.
Second quarter was 21% reoccurring Theres really no <unk> in that line so.
And we think we have the ability to keep going on the reoccurring line and in some of the products. We talked about give us reason for that conviction. So we'll continue to grow that and then what I would tell you is.
Ability to sell.
The processing of the year TC credits now we moved that over time, and 401, K and and tax credits around what's he et cetera in there.
There's other things that we have the ability to go I think youll see some line extensions.
Extensions in that area that will bear fruit in 'twenty, four but the reoccurring revenue of this business being up 20%.
Both the first quarter and second quarter, a year gives us pretty good optimism heading into the back half of 2023.
Perfect very helpful.
And I know you broke out you said bookings growth was kind of 60 40, new versus existing I apologize if I missed it but did you break out bookings growth in the quarter.
And we've broken it out before.
Just wondering I'm, just wondering was that sorry in Q2 bookings growth.
We were about 60 40, I would tell you. We've hovered between 40 60, 50, 50, 60 40, depending on products and depending on.
And kind of where we're at our new a new logos has been particularly strong here the last six to nine months.
That.
As our investment in marketing in both the digital marketing as well as the content that we had in our HR survey. If you go to assured software Dot Com you can get a copy that survey, but thats. Some of the thought leadership, that's been we've been able to to.
Monetize into new logos and that's been very successful and then as far as the growth rate of some of the services and products that we offer.
The attach rates have been up on the new logos, which is very very strong.
But thats led to some of the new logo growth.
Probably more so than we've had in past years.
Okay got it thank you.
Greg Thank you.
And we have.
Any more questions.
There are no further questions I'll turn it back over to you for closing remarks.
Great Hey.
I've been here gosh, almost 14 years now are really proud of the staff.
Theres always for constituents that I think of in running our business.
It's the employees that we have and they've done an outstanding job.
The clients, we serve and on behalf of the $1 seven employees that we serve and a 100000 clients we serve.
Really good to see the momentum or the investors are a big piece of.
We want to satisfy from a financial return in year over year, we've had pretty strong stock performance. We're not satisfied we want to continue to improve that and then it's the communities we serve.
We're having a good fortune of being a.
Number of cities across the United States, and we always want to helping the community.
Really positive of where we're at feel like we have a long way to go we've not yet reached our potential and we will do so over time and this gives us a great jumping off point look forward to seeing you next time and appreciate your interest and assure bye now.
And this concludes this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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