Q1 2024 Paylocity Holding Corp Earnings Call
Okay.
Good day and welcome to the pay larceny holding Corporation first quarter 2020 for fiscal year results Conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one.
<unk> on your telephone you will then hear an automated message advising your hand is raised to withdraw your question Press Star one again.
Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker, Mr. Ryan Glenn Chief Financial Officer.
For yours.
Good afternoon, and welcome to Teladoc. These earnings results call for the first quarter of fiscal 'twenty, four which ended on September 30th 2023.
Brian Glenn Chief Financial Officer, and joining me on the call today are Steve Bullshit Me Toby Williams Kosta.
I see.
Today, we will be discussing the results announced in our press release issued after the market closed.
A webcast replay of this call will be available for that 45 days on our website under the Investor Relations tab before beginning we must caution you that today's remarks, including statements made during the question and answer session.
Forward looking statements. These statements are subject to numerous important factors risks and uncertainties, which could cause actual results to differ from the results implied by either other forward looking statements.
Also these statements are based solely on the present information and are subject to risks and uncertainties that could cause actual results to differ materially from those projected in afford looking statements.
Additional information please refer to our filings with the Securities and Exchange Commission irrespective.
And other disclosures, we do not undertake any duty to update any forward looking statements.
Also during the course of today's call, we will refer to certain non-GAAP financial measures. We believe that non-GAAP measures are more representative of how we internally measure the business and there is a reconciliation schedule detailing. These results currently available in our press release, which is located on our website at SEDAR com under the Investor Relations tab inside of the Securities Exchange Commission.
Please note that we are unable to reconcile any forward looking non-GAAP financial measure to their directly comparable GAAP financial measure because the information which is needed to complete a reconciliation is unavailable at this time without unreasonable effort.
In regard to upcoming conference schedule Toby will attend the Stifel Conference in Chicago on November 9th Steve will attend the Needham Virtual conference on November 16th.
I'll turn the D. A Davidson Tech summit in New York on November 16th and the UBS Conference in Scottsdale on November 28th Toby will attend the Raymond James Conference in New York on December 5th and I will attend the Barclays Conference in San Francisco on December 7th Mmm Conference in New York on January 18.
Please let me know if you'd like to schedule time with us at any of these events.
That let me turn the call over to Steve.
Thank you Ryan and thanks to all of you for joining us on our first quarter fiscal 'twenty four earnings call. Our solid results continued into fiscal 'twenty four with total revenue growth of 25% as a differentiated value proposition of providing the most modern software in the industry continues to resonate in the marketplace recurring and other revenue was $291 7 million.
Or 19% growth over Q1 of last year.
Our growth continues to be fueled by our ongoing commitment to driving innovation and revolutionizing the way organizations engage with their employees as highlighted by the recent announcement of two new product releases rewards and recognition and employee voice embedded throughout the Pelosity platform rewards and recognition designed to help clients improve employee retention by automating.
Customizing, both Pierre and manager feedback across work anniversaries birthdays every moment of achievement through personalized recognition and reward programs.
Similarly employee voice combined with our proprietary statistically validated engagement model to improve upon our existing survey functionality that help clients aggregate analyze and act on employee feedback at a much larger scale and ultimately a driver of greater employee engagement and talent retention.
Following the release of evolution RPT wide opportunity now sit at 550, and we remain confident in our ability to achieve our target of 600.
You need to develop the most modern product suite in the industry.
Our innovation continues to be recognized by third party.
He was recently named an overall leader in 10 product categories and the GT quarterly bridge reports for the 20 <unk> consecutive quarter across multiple segments.
One the Brandon Hall Group HCM Excellence award and ranked as top five vendor across 14 does your experience and vendor satisfaction category.
And you'll be HR system report.
I would now like to pass the call to Toby to provide further color on the quarter. Thanks.
Thanks, Steve.
Tober, we held our annual elevate client conference, where we hosted several thousand business leaders, representing HR finance, it and operations across dozens of sessions over the course of two days and elevate attendees had the opportunity to earn sharing credits. In addition to partnering with our product and service teams to help influence our future roadmap through our <unk>.
Client as co creator philosophy. This dynamic was exemplified by the 10 organizations that one our inaugural elevate award honoring forward thinking HR teams that are solving business challenges through innovative use of technology and a big Thank you to our employees clients and partners for helping create the best elevate conference that we've had to date.
While it elevate we also had the opportunity to connect with several clients that are leveraging our new solutions, including an engineering firm with over 300 employees that is utilizing market pay to make data driven decisions around employee compensation and ensure that they remain competitive in the recruitment of new talent, while also maintaining fair compensation for their existing employees.
In addition to rewards and recognition and employee boys. We also announced the launch of our next generation mobile App, which continues to redefine how our clients employees are able to interact with key HR functions, regardless of whether they are in the office working from home or on the go.
Today's workforce is more distributed and relying on mobile devices than ever before and we continue to see increasing mobile versus desktop usage.
Growing demand for modern employee driven solutions continues to be reflected in solid demand across our target market and we're pleased with the momentum in our sales team heading into the selling season. We're similarly happy with the consistency of our referral channel, which once again delivered more than 25% of our new business in Q1.
A strong culture philosophy continues to be recognized externally as we recently were named to Fortune's list of best employers for women.
Echoing Steve's comments I would like to thank all of our more than 6000 employees for a strong start to fiscal 'twenty four I would now like to pass the call to Ryan to review the financial results in detail and provide updated fiscal 'twenty for guidance.
Thanks, Tobey total revenue for the first quarter was $317 6 million, an increase of 25% with recurring and other revenues up 19% from the same period last year.
Gross profit was 73, 4% for Q1 versus 72, 1% in Q1 of last year, representing 130 basis points of leverage as we continue to focus on scaling our operational costs, while maintaining industry, leading service levels, we can.
Continue to make significant investments in research and development and to understand our overall investment in R&D. It is important to combine both what we expense and what we capitalize on a dollar basis, our year over year investment in total R&D increased by 21% when compared to the first quarter of fiscal 'twenty, three and we remain focused on making incremental investments in R&D throughout fiscal <unk>.
Four as we continue to build out the platform to serve the needs of the modern workforce.
So our go to market activities on a non-GAAP basis sales and marketing expenses were 22, 2% of revenue in the first quarter and we remain focused on making incremental investments in this area of the business in fiscal 'twenty four to drive continued growth.
On a non-GAAP basis G&A costs were 10, 3% of revenue in the first quarter versus 12% in the same period last year and we remain focused on consistently leveraging our G&A expenses on annual basis.
Our adjusted EBITDA for the first quarter was $104 9 million or 33% margin and exceeded the top end of our guidance range by $12 4 million and represented nearly 700 basis points of leverage versus Q1 of fiscal 'twenty three.
Briefly covering our GAAP results for Q1 gross profit was $216 1 million operating income was $41 2 million and net income was $34 5 million.
In regards to the balance sheet, we ended the quarter with cash and cash equivalents of $305 million and no debt outstanding.
In regard to client held funds and interest income our average daily balance of client funds of approximately $2 3 billion in Q1, we're estimating in the average daily balance will be approximately two four to $2 5 billion in Q2 with an average annual yield of approximately 435 basis points on a full year basis. We are estimating the average daily balance will be approximately.
Two five to $2 6 billion with an average yield of approximately 420 basis points.
While the demand environment for new business remains solid year over year employees on the platform growth came in below our expectations for Q1, providing headwinds in the quarter and the fiscal year.
Finally, I'd like to provide our financial guidance for Q2 and for fiscal 'twenty four.
For the second quarter of fiscal 'twenty for total revenue is expected to be in the range of $322 5 million to $326 5 million or approximately 19% growth over second quarter of fiscal 'twenty three total revenue.
And adjusted EBITDA is expected in the range of $100 million.
$103 million.
And for fiscal year 'twenty four total.
Total revenue is expected to be in the range of $1 405 billion to $1 41 zero billion or approximately 20% growth over fiscal 'twenty three.
And adjusted EBITDA is expected to be in the range of 474 million to $478 million, which represents approximately 200 basis points of leverage over fiscal 'twenty three.
In conclusion, we are pleased with our Q1 results and the momentum we have across our sales and operations teams as we enter our busiest time of the year operator, we're now ready for questions.
Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your question Press Star One one again due to time restraints. We ask that you. Please limit yourself to one question and one follow up question. Please standby while we can.
The Q&A roster.
Our first question will come from the line of Scott Berg with Needham <unk> Co. Your line is open.
Hi, everyone. Thanks for taking my questions. I guess first question is to follow up on Ryan's comments around seats count here for.
Previous system customers and expectations, there how much below your expectations, both in the quarter and your forecast the guidance for the year are you expecting to seek out to be I guess relative to that initial expectation.
Hey, Scott, it's Ryan So I think what we saw in the quarter was a little bit of softness in August and September which as we had talked about we did not assume a decline there in Q1, so a little bit light versus expectations that obviously weighed a bit on the recurring revenue in Q1, and I think we factored that in as.
As we looked at maintaining guidance for the full fiscal year. So it probably didn't put a full dollar amount on it but with certainly a headwind in the quarter and we did factor that in as I said over the balance of the fiscal year.
Sure.
One that you have a pretty large customer basis are you able to target any one thing in particular vertical or customer segment that might be driving some of the weakness there because I think the overall employment numbers are reasonably healthy, but theres certainly our pockets of weakness out there.
Yeah, nothing that I would highlight from a from a vertical or geographic perspective, I think the work force levels are up a touch year over year. So similar to what you had seen some of the other players call out as far as year over year, but sequentially still down a little bit.
Got it helpful and then from a follow up question perspective is.
How should we think about your cross sell cadence for the year I know you all had a pretty strong emphasis last.
Last couple of years, but.
Cadence in the quarter kind of similar to what you've seen the last couple of years or is there any notable change on how your existing customers are buying new modules.
Yes, I would say no noticeable change at all we have accelerated investments over the last several years and the inside sales team that is selling client products back to existing customers at the same time, you can see we've accelerated our road map and we've added a lot of new products use as well and so those are being received really well within the customer base.
And we were pleased with the performance of that team in Q1.
Thank you one moment for our next question.
Yeah.
That will come from the line of Brian Peterson with Raymond James Your line is open.
Hi, Thanks for taking the question. So I just maybe wanted to.
To focus on the linearity.
And thinking about the recurring revenue guidance for the second quarter. It seems like the full year implies an acceleration into the back half of the year is there anything in terms of enterprise mix or implementation or backlog that kind of drives that I know, we're seeing some moving parts of unemployment, but just kind of wanted to understand how you guys are thinking about linearity over the course of the year.
Yeah, Brian I think as we called out on the August earnings call. We did say that the first half of the year, probably had incrementally harder comps when you look at the recurring revenue growth that we saw in the first two quarters of of last fiscal year and the normalization of workforce levels in the back half of this year and obviously.
Some some softness in the first quarter. So I think we took all that into account not not anything else I'd call out relative to to macro or the sales environment, but Steve anything you want add that no I think from our perspective execution was pretty much down the middle in terms of what we expected with the exception of seeing a little bit of the softness as Brian described.
<unk> kind of sequentially month over month, the couple of the months in the quarter.
But from a demand environment and activity levels, we feel pretty good about where were positioned. This is obviously a really important time of year for us because you've got a lot of starts in January it's really the biggest time of year. This is just the first quarter, obviously and so there's a lot of execution in front of us, but we feel good about the start we got off to.
Great and maybe just as a follow up obviously this has been a big focus on the spaces.
Understanding kind of the revenue mix in any revenue streams that may not be tied to sort of a P. P Y dynamics that are more transactional or onetime in nature. I don't think you guys have broken that out previously, but any help on kind of sizing that impact I know, it's come up a lot. This week. Thanks, guys. Yeah, I know I understand the context of the question. So I think if you go back many years ago.
The industry was highly payroll centric and it was very transactional fee based and that ends up being billed on a per payroll basis that was very common as well.
We moved to modernize our suite in many many years ago, we made the transition to really be cloud provider and charging a ppm basis.
So regardless of how many payroll as a customer runs they pay us the same amount on a per employee per month basis, and so we don't necessarily see any revenue variance from that model that is something that was pretty common in some of the providers have been around for a longer.
A time, but I think from a customer experience perspective, it's much better to know exactly what your bill is going to be it's based off of per employee.
Per month.
And the other thing I would notice you know less than half of our revenue is payroll based today and so it's a bundled billing situation for our customers So no impact.
Thank you one moment for our next question.
And that will come from the line of Brad Reback with Stifel. Your line is open.
Great. So a couple of things on the.
<unk> employees on the platform comment any sense on where that was in October.
I would just say we would provide you more color at the end of the quarter, what that looks like but we obviously have factored that into the guidance on a go forward basis. So we were able to look at the first quarter and kind of have an early look at October and factor factor that into the guidance, but we'll give you better color when we have the quarter behind us, Okay, and Steve on that latter point.
There can you give us any directional sense on the guide if you just assume sort of the trends.
Trends Youre seeing right now if you assume things get.
Or any way to size that up just so as we see the economy, we can understand how it impacts you.
Yeah. So I mean, I think we were able to obviously maintain our guidance for the year, we had a beat in the quarter. So I think just from a sizing perspective. This was not the biggest needle mover just in terms of the impact of employees on the platform we've got essentially.
A full look at the first three months and we get an early look at the fourth month, and we've kind of factored that into the year and we're still be able to maintain our guidance for the year and we feel pretty good about it knowing that this is the first quarter of the year and in our business. There's a lot of sales that happen in the next quarter that gets started in January. So there is just I think traditionally if you look at the way we think.
First quarter is we've got a lot of execution, we sell and implement a lot of businesses within that same quarter and so I think it's a combination of seeing just a small amount of softness and employees on the platform and just the normal approach we take on our first quarter of fiscal year perfect. Thanks very much.
Thank you.
Our next question.
And that will come from the line of Bryan Bergin with TD Cowen Your line is open.
It's actually Jared Levine on for Brian Tonight in terms of the sales head count can you provide an update on your sales head count growth attention for FY 'twenty for it. They can you remind us when you typically do most of that sales head count hiring during the fiscal year.
Hey, Jared it's Toby.
Yes, I mean, I think as we've said before we came into the year fully staffed sales head count up 18% and most of the hiring of that head count comes in during that time, we hire all throughout the year, but I think you see.
Hiring season for the sales team really in that spring timeframe and I think as we've said before we're really happy with the level of talent across the sales team really happy with the class that came in coming into this fiscal year and as Steve said.
I mean, we're right in the selling season and so I think we came through Q1, we're really happy with the performance of the team and I'm happy with where we said from a staffing perspective as we came through Q1 this year and on into selling season.
Great and then in terms of the enterprise segment, let's call that a thousand plus employee how are your win rates there in the past 12 months, how do those compare to prior years and can you update us in terms of like the mix of clients that fall in that enterprise segment.
Yes, so we have over the last several years focused some of our most experience.
Reps on some of these larger market opportunities. They were just happening more naturally in the market we've kind of always.
We're focused on those when they became available but we definitely have seen increased traction upmarket I think we've called that out probably over the last two years.
I Wouldnt have anything from a win rate perspective to tell you. They definitely have been pretty strong for us. If I were to look at first quarter, which is kind of interesting I would call. It broker referrals and really our core team as being the strength of the sales force and first quarter.
From our perspective, the largest part of the market and where we focus the most so that was a definite positive.
Thank you one moment our next question.
That will come from the line of Mark Marcon with Baird. Your line is open.
Hey, good afternoon, and thanks for taking my questions.
With regards to the sales pipeline.
Steve or Toby can you describe how that sales pipeline looks right now.
<unk> two a year ago and also can you describe what you ended up seeing during the first quarter in terms of.
Sales conversions are our clients.
Acting in any way you could have more hesitant manner or is the cadence relatively similar to a year ago in terms of being able to close sales.
Yes, so I think the sales pipeline is building nicely as we are really in the throes of kind of selling season.
Lots of execution in front of us.
I would say nothing major Mark I mean, maybe at the margins you might hear from spots in the Salesforce, where it's taken a little bit longer for people to make decisions.
I wouldn't say that the uniform I would say that we're hearing that a little bit at the margin.
And that would be really the only call out.
Any change at all in terms of like who you're going up against or are there any new competitors that are out there any private players that.
Are competing for the same clients or anything that you're seeing that's different.
From a competitive front, it's absolutely the same in usual suspects, it's always been a very competitive environment that definitely has not changed.
There's only a handful of private companies of any size or scale that really hasnt changed in terms of whether we're seeing them any more or less.
So we really feel good about the competitive position, we're in especially with the product investments that we've made in all of the new products that we've been able to release and so that becomes a big point of differentiation just like it did last year.
Great. Thank you.
Thank you one moment our next question.
That will come from the line of Raimo Lynch chat with Barclays. Your line is open.
Hey, Great. This is Shaun mcmeans on for Raimo. Thanks for taking our question I wanted to ask about interest coming out of elevate you talked about several thousand clients at the event.
What did that look year over year and the pipeline.
Pipeline exiting that and does that pipeline provide a level of comfort around the reiterated full year guidance. Thank you.
Yeah sure so I mean, great callout for elevate.
I think as I had said in the prepared remarks. It was it was our our best elevate to date, we had thousands of attendees there and I think felt really good about the level of attendance and the level of client engagement.
Both from a from an existing client perspective and then.
The level of focus on our product and our profit product differentiation that that gives us the opportunity to.
Talk about with our client base. So I think overall I feel really good about the event.
And I think we as Stephen said feel feel pretty good about the momentum that we have coming out of Q1.
That certainly around elevate and part of that I think is just how we're executing from from an overall go to market perspective. So I think overall, we feel feel very solid coming out of it and excellent and a quick follow up if I may it looks like you've picked up a little bit of yield still quarter over quarter and as you may be thinking about extending duration as rates are staying higher.
Or for longer.
With the reiterated guidance between five points for.
$4 five to four 6% do you expect that to continue until rates go down around those levels.
Yes, I mean, I think we gave a fair amount of details in prepared remarks relative to average daily balance and yield and I think we guided in a fairly tight range from a yield perspective between call. It 420, and 440 basis points of yield for the year. So I think we'll be in that range. We're certainly looking at the yield curve, we're looking at duration of.
The portion of client held funds that we do have invested and I think as we go deeper into the year, we'll update guidance accordingly, if we see changes there.
Thank you one moment our next question.
And that will come from the line of Jason <unk> with Keybanc capital markets. Your line is open.
Great. Thanks for taking my question, it's nice to see the <unk> go up to $5 50, with the two new modules.
So I've got this correct. This is kind of the second quarter in a row, where we've seen that current P. P Y increase I guess, what's giving you the ability to accelerate the new offerings here and how should we think about trajectory going forward.
Sure I think if you go back a couple of years ago, you can see that we've made some incremental investments in R&D, we obviously had a little bit of a tailwind in terms of interest revenue increases. So we made some some platform investments we added a whole bunch of folks we kicked off some new projects and I think youre seeing there.
The first of that labor come to market with four new recent product Skus I would tell you we feel really good about the pipeline from a product perspective, you probably have heard me say many times that we have.
Lots of ideas that we have that we think can really help our customers and we get a lot of those ideas as customers are co creator and so the pipeline from a product perspective is pretty is pretty strong.
And I think on the flip side, you see that we're able to do that while at the same time kind of normalizing kind of those R&D investments in the quarter and that's probably the right way to think about it is just a bit of a period of extra investment and youre seeing the benefit from it but I feel like the investment level that we're at in terms of size and scale now really allows us to really balance investing in the <unk>.
Experience and making sure we're reacting to their feedback still funding all sorts of new products and making platform investment investments. So that we can stay being the most modern platform in the industry.
Excellent and then really nice EBITDA beat any change in guidance philosophy.
Is it fair to think you might be focusing more on margin expansion this year versus prior years. Thanks.
Yes, I think that really happy with the performance in the quarter and the ability to raise the year as much as we did I think we are guiding to an adjusted EBITDA range of about 34 to 36 30.
34% or so so just about 100 basis points short of our updated target. So feel really good about that progress nothing that I would call out as far as one time or additional areas of focus I think it's really a function as the business gets larger that we're able to continue to drive scale, while at the same time investing to drive growth in the future.
Thank you one moment our next question.
And that will come from the line of Alex Zukin with Wolfe Research. Your line is open.
Hey, guys. Thanks for taking the question I guess, maybe can you just talk about.
From those workforce levels were.
Were there any.
Any particular verticals.
That you saw.
Either seeing anecdotally weaker workforce levels or that anecdotal commentary around taking longer.
Around sales cycles. Our go lives anything there would be it would be helpful.
Yes, I would say again I want to just make sure that we talk about that as being kind of a small change in the workforce levels being a little bit less than we expected. So just from an order of magnitude. This is not a huge impact.
We definitely looked at other factors in terms of trying to figure out was this a pocket from a geography perspective or vertical market. The reality was it was pretty much just across the board as Ryan mentioned, if you look at it on a year over year basis. It was up we expected it to be up it just was not up the same amount and then on a month over month basis.
It was actually down two of the three months in the quarter and so.
Still a relatively small impact, but something that we've kind of factored into the guidance by no means do we think there is a whole bunch of client behavior that would be a sign of a very different environment than we're in but we definitely had that blip in the quarter.
That's actually Super helpful and I guess to the extent I know this question has been asked but as we think about it from our guidance, particularly for the full year and even maybe.
Just commenting on our long term targets that you guys gave at the analyst day is still feel do you still feel really good about those targets.
And in terms of the full year moderating unemployment levels.
Is it just fair to assume that you've taken.
The slight difference into account or have you have you been a little bit more conservative in the employment levels for the full year, Yeah. No. I mean, we have not forecasted some different employment environment or some recession into what we've guided we took what we saw in first quarter. We took the early look into October we factored that into the balance of the year that was certainly.
One of the biggest drivers in terms of just maintaining our guidance for the year versus taking that up it kind of all factored in we feel good about the fact the execution in the business.
And we're still focused on obviously those long term objectives, and we've got a rich product pipeline.
And a lot of momentum.
Thank you one moment our next question.
And that will come from the line of Daniel Jester with BMO capital markets. Your line is open.
Great. Thanks for taking my question, maybe to kind of continue on this vein philosophically. If you do see the economy start to we can as we go into calendar 2024, what steps are you going to do to alter your business strategy if any.
Well.
Think we've gone through many cycles in our history in the past.
These things don't typically fall off a cliff quickly.
There's a very gradual impact in a recurring revenue model.
So it does give us the ability to kind of make adjustments in terms of what we're seeing in front of us.
So that's the first thing that I would say and.
And we do have a fair amount of variable cost that really is assigned to the volume and so it's relatively easy for us to adjust in any kind of down market. If that's what we're seeing.
We've actually had a lot of success selling in down markets in our past history as well and so part of the value proposition that we're offering customers is efficiency that they gain from using a more modern platform that value proposition does become pretty important it in a tight market and so you definitely lean into that.
And I think even if you went back into Covid and the fact that we were able to sell through that which was certainly the biggest drop you've ever seen economically. So yeah, I wouldn't say it doesn't affect us, but I think our industry and I think the investments we've made in our product make us fairly resilient.
To that type of market fluctuation.
Great. Thank you and then I don't think you've touched on this yet in terms of new buyer behavior are you seeing any change in the demand levels in terms of taking new modules at start relative to the past call. It 12 months or so thank you.
I would tell you that average revenue per customer increases has been a core part of our growth equation for a long time.
And we have obviously added significantly to the product it was $200 at the time of IPO back in 2014.
So we continue with that momentum I already called out earlier on the call that we've had great ability to sell back into the client base.
Attach rates for the new products used we've been happy with and we've got a pretty rich product pipeline and so.
That is and continues to be a big part of the equation and we see these new customers continuing to adopt more product.
Thank you one moment for our next question.
And that will come from the line of Adam <unk> with Bank of America. Your line is open.
Hey, Thanks for taking my question a quick one on R&D, what are some product areas of functionality youre still looking around that to get to that $600.
<unk> target.
Yes, I think for competitive reasons I never like to announce the product until we're very close to launching that and bringing that to market.
What I would tell you is I think we continue to have opportunities to extend the valuable data that we have about an employee's person record to be able to automate a number of internal processes for our customers.
Some of those really fit right into kind of a core HR organization. Some of those start to extend outside of that where that data can become valuable. We also have opportunity to be able to add deeper capabilities and functionality very much like scheduling plus which was one of our new product skus that allow our customers to take advantage of richer functionality and allows us to be able to get a little bit.
More pricing out of that equation and so I think it's really kind of a combination of innovating in places, where we don't see our competitors go on top of actually just making our functionality.
And better and then lastly, sometimes it's reacting to customer feedback I think rewards and recognition as a great example of client feedback driving us to launch a SKU that maybe we wouldn't imagine three or four years ago and so it's all three of those things that drive the innovation.
Thank you that's very helpful. And then a follow up can you remind us what the ramp time is for the new sales head count you've brought in this past Q1.
Yes.
Yeah, I would say that I don't think we have seen any significant change in terms of the ramp time of the sales team that we would have hired in that spring timeframe, which again is the sort of the main part of the hiring season, although we continue to hire reps throughout the course of the year every single year and I think it was.
I mentioned few minutes ago I think we are came into the came into the new fiscal year with sales head count up 18%. That's the same level of increase generally we've had last few years.
I think we feel really good about the level of talent, we've been able to attract and as Steve said a minute ago, I think where we are in the heart of selling season, and I think we feel pretty good about how well the momentum that we had in the course of Q1 and feel really good about where we sit from a staffing perspective and from a talent level perspective, as we sit here.
And the hardest selling season.
Thank you one moment our next question.
And that will come from the line of Robert Simmons with D. A Davidson your line is open.
Hey, Thanks for taking my question so.
Your guidance has you below the 20% growth target you've put out there what do you think you can return to that.
Level and what is going to be the most likely kind of us to get there.
Yeah.
Our goal is obviously to continue to focus on that 20% target from a long term perspective.
And there's been certainly a lot of noise post COVID-19 in some of these numbers and in some ways, even some of the comparables on the first half of the year that we've got.
But we feel focused on getting there I think if you look at the guidance overall for the year were right at the number implied a little bit lower but not a lot lower on the last couple of quarters I think the other thing I would say that guidance right not not always actuals as well and so if you kind of <unk>.
Factor all that in place we feel like were you know from a guidance perspective, we're pretty darn close to the target already and we're going to stay focused on that number.
Got it and then can you talk about the customer reaction and feedback so far from the announcements you had at elevate.
Uh huh.
Yeah, I mean, I think overall, we as Steve said, a few minutes ago really good reaction to elevate overall, but I think as it relates to some of the product announcements. We've had we've had a strong couple of quarters of new product introduction with.
Things most recently.
Rewards and recognition and employee voice that Steve was talking about I think the overall reaction. So far obviously early days in terms of the launch of those products, but the reaction. So far has been has been great really strong and.
I think those to Steve's point, a minute ago I mean, those continue to be products that.
We have collaborated with clients on we've gotten feedback from them and we've now delivered products that I think they are indicating.
Indicating our our value to them and so while it's early days I mean, I think the reaction has been really strong so far.
Thanks.
Thank you one moment our next question.
And that will come from the line of Terry Tillman with <unk>. Your line is open.
Yes, thanks for fitting me in as well.
Maybe my first question and then I did have a follow up either Fortunately or unfortunately for you all the first question as we talk about growth algorithm.
And Steve I think you said it really well I mean, you've got the team on the field you got to execute in our core business rest of the year, So I totally get that but what I'm curious is with what you know right now how do you think the mix of growth and new revenue coming on would look between new units and average revenue per customer this year versus last year do you see any discernible potential changes.
And those mixes and then I had a follow up.
Okay. So I think.
I think.
Terry, but we quote our salespeople on new recurring revenue not necessarily based off a specific number of units.
Over the last couple of years as we've had success upmarket and success with driving more product <unk> seen average revenue per customer play a bigger role.
And the units, obviously were slightly smaller component of that.
I think my reaction to that is we want to get to the number and we want the sales force to be able to go with what the customers need and sometimes that means we're selling more customers and sometimes they're selling more product.
I think it's too early to be totally honest with you this year to be able to tell you, whether we're going to see a specific mix shift.
We do have a fair amount of product coming out this year, we've leaned in a little bit more into selling back to the client base. So if I were to tell you a lien that would probably be the slight lean based off of that initiative, but we're going to let the year play out.
Understood totally.
Maybe just a follow up question and then maybe this is easier said than done but you all have done a lot in terms of these add on products that drive that TEP y.
But have there been learnings when you bring these newer products out that somehow you can just get the quicker kind of attach rates, so that like 20% plus target et cetera, with the newer products just because from learnings from the prior add on products or is it not that simple to be able to put all of that kind of testing and learning.
Yeah. So I mean these are obviously youre talking products that can be maybe a dollar ppm up to several dollars ppm and so as you look to add those you first typically see a fair amount of movement with new customers coming on board. So you launch it to the sales force. The two new products. We just talked about are available for January starts so were already <unk>.
<unk> sign ups for those two products as we speak.
And so that ends up being what I would say, it's a fairly normal ramp up rate that it's been pretty consistent with various products over time, So I don't see a big opportunity to move that we have gotten better over the years, though as we sell back to the client base.
That team has scaled and the performance of that team has been really strong and so I think there's still opportunity for us to continue to improve.
Drive utilization, whether that's things like free trials and better description of the product and just having more head count talking to our customers and.
And frankly designing products that customers actually want and so when you put all that together I think the sales back to the client base continues to be an annuity that we will we will gradually improve over time.
Thank you.
Yeah.
Thank you one moment our next question.
And that will come from the line Pat Wall Ravens with JMP Securities. Your line is open.
Hey, Pat you there.
Sorry about that I was on mute.
Steve you've already said the market is big enough for all of the cloud vendors.
Along.
As the expenses.
Legacy players.
But at some point.
That would come to that and then you can start taking share from each other.
Where are we in that process and how far away from that.
Yeah. It's a good question Pat I mean, I think Theres still you know a million targeted business in our target market, we've obviously expanded that target market a little bit.
On the low end and on the upper end so that has grown since our IPO in 2014, it still feels like a big market opportunity I look at the activity levels of the sales force and how many people are they meeting every single week and those remain fairly consistent which tells me that there is a lot of opportunity still out there and I think.
Top of that we've had really great success of adding product and a history of innovation. So that that average revenue per customer part of the equation is something that we can have confidence in so I still theres a ton of opportunity for us to be able to grow this business will be a little.
About $1 4 billion forecasted this year, we're very much focused on what does it take to get to 2 billion and then and continue to grow beyond that so it still feels like a large opportunity.
Thank you.
Thank you I'm showing no further questions in the queue at this time I would like to turn the call back over to management for any closing remarks.
As usual I just want to thank all of you for your interest in Pelosity. So tobey sentiments from the prepared remarks, thanks to all of our employees for.
All the effort to a good start to our fiscal year I have a good day.
This concludes today's program. Thank you all for participating you may now disconnect.
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