Q4 2023 Asure Software Inc Earnings Call

Operator: Good afternoon, and welcome to Asure's fourth quarter and full year 2023 earnings conference call. Joining us for today's call are Chairman and CEO Pat Kempel, Chief Financial Officer John Pence, and VP of Investor Relations, Patrick McKillop. Following the prepared remarks, there will be a question and answer session for their analysts and investors. I'll now turn the call over to Patrick McKillop for introductory remarks. Please go ahead,

Good afternoon, and welcome to assure us fourth quarter and full year 2023 earnings conference call joining us for today's call are chairman and CEO, Pat Campbell Chief.

Chief Financial Officer, John Pens I.

N V P of Investor Relations Patrick Mckillop.

Following the prepared remarks will be a question and answer session for analysts and investors I'll now turn the call over to Patrick Mckillop for introductory remarks. Please go ahead Patrick.

Patrick McKillop: Thank you, operator. Good afternoon, everyone. And thank you for joining us for Asure's fourth quarter and full year 2023 earnings results. Following the close of the markets, we released our financial results. The earnings release is available on the SEC's website and our investor relations website at investor.asuresoftware.com, where you can also find the investor presentation.

Thank you operator, good afternoon, everyone and thank you for joining us for Ishares fourth quarter and full year 2023 earnings results call.

Following the close of the market, we released our financial results.

The earnings release is available on the Sec's website, and our Investor Relations website at Investor Dot assure software dotcom.

You can also find the investor presentation.

Patrick McKillop: During our call today, we will discuss non-GAAP funding, which we believe to be useful to investors and excludes the impact of certain items. Description and timing of these items, along with a reconciliation of non-GAAP funding 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 risk; we use the words, such as, believes, and may, to indicate forward-looking statements. And we encourage you to review our filings with the SEC for additional information on factors that could cause actual results to differ materially from current expectations. I will hand the call over to Pat in a moment, but I just wanted to take a moment to remind folks of our upcoming investor relationship. On March 17th through the 19th, we will attend the 36th...

During our call today, we will reference non-GAAP financial measures, which we believe to be useful to investors and exclude the impact of certain items.

A description and timing of these items along with 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.

We use the words such as expects believes in may to indicate forward looking statements.

We encourage you to review our filings with the SEC for additional information on factors that could cause actual results to differ materially from current expectations.

I will hand, the call over to Pat at the moment, but I just wanted to take a moment to remind folks of our upcoming investor relations activities.

On March 17th through the 19th we will intend to thirty-six anti annual Roth Conference in Dana point, California.

Patrick McKillop: Annual Roth Conference and Dana Point. We also plan to do a few non-deal roadshows later this spring as well. Investor outreach is very important to Assure, and I'd like to thank all of those that assist us in our efforts to connect with investors. Finally, I would like to remind everyone that this call is being recorded, and it will be made available for replay via a link available on the investor relations section of our website. With that, I would now turn over the call to Pat Geppel, Chairman and CEO.

We also plan to do a few non deal Roadshows later this spring as well.

Investor outreach is very important to be sure and I want to thank all of those that assist us in our efforts to connect with investors.

Finally, I would like to remind everyone that this call is being recorded and it will be made available for replay replay via a link available on the Investor Relations section of our website.

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

Pat Kempel: Thank you, Patrick, and welcome, everyone, to Asure Software's fourth quarter and full year 2023 earnings results call. I am joined on this call by our CFO, John Pence, and we'll provide a business update for our fourth quarter and full year 2023 results, as well as our outlook for 2024. Following our remarks, we'll be available to answer your questions.

Thank you Patrick and welcome everyone to assure software's fourth quarter and full year 2023 earnings results call I'm joined on this call by our CFO, John Pat and will provide a business update for our fourth quarter and full year 2023 results as well as our outlook.

For 2024, following our remarks, we'll be available to answer your questions. As you can see from our reported results. Our strong momentum continued during 2023 with strength coming from solid execution across the business. Our total revenue growth in 2023.

Pat Kempel: As you can see from our reported results, our strong momentum continued during 2023, with strength coming from solid execution across the business. Our total revenue growth in 2023 was 24% versus the prior year; excluding ERTC, our revenues were up 19%. Our recurring revenues grew 16% versus the prior year; excluding ERTC, our recurring revenues were up 19%. Our net loss was $9.2 million, a $5.3 million improvement versus the prior year, and adjusted EBITDA was up 97% versus the prior year period.

Well, it's 24% up versus the prior year, Excluding New York D. C. Our revenues were up 19% our reoccurring revenues grew 16%.

Versus the prior year, excluding E. R. A T C. A reoccurring revenues were up 19%. Our net loss was 9.2 million a 5.3 billion dollar improvement versus the prior year and adjusted EBITDA was up 97% versus the prior year.

Pat Kempel: Lastly, our cash from operations for 2023 was $18.9 million versus $13.7 million in 2022. We have multiple growth drivers in our business with HR Compliance, Asure Marketplace, and our payroll tax management solutions showing very strong growth in 2023. We believe that over time, these business lines can become much larger contributors to our overall revenues. As our payroll tax management offering continues to grow, it can contribute to our float balances growing as well. We continue to build on our momentum by advancing our technology through leading partnerships and launching strategic sales initiatives such as the bundling of our 401k products with payroll to drive new client additions. This particular initiative was launched a short time ago, and the reception we have received thus far has been very positive. Many small businesses traditionally have not had the resources to offer 401k retirement solutions, but around 20 or more states in the U.S. have mandated these plans, and many more have introduced legislation mandating 401k plans for small businesses.

Year period lastly, our cash from operations for 2023 was $18 9 million versus $13 7 million in 2022, we have multiple growth drivers in our business with HR compliance it sure market place and our <unk>.

Oh tax managed with pollution, showing very strong growth in 2023, we believe that over time needs. That's why they can become much larger contributors to our overall revenues as our payroll tax management offering continues to grow it can contribute to our.

Our float balances growing as well we continue to build on our momentum by advancing our technology through leading partnerships and launching strategic sales of nature that touches the bundling of our 401k products with payroll to drive new client that they said this particular initiative.

Well it has launched a short time ago and the reception. We have received thus far has been very positive. Many small businesses. Traditionally we have not had the resources to offer 401, K retirement solution, but around 20 or more states in the U S have mandated these plans.

And many more have introduced legislation mandating 401k plans for small business to the U S governments. The cures Act two point all aimed to increase employee participation and retirement plans by providing tax credits the support the setup of employer.

Pat Kempel: The U.S. government's Secures Act 2.0 aims to increase employee participation in retirement plans by providing tax credits to support the setup of employer-based retirement plans, and Asure has the solutions they need to set up those plans. We continue to advance our technology with partnerships, as evidenced by the recent invitation to join the SAP PartnerEdge Open Ecosystem. The partnership with SAP will allow Asure to enhance its payroll tax engine by integrating with the SAP systems and streamlining payroll tax processes for its existing SAP clients.

Based retirement plans and I'm sure has the solutions they need to set up those plan, we continue to advance our technology partnerships as evidenced by the recent invitation to join the S. H P partner adds to open ecosystem the partnership with <unk>.

J P will allow it sure to enhance its payroll tax engine by integrating with the FAA P systems and streamline payroll tax processes for its existing <unk>.

Pat Kempel: Also, in today's press release, we mentioned we received Workday Global Payroll Certification for integration into Workday HCM and Asure Payroll Tax Management. This solution helps large enterprises streamline processes, enhance compliance accuracy, and stay ahead of regulatory changes. The certification accelerates Asure's payroll tax business into the workday human capital management ecosystem. Our sales efforts during 2023 resulted in a 56 percent increase in new bookings versus the prior year, and we're pleased with the productivity per rep we're experiencing. We've expanded our sales force during the year to approximately 110 reps with plans to go about 130 and have been very pleased with the quality of new hires that we've made. We're supporting our sales efforts with digital marketing, which will drive higher levels of sales leads and productivity in 2024. Based on our current business trends, we're reiterating our full year 2024 revenue guidance of 125 to 129 million with an even margin of between 20 and 21 percent. As a reminder, this guidance excludes any potential contributions from ERTC filings but does include our plan to resume acquisitions in earnest.

Clients also in today's press release, we mentioned reversed the workday global payroll certification for integration into Workday HCM and it's sure payroll tax managed about this solution helps large enterprises streamline processes enhanced compliance accuracy.

And stay ahead of regulatory changes.

Certification accelerate assures payroll tax benefit into the workday human capital management ecosystem.

Our sales efforts during 2023 resulted in a 56% increase in new bookings versus the prior year and were pleased with the productivity per rep were experiencing we've expanded our sales force during the year to approximately 110 reps with plans to go.

So about 130 and I've been very pleased with the quality of new hires that we've made we're supporting our sales efforts with digital marketing, which will drive higher levels of sales leads and productivity in 2024 based on our current business trends, we're reiterating our.

Full year 2020 for revenue guidance of 125 to 129 million with EBITDA margin of between 20 and 21% as a reminder, this 24 guidance excludes any potential contribution from me our T SEC filing but.

Does it include our plans to resume acquisitions Internet, we have signed agreements to purchase approximately $7 million of annual reoccurring revenue and the pipeline is very strong as we look at the business. Excluding E. R. T C from 'twenty to 'twenty three our guy.

John Pence: We have signed agreements to purchase approximately $7 million of annual recurring revenue, and the pipeline is very strong. As we look at the business excluding ERTC from 2023, our guidance for 2024 implies a 25 percent plus growth rate, which is very positive. Additionally, reviewing our growth excluding ERTC for the past few years, we're witnessing solid double-digit growth, and the implied 25 percent growth rate in our guidance of 2024 would be an acceleration of the rates we saw in previous years. Now, I would like to hand it off to John Pence to discuss our financial results in more detail as well as our quarter one guidance. John?

For 'twenty 'twenty four implies a 25% plus growth rate, which is very positive digitally are reviewing our growth excluding E. R. A T C for the past few years, we're witnessing solid double digit growth any implied 25%.

Growth rate in our guidance of 2024 would be an acceleration of the rates. We saw in previous years now I would like to hand, it off to John Pat to discuss our financial results in more detail as well as our quarter one guidance John.

John Pence: Thanks, Pat. As Patrick 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. The reconciliations themselves are also included in our most recent investor presentation posted in the investor relations section of our website at investor.asuresoftware.com. Now on to the fourth quarter and 2023 results. Fourth quarter total revenues were $26.3 million, decreasing by 10% relative to the prior year, but including ERTC, total revenues were up 15% from the prior year. For the year 2023, total revenues grew by 24%, to $119.1 million, excluding ERTC. Recurring revenues for the fourth quarter grew 4% versus the prior year to $25 million, and excluding ERTC revenues were up 15% from the prior year.

Thanks Pat.

Patricia mentioned at the beginning of this call several of the financial figures discussed today are given on a non-GAAP or adjusted basis, we will find a description of these GAAP to non-GAAP reconciliations in the earnings release.

Made available earlier today.

Reconciliations themselves are also included in our most recent investor presentation posted in the Investor Relations section.

Our web site at Investor not assure software dot com.

Now onto the fourth quarter and 2023 results.

Fourth quarter total revenues were $26 3 million decreasing by 10% relative to prior year.

Excluding <unk> total revenues were up 15% from the prior year.

Full year 2023 turnaround has grew by 24%.

$119 1 million.

Excluding your TC total revenues were up 19% from the prior year.

Recurring revenues for the fourth quarter grew 4% versus the prior year to $25 million, excluding <unk> revenues were up 15% from the prior year.

John Pence: Full-year recurring revenues grew by 16% to $99.7 million year-over-year, and excluding ERPC revenues were up 19% from the prior year. Full-year and fourth-quarter recurring revenues grew on the strength of HR compliance solutions, assure marketplace, and increased interest revenues with average client balances exceeding $200 million during the year. Net loss for the fourth quarter was $3.6 million versus $1.1 million during the prior year.

Full year recurring revenues grew by 16% to $99 7 million year over year and excluding your TCE revenues were up 19% from the prior year.

Full year and fourth quarter recurring revenues grew on the strength of each are compliant solutions sure marketplace and increased interest revenues with average client balances exceeding $200 million during the year.

Net loss for the fourth quarter was $3 6 million versus $1 1 million during the prior year.

John Pence: Net loss for the full year, 2023, was $9.2 million, an improvement of $5.3 million versus the prior year loss of $14.5 million. Gross margins for the fourth quarter decreased. 68% from 72% in the prior year. Foyer gross margins increased to 72% from 65% prior, non-GAAP gross margins for the fourth quarter decreased to 72% from 76% in the prior year, and non-gross margins for the full year increased to 76% from 70% in the prior year. The decline in margins during the fourth quarter was driven by lower revenues versus the prior year as a result of lower ERTC revenues.

Net loss for the full year of 2023.

It was $9 2 million, an improvement of $5 3 million versus the prior year loss of $14 5 million.

Gross margins for the fourth quarter decreased to 68% from 72% in the prior year.

Full year gross margins increased to 72%, 65% prior year.

non-GAAP gross margins for the fourth quarter decreased to 72% from 76% in the prior year.

non-GAAP gross margins for the full year increased to 76% from 70% in the prior year.

Coin in margins during the fourth quarter were driven by lower revenues versus the prior year.

As a result of lower ERP see revenue.

John Pence: Margin expansion for the full year was driven by growing high-margin revenue streams, continued progress with our efficiency initiatives, and scale benefits from our growth. We continue to believe there is substantial margin upside over the longer term at the business scale. EBITDA for the fourth quarter was $1.1 million, down from $5 million in the prior year. EBITDA of $14.3 million for the full year was up 63% versus the prior year. Adjusted EBITDA for the fourth quarter decreased to $2.8 million.

Margin expansion for the full year was driven by growing high margin revenue streams continued progress with our efficiency initiatives and scale benefits from our growth.

We continue to believe there is substantial margin upside over the longer term as the business scales.

EBITDA for the fourth quarter was $1 1 million down from $5 million in the prior year.

EBITDA of $14 3 million for the full year was up 63% versus the prior year.

Adjusted EBITDA for the fourth quarter decreased to $2 8 million from 6 million in the prior year.

John Pence: 6 million in the prior year, and it just needs a bit of margin. 11% in the quarter compared with 21% in the prior year. Suggested EBITDA of $23.3 million for the full year was up 97% versus the prior year. And just even our margin for the full year was 20% versus 12% in the prior year. Our capital operations for 2023 were $18.9 million versus $13.7 million in 2022. We ended the year with cash and cash equivalents.

Adjusted EBITDA margin was 11% in the quarter compared with 21% in the prior year.

EBITDA of $23 3 million for the full year was up 97% versus the prior year.

The better our margin for the full year was 20% versus 12% in the prior year.

Our cash from operations for 2023 was $18 9 million versus $13 7 million in 2022.

We ended the year with cash and cash equivalents of <unk>.

John Pence: $30.3 million, and we have debt of $4.3 billion. Now, in terms of guidance for the first quarter of 2024, we are guiding the first quarter revenues to be in the range of $30 to $32 million, and adjusted EBITDA for the first quarter is anticipated to be between 6 and 7%.

$33 million, and we had debt of $4 3 million.

Now in terms of guidance for the first quarter of 'twenty 'twenty four we are guiding the first quarter revenues to be in the range of $30 million to $32 million.

Adjusted EBITDA for the first quarter is anticipated to be between six and $7 million.

John Pence: We are reiterating our 2024 revenue guidance to be in the range of $125 to $129 million with adjusted EBITDA margins of between 20% to 21% at these revenue levels. As Pat mentioned in his comments earlier, these guidance figures exclude any contribution from ERTC revenue but assume a resumption of acquisition. We are excluding ERTC given the uncertainty about the future of the program.

We are reiterating our 2020 for revenue guidance to be in the range of 125 to 129 million with adjusted EBITDA margins of between $20 to 21% at these revenue levels.

As Pat mentioned in his comments earlier these guidance figures exclude any contribution from your TCE revenues, but assume a resumption of acquisitions.

We are excluding or do you see given the uncertainty about the future of the program.

John Pence: The growth from our HR compliance Asure marketplace is expected to continue to be strong contributors going forward. Also, during 2023, we saw very good growth from our standalone payroll tax management product offering as well. Apparel Tax Management platform has multiple shotgun goals, with the platform being offered as a service to large enterprises as well as HCM vendors.

The growth from our HR compliance assure marketplace are expected to continue to be strong contributors going forward.

Also during 2023, we saw very good growth from our Standalone payroll tax management product offering as well as payroll tax management product has multiple shots on goal with the platform being offered as a service to large enterprises as well as HCM vendors.

John Pence: While the above-mentioned are strong contributors to our growth, we also expect to drive growth through inorganic means. We have signed agreements to purchase approximately $7 million of annual recurring revenue so far, and the pipeline is strong. In conclusion, we are pleased with our performance in 2023 and the momentum we have built on the strength of product development, technology, and sales. This gives us confidence in our forward-looking guys.

While the above mentioned are strong contributors to our growth. We also expect to drive growth through inorganic methods. We have signed agreements to purchase approximately $7 million of annual recurring revenue so far and the pipeline is strong.

In conclusion, we are pleased with our performance in 2023 and the momentum we have built on the strength of product development technology and sales.

This gives us confidence in our forward looking guidance.

John Pence: As we look at the business, excluding ERTC revenues in 2023, we are generating approximately $100 million in revenue. And the guidance we have given to 2024 implies 25% plus growth for this year, which is a very healthy rate. If we look back, the core business grew 16% in 2021 and 17% from 2022 to 2023.

As we look at the business excluding your TCE revenues in 'twenty three we are generating approximately $100 million in revenues and the guidance, we have given to between 24 and plus 25% plus growth for this year, which is very healthy rate.

If we look back the core business grew 16% in 2021.

<unk> 22, and 19% from 'twenty to 'twenty two 'twenty three.

Pat Kempel: And then we look to guidance for this year, and you can see the growth rate accelerating, assuming we achieve our goal. We are excited about 2024 and look forward to it being a breakout year for Asure in driving profitable growth and leveraging initiatives we've implemented across the business to generate sustainable growth and create shareholder value. With that, I will turn the call back to Pat for closing remarks. Thank you, John.

And then we look to guidance for this year and you can see the growth rate accelerating assuming.

We achieve our goals.

We are excited about 'twenty 'twenty, four and look forward to it being a breakout year for sure and driving profitable growth and the leveraging of the initiatives, we've implemented across the business to generate sustainable growth and create shareholder value.

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

Thank you John we are pleased to deliver continued growth in 2023, achieving 24% total revenue growth, we remain committed to creating products and technologies that make a difference for our customers, but continued improvement of our solution.

Pat Kempel: We are pleased to deliver continued growth in 2023, achieving 24% total revenue growth. We remain committed to creating products and technologies that make a difference for our customers. The continued improvement of our solutions over the last few years is being reflected by our continued growth, and we're elated to see positive impressions from our client base as we are creating valuable solutions which will enable them to focus on their core business operations. Our business has multiple growth drivers in HR compliance, Asure Marketplace, payroll tax management, and our new 401k off-balance sheet. Small business owners face an increasingly complex world to operate in, and we're offering multiple solutions to these business owners to ease the demands on their time so that they can focus on the things that are most important. Our recent sales initiative in bundling 401k with payroll has gotten a positive reception thus far. The Secure 2.0 Act gives small businesses the funding they need to implement 401k plans, which many states are mandating now, and we expect more to pass such mandates in the future.

Over the last few years is being reflected by our continued growth and we're elated to see positive impressions from our client base as well as we are creating valuable solution, which will enable them to focus on their core business operation or business.

Has multiple growth drivers in HR compliance.

Sure marketplace payroll tax vantage, Matt and our new 401k, offering small business owners face an increasingly complex world to operate in and we're offering multiple solutions to these business owners.

Is the demands on their time, so that they can focus on the things that are most important our recent sales initiatives and bundling 401k with payroll has gotten a positive reception. Thus far the secure 2.0 Act gives small businesses the funding they need to implement forum.

K plan, which many states that are mandating now and we expect more of the past mandates in the future. We also anticipate demand for our HR compliance solution will continue to be healthy as businesses increasingly seek to supplement their internal capabilities with it.

Pat Kempel: We also anticipate demand for our HR compliance solutions will continue to be healthy as businesses increasingly seek to supplement their internal capabilities with external experts who can help them navigate the increasing complexity of doing their business day-to-day. Assure Marketplace has been a strong contributor as well, via our partnerships with Equifax, H&R Block, and StayZoom.

All experts, who can help them navigate the increasing complexity of doing their business day to day, it's pure marketplace. It's been a strong contributor as well via our partnerships with Equifax H&R block and say soon our payroll tax management solution has had great.

Pat Kempel: Our payroll tax management solution has had great potential, with this solution being offered to large enterprise clients and human capital management vendors. Our recent partnership announcements with Workday and SAP are great accomplishments for our payroll tax management business, and as John mentioned, we saw good growth for that product offering during 2023. We remain excited about what lies ahead for this business. Our guidance for 2024 reflects our expectations for continued growth, which will be delivered through a combination of organic and inorganic growth.

Potential with this solution being offered to large enterprise clients and human capital management vendors. Our recent partnership announcements with workday and SAP are great accomplishment for our payroll tax management business and as John mentioned, we saw good growth for <unk>.

That product offering during 2023, we remain excited about what lies ahead for this business our guidance for 2024 reflects our expectations for continued growth, which will be delivered with a combination of organic and inorganic growth we signed agreement the PERC.

Pat Kempel: We have signed agreements to purchase approximately $7 million of annual recurring revenue so far, and the pipeline is strong. Our margins and cash flow have continued to improve as the business has scaled, and we have focused on improving efficiency across the business, which helps improve the cost structure. As John mentioned earlier, when we view the business excluding ERTC, core revenues continue to grow at a healthy double-digit rate, and our guidance for 2024 implies a 25%-plus potential growth rate. While we're pleased to have been able to generate revenues from the ERTC program, we want to remind you that our core business continues to perform very well, and we hope that our discussion today helps illustrate our plans for the future as we move on from

It's approximately $7 million of annual reoccurring revenues, so far and the pipeline is strong our margins and cash flow have continued to improve as the business at scale and we are focused on improving efficiency across the business, which helped improve the cost structure as John mentioned earlier.

Earlier, when we view the business, excluding <unk> T. C core revenues continue to grow at a healthy double digit rate and our guidance for 2024 implies a 25% plus potential growth rate. While we are pleased to have been able to generate revenues from the ear D. C program we.

Want to remind you that our core business continues to perform very well and we hope that our discussion today helps illustrate our plan for the future as we move on from Dr. T. C. During 2023, we have expanded the sales force as well as invested in marketing.

Pat Kempel: During 2023, we expanded the sales force as well as invested in marketing initiatives, and we now feel the business is on the right side for future success as we enter the remainder of 2024. We will continue to provide innovative human capital management solutions that help small businesses thrive, human capital management providers grow their base, and large enterprises streamline tax compliance. Thank you for listening to our prepared remarks, and so with that, I'll send the call back to the operator for the question-and-answer session. Operator?

And we now feel the business is right side for future success as we enter the remainder of 2024, we will continue to provide innovative human capital management solution that helps small businesses thrive human capital manage ment providers.

Grow their base and large enterprises streamlined tax compliance.

You for listening to our prepared remarks, and so with that I'll turn the call back to the operator for the question and answer session operator.

Operator: Thank you; we will now be conducting a question and answer session. If you would like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Thank you will now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you like to move your question from the queue for participants using speaker equipment may be necessary to pick up.

Pat Kempel: For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 1. One moment, please, while we poll for questions. Our first question today is coming from Joshua Riley from Niedermann Company. Your line is now live. All right, thanks for taking my questions here and a nice job on wrapping up the year. Maybe just starting off on ERTC, I know we're moving on from that, but just to wrap up a couple of things, there's some proposed legislation to make the end date retroactive to January 31st. I've been getting some questions, have you guys still been submitting applications for ERTC, even while the program is technically paused, and have there been any costs associated with submitting these applications before you've actually generated any revenue there? Just maybe an update on a couple of those more technical items, to start. Yeah, Josh, thanks.

Handset before pressing star one one moment, please what would you poll for questions.

Our first question today is coming from Joshua Reilly from Needham and company. Your line is our lives.

Alright, Thanks for taking my questions here and nice job on wrapping up the year team.

Maybe just starting off on <unk> E. C. I know were moving on from that but just to wrap up a couple of items. There are some proposed legislation to make the end date retroactive to January 31st I've been getting some questions have you guys still been submitting applications for E. R. T D. Even while the program is technically pause.

Has there been any costs associated with submitting these.

Application before you've actually generated any revenue there just maybe an update on a couple of those more technical items.

Yes, Josh thanks.

Pat Kempel: Thanks for the question. At ERTC, we're a processor on behalf of our clients. So when, you know, the IRS has paused, there has been some legislation, whether they'll let the product or let the program run out in 2020 on April 15th, like scheduled, and then in 2021 on April 15th of the following year, or will they retroactively change it to January 31st? That remains a question for Congress and the IRS.

So the question for me our T C, where a processor on behalf of our clients. So well you know the IRS says pause there has been some legislation whether.

They'll let the product.

The program run out in 2020 in April 15th like scheduled and then in 'twenty 'twenty. One April 15th of the following year is scheduled or will they retroactive to January 31st that remains a question for Congress and the IRS are what we've done.

Pat Kempel: What we've done is, you know, we'll make sure that if somebody wants to file an ERTC claim, we'll process that on their behalf. And there are some, you know, what I'll call minor costs that are involved in that process. But really, we've, you know, kept out revenue in our guidance going forward. And, you know, when the bill or potentially the legislative environment changes, we'll inform our customers as well as our investors alike. But, you know, we have taken it out of the guidance, and there'll be small run rate dollars. But, you know, we, at this point in time, the volume of activity with ERTC has gone down quite a bit. We want to make sure that if somebody does deserve a refund, we'll process it on their behalf.

And as you know, we will make sure that if somebody wants to.

File and the RTC claim will process on that on their behalf.

And there are some men on what I'll call. It minor costs that are involved in that process, but really we've kept out the revenue are in our guidance going forward and you know when the the bill or or potentially the legislation environment changes.

You know, we'll we'll inform our customers as well as our investors alike, but we haven't taken it out of the guidance there'll be small run rate dollars, but you know.

We are at this point in time, the volume of activity with E. R. T. C has gone down quite a bit we want to make sure that if somebody does deserve a refundable process on their behalf.

Pat Kempel: But that's kind of where we are in the program. Got it. And then just two follow-up items on the March quarter guidance. First item: what are you assuming for W2 and forms revenue on a year-over-year basis? Are you assuming it's going to be flat or maybe even slightly down year-over-year? And how much is job switching impacting that revenue? That's the first item.

But that's kind of where we are in the program.

Got it and then just to follow up items on the March quarter guidance first item being what are you assuming for W. Two informs revenue on a year over year basis are you, assuming it's going to be flat or maybe even slightly down year over year and how much is job switching.

Impacting that revenue that's the first item and then just one other quick item on the March guidance Yeah. Its a same store sales is roughly flat year over year. There you know sometimes has effects of turnover et cetera, you know that.

John Pence: And then just one other quick item on the March guidance. Yeah, Josh, theme store sales are roughly flat year-over-year. They're, you know, sometimes it has the effects of turnover, etc. You know, the W2 and year-end revenue. And when we have W2 revenue, we have W2s, we also have ACA, and then we have kind of tax filing forms versus payroll forms.

The W. Two and year end revenue and when we have W. Two revenue we have W. Twos, we outside of HCA and then we have kind of a tax filing form insurance payroll forms, but you know the revenue is a you know I think slightly up year over year, but you know if you can kind of ballpark that.

John Pence: But, you know, revenue is, you know, I think slightly up year-over-year. But, you know, if you kind of ballpark that in the high fours, that's kind of where we are from a revenue perspective.

In the high fours, that's kind of where we are from a revenue perspective.

John Pence: And then what are you assuming also in the March quarter guidance for the H&R block revenue? And can you just remind us if there was any H&R block revenue last year in the March quarter? And then any seasonality around how that might abruptly end on April 15th or when the tax filing deadline? Again, the W-2 revenue, whether it's Intuit or it's H&R Block, the seasonality is more in the first quarter as opposed to all year round, and that's just because personal tax returns have a heavy emphasis on the first quarter, and with a little bit sliding into the second quarter, the use of the W-2 follows that kind of process.

Got it and then what are you assuming also in the March quarter guidance sitting H&R block revenue and can you just remind us if there was any.

<unk> Black revenue last year in the March quarter, and then any seasonality around how that might abruptly and win on April 15th or when the tax filing data. Thank you got it.

W. Two revenue, whether it's into it or its H&R block the seasonality.

Is more in the first quarter as opposed to all year round and that's just because personal tax returns is heavy emphasis on the first quarter and with a little bit slide again to the second quarter, but you said a W. Two.

You know follows that kind of process.

John Pence: We're probably talking about a minor six figures, so a little over $100,000 of revenue in that kind of area, and that's up from last year, but all in all, that's not a huge contributor to our marketplace revenue. We've announced some recent programs in the marketplace, and H&R Block, as well as Intuit, will be a nice kind of program for the convenience of our employees and getting their taxes done, but it's not a huge revenue stream for us. I got it.

You know, we're probably talking about.

About miner.

Six figures so did a little over 100000 of revenue and that kind of area and that's up from last year, but you know all at all that's not a huge contributor of our marketplace revenue.

Been out some reset you know program and sit in the marketplace and H&R block as well as into it'll be a nice kind of program and FERC convenience of our employees and and and and are getting their taxes done, but its not a huge revenue stream for us.

Pat Kempel: Thanks, guys. Thanks, Jeff. Thank you. Next question is coming in from Brian Beckman from TD Cowen. Your line is now live. This is Jared Levine on for Bryan tonight.

Got it thanks guys.

Thanks, Jeff.

Thank you next question is coming from Brian Bedell from TD calendar. Your line is now live.

It's actually cured Levine on for Brian Tonight in terms of Ah <unk> and into <unk>. So far have you noticed any change in the demand environment or even the competitive environment relative to prior quarters.

Pat Kempel: In terms of 4Q and into 1Q so far, have you noticed any change in the demand environment or even the competitive environment relative to prior quarters? You know, for the first quarter, based on the fourth quarter, I haven't seen a great change in demand. I would tell you that we have pretty robust demand. We're launching a number of new programs that we talked about, whether it's 401k, or the marketplace. We have, you know, kind of new capability in the area of benefits around receiving commissions as well. So a number of different drivers for us, but the demand environment's been pretty strong. I did come from our sales kickoff here in the last month or three weeks, I should say, and I think people are pretty fired up and, you know, pretty confident that they can make their plans. So, you know, I think we had a bit of a pivot on September 14th when the ERTC paused, but we have no shortage of opportunities with new product introductions, new technology, as well as our bundling. And people are, quite frankly, pretty, pretty fired up.

You know on the first quarter based on fourth quarter I haven't seen a great change in demand I would tell you I think were pretty robust demand. We're launching a number of new programs that we talked about whether its 401K are the marketplace we have.

You know got a new capability in the area of benefit surround are receiving commissions as well so number of different drivers for us, but a demand environment, it's pretty pretty strong I did come from our sales kickoff here in the last month or three weeks.

So I should say and I think people are pretty fired up and you know I'm pretty confident that they can make their plan. So.

I think we had a bit of a pivot in September 14th 20 year T. C paused, but we have no shortage of opportunities with new product introduction, new technology as well as our bundling and people are quite frankly pretty pretty fired up so.

Pat Kempel: So, you know, for us, it's been pretty positive. Okay, and then that competitive environment as well? I'm sorry, Jerry, you cut out for a second.

For us it's been pretty positive.

Okay, and then the competitive environment as well.

I'm sorry, you cut out for a second if you could ask that question. So the second part of the question was in terms of any change in the competitor competitive environment as well.

Pat Kempel: If you could ask that question again. So the second part of the question was in terms of any change in the competitive competitive environment as well. No, you know, we see on the small end, we might see Augusta, which is a private company; we see ADP and Paychex. You know, those are the vendors we see.

No no you know, we we see a lot of small and you know we might see aircrafts. So it's a private company, we see ADP and paychex.

You know those are the vendors, we see I would say you know.

Pat Kempel: I would say, you know, similar to regional banking, compliance, and money transmission licenses, the government's leaning in more and more, whether it's state or federal or ACH, on the compliance environment. And we are seeing that there's a trend where the smaller providers that did payroll either as a service for their CPA clients or they were doing payroll, you know, now that they have to be licensed, there is a kind of flight to companies such as ourselves because we're, you know, we're licensed and, you know, have expertise in money movement and tax filing. So I think that's been a positive thing for us. But no super huge change in the marketplace. We see the same people that we saw last year.

Similar to regional banking compliant send money transmission licenses the government's leaning in more and more whether it's state or federal or a C. H.

Clients' environment, and we are seeing that there's a trend where the smaller providers that did payroll either as a service for their CPA clients or there. They were doing payroll you know now that they have to be license. There is a kind of a flight to you.

Companies, such as ourselves because where are you now where liza I understand are you know they have expertise and money movement in tax filing. So I think that's been a positive for us but no super.

You changed in the marketplace, we see the same people that we saw last year.

John Pence: Okay, great. And then for my follow-up question, what was the float revenue in FY 23? And then what are you assuming in that FY 24 guide in terms of float revenue? Yeah, we were a little under 9 million this year when it was all said and done. And that compares roughly to about two and a half or so the year before.

Okay, Great and then for my follow up what was the float revenue in FY2023 and then what are you assuming in that FY 'twenty four guide in terms of float revenue.

Yeah, we were a little under $9 million. This year, when it's all set and done in that comparative roughly to about two and a half or so that you are poor.

John Pence: We've got growth, kind of a combination of two or three things that we're thinking about in terms of the forecast. Overall, we've modeled a half point decline mid-year in our core business, but we see you have some growth and flow as a result of a couple of factors, right? So we talked about acquisitions. When we acquire these businesses, we're going to take on their client fund balance. And then, and we've talked about it in the past, but one of our key growth areas is the tax service provision. That also comes with it, a lot of client fund dollars. And it's actually one of the things that we do when it comes to pricing. You know, we might forego some fee revenue just to get client balances.

We've got a <unk>.

Growth kind.

Kind of a combination of two or three things that we're thinking about in terms of the forecast.

Overall, we've modeled a half point decline mid year in our core business, but we see.

Some growth in float as a result of a couple of other factors right. So we talked about acquisitions. When we acquire these businesses, we're going to take on their client fund balances.

And then and we've talked about in the past, but one of our key.

Growth areas is on the tax service, providing that also comes with it.

A lot of clients on dollars.

Actually one of the things.

Rising and we might forego some.

Fee revenue just to get the client balances. So it's definitely a part of our model in terms of that side of the business. So I would say in general I think it's pretty consistent with the overall growth trend.

John Pence: So it's definitely a part of our model in terms of that side of the business. And I would say, in general, I think it's pretty consistent with the overall growth trend. So if you think about, we've got it at 25% growth directionally from the core business, I would say that we expect, kind of between the acquisitions, between those initiatives, we think that we're probably in that kind of same growth rate for float dollars next year. Great, thank you.

So if you think about we've got it to 25% growth.

Directionally from the core business I would say that that we expect kind of between the acquisitions between those initiatives.

We think that we're probably in that kind of same growth rate per foot dollars next year.

Great. Thank you.

Pat Kempel: Thanks for the question. Thank you. The next question is coming from Eric Martinuzzi from Lake Street Capital. Your line is now live.

Thanks for the questions.

Thank you next question is coming from Eric Martin Ritchie from Lake Street Capital. Your line is that life.

Eric Martinuzzi: Yeah, I wanted to focus on the acquisitions, just for Q4, how much revenue was from acquisitions? Yeah, roughly half a million. All right, and then you talked about the 7 million ARR under contract. When are you expecting those deals to close? And how much are you paying? Go ahead.

Yeah I wanted to focus on the acquisitions just for Q4, how much revenue was from acquisitions.

Yeah, roughly a half million dollars.

Alright, and then you talked about.

A $7 million of Ey are under contract when are you expecting those deals to close and how much are you paying.

John Pence: I was going to say, roughly, we'll probably get, of those seven, probably 75% of them this year. Some of it's going to hit the beginning of March; some of it will kind of hit the beginning of April. So I think of that seven, maybe five, five and a half will come in this year. In terms of where you're going next, in terms of what we're paying for, I think we've been pretty judicious. I'll let Pat kind of give you a blended rate for that $7 million purchase. Yeah.

Yes go ahead.

Roughly you would probably get above that seven.

75% of it this year.

Some of it's going to hit beginning of March some of it will kind of hit beginning in April So I think of that seven maybe five five and a half will come in this year in terms I think where you're going next is paying for it. We think we've been pretty judicious I'll get all of that kind of gave a blended rate. So that's seven land purchase yeah, and you know I would say.

Pat Kempel: And, you know, I would say roughly, in that area of two times revenue. We did have a, in our subsequent note, in the 10K, you know, we had a little over a $5 million acquisition from a revenue perspective that we closed on a couple days ago. And then what I would say is the pipeline is very active, you know, a number of March and April kind of starts, as well as, you know, we remind you, we have about $200 million or so of acquisition targets within the reseller community. Probably a pipeline right now of about $20 million or $25 million is actionable.

Roughly in that area of two times our revenue we did have a in our subsequent node in the 10-K.

You know we had.

A little over a $5 billion acquisition from a revenue perspective.

We closed on a couple of days ago, and then what I would say is the pipeline is very active.

There are a number of March April.

Starts as well as.

Remind you we have about $200 million or so of acquisition targets within the reseller community probably a pipeline right now of about 20 million or 25 million are actionable. So you know we're we're kind of the pipeline is strong we're executing on the plan then and real confident that.

John Pence: So, you know, we're kind of, the pipeline is strong. We're executing on the plan, and we're really confident that we'll get the revenue associated with that. Yeah. Again, I think we've been pretty transparent about this. This is definitely part of the model. We were happy to do the equity raise in the third quarter to pay down debt and also give us this dry powder to start really pursuing that part of the model. I mean, it's really important to us.

We will get the revenue associated with that and again I think we've been pretty pretty transparent on this is definitely part of our model we.

We were happy to do that.

The equity raise.

Third quarter to pay down debt and also give us this dry powder to start really prosecuting that part of the model I mean, it's really important to us unless you see the adjusted EBITDA margins and that's really important.

Pat Kempel: As you see, the adjustment even in March is really important to get the scale right. So if we have to replace, let's say $18 million for ERTC, in 2024. That's an important part of that strategy. And I think that, again, if we can get it executed, we'll be able to deliver the same margins. Yeah, Johnny, and Eric, the one thing I would add to John's half a million dollars is when we do acquire, especially the resellers, as well as other payroll assets, we layer on the marketplace, we layer on tax filing dollars, the money movement, that's not in that half a million, and clearly, we've instituted that as well, so that's part of our model. And traditionally, we've talked about acquisition economics Right, but I'm just trying to get at a true organic.

To get to scale, so, let's say if we have to replace.

What about $18 million of LTC in 2024.

That's an important part of that strategy and I think that again, if we can get it executed.

Liver the same.

Margins.

Got it always saying, Eric Eric the one thing I would add to Johns happen.

<unk> billion dollars is when we do acquire especially the resellers as well as you know other payroll assets, we layer on to marketplace, we layer on tax filing dollars money movement.

You know that's not in that half billion in and clearly you know we've.

<unk> instituted that as well so that's part of our model and traditionally we've talked about acquisition.

Economics from a cost reduction perspective, what we're pleased to be seeing is that we also get those benefits from a revenue perspective.

Right, but I'm just trying to get at a true organic and if you're telling me you acquired somebody you know two days ago for that's going to be $5 million of revs in 2024, then.

Eric Martinuzzi: And if you're telling me you acquired somebody, you know, two days ago for 5 million in revenue in 2024, then, you know, look, over 400,000 of your revenue in Q1 is from acquisitions. That's, I just want to make sure I'm right with the math there. Is that correct? Yeah, if you're, you know, people ask for different reasons.

Over 400000 of your revenue in Q1 is from acquisitions. That's I just wanted to make sure I'm right with the math there is that correct yes.

People ask for different reasons, but if you're triangulating from an organic perspective.

Pat Kempel: But if you're triangulating from an organic perspective, you know, we didn't have a lot of acquisitions prior to the fourth quarter, so that number is pretty pure. And then, you know, you got our answers from that. Got it. Thanks for taking my question. Thanks, Eric. Thank you. As a reminder, that's star number one to be placed in the question queue. Our next question is coming from Richard Baldry from Roth Capital Partners. Your line is now live.

You know we didn't have a lot of acquisitions prior to the fourth quarter. So that number is pretty pure and then you know you you've got our answers from that.

Got it thanks for taking my questions.

Thanks, Eric.

Thank you as a reminder, that star one to be placed in the question queue.

Our next question is coming from Richard Baldry from Roth Capital Partners. Your line is now live.

John Pence: Thanks. Your OPEX from 3Q to 4Q is pretty flattish, and to get to sort of the profitability we see or that you're guiding for next year, it looks like it'll be, you know, call it well-controlled on the OPEC side. Yet I'm still concerned that, you know, given the organic growth you're seeing underlying the business, maybe you should be accelerating your hiring or spending on internals a little more than what seems to be implied in the results. Thanks. Yeah, I'll give you my perspective, and I'll let Pat Gunna go.

Thanks, Your Opex from three key to for Q is pretty flattish and to get to the sort of the profitability. We see are that youre guiding for next year. It looks like there'll be you know.

Well controlled on the Opex side at.

At all concerned that given the organic growth youre seeing underlying the business that maybe you should be accelerating your hiring or spending on internal a little more than what seems to be implied in the results.

Okay, I'll give you my perspective, and I'll, let Pat Gonna go I think as we've talked about.

Pat Kempel: I think, you know, as we've talked about, um... The fourth quarter, even as we were given the guidance, was a pretty sharp pivot. As we were planning ahead for the end of the year, we were trying to invest heavily in terms of our sales and operations to get ready for the next year. I would say that ERC going away put pressure on the fourth quarter, but we don't see a lot of incremental cost going into 2024 from the fourth quarter, is kind of my perspective. I think we have to deliver the revenue, but I think the cost structure is pretty stable. Yeah, and Rich, I think it's a good point and one we talk about quite a bit at the management level as well as at the board level.

Fourth quarter, even as we were giving the guidance. We are you know it was a pretty sharp pivot.

As we were planning ahead for the end of the year.

We were trying to invest heavily in terms of our sales and ops.

Get ready for the next year.

I would say that.

See going away up a pressure.

On the fourth quarter, but we don't see a lot of incremental <unk>.

Cost going into 2004 from from the fourth quarter, it's kind of my perspective, I think we.

We have to deliver the revenue.

I think that the cost structure is pretty stable.

Yeah, and then rich I think its a good point and one we talk about quite a bit.

Management level as well as the board level in our investor deck.

Pat Kempel: In our investor deck, you know, we did pop out more and more of the model, and I think what you're seeing in 2021, you know, we had roughly 10% adjusted EBITDA as a percentage of revenue. This past year in 2023, we were fortunate to go to 20% at that, you know, kind of call it, 119 level. For illustrative purposes, at 200 million, we think it's 30%.

We did pop out more and more of the model and I think what you're seeing in 2021, we had roughly 10% adjusted EBITDA as a percentage of revenue. This past year in 2023, we're fortunate to go to 20 per sat at that you know kind of call. It 119 law.

You know our model in for illustrative purposes at $200 million, we think it's a 30%.

Pat Kempel: So it's a very much a scale business, and that's what we're focused on. What ERTC allowed us to do is invest in kind of technology and payroll, and we're running at increased levels for that. Now with ERTC, it was a one-time revenue, and, you know, you're kind of one and done.

So it's a very much a scale business and that's what we're focused on what are your T. C allowed us to do is invest in.

And kind of technology and payroll and we're running at increased kind of levels for that now with the RTC. It was one time revenue and you know you were kind of one and done here, where it's allowing us to invest in a in a repetitive business model so well this year.

Pat Kempel: Here, it's allowing us to invest in a repetitive business model. So while this year, roughly 18 million dollars or so was ERTC one-time revenue, next year, as we, you know, model with guidance, most of that revenue is repetitive revenue. So you're going to see us really build a platform of growth that's repetitive revenue, and it's only accelerated in the last couple years. From a cost perspective, what we've done is we've been able to really right-size the scalability model. Primarily, we invested in our infrastructure with common service tools, Salesforce, NetSuite, and AWS. Now we're starting to invest in AI, and we think we have some pretty good winners in that area. And then just the simplification of the business around bank accounts, money movement, and the marketplace allows us to move to where we can invest in our important asset around people but also invest in efficiency and the scale outcome. So we think we're well on our way and really pleased with the outlook here. So I appreciate the question, but that's how we're looking at it today.

Roughly $18 million or so was the R. A T C. One time revenue next year as we.

Get a model with guidance most of that revenues repetitive revenue, so you're going to see us really build a platform of growth.

Repetitive revenue and it's only accelerated in the last couple of years from a cost perspective, what we've done is we've been able to really right size. The scalability model, primarily we invested in our infrastructure with common service tools Salesforce that suite AWS.

Now, we're starting to invest in AI and we think we have some pretty good winters in in that area and then just the the simplification of the business surround bank accounts money movement in the market place allows us to move where we can invest in our important asset around people, but.

We also invest in efficiency and in the scale outcome. So we think we're well on our way and I'm really pleased with the outlook here. So.

I appreciate the question, but that's how we're looking at it today.

John Pence: And in terms of revenue seasonality, from Q1 to Q2, there's usually a dip because of the W-2 type, you know, upswing in Q1. Do you think that's at all different in terms of magnitude this year given sort of the mix changing in the business? Yeah, I don't think it'll be as dramatic.

And in terms of revenue seasonality from Q1 to Q2 is usually get because of their W. Two types.

Upswing in Q1.

And all different in terms of magnitude this year, given sort of the mix changing in the business.

Yeah, I don't I don't think it'll be as dramatic also just because of some of the acquisitions too right. So youre going to have some of that muted by the fact that some of these acquisitions and the revenue is going to start coming on so I'd say, probably not as dramatic as the step ladder.

John Pence: Also, just because of some of the acquisitions, too, right? So you're going to have some of that muted by the fact that some of these acquisitions and revenue are going to start coming in. So I'd say probably not as dramatic as it sounded last, and last for me would be more about the M&A pipeline, sir, you know, against the macro backdrop... It sounds like the ones you've done recently fit your targets really well. Do you feel like, you know, the targets you're going after in terms of valuation, cash flow capabilities, etc., are those, you know, sort of well within the grasp of the pipeline you're looking at? Has that changed at all recently?

Okay.

For me it would be more about the M&A pipeline.

Against the macro backdrop.

And it sounds like the ones you've done recently hit your targets early Lal D. Do you feel like you know the targets you're going after in terms of valuation cash flow capabilities et cetera.

Those sort of well within grasp of the pipeline you are looking at that changed at all recently.

John Pence: Just how are you feeling about that? Thanks. I think my perspective on it is that there are Goldilocks providers; I think everything is going kind of according to the model. And, as Pat mentioned, it's a unique time for these small providers. I mean, the cost of doing business with the regulations that the various states are putting in place, the banking system, it's really having an effect on some of these smaller providers, whether they want to stay in business and take the risk, or whether they think this is a better time to exit. So I think it's a unique time in the space.

Just how are you feeling about that thanks.

I'll give my perspective on it I think there are you know goldilocks like everything is going according to the model and as Pat mentioned, there's a it's a unique time.

Time for the small providers I mean, the the cost of doing business with.

With the regulations that the various stages of putting in place of the banking system.

It's really.

Having had an effect on some of these smaller providers, whether they want us to stay in business and take the risk where do they think this is a better time to exit. So I think it's a unique time in the space that we've embraced it.

John Pence: We've embraced it in terms of trying to get our house in order in terms of being very compliant. We take it very seriously. It's hard if you're a small provider to afford some of that cost structure. Great, thanks. Thanks, Rich.

In terms of trying to get our.

Our house in order in terms of being very compliant and we take it very seriously.

It's hard if you're a small provider to afford some of that cost structure.

Great. Thanks.

Pat Kempel: Thank you. The next question today is coming from Jeff Van Reen on behalf of Craig Hallam. Your line is now live.

Thanks Rich.

Thank you next question today is coming from Jeff Van <unk> from Craig Hallum. Your line is now live.

Jeff Van Reen: Great. Hey guys, thanks for taking the questions. A few for me.

Great Hey, guys. Thanks for taking the questions a few for me on sales.

Pat Kempel: On sales, what do you see in terms of the timeline for the reps to ramp up to productivity? How has that changed in the last, call it, six months, 12 months? You know, Jeff, I think, if anything, it's probably gone up a bit. Productivity and the quality of hires have gone up for us, so we've been really pleased with that. I think some of it is that the pace of change is quick.

What are you seeing in terms of the timeline for the reps to ramp to productivity how is that changed in the last call. It six months 12 months.

You know, Jeff I think if anything it's probably gone up a bad productivity and quality of pieris caught up for us. So we've been really pleased with that I think some of it is the pace of change is quick so in other words you know if you think about kind of where we were at you know.

Pat Kempel: So in other words, you know, if you think about kind of where we're at, you know, we've had a lot of really good success in the marketplace and in tax filing, as well as, you know, ERTC. We are now, you know, kind of introducing 401K. We have a medical benefits kind of product, and so now you have new reps and new products. And at those times, the sale of a concept and then delivering that to a newer person sometimes takes a while to get to that area.

We've had a lot of really good success in the marketplace and then tax filing as well as you know your T. C. We now are you know kind of introducing 401k, we have a medical benefits our kind of product.

And so now you have new reps and new products and in those times the sale of our concept and then delivering that to our newer person sometimes takes a while to get to that area. The other thing I would say is I and again, we're really really.

Pat Kempel: The other thing I would say is, and again, we're really, really happy with the quality of the sales reps, but in the area of tax filing, when you start to go up market with SAP and Workday, now you're talking about a sale or a process or even a book to bill implementation that takes a little bit longer, and the only reason for that is that those customers have higher dollar revenue numbers, and they take a little bit But, you know, bookings: we had another really, really strong year. XCRTC, our bookings were up 40%. It gives us confidence to go to 130 reps, so we think we have really good onboarding training.

Happy with the quality of sales reps, but the area of tax filing when you start to go up market with a S. A P and workday now you're talking about a sale or a process or even a book to bill around implementation that takes a little bit longer and and the only reason for that is.

Those customers have higher dollar revenue numbers, and they take a little bit longer to implement but.

You know bookings, we had another really really strong air X CRT Sea air bookings were up 40%.

It gives us confidence to go to a 130 reps. So we think we have really good onboarding training, we have a lot of the.

Pat Kempel: We have a lot of the right mix to get productivity up. I would just say we're throwing more at the reps from a product perspective. Part of our charm is that we give a lot of products in the bag that some of the other companies don't, where they isolate or go to a one-product kind of sale. We give our business people and our salespeople the opportunity to sell all the products in the bag. Sometimes that does take a little bit longer than if you were only selling one product, but we think it makes them more consultative and more value-added in the future, and I'll tell you what, I couldn't be more pleased with our sales folks.

The right mix to get productivity up I would just say we're talk more at the reps from a product perspective part of our charm is that we give a lot of the products in the bag that some of the other companies don't where they isolate or go to a one product kind of a sale.

We give them our business people, our salespeople the opportunity to sell all the products in the bag, sometimes that does take a little bit longer than if you were only selling one product, but we think it makes some more consultative and more value added in the future and I I'll tell you what I couldn't be more pleased.

With our sales folks.

Good good to hear so on payroll tax management, you just referenced it a minute ago about these deals being larger and potentially taking longer windows. When do those deals start to show up and move the needle from a revenue standpoint would we should we start to think of kind of low to mid seven figure run rates by the end of the year or just don't know.

Pat Kempel: So on payroll tax management, you just referenced it a minute ago about these deals being larger and potentially taking longer. When do those deals start to show up and move the needle from a revenue standpoint? Should we start to think of kind of low to mid-seven figure run rates by the end of the year? Just help us size it; when do those deals start to move the needle? Yeah, I mean, I'll give you one example.

Help us size when do those deals start to move the needle.

Yeah, I mean I'll give you. One example, I have a company with 22000 employees and they'll start between March and April 1st and that process has been going on about a six months or so we went live with a 100000.

Pat Kempel: I have a company with 22,000 employees, and they'll start between March 1st and April 1st. And that process has been going on for about six months or so. We went live with a 100,000 employee company last year, and that process took us almost a year from start to finish, but we went live over six months later. We have some pipelines of some what AOL calls "two comma deals." And, you know, we think that they'll start layering in towards the second half of the year, but we're in the sales processes right now. So yeah, no, I think you'll just see a consolidated ramp.

A company last.

Last year and that process took took us almost a year from start to finish but went live over six months, we have some pipelines of some.

What ill call is you know kind of a two comp ideals and and you know we think that that all they'll start layering in towards the second half of the year, but we're in sales processes right. Now so yeah, no I think you'll just see a consolidated rap.

Pat Kempel: And then, you know, we've introduced what we call banking in a box and our treasury management solution, which in some cases will partner with some of these deals as well, that will increase the total addressable market as well as the deal size. So we think we're positioned really nicely, and you'll see that throughout the year.

And then you know we've introduced what we call banking at a box and and our Treasury management solution that in some cases, we'll partner with some of these deals as well that will increase the.

The total addressable market as well as the deal size. So we think we're positioned really nicely and you'll see that throughout the year.

Pat Kempel: Yeah, it's great to hear about the Marketplace product as well. I think you referenced, obviously, Equifax off to a strong start, with a little bit of contribution from HRB and Zezune. How do you think about a goal for Marketplace by the end of the year and outside of Equifax, which had maybe some different contracting structure? How are the timelines for the other deals, you know, ramping relative to expectations? So timeline of ramp relative to expectations, and then just goals for the year for that segment. Yeah, I think, you know, just from our perspective, we kind of look at the business three ways. We have our core kind of business, and growth that, you know, we're going to get momentum coming off that business. We have some enhanced initiatives, that's the second vehicle.

Yeah, it's great to hear on the marketplace product as well I think you referenced obviously equifax off to a strong start a little bit of contribution from HB in it.

Zune, how do you think about our goal for marketplace by the end of the year in and outside of Equifax, which had maybe some different contracting structure.

How are the timelines of the other deals.

You know ramping relative to expectations, so timeline of ramp relative to expectations.

And then just our goals for the year for that segment.

Yeah, I think just from our perspective, you know, we we kind of look at the business three ways, we have our core kind of business and that growth that you know, we're gonna get momentum coming off that business. We have some enhanced initiatives. That's a second vehicle and you know whether that's the treasury.

Pat Kempel: And, you know, whether that's the treasury management, the 401k, some of those newer products that we're working on, and then we have acquisitions, which we layer on top of our product offerings. From a goal perspective, you know, the 125 to 129 million imply 25% growth. In that kind of initiative, probably, you know, 10 ish or so is the momentum that we've had over the past year, you know, the growth rate of acquisitions, we've kind of published somewhere, you know, in that 10 to 12%. And then some of these enhanced initiatives, whether you look at 401k; we pulled 401k out of the marketplace and made its own separate products.

Management at the 401K some of those newer products that we're working and then we have acquisitions, which we'd layer some of our product offerings to from a goal perspective, you know the the 125 to 129 million would imply a 25% growth.

In that kind of initiative probably.

10 ish or so is momentum that we've had over the past year, you know the growth rate of acquisitions, we've kind of published.

Somewhere in that 10% to 12% and then somebody who said enhanced initiatives, whether you look at 401K. We pulled forward one day out of the market place that made it so on separate products. So you won't see you know to some extent, we probably took a little bit away from the marketplace, but certainly will grow.

Pat Kempel: So you won't see, you know, to some extent, we probably took a little bit away from the marketplace but certainly will grow the marketplace well into the double digits. And then, you know, from our perspective, it's probably too early to call a target number just because we have a number of initiatives, you know, whether it was the healthcare initiative. Recently, we did an acquisition that expanded our capability and received commissions. So we're kind of in the middle of the movie, Jeff. I think I'll give you a little bit more color here at the end of the first quarter.

All the market place.

Well into the double digits and then get off.

From our perspective, it's probably to a little bit too early to call a target number just because we have a number of initiatives. You know weather you know it was the health care initiative. Our recently, we did an acquisition with expanded our capability in receiving commissions. So we're caught in the middle of the move.

Each F. I think I'll give you a little bit more color here at the end of the first quarter and you know we did one acquisition you know two days ago. So I'm I don't want to put targets that would limit US right now I would say at the end of the first quarter will come out with a clear number.

Jeff Van Reen: And, you know, we did one acquisition two days ago. So I don't want to put targets that would limit us right now. I would say at the end of the first quarter, we'll come out with a clear number. Got it.

Got it fair enough. Thank you.

Jeff Van Reen: Fair enough. Thank you. Thank you. The next question is coming from Vincent Colicchio from Bergin Research. Your line is now live.

Thank you. Your next question is coming from Vincent Colicchio from Barrington Research. Your line is now live.

Yeah, Pat do you have a booking growth number for Q4, if we exclude your T C.

Vincent Colicchio: Yeah, Pat, do you have a booking growth number for Q4 if we exclude ERTC? If we exclude, well, for the year, excluding ERTC, it's 40%, and for the fourth quarter specifically, if we exclude ERTC, you know, we're closer to 50%, or 56%, I think it was in the fourth quarter. So, you know, good strong bookings, a lot going on in the business, and that, and I think you'll see more bundling, and the bundling initiatives are starting to pay off, and as far as client companies are concerned, do they grow their employee base in the quarter, and what are your expectations for that in 24? You know, on client, we modeled roughly flat; we didn't get into it because, you know, if you think about the backdrop, you had the macro environment with, you know, either interest rates and, and, you know, people were modeling, some people, depending on what your belief was, was either going to be a recession or growth, etc. We just modeled a flat area and then a six, a half basis point cut in the second half on flow.

If we exclude a well in.

For the year, if excluding ERP.

E. R. T. C is it's 40% right and the fourth quarter, specifically, if we exclude ear teams see.

It all we're closer to 50% 50.

56% I think it was in the fourth quarter. So that you know good strong bookings a lot going on in the business and that in and I think you'll see you know more.

More bundling and the bundling initiatives starting to pay off.

And.

As far as client companies do they grow their employee base in the quarter and what are your expectations for that in 'twenty four.

Oh on client, we modeled roughly flat we didn't get into it because you know if you think about the backdrop.

Had a the macro environment with you know either interest rates and and you know people were modeling you know some people depending on what your belief was wanted to see if they're gonna be a recession or growth et cetera. We just model the flat area and then a six a half basis point cut.

But in the second half on float so.

Pat Kempel: So we don't get too worked up on the quarterly results or what I'll call same store sales growth. And if we do get some of those hiring initiatives growing, that's kind of a benefit to the model. And then do your bookings break down in the quarter between new and existing clients?

So we don't get too worked up on.

On a quarters or what I'll call same store sales growth and if we do get some of those hiring initiatives are growing.

That's kind of a benefit to the model.

And then do you have your bookings breakdown in the quarter between new and existing clients.

Pat Kempel: You know, one of the things that we're working hard on, and we just had our sales kick off is, you know, we do about 65 to 70% new logos. What we want to do is even that out over time. You know, we believe that we have an opportunity to continue to drive our base business, and, you know, we're having a lot of success with bundling. We want to make sure that we have that same bundling success, and one of the things that we're doing is making it easier to do business across the bundles with us.

You know one of the things that we were working hard and we just had our sales kickoff.

As you know, we do about 65% to 70% new logos. What we wanted to do is even that out over time, we believe that we have an opportunity to continue to drive our base business and you know, we're having a lot of <unk>.

Success with bundling, we wanted to make sure that we have that same bundling success and one of the things that we're doing is it making it easier to do business across the bundles with us some of the things that we're doing from a technology rollout strategy will augment that and then we'll get into.

Pat Kempel: Some of the things that we're doing from a technology rollout strategy will augment that, and it will get into more product-driven sales and kind of check-the-box sales. We're excited about those initiatives, but we're still early days. So when I look at bookings and and Ale, who's our chief revenue officer and president, he's done a fantastic job.

More of a product driven sales and kind of check the box sales. We're excited about those initiatives, but we're still early days. So when I look at bookings and N L. Who's our chief revenue officer, and President and he's done a fantastic job one of the initiatives that we're trying to do is we think that there's bay.

Pat Kempel: One of the initiatives that we're trying to do is we think that there's base sales growth that while we've achieved a lot of success in the model, we think we can even do better. And that's where we're going to work those percentages. We also have hired a couple groups of people to really work on those bundling and those product-driven sales to continue to grow. Thanks, Fred.

<unk> sales growth that while we've achieved a lot of success in the model. We think we can even do better and that's where we're going to work. Those percentages. We also have hired a couple of groups of people to really work on those bond delaying and add those product driven sales to continue to.

Vincent Colicchio: Thank you, man. Thank you. Our next question is coming from Greg Gibbous from Northern Capital. Your line is now live.

Wrong.

Thanks, Brett.

Thanks, you bet.

Thank you. Our next question is coming from Greg give us from Northern capital. Your line is now live.

Greg Gibbous: Thanks, Pat and John. Thanks for taking the questions. You know, just to clarify, you know, I think you were saying growth from acquisitions was 10 to 12 percent organically and inorganically. Is that right? I think what we said even with the, when we were talking about the guidance for the full year, last quarter, we were implying roughly 25% growth or higher with kind of a split evenly between both organic and non-organic. So I don't think that's changed.

Do you think that John Thanks for the questions.

Just to clarify I think you were saying growth from acquisitions and 12% organically Inorganically is that right.

Yeah, I think what we said even with the.

When we were talking about the guidance for the full year last quarter, we were implying roughly 25% growth or higher with kind of a split evenly between both organic and organic so I don't think that's changed and then again, it's never going to be perfectly linear, especially with acquisitions theyre going to kind of come in at.

John Pence: And again, it's never going to be perfectly linear, especially with acquisitions. They're going to kind of come in as they get closed. But we still think that's the right way to think about the overall view of the year as a kind of that relative contributor. Great. Yeah, I just wanted to see if anything changed there.

As they get closed but.

But we still think that's the right way to think about the overall view of the year.

There's kind of a that relative contributor.

Great, Yes, I just wanted to see if anything changed there I appreciate it.

John Pence: Appreciate it. And then, you know, regarding the headcount and C or C count trends, you know, wondering if you're seeing anything there. You know, I think you said that you modeled 2024 guidance just off of, you know, roughly flat. Has anything changed in terms of customer headcount or C count growth or decline? You know, no, we've not seen, from my perspective, a significant change one way or the other in the last year or so in terms of the number of employees per, for your account, per employee? I got it.

And then regarding the head count in CRT count trends.

Wondering if youre seeing anything there you know I think you said that you model 2020 for guidance just off of.

Roughly flat is that has anything changed in terms of <unk>.

Customer head count or SKU count.

Growth or decline.

No we've not seen it yet.

From my perspective, a significant change one way or the other in the last year or so in terms of the curve.

Uh huh.

Employee count employees.

Got it and.

Greg Gibbous: And I guess lastly, just as I think about, um, quarterly trends or seasonal trends, without ERTC, you know, I know that was kind of big in Q2, how would you advise us in terms of what 2024 would look like cadence-wise versus. All right, so I think, again, our guidance is 125 to 129 for the full year that has no ERTC component in it. And that if you think about 23, 119 we just delivered, it has approximately $18 million for ERTC in it, right? So you're growing a base of 101, and doing approximately 125 to 129, so that's kind of the way we're looking at ERTC vis-a-vis 24. Yeah, and the only thing I'd say of that 101 last year, or 2023, with 18 million ERTC, ERTC was mainly a one-time revenue, right? Because you had the 941X, and you know, you had that process, and it was a one-time revenue.

And I guess lastly, just as I think about.

Quarterly trends are seasonal.

Without <unk> I know that was kind of big on Q2.

How would you advise us in terms of.

What 'twenty 'twenty four would look like cadence wise versus 2023.

Alright.

I think again our guidance.

As you know 125 to 129 for the full year that has no ear T C component in it and that if you think about a 23 2019, we just delivered as approximately $18 million for your T. C. N. It right so you're growing our base of 101.

Approximately 125 to 129, so that's kind of the way we're looking at here in D. C. S vis vis 24.

Yeah, and the only thing I'd say of that 101.

Last year or 2023 with $18 million of B R. A T C.

T. C was mainly one time revenue right because you had the 941 acts and you know you had that process and it was one time revenue when you think about the bookings and sales of our repetitive revenue business. They build on each other so you know the 125 to 129.

John Pence: When you think about the bookings and sales of a repetitive revenue business, they build on each other. So, you know, the 125, the 129, what we're pretty excited about is growing that base. And then when you think about the fourth quarter, you start to grow that base.

And what we're pretty excited as to grow that base and then when you think about fourth quarter you start to grow that base and you know we think we could exit.

Pat Kempel: And, you know, we think we could exit at close to 30% growth. And when you have that kind of growth from a repetitive revenue perspective, now that leads to a multi-year growth strategy. And then, you know, I just want to remind you, we're in a scale business. And, you know, in 2021, we had 10% adjusted EBITDA margins. 2023, we finished a year here; we had 20%, you know, picked a number at close to 200; you'll see 30%.

You know.

In a close to 30% growth and when you have that kind of growth from our repetitive revenue perspective, now that leads into a multi year growth strategy and then I'd just remind you. We're in a scale business and you know in 2021, we had 10% adjusted EBITDA margins.

2023, we finished a year here, where we had 20%.

The number at close to two water and you'll see 30%. So we think we're really set up well.

John Pence: So we think we're really set up well for the long term, employees and clients alike, and so you'll feel really good about the momentum that we currently have. Yeah, and I would just again, I think we made this point a couple times, but just to re-emphasize it. 22 to 23 growth; XERTC was 19%, right? So it's just something to keep focused on. I mean, the ERTC creates a lot of noise in terms of the numbers and the comparisons, but the core business, when you start to exclude it, really is performing just fine.

Long term.

And our employees and clients alike, and so feel really good about the momentum that we currently have yeah. I would just again I think we've made this point a couple of times, but just to reemphasize.

The 'twenty two 'twenty three growth actually RTC was 19% right. So it's just something to keep focused on I mean, the ERP see creates a lot of noise in terms of the numbers and the compares but the core business. When you start to exclude it really is performing just fine.

John Pence: And again, it's gonna perform great this year, we think. Thank you, Greg. Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to any further closing comments. No, I'll tell you, I'm really excited about 2024.

Again, thats not a corporate this year, we think so.

Great. Thank you Greg.

Thank you we've reset of our question and answer session I'd like to turn the floor back over for any further or closing comments.

No I'd tell you I'm really excited about 2024 came off some really good events around our sales kickoff and.

Pat Kempel: We came off some really good events around our sales kickoff. And, you know, we had a group of high performers together. They see the momentum; they see the future of the business.

You know we had a a group of high performers together they see the momentum they see the future of the business.

We're very pleased with how we're positioned for 2024 and.

Pat Kempel: We're very pleased with our position for 2024. And, you know, stay with us. As Patrick mentioned, we're at the Roth Conference here in March. We're going to do some non-deal roadshows, so we're going to get out to the community. We have a lot coming up in May.

Stay with us.

Patrick mentioned, we're at the Roth Conference here in March we're going to do some non deal roadshows. So we're gonna get out the community we have a bunch coming up in May. So we hope to see you soon and I really appreciate your interest as an investor have a great day and thank you.

Operator: So we hope to see you soon, and I really appreciate your interest as an investor. Have a great day, and thank you. Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation.

Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.

Yes.

Yeah.