Q2 2024 Asure Software Inc Earnings Call

Speaker Change: Good afternoon and welcome to Assure's second quarter of 2024 earnings conference call.

Unknown Executive: Earnings Conference Call. Joining us today on today's call are Chairman and CEO Pat Gepel, Chief Financial Officer John Pence, and Vice President of Investor Relations, Patrick McKillop. Following the prepared remarks, there will be a question-and-answer session for the analysts and investors.

Speaker Change: Following the prepared remarks, there will be a question and answer session for the analysts and investors. I would now like to turn the call over to your host, Patrick McKillop.

Patrick McKillop: I would now like to turn the call over to your host, Patrick McKillop. For introductory remarks, please go ahead.

Unknown Executive: Joining us today on today's call are Chairman and CEO Pat Goeppel, Chief Financial Officer John Pence, and Vice President of Investor Relations Patrick McKillop for introductory remarks. Please go ahead.

Patrick McKillop: Thank you, operator. Good afternoon, everyone, and thank you for joining us for a sure second quarter of 2024 earnings results call. Following the close of the markets, we released our financial results.

Patrick McKillop: Thank you, operator. Good afternoon, everyone. And thank you for joining us for Asure's second quarter 2024 earnings results call. Following the close of the markets, we released our financial results.

Patrick McKillop: The earnings release is available on the SEC's website and our Investor Relations website at investor.suresoftware.com, where you can also find the investor presentation. During our call today, we will reference non-GAAP financial measures, which we believe to be useful to investors and exclude the impact of certain items. The description and timing of these items, along with the reconciliation of non-GAAP measures to the most comparable GAAP measures, can be found in our earnings release.

Patrick McKillop: 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.

Patrick McKillop: 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. I will hand the call over to Pat in a moment. Investor outreach is very important to Assure, and I would like to thank all those that assist us in our efforts to connect with investors. With that, I would now like to turn the call over to Pat Goeppel, Chairman and CEO.

Patrick McKillop: 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.

Patrick McKillop: A description and timing of these items along with the reconciliation of non-GAAP measures to their most comparable GAAP measures can be found in our earnings release.

Patrick McKillop: Today's call will also contain forward-looking statements that refer to future events, and as such involves some risks. We use words such as expects, believes, and may to indicate forward-looking statements. And we encourage you to review our filings with the SEC for additional information on factors that could cause actual results to differ materially from our current expectations.

Patrick McKillop: Today's call will also contain forward-looking statements that refer to future events and as such involve some risks.

Patrick McKillop: We use words such as expects, believes, and may to indicate forward-looking statements.

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

Patrick McKillop: 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 relations activities. On September 12, we will be hosting one-on-one meetings at the Barretton Fall Conference, which is being held virtually. Also, the team will have a member attending the Lake Street Conference in New York that same day. We are planning on some non-deal road chores for September and October. Also in November, we are hosting one-on-one meetings at the Needham SaaS Conference, which is being held virtually. We anticipate more conference participation during the fall months, based on last year's schedule, and look forward to connecting with all of you soon.

Patrick McKillop: 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 relations activities.

Pat: On September 12th, we will be hosting one-on-one meetings at the Barrington Fall Conference, which is being held virtually.

Speaker Change: Also, the team will have a member attending the Lake Street Conference in New York that same day.

Speaker Change: We are planning on some non-deal roadshows for September and October . Also in November , we are hosting one-on-one meetings at the Needham SAS Conference, which is being held virtually.

Speaker Change: We anticipate more conference participation during the fall months based on last year's schedule and look forward to connecting with all of you soon.

Patrick McKillop: Investor outreach is very important to assure. I would like to thank all of those that assist us in our efforts to connect with investors.

Speaker Change: Investor outreach is very important to Assure and I would like to thank all those that assist us in our efforts to connect with investors.

Patrick McKillop: 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.

Speaker Change: 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.

Pat Gepel: With that, I would now like to turn the call over to Pat Geppel, Chairman and CEO. Pat. Thank you, Patrick, and welcome everyone to Assure Software's second quarter 2024 earnings results call. I am joined on this call by our CFO, John Pence, and we will provide a business update for our second quarter 2024 results, as well as our outlook for the rest of 2024. Following our remarks, we will be available to answer your questions. Our Second Quarter revenues were very solid, coming in at 28 million, and our reoccurring revenues were up 18 percent during the quarter, which is a nice improvement.

Speaker Change: With that, I would now like to turn the call over to Pat Goeppel, Chairman and CEO . Pat?

Pat Goeppel: Thank you, Patrick, and welcome everyone to Asure Software's second quarter 2024 earnings results call.

Pat Goeppel: I am joined on this call by our CFO , John Pence, and we will provide a business update for our second quarter 2024 results, as well as our outlook for the rest of 2024. Following our remarks, we will be available to answer your questions.

Pat Goeppel: Our second quarter revenues were very solid, coming in at $28 million, and our reoccurring revenues were up 18%.

Pat Gepel: Our revenues were driven by strong contributions from our Assure Marketplace offering payroll tax management, and interest earned from funds held for clients, which we refer to as flow. During Q2, we are pleased to see our organic growth rates increase to 7 percent from 3.5 percent during Q1, and we believe that we will deliver double-digit growth in the back half of 2024. In 2023, you may recall we raised money to make acquisitions. Solutions, improve our technology, grow over ERTC revenues, and deliver double-digit growth. We have executed this plan very well in the first half of 2024.

Pat Goeppel: During the quarter, which is a nice improvement, our revenues were driven by strong contributions from our Asure Marketplace offering, payroll tax management, and interest earned from funds held for clients, which we refer to as FLO.

Pat Goeppel: During Q2, we are pleased to see our organic growth rates increase to 7% from 3.5% during Q1, and we believe that we will deliver double-digit growth in the back half of 2021.

Pat Goeppel: In 2023, you may recall we raised money to make acquisitions for the American Heart Association.

Pat Goeppel: Improve our technology.

Speaker Change: We have executed this plan very well in the first half of 2024.

Pat Gepel: We remain excited about the opportunities to lie at for our business and are very pleased with the continued momentum of our payroll tax management business. As evidenced by the recent deal, we announced with Venture. Our deal adventure, the largest privately held organization in the HR technology and service sector for our payroll tax management solution, will deliver comprehensive payroll tax management for Prism, HR clients, and ventures internal operation. This is a significant win for our payroll tax solution and coupled with the wins in the enterprise space with providers of Workday and SAP clients. We expect that over time, as this business grows, it will contribute to growing our float balances as well.

Speaker Change: We remain excited about the opportunities to lie at.

Speaker Change: for our business and are very pleased with the continued momentum of our payroll tax management business as evidenced by the recent deal we announced with Venture. Our deal with Venture, the largest privately held organization in the HR technology and service sector,

Speaker Change: For our payroll tax management solution, we'll deliver comprehensive payroll tax management for PRISM, HR clients, and ventures internal operation.

Speaker Change: This is a significant win for our payroll tax solution, and coupled with the wins in the enterprise space.

Speaker Change: with

Speaker Change: providers of Workday and SAP clients, we expect that over time as this business grows, it will contribute to growing our float balances as well. Our pipeline for this solution remains robust.

Pat Gepel: Our pipeline for this solution remains robust, and we look forward to potentially announcing more deals in the future.

Speaker Change: and we look forward to potentially announcing more deals in the future.

Pat Gepel: We have also recently formed a partnership with My HR Screens, a premier provider of background screening services. This collaboration aims to expand access to a comprehensive background screen solutions for small and mid-sized businesses, facilitating a safer and more efficient hiring process. Additionally, in July, we acquired an applicant tracking system technology company, which enhances Assure's product suite for small and medium-sized businesses. This highly rated applicant tracking system features an automated, simple, all-in-one hiring tool which includes services such as job ad writing powered by AI, automated interview scheduling, and auto submission to major job posting sites. The technology has good growth and creates a very good cross-sell opportunity for us, plus to this complementary to our existing HR-compliant solution.

Speaker Change: We have also recently formed a partnership with MyHRScreens, a premier provider of background screening services.

Speaker Change: This collaboration aims to expand access to a comprehensive background screening solutions for small and mid-sized businesses, facilitating a safer and more efficient hiring process.

Speaker Change: Additionally, in July , we acquired an applicant tracking system.

Speaker Change: Asure Systems Technology Company, which enhances Asure's product suite for small and medium-sized businesses.

Speaker Change: This highly rated applicant tracking system.

Speaker Change: Automated, simple, all-in-one hiring tool, which includes services such as job,

Speaker Change: Ad writing powered by AI, automated interview scheduling, and auto submission to major job posting sites.

Speaker Change: The technology has good growth and creates a very good cross-sell opportunity for us. Plus, it is complementary to our existing HR-compliant solution.

Pat Gepel: Our portfolio of products and partnerships continues to grow in addition to others previously announced, like HR logics for tax credits and proactive health management programs for health management tools and services. These partnerships are great additions that really enable us sure to offer more solutions in addition to our payroll processing for small and medium-sized businesses. Our sales teams now have a broader product offering in their arsenal to help win new business as well as upsell existing clients. Strategic sales initiatives such as fumbling our payroll services with our 401K offering allow us to continue to win new clients, and they continue to see positive results.

Speaker Change: Our portfolio of products and partnerships.

Speaker Change: continues to grow in addition to others previously announced.

Speaker Change: like H.R. Logix for tax credits.

Speaker Change: and Proactive Health Management Program.

Speaker Change: for Health Management Tools and Services. These partnerships are great additions that really enable Asure to offer more solutions in addition to our payroll processing.

Speaker Change: for small and medium-sized businesses. Our sales teams now have a broader product offering in their arsenal.

Speaker Change: to help win new business, as well as upsell existing clients. Strategic sales initiatives, such as bundling our payroll services with our 401k offering,

Patrick Goepel: allow us to continue to win new clients, and they continue to see positive results. The need for small businesses to offer 401k plans is driven by many states mandating such plans as there's funding available to small businesses to set up these plans through tax credits from the Secure 2.0 Act from the U.S. government.

Speaker Change: Allow us to continue to win.

Pat Gepel: The need for small businesses to offer 401K plans is driven by many states mandating such plans as they're spending available to small businesses to set up these plans through tax credits from the Secure 2.0 Act from the U.S. government. I sure have the expertise to help small businesses navigate this process successfully. Our sales efforts during the second quarter resulted in a 131% increase in new bookings versus prior year. We continue to work on expanding our Sales 4.0 Act, which we are projecting to go to about 130 reps by year end 2024. Also, we continue to make use of digital marketing efforts to support the sales team with sales fleet and help increase productivity.

Speaker Change: New Clients, and they continue to see positive results. The need for small businesses to offer 401k plans is driven by many states mandating such plans as there is funding available to small businesses to set up these plans through tax credits from the Secure 2.0 Act.

Patrick Goepel: Asure has the expertise to help small businesses navigate this process successfully. Our sales efforts during the second quarter resulted in a 131% increase in new bookings versus the prior year. We continue to work on expanding our sales force income, which we are projecting to go to about 130 reps by year end 2024. We also continue to make use of digital marketing efforts to support the sales team with sales leads and help increase productivity.

Speaker Change: from the U.S. government. Asure has the expertise.

Speaker Change: to help small businesses navigate this process successfully. Our sales efforts during the second quarter resulted in a 131% increase.

Speaker Change: and new bookings versus the prior year.

Speaker Change: We continue to work on expanding our salesforce income, which we are projecting to go to about 130 reps.

Speaker Change: by year-end 2024. Also, we continue to make use of digital marketing efforts to support the sales

Patrick Goepel: Based on our current business trends, we're updating our full year 2024 revenue guide to a range of 123 to 129 million, and we still expect adjusted EBITDA margins of between 20 and 21%. The forward guidance range for 2024 is the result of the variability of the timing of closing and implementing both large enterprise arrangements and anticipated acquisitions. Our guidance in 2024 implies a very healthy double-digit growth rate if we exclude ERTC from 2023 revenues for comparison. Now I'd like to hand it off to John to discuss our financial results in more detail as well as our

Speaker Change: team with sales leads and help increase productivity. Based on our current business trends, we're updating our full year 2024 revenue guides.

Pat Gepel: Based on our current business trends, we're updating our full year 2024 revenue guides to a range of 123 to 129 million, and we still expect adjusted even a margin between 20 and 21%. The forward guidance range of 2024 is the result of variability of timing of closing and implementing full-large enterprise and arrangement and a anticipated acquisition. Our guidance in 2024 implies a very healthy double-digit growth rate if we exclude ERTC from 2023 revenues for comparison.

Speaker Change: to a range of $123 million to $129 million, and we still expect adjusted EBITDA margins

Speaker Change: The Forward Guidance Range of 2024 is the result of variability of timing of closing and implementing both large enterprise arrangements and anticipated acquisitions.

Speaker Change: Our guidance in 2024 implies a very healthy double-digit growth rate if we exclude ERTC from 2023 revenues for comparison.

John Pence: Now I'd like to end it off to John to discuss our financial results in more detail, as well as our quarter-three guidance. John 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 gap to non-gap reconciliation in the earnings release that was made available earlier today. The reconciliation themselves are included in our most recent investor presentation, hosted in the Investor Relations section of our website at investor dot asuresoftware dot com.

Speaker Change: Now, I'd like to hand it off to John to discuss our financial results in more detail as well as our quarter three guidance. John ?

John: 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.

Patrick: You will find a description of these GAAP to non-GAAP reconciliations in the earnings release that was made available earlier today.

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

John Pence: Now on to the second quarter results. Second quarter revenues were 28 million, down 2.4 million or 8% year-over-year, owing to a six and a half million reduction in ERTC revenue. However, excluding ERTC, total revenues were up 18% from prior year. Recurring revenues to a second quarter grew 18% versus the prior year to 27.1 million. Recurring revenues accounted for 96% of our total revenues in the quarter. Second quarter, recurring revenues grew on the strength of increased revenue from our payroll tax management solutions and increased flow revenues with an average client balance of approximately 220 million dollars throughout the quarter.

Speaker Change: Now on to the second quarter results.

Speaker Change: Second quarter revenues were $28 million, down $2.4 million, or 8% year-over-year, owing to a $6.5 million

Speaker Change: Reduction in ERTC revenue. However, excluding ERTC total revenues were up 18% from prior year. Recurring revenues for the second quarter grew 18% versus the prior year to $27.1 million.

John Pence: versus the prior year to $27.1 million. Gross margins for the second quarter decreased to 67% from 72% in the prior year. Non-GAAP gross margins in the second quarter decreased to 73% from 77% in the prior year. The decrease in gross margins for the second quarter is primarily attributed to the decrease in total revenue.

Speaker Change: Recurring revenues accounted for 96% of our total revenues in the quarter.

Speaker Change: Second quarter recurring revenues grew on the strength of increased revenue from our payroll tax management solutions and increased float revenues with an average client balance of approximately $220 million throughout the quarter.

John Pence: Combined with revenues from new customers obtained through acquisitions. Net loss of the second quarter was 4.4 million versus a net loss of 3.8 million during the prior year. Gross margins for the second quarter decreased to 67% from 72% in the prior year. Non-GAAP gross margins in the second quarter decreased to 73% from 77% in the prior. The decrease in gross margins for the second quarter is primarily attributable to the decrease in total revenue. We continue to believe there are substantial margins upside over the longer term as business scales. Evidop to the second quarter was 1.3 million, down from 3.3 million in the prior year.

Speaker Change: Combined with revenues from new customers obtained through acquisitions.

Speaker Change: Net loss for the second quarter was $4.4 million versus a net loss of $3.8 million during the prior year.

Speaker Change: Gross margins for the second quarter decreased to 67% from 72% in the prior year. non-GAAP gross margins in the second quarter decreased to 73% from 77% in the prior year. The decrease in gross margins for the second quarter is primarily attributable to the fact that GAAP is a non-GAAP program.

Speaker Change: to the decrease in total revenue.

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

Speaker Change: EBITDA for the second quarter was $1.3 million, down from $3.3 million in the prior year. Adjusted EBITDA for the second quarter decreased to $4.1 million from $6.1 million in the prior year, consistent with the decrease in revenues.

John Pence: Adjusted evidop to the second quarter decreased to 4.1 million from 6.1 million in the prior year, consistent with the decrease in revenues. Our adjusted e-brow margin was 15% in the quarter compared with 20% in the prior year. We ended the second quarter with cash and cash equivalent to 21 million, and we have debt of 6 million.

Speaker Change: And our adjusted EBITDA margin was 15% in the quarter compared with 20% in the prior year.

Speaker Change: We ended the second quarter with cash and cash equivalents of $21 million and we have debt of $6 million.

John Pence: Now, in terms of guidance for the third quarter of 2024, we are guiding third quarter revenues to be in a range of 3 million to 33 million, and adjusted EBITDA for the third quarter is anticipated to be between 6 million and 7 million. We are updating our 2024 guidance to be in the range of 123 million to 129 million, with 4-year adjusted evidop margins of between 20% to 21%. As Pat mentioned in his comments earlier, the expanded guidance range figures for 2024 is the result of variability in the timing of closing, recognition of revenue from, and implementing both large enterprise arrangements and anticipated acquisitions into our organization.

Speaker Change: Now in terms of guidance for the third quarter of 2024, we are guiding third quarter revenues to be in the range of $30 million to $33 million, and adjusted EBITDA for the third quarter is anticipated to be between $6 million and $7 million.

John Pence: We are updating our 2024 guidance, of between 20% to 21%. As Pat mentioned in his comments earlier, the expanded guidance range figures for 2024 are the result of variability in the timing of closing, recognition of revenue from, and implementing both large enterprise or... We continue to assume a combination of organic and inorganic growth in our current year guidance. The outlook for the core products, we believe, remains robust, as evidenced by the strong increases in recurring revenue in the last two quarters. Our recurring revenue as a percentage of revenue this quarter was 96% versus 75% in last year's second quarter, which is a very impressive improvement as we are replacing one-time ERTC revenue with high-value recurring revenue.

Speaker Change: We are updating our 2024 guidance.

Speaker Change: to be in the range of $123 million to $129 million with 4-year adjusted EBITDA margins.

Speaker Change: of between 20% to 21%. As Pat mentioned in his comments earlier, the expanded guidance range figures for 2024 is the result of variability in the timing of closing, recognition of revenue from, and implementing both large enterprise arrangements.

Pat Goeppel: and Anticipated Acquisitions into our organization.

John Pence: Organic growth improved nicely from 3.5% in Q1 to 7% in Q2, and we expect to deliver double digits in the back half of this year. We feel good about how we have executed our acquisition. Graduate, with 15 million annual recurring revenue being acquired so far over the last 10 months, and the average prices in pay have been consistent with our model coming in at between two and three times revenues. We continue to assume a combination of organic and inorganic growth in our current year guidance. The outlook for the core products we believe remains robust as evidenced by the strong increases in recurring revenue in the last two quarters.

Speaker Change: Organic growth improved nicely from 3.5% in Q1 to 7% in Q2, and we expect to deliver double digits in the back half of this year. We feel good about how we have executed our acquisition strategy. With $15 million in annual recurring revenue,

Pat Goeppel: being acquired so far over the last 10 months.

Pat Goeppel: And the average price is...

Pat Goeppel: Being paid has been consistent with our model, coming in at between two and three times revenues.

Pat Goeppel: We continue to assume a combination of organic and inorganic growth in our current year guidance.

Speaker Change: Now look for the core products.

Speaker Change: We believe remains robust as evidenced by the strong increases in recurring revenue in the last two quarters. Our recurring revenue as a percentage of revenue this quarter was 96% versus 75% in last year's second quarter, which is a very impressive improvement as we are replacing one-time ERTC revenue with high-value recurring revenue.

John Pence: Our recurring revenue is a percentage of revenue this quarter was 96%, versus 75% in last year's second quarter, which is very impressive improvement as we are replacing one time ERTC revenue with high value recurring revenue.

John Pence: In conclusion, we are optimistic about the remainder of 2024. We believe we have executed well against our plans as we move past ERTC. The ERTC headwinds will die down as we go to the back after 2024 and enter 2025. Our focus remains on growing the business and delivering compelling solutions to our customers.

Pat Goeppel: In conclusion, we are optimistic about the remainder of 2024. We believe we have executed well against our plans as we move past ERTC.

Speaker Change: The RTC headwinds will die down as we go through the back half of 2024 and enter 2025.

Speaker Change: Our focus remains on growing a business and delivering compelling solutions to our customers.

Pat Gepel: With that, I will turn the call back to Pat for closing remarks. Thanks, John. We are pleased to have delivered solid results in the second quarter of 2024. Our second quarter was very active with our recurring revenues growing 18% year over year, plus the combination of completing acquisitions and launching more products as we build a sure to be in a strong position for future success. Our focus on growing the business, improving our technology, and offering more products will be a continuous effort, and we feel that we have made excellent progress in the first half of 2024.

Speaker Change: With that, I will turn the call back to Pat for closing remarks.

John: Thanks, John .

Pat Goeppel: We are pleased to have delivered solid results.

Pat Goeppel: In the second quarter of 2024, our second quarter was very active with our recurring revenues growing 18% year over year, plus the combination of completing acquisitions and launching more products.

John: is we build Asure to be in a strong position for future success. Our focus on growing the business...

Speaker Change: Improving our technology and offering more products will be a continuous effort and we feel that we have made excellent progress in the first half of 2020.

Pat Gepel: Over the last few quarters, we have announced multiple partnerships to be able to offer more valuable services to our clients in addition to our payroll services. Small and medium-sized business owners need assistance with more than just payroll. Our ability to offer products to help them uncover tax credits that they may be eligible for, proactive health management programs which can aid in lowering healthcare premiums. My HR screens, for example, which can aid them in performing pre-employment background checks and an applicant tracking technology to aid them in their hiring practices, are all very important tools that these business owners need to succeed.

John: Over the last few quarters, we've announced multiple partnerships to be able to offer more valuable services to our clients, in addition to our payroll services.

John: Small and medium-sized business owners need assistance with more than just payroll. Our ability to offer products

John: Uncovered Tax Credits, Proactive Health Management Programs which can aid in lowering health care premiums

John: My HR screens, for example, which can aid them in

John: Performing pre-employment background checks.

John: and an applicant tracking technology.

John: To aid them in their hiring practices are all very important tools that these business owners need to succeed.

Pat Gepel: Our HR compliance offering is another example where we can help small business owners navigate all the complex laws regarding employment, such as minimum wage laws, which have grown exponentially over the years. Our management training and family leave acts are also difficult for small business owners to manage. The growth of a sure marketplace is expected to continue, and our recent momentum with payroll tax management has also great potential, as evidenced by our recent deal with venture. The pipeline for payroll tax management is robust, and we believe we will potentially announce more deals in the future. In summary, we're very pleased to have delivered another solid performance in Q2 against the backdrop of some unfavorable year-over-year comparison due to ERTC.

John: Our HR Compliance offering is another example where we can help small business owners navigate all the complex laws regarding employment, such as minimum wage laws, which have grown exponentially over the years, harassment training.

John: and Family Leave Act are also difficult for small business owners to manage. The growth of Asure Marketplace is expected to continue, and our recent momentum with payroll tax management has also great potential, as evidenced by our recent deal with Venture.

John: The pipeline for payroll tax management is robust, and we believe we will potentially announce more deals in the future. In summary, we're very pleased to have delivered another solid performance in Q2. Against the backdrop

John: of some unfavorable year-over-year comparisons due to ERTC. We believe we're executing extremely well on the plan we have laid out previously, which have included raising capital to make acquisitions.

Pat Gepel: We believe we're executing extremely well on the plan. We have laid out previously, which have included raising capital to make acquisitions, improve our technology, and grow double digits, and we've done exactly that. Over the last 10 months, we've made nine acquisitions. which bring in approximately 15 million in annual recurring revenue and improve their technology with the recent launch of best-in-class employee self-service, role-based identity access, and more. Our recurring revenues grew at a double-digit rate of 18 percent in this quarter, and we believe that there will be more double-digit growth in the future. Recurring revenue as percentage of our revenues has increased from 75 percent in last year's second quarter to 96 percent in this quarter, which is a very impressive stat as we're replacing one-time ERTC revenue with more valuable reoccurring revenue.

John: Improve our technology and grow double digits and we've done exactly that over the last 10 months We've made nine acquisitions which

Unknown Executive: bring in approximately $15 million in annual recurring revenue, and improve their technology with the recent launch of best-in-class employee self-service, role-based identity access, and more. Our recurring revenues grew at a double-digit rate of 18% in this quarter, and we believe that there will be more double-digit growth in the future. Recurring revenue as a percentage of our revenues has increased from 75% in last year's second quarter to 96% in this quarter, which is a very impressive stat, as we're replacing one-time ERTC revenue with more valuable recurring revenue. Our backlog balances have more than doubled versus last year, as we continue to bring on new clients, both large and small.

John: bring in approximately $15 million in...

John: Annual reoccurring revenue, improve their technology with the recent launch of best-in-class employee self-service, role-based identity access.

John: and more.

Speaker Change: Our recurring revenues grew at a double-digit rate of 18% in this quarter, and we believe that there will be more double-digit growth in the future. Recurring revenue is a percentage of our revenue.

John: who has since increased.

Speaker Change: From 75% in last year's second quarter to 96% in this quarter, which is very impressive stat as we're replacing one-time ERTC revenue with more valuable reoccurring revenue.

Pat Gepel: Our backlog balances have more than doubled versus last year as we continue to bring on new clients, both large and small.

Speaker Change: Our backlog balances have more than doubled.

Speaker Change: versus last year as we continue to bring on new clients both large and small. We look forward to providing more detail on our 2025 outlook when we issue guidance during our next earnings release in November . The headwinds from ERTC are now starting to dissipate and we look forward to the remainder of 2024 and continue to deliver positive results.

Pat Gepel: We look forward to providing more detail on our 2025 outlook when we issue guidance during our next earnings release in November. The headwinds from ERTC are now starting to dissipate, and we look forward to the remainder of 2024 and continue to deliver positive results. 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.

Unknown Executive: We look forward to providing more detail on our 2025 outlook when we issue guidance during our next earnings release in November. The headwinds from ERTC are now starting to dissipate, and we look forward to the remainder of 2024 and continuing to deliver positive results. 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. So with that, I'll send a call back to the operator for the question-and-answer session. Operator?

Speaker Change: 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.

Pat Gepel: Thank you for listening to our prepared remarks.

Speaker Change: Thank you for listening to our prepared remarks. So with that, I'll send a call back to the operator for the question and answer session. Operator?

Unknown Executive: So with that, I'll send a call back to the operator for the question-and-answer session, operator. Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, 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'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions.

Speaker Change: Thank you. At this time we'll be conducting a question and answer session.

Operator: If you'd like to ask a question, 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'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 2. Please proceed with your question.

Speaker Change: If you'd like to ask a question, please press star 1 on your telephone keypad.

Speaker Change: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: One moment, please, while we poll for questions.

Joshua Reilly: Our first question comes from Joshua Riley with Needament Company. Please proceed with your question. Yes, thanks for taking my questions and a nice job on the quarter here. So maybe just starting off, if we look at the wider range of guidance for 2024 revenue, can we just review your thoughts on, you know, what's different this quarter versus the prior quarter, whether it's changed assumptions around M&A, floating income, or the macro? And what is this comment around the timing of large enterprise deals? I assume that refers to some payroll tax opportunities. Yes, thanks for the question.

Speaker Change: Our first question comes from Joshua Reilly with Needham & Company. Please proceed with your question.

Joshua Riley: Yeah, thanks for taking my questions and nice job on the quarter here.

Joshua Riley: So, maybe just starting off, if we look at the wider range of guidance for 2024 revenue, can we just review your thoughts on, you know, what's different this quarter versus the prior quarter, whether it's...

Speaker Change: Change assumptions around M&A, float income, or the macro and and what is this comment around timing of large enterprise deals? I assume that refers to some payroll tax opportunities

Pat Gepel: First of all, John Pax, myself, and I hope we'll see in our president are available for questions. But just on that, Josh, first of all, we feel really good about what we did the first half of the year. As we looked at the second half, and primarily it's around the enterprise deals and tax. You know, we want a bunch, and some of them have phased installs; some of them have, you know, start dates that, you know, could push a month or a quarter. So, you know, lining those up sometimes are difficult, and then we've had, even the second quarter, we had a large successful deal.

John Pence: Yeah, Josh, thanks for the question. First of all, John Pence, myself, Eyal Goldstein, our president, are available for questions.

Speaker Change: But just on that, Josh, first of all...

Speaker Change: We feel really good about what we did the first half of the year. As we look at the second half, and primarily it's around the enterprise deals and tax,

Speaker Change: You know, we won a bunch, and...

Speaker Change: Some of them have phased installs, some of them have...

Speaker Change: start dates that could push a month or a quarter. So, lining those up sometimes are difficult. And then we've had, even the second quarter, we had a large successful deal that started a month later. So, when we're looking at that, we just want to give ourselves enough flexibility. It's not a question of if, it's a question of when. And we feel really good about sales, really good about the backlog. We just want to make sure we land, you know, we stick the landing on some of these enterprise deals that are relatively new to us.

Pat Gepel: It started a month later. So when we're looking at that, we just want to give ourselves enough flexibility. It's not a question of if; it's a question of when, and we feel really good about sales, really good about the backlog. We just want to make sure we land, you know, we stick the landing on some of these enterprise deals that are relatively new to us.

Pat Gepel: And I'll give you some color. You know, we want a large manufacturing company, 30,000 employees, et cetera. And it was supposed to start in January. It's probably going to start here on his first. That's one example. Another one, you know, we have a partnership with one of the enterprises, many earpiece systems. And it's over 250,000 employees. And it's supposed to start the back half of the year. Could it slip to January? It's not a question of selling. It's a question of installing it. So for those reasons, and then even acquisitions by nature sometimes, it's, you know, when you convert some of the revenue in some cases.

Speaker Change: And I'll give you some color. You know, we wanted a large manufacturing company, 30,000 employees, etc. And it was supposed to start in January . It's probably going to start here August 1st.

Speaker Change: That's one example. Another one, you know, we have a new partnership.

Speaker Change: with one of the enterprise ERP systems.

Speaker Change: It's over 250,000 employees, and it's supposed to start the back half of the year. Could it slip to January ? It's not a question of selling, it's a question of installing it. So for those reasons, and then even acquisitions by nature sometimes, it's when you convert some of the revenue in some phases. So... Thank you.

Joshua Reilly: So again, it's not a question of if; it's a question of when. We want to make sure we give, give ourselves some flexibility. And I would say what's different than last quarter, not much. And just that we continued to execute on the plan. Got it. And if you look at that 15 million in the AR now that you've acquired, I guess that's in the last 12 months versus year to date. Is that consistent with what you would have expected entering the year? And does that, you know, is the amount of revenue you're actually going to recognize from those acquisitions in the current calendar, you're pretty consistent with what you expected entering the year.

Speaker Change: Again, it's not a question of if, it's a question of when, we want to make sure we give ourselves some flexibility. And I would say what's different than last quarter, not much, it's just that we continue to execute on the plan.

Speaker Change: Got it. And if you look at that $15 million in ARR now that you've acquired, I guess that's in the last 12 months versus year-to-date.

Speaker Change: Is that consistent with what you would have expected entering the year? And does that, you know, is the amount of revenue you're actually going to recognize from those acquisitions in the current calendar year pretty consistent with what you expected entering the year? Thanks, guys.

Pat Gepel: Thanks, guys. Yep. I think so. And just to be clear, that's 10 months. So it's kind of October of last year through July or through yesterday, so it gives you some sense as to timing. And yet, it's pretty consistent with what we were expecting. And we've still got some more, I think, in the pipeline that we're hoping to close in the next few months, but it's pretty consistent with what we're hoping for. If not, a little bit more. Got it.

Speaker Change: Yep, I think so. And just to be clear, that's 10 months. So it's kind of

Speaker Change: October of last year through July or through yesterday so it gives you some sense as to the timing and yeah it is pretty consistent with what we were expecting and we've still got some more I think in the pipeline that we're hoping to close in the next few months.

Speaker Change: But yeah, it's pretty consistent with what we were hoping for, if not a little bit more.

Unknown Executive: I'll get back in the queue. Thanks, guys. Thank you, guys.

Speaker Change: Transcribed by https://otter.ai

Speaker Change: Got it, I'll get back in the queue, thanks guys.

Garrison: Our next question comes from Brian Bergen with TD Callin. Please proceed with your question. Hi, thank you. This is Garrison for Brian.

Operator: Our next question comes from Brian Bergin with TD Cowan. Please proceed with your question.

Speaker Change: Thank you, guys.

Speaker Change: Our next question comes from Brian Bergin with TD Cowan. Please proceed with your question.

Unknown Executive: I was just wondering if you could comment on the demand environment relative to prior quarters, maybe compare across your offerings or how the top of quantum activity is looking year over year. Thank you. Yeah, no, I appreciate it. I think you know, demand environment is very strong both on the small business marketplace as well as some of the tax opportunities, etc.

Speaker Change: Hi, thank you. This is Gareth. I'm for Brian . I was just wondering if you could comment on the demand environment relative to prior quarters. Maybe compare across your offerings or how the top of funnel activity is looking year over year. Thank you.

Bryan Bergin: Yeah, no, I appreciate it. I think, you know, the demand environment is very strong, both in the small business marketplace, as well as some of the tax opportunities, etc. I might get Eyal into the conversation here. Eyal, do you want to talk a little bit about the sales demand environment?

Speaker Change: Yeah, no, I appreciate it. I think, you know, demand environment is very strong, both on the small business marketplace, as well as some of the tax opportunities, etc. You know, I might get Eyal into the conversation here. Eyal, do you want to talk a little bit about the sales demand environment?

Unknown Executive: I might get ill into the conversation here. You want to talk a little bit about sales demand environment. So, so yeah, we're working in consistent strong demand across the business. Small business, both in our direct and our reseller channel, continues to be really strong. In fact, we've seen an uptick in new payroll customers that we're bringing on. So that's really healthy. Our tax business that has been mentioned and John's been mentioning is we're seeing much higher increased activity there. And so I would say that one has gone up significantly from a pipeline perspective, but overall very strong and across all the different businesses.

Eyal Goldstein: So, yeah, Garrett, we're seeing consistent strong demand across the business. Small business, both in our direct and our reseller channel, continues to be really strong. In fact, we've seen an uptick in new payroll customers that we're bringing on, so that's really healthy. Our tax business, which Pat and John have been mentioning, we're seeing much higher increased activity there, and so I would say that one has gone up significantly from a pipeline perspective, but overall, very strong and across all the different businesses.

Ayl: So, yeah, Garrett, we're seeing consistent strong demand across the business. Small business, both in our direct and our reseller channel, continues to be really strong. In fact, we've seen an uptick in new payroll customers.

Ayl: That's really healthy. Our tax business that Pat's been mentioning and John's been mentioning is we're seeing much higher increased activity there. And so I would say that one has gone up significantly from a pipeline perspective, but overall very strong and across all the different businesses.

Unknown Executive: Great. Thank you.

Speaker Change: Great, thank you.

Eric Martinuzzi: Our next question comes from Eric Martin Newtzi with Lake Street Capital. Please proceed with your question. Yeah, looking for a little more color on the applicant tracking company that you acquired in July. Just what did we pay for that? So kind of what would perform a cash balance fee for the month ending July? And then what could we expect revenue contribution there?

Speaker Change: Our next question comes from Eric Martinuzzi with Lake Street Capital. Please proceed with your question.

Unknown Executive: Yeah, looking for a little more color on the applicant tracking company that you acquired in July. Just what did we pay for that? So kind of what would the cash balance be for the month ending July? And then what could we expect revenue contribution there?

Speaker Change: Looking for a little more color on the applicant tracking company that you acquired in July .

Speaker Change: Just what did we pay for that so kind of what would a perform a cash balance be for the the month ending July and then what could we expect a revenue contribution there?

Unknown Executive: Yeah, I mean, I think we're going to talk about acquisitions and aggregate. I believe there is some subsequent disclosure in the queue on that one, just in terms of that, because of the size and the materiality of it. But in general, really... Obviously, you don't want to talk about the third quarter since we're just talking about the second quarter right now.

John Pence: Yeah, I mean, I think we're going to talk about kind of acquisitions and aggregate. I believe there is some subsequent event disclosure in the queue on that one just in terms of just the size and the materiality of it. But in general, really, obviously don't want to talk about third quarter since we're just talking about second quarter right now. But I think you can get some color with respect to the purchase price on that one.

Speaker Change: Yeah, I mean, I think we're going to talk about kind of acquisitions and aggregate. I believe there is some subsequent disclosure in the queue on that one, just in terms of that, because of just the size and the materiality of it. But in general, really...

Speaker Change: Obviously you don't want to talk about...

Unknown Executive: But I think you can get some color with respect to the purchase price on that one. And again, we want to try to talk about the acquisitions in aggregate just because we've got some that are, you know, lots of different multiples, lots of different structures. But I'm trying to get some sense of the relative size of the overall portfolio of acquisitions. And then just on the applicant tracking company, first of all, we were attracted to that business. It's technology that we didn't have in the house.

Speaker Change: Unknown Executive, Randal Rudniski, Patrick Goepel

Pat Gepel: And again, we want to try to talk about the acquisitions and aggregate just because we've got some that are lots of different multiples, lots of different structures, but trying to get some sense as a relative size of the overall portfolio acquisitions. And then just on the applicant tracking company, first of all, we were attracted to that business. It's a technology that we didn't have in-house. We feel it's an easy, you know, we go to market with three value propositions: basically access to capital, compliance, and access to people. We've been looking for the right company, and the culture around that is really strong.

Speaker Change: portfolio acquisitions. And then just on the applicant tracking company, first of all, we were attracted to that business. It's a technology that we didn't have in-house.

Unknown Executive: We feel it's an easy, you know; we go to market with three value propositions, basically access to capital compliance and access to people. We've been looking for the right company, and the culture around that is really strong. We're not telegraphing the name of that quite yet, just as we're in the process of working through all the client notifications, et cetera, but we feel really good about the business scalability of it. And then we also think there's a tremendous opportunity to cross-sell because as we look at our small business owners and what they need is access to people, we allow for, you know, kind of personalized websites around the We think this will be, you know, an area of business that will double here in very short order. And so we feel really good about that. Any other thoughts or follow-ups, Eric?

Speaker Change: We feel it's an easy, you know, we go to market with three value propositions.

Speaker Change: Basically, access to capital, compliance, and access to people. We've been looking for the right company, and the culture around that is really strong. We're not telegraphing the name of that quite yet, just as we're in the process of working through all the client notifications, et cetera.

Pat Gepel: We're not telegraphing the name of that quite yet, just as we're in the process of working through all the client notifications, et cetera. But feel really good about the business scalability of it. And then we also think there's a tremendous opportunity across South because as we look at our small business owners and what they need is access to people. We allow for, you know, kind of personalized websites around the people, job board integration, et cetera. We think this will be, you know, an area of business that will double here in a very short order. And so we feel really good about that.

Speaker Change: Feel really good about the business scalability of it, and then we also think there's a tremendous opportunity to cross sell Because as we look at our small business owners

Speaker Change: and what they need is access to people. We allow for personalized websites around the people, job board integration, etc. We think this will be an area of business that will double here in a very short order and so we feel really good about that.

Unknown Executive: Any other thoughts or follow-ups area?

Eric Martinuzzi: Any other thoughts or follow-ups, Eric?

John Pence: Yes, separate topic here. You talked about the good pipeline here and some large enterprise arrangements that may slip a little bit to the right. But what about the install based specifically the churn of your existing customers in Q2 versus prior quarters? All in, we're about 90 or 91% on a retention. That's pretty consistent, which is where we've been. So, you know, feel good about that.

Eric Martinuzzi: Yeah, separate topic here. You talked about the...

Eric Martinuzzi: Good pipeline here and some large enterprise arrangements that may slip a little bit to the right, but what about the install base, specifically the churn of your existing customers in Q2 versus prior quarters?

Unknown Executive: Yeah, all in all, we're about 90.

Speaker Change: Yeah, all in, we're about 90 or 91% on a retention. That's pretty consistent with where we've been. So, we don't feel good about that. As far as

John Pence: As far as, you know, kind of the, you know, the customer base fine, we're, you know, somewhere around a 50, 50 split in some quarters. We've been as high as 70% new logos, 30% base sales. So, you know, obviously across the demand is pretty strong. And some of it's just we're coming out with more and more products as technology. You know, we improve the technology and go to market with more products. So, it's, you know, happy customers find more, and you know, we feel like we're in a pretty good shape here as we enter into the second half.

Speaker Change: you know, kind of the, you know, the customer base buying were

Speaker Change: You know, somewhere around a 50-50 split, in some quarters we've been as high as 70% new logos, 30% base sales.

Speaker Change: So, you know, obviously the cross-out demand is pretty strong, and some of it's just we're coming out with more and more products as technology, you know, we improve the technology and go to market with more products. So it's, you know, happy customers buy more, and, you know, we feel like we're in pretty good shape here as we enter into the second half.

Unknown Executive: Thank you. Thanks, Sarah.

Speaker Change: Got it. Thank you.

Jeff Van Ree: Our next question comes from Jeff Van Ree with Craig Hallum Capital Group. Please proceed with your question. Great. Thanks, guys. So, a couple from me, just on the acquisition from, first of all, applicant tracking, bringing some incremental capabilities looks like a nice fit.

Operator: Our next question comes from Jeff Van Ree with Craig Hallam Capital Group. Please proceed with your question.

Sarah: Thanks, Eric.

Speaker Change: Our next question comes from Jeff VanRee with Craig Hallam Capital Group.

Jeffrey Rhee: Great, thanks guys. So, a couple of questions on the acquisition front. First of all, applicant tracking, bringing in some incremental capabilities, looks like a nice fit. In terms of the pipeline and what you look at acquiring the rest of the year, is it predominantly resellers, or are you seeing other technologies, kind of a mix of acquisitions to come?

Speaker Change: Please proceed with your question.

Jeff Vanry: Great, thanks guys. So a couple for me just on the acquisition front. First of all, applicant tracking, bringing in some incremental capabilities looks like a nice fit. In terms of the pipeline and what you look at acquiring the rest of the year, is it predominantly resellers or are you seeing other technologies, just kind of a mix of acquisitions to come?

Pat Gepel: In terms of the pipeline and what you look at, acquiring the rest of the year, is it predominantly resellers or are you seeing other technologies kind of the mix of acquisitions to come? Yeah, almost, almost all will be resellers. You know, we have one kind of one more product capability at some point in time here. But if I were to look at the rest of the year, I think the resellers will probably be more dominant. Okay.

Speaker Change: Yeah, almost all will be resellers. We have one more product capability at some point in time here, but if I were to look at the rest of the year, I think the resellers will probably be more dominant.

John Pence: And then on the acquisitions, not the split hairs here, but the 10-month timeline. I mean, the way we built the model, at least for us, you're called seven months in on a seven month period. Where are you on the 10 to 15? Are we talking like 12 million, or can you dial it in a little closer? Yeah, I think that's about right. I think there was a three or so we did in the fourth quarter of last year. So I think that's fair. But again, trying to, it gets me a little hard to parse this because if you think about, we did give organic versus an organic growth stats for second quarter.

Speaker Change: Okay, and then on the acquisitions, not to split hairs here, but the 10-month timeline, I mean, the way we built the model, at least for us, you're, you're call it seven months in. On a seven-month period, where are you on the 10 to 15? Are we talking like 12 million, or can you dial it in a little closer?

Unknown Executive: Yeah, I think that's about right. I think there were three or so we did in the fourth quarter of last year. So I think that's fair.

Speaker Change: Yeah, I think that's about right. I think there was a...

Speaker Change: three or so we did in the fourth quarter of last year so I think that's fair

Speaker Change: But again, I'm trying to it gets it gets real hard to parse this because we think about we did give Organic versus inorganic growth stats for second quarter, so I think it was seven organic 11 inorganic And then again in our guide for the third and fourth we're pretty consistent in terms of our messaging here I think it's going to be a similar type of

John Pence: So I think it was seven organic, 11 inorganic. And then again, in our guide for the third and fourth, we're pretty consistent in terms of our messaging here. I think it's going to be a similar type of, you know, complement of both organic and an organic in the third and fourth quarter. So trying to give directions. I mean, it's hard to kind of nail these things to the percentage, but I think directly that's what you'll see for the balance of the year too.

John Pence: Yeah, Jeff, maybe in January, we're talking about it. I had it a call, but you know, we did 18% or so. So, you know, third quarter to low and the high imply a 23% year over year improvement to a 35. Fourth quarter of the guide implies a 32 to 44% on the low and the high. And I would say we're right on pace on acquisitions, the turn from ERTC to organic growth. As expected, you know, it might be a percent or two lower coming out of the gate, but. But we feel really good about where we are in the backlog; it is more than double.

John Pence: So, as we slot that in. You know, the organic growth would definitely be over double digits here. So, you know, our plan is going pretty close to expected. Yeah, okay, helpful.

Unknown Executive: Okay, helpful. And then two last quick ones, if I could sneak them in. John, the W2 revenue, can you just remind me what that was in Q1? And then second, around the REVREC for the venture deal, just as an example, what would a deal like that look like from a REVREC standpoint? We're talking falls in one quarter, periodically ratable over time, just refresh how the deals like that, because they tend to be larger, obviously. How is that going to play in REVREC? Thanks. Yeah, at a high level, it's a multi-year deal.

John Pence: And then two last quick ones, if I could sneak them in. John, the W-2 revenue, can you just remind me what that was in Q1?

John Pence: And then second, around the Rev-Reck for the Venture deal, just as an example, what would a deal like that? How would that play out from a Rev-Reck standpoint? Are we talking, you know, falls in one quarter, periodly, radical over time, just refreshment, how the deals, like that, because they tend to be larger, obviously, how is that going to play in Rev-Reck? Thanks. Yeah, at a high level, it's a multi-year deal. There's some upfront cash component, but what will happen is, despite the upfront cash, we'll amortize some of that upfront cash payment over the life of the agreement.

John Pence: So it gets more blended, and even the cash flows might not exactly match up. So we get some cash upfront that then ultimately amortizes in as we provide the service to your question on W-2's for the first quarters, about $5 million. Okay, great. Thank you. Sure. Thanks, Jeff.

Unknown Executive: Okay, great. Thank you.

Vincent Colicchio: Our next question comes from Vincent Coluchio with Barrington Research. Please proceed with your question. Yeah, Pat, the booking growth number you cited was that adjusted for ERTC bookings in the year-ago period? It was. The other thing I guess we ought to be clear to is back to that comment that Jeff just had; there is some kind of one-time money in that that you don't get amortized into revenue, but we saw it fake commissions on the fact that the cash is coming in earlier. So anyway, it's a number that has both recurring as well as some one-time revenue in it, but it does have ERTC out to answer your question, does.

Operator: Our next question comes from Vincent Colicchio with Barrington Research. Please proceed with your Yeah, Pat, the, uh, the booking growth number you cited was that adjusted for?

Speaker Change: Our next question comes from Vincent Colicchio with Barrington Research. Please proceed with your question.

Vincent Colicchio: Yes, Pat.

Vincent Colicchio: The bookings growth number you cited was that adjusted free or to see bookings in the year ago period.

Patrick Goepel: It was. The other thing I guess we ought to be clear about is back to that comment that Jeff just made. There is some kind of one-time money in that that, again, will get amortized into revenue, but we still have to pay commissions on the fact that the cash is coming in earlier. So anyway, it's a number that has both recurring as well as some one-time revenue in it, but it does have ERTC out, to answer your question, Vince.

Speaker Change: Got it.

Speaker Change: It was the other thing I guess, we ought to be clear too is back to that comment that Jeff just had there is some kind of one time money in that debt.

Speaker Change: Ill get amortized into revenue, but we still have to pay commissions on the fact that the cash is coming in earlier so.

Speaker Change: Anyway, so it's a number that has both.

Speaker Change: <unk> as well as some onetime revenue on it but it does have the LTC out to answer your question desk.

Pat Gepel: And then I'm asking a question. So if you look at your client base, are they expanding at a healthy clip, a modest clip, or not at all? You know, the client base, and I'll talk to you or let you all answer a couple of questions here. But I'm the client base in general. You know, I think the client headcount, if you will, is about flat. So we're not seeing appreciable growth, but there's still more jobs than people, especially in the areas that, let's say, the trade organizations and restaurants and stuff like that. What we are seeing now is, you know, cross-hell opportunities, and some of it's our capability and some of it's the client buying patterns that they want to buy more.

Speaker Change: And then.

Speaker Change: Macro question. So if you look at your client base.

Speaker Change: Are they expanding at a healthy clip by modest clip we're not at all.

Patrick Goepel: You know, the client base, and I'll talk to you or let Eyal answer a couple questions here. But on the client base in general, I think the client headcount, if you will, is about flat. So we're not seeing appreciable growth, but there are still more jobs than people, especially in the areas of, let's say, trade organizations and restaurants and stuff like that. What we are seeing, though, is, you know, cross-sell opportunities, and some of it's our capability, and some of it's the client buying patterns that they want to buy more. Eyal, anything else on your end?

Speaker Change: Their client base.

al: I'll talk to air let al answer a couple of questions here, but on the client base in general I think the client head count if you will is about flat.

Speaker Change: So we're not seeing appreciable growth, where there is still more jobs and people, especially in the areas of let's say the trade organizations and restaurants and stuff like that what we are seeing though is.

al: Cross sell opportunities and some of it's our capability and some of its decline client buying patterns that they want to buy more.

Unknown Executive: Ale, anything else on your end? Yeah, I would just say another big thing we're seeing, especially with the acquisition of the recruiting pieces. Customers are looking for ways to find more employees. So there definitely are open positions. They're looking to grow. It's not massive like what it was, but there is a need to find good candidates and a healthy amount of candidates across our customer base right now. Thanks for all that color. What's it for me? Thanks. Thanks, fans.

Speaker Change: Anything else on your end.

Eyal Goldstein: Yeah, I would just say another big thing we're seeing, especially with the acquisition of the recruiting piece, is customers are looking for ways to find more employees. So there definitely are open positions; they're looking to grow. It's not massive like it was, but there is a need to find good candidates and a healthy amount of candidates across our customer base right now.

Speaker Change: Yeah, I would just say another big thing, we're seeing with especially with the acquisition.

Speaker Change: The recruiting piece is customers are looking for ways to find more employees. So there definitely are open positions. They are looking to grow its not math holds like what it was but there is a need to find good candidates and a healthy amount of candidates across our customer base right.

Speaker Change: Now.

Speaker Change: Thanks for all that color that's it for me thanks.

Vince: Thanks Vince.

Greg Gibas: Our next question is from Greg Gibbis with No Island Securities. Please proceed with your question. Thank you for taking the questions, guys. Good afternoon.

Operator: Our next question is from Greg Gibas with New Orleans Securities. Please proceed with your question.

Speaker Change: Our next question is from Greg <unk> with Northland Securities. Please proceed with your question.

Gregory Gibas: Hey, thanks for taking the questions, guys. Good afternoon.

Greg: Hey, Thanks for taking the questions guys. Good afternoon regarding the doubling of your backlog year over year, great to see that wanted to kind of dive in a little deeper on kind of the drivers. There you know would you say, it's mostly just improving demand for products would you say theres kind of better go to market approach and is there any impact just from.

Gregory Gibas: Regarding the doubling of your backlog year over year, you know, great to see that. Wanted to kind of dive in a little deeper on kind of the drivers there, you know. Would you say it's mostly just, you know, improving demand for products? Would you say there's kind of a better go-to-market approach? And, you know, is there any impact just from longer implementation or time to deploy for, you know, some of your larger enterprise, enterprise-type clients?

Pat Gepel: Regarding the doubling of your backlog, you're great to see that one of the kind of, I've been a little deeper on kind of the drivers there. You know, would you say it's mostly just, you know, improving demand for products? Would you say there's kind of better going to market approach? And, you know, is there any impact just from longer implementation or time to deploy for, you know, some of your larger enterprise pipelines? Yeah, Greg, I think that's a thoughtful question. And I think first of all, on tax, you know, we're winning more in the enterprise space, which is very positive.

Speaker Change: The longer implementation time to deploy for some of your larger enterprise enterprise type clients.

Patrick Goepel: Yeah, Craig, I think that's a thoughtful question. And I think, first of all, on tax. We're winning more in the enterprise space, which is very positive. You know, some of these pursuits are longer-term deals, too. And so, for example, something like 37% of the backlog is this, you know, is in the year, kind of, if you will, revenue, and then you have multi-year deals as well. So some of it is a little bit of a demand environment based on newer products that we're offering and being very aggressive.

Speaker Change: Yeah, Greg I think that's a thoughtful question and I think first of all on tax.

Speaker Change: We're winning more in the enterprise space, which is very positive.

Pat Gepel: You know, some of these pursuits are longer-term deals too. And so, you know, for example, something like 37% of the backlog is this, you know, is in the year. Kind of, if you will, revenue, and then you have multi-years deals as well. So some of it is a little bit of demand environment based on newer products that they were offering and being very aggressive. You know, we have integration opportunities that we previously announced with work in SAP. And, you know, we have another one here that we haven't announced yet that, you know, you'll recognize that name as well as an integration opportunity.

Speaker Change: Some of these pursuits are longer term deals to and so you know for example, something like 37% of the backlog is this you know as in the year kind of if you will revenue and then you have multiyear deals as well so.

Speaker Change: Some of it is a little bit demand environment based on newer products that we're offering and being very aggressive we have integration opportunities that we previously announced with workday and SAP.

Patrick Goepel: You know, we have integration opportunities that we have previously announced with Workday and SAP. And, you know, we have another one here that we haven't announced yet that, you know, you'll recognize that name as well as an integration opportunity. So we're pretty excited about that.

Speaker Change: And we have another one here that we haven't announced yet.

Speaker Change: You'll recognize that name as well as an integration opportunity. So we're pretty excited about that that's driving some of the backlog and then some of the things that we've talked about on other conference calls <unk> K and the integration of payroll that that's happening right now some of it is because some of these products around.

Pat Gepel: So, we're pretty excited about that. That's driving some of the backlog, and then some of the, you know, things that we've talked about on other conference calls: 401K and the integration of payroll. That's happening right now. Some of it is because some of these products are relatively new. You know, booked a bill is probably longer than I would like at this point in time. And in fact, you know, we're on some calls today. Even that, you know, we're driving those, those booked a bill numbers down the second half and next year. And some of it's just we're brand new and offering some of these services.

Patrick Goepel: That's driving some of the backlog. And then some of the things that we've talked about on other conference calls, 401k and the integration of payroll, that's happening right now. Some of it is because some of these products are relatively new. You know, book to bill is probably longer than I would like at this point in time. And in fact, you know, we were on some calls today even that we're driving those book to bill numbers down in the second half and next year.

Speaker Change: Typically no.

Speaker Change: The bill is probably longer than I would like at this point in time and in fact, we're on some calls today, even that we are driving those.

Speaker Change: Those book to Bill numbers down in the second half and next year and some of it is just were brand new and offering some of these services. So there's a little combination of book to Bill lawn gating a bit in some of the new products, but the bulk of it is really tax filing again, our presence in the enterprise marketplace, that's driving it.

Patrick Goepel: And some of it's just that we're brand new to offering some of these services. So there's a little combination of book to bill, elongating a bit on some of the new products, but the bulk of it is really tax filing and our presence in the enterprise marketplace that's driving it.

Pat Gepel: So there's a little combination of booked a bill, long eating a bit in some of the new products. But the bulk of it is really tax filing, and our presence in the enterprise marketplace that's driving it. Great. That's a couple of pets.

Patrick Goepel: Great, that's helpful, Pat. And if I could just clarify, too, on your comments on kind of organic growth in the back half, you know, I guess what's implied in guidance, did you kind of say that roughly equal contributions from organic versus growth in that position?

Speaker Change: Great that's helpful Pat.

Pat Gepel: And if I could just clarify to when your comments on kind of organic growth in the back half, you know, I guess what's implied in guidance. Did you kind of say that roughly equal contributions from organic versus growth management? Yeah, that's why I mean, you say that's this been kind of our consistent message. You know, it's hard to predict exactly. It's going to be 50/50, but it'll be, you know, a healthy combination of both. And in break, when I would say just in general, all along, if you think about it, we had one-time revenue last year kind of attributed to your TC.

Speaker Change: If I could just clarify too on your comments on kind of organic growth in the back half.

Speaker Change: I guess, what's implied in guidance did you say that roughly equal contributions from organic versus growth in that position.

Patrick Goepel: That's been kind of our consistent message. It's hard to predict exactly, but it's going to be 50-50, but it'll be a healthy combination of both.

Speaker Change: Yes, that's all I can say that there's been kind of a consistent message.

Speaker Change: It's hard to predict exactly it's going to be 50, 50, but it'll be a healthy combination of both.

Patrick Goepel: And Greg, what I would say just in general, all along. If you think about it, we had one-time revenue last year kind of attributed to ERTC. When we built the plan, the big theme here was we're replacing repetitive revenue, or excuse me, replacing non-repetitive revenue with repetitive revenue. In the first quarter, we had about 3.5% organic growth. This quarter, it's now 7%. But if you look at what we started, let's say in May and June and even July, we had a really good July. You know, payroll units were at a very strong July.

Speaker Change: And then Frank what I would say just in general all along if you think about it we have one time revenue last year kind of attributed the year Tc when we built our plan the big the Big theme here was for replacing repetitive revenue or excuse me in replacing not repetitive revenue with repetitive revenue.

Pat Gepel: When we built the plan, the big, the big theme here was we're replacing repetitive revenue, or excuse me, replacing non-repetitive revenue with repetitive revenue. The first quarter, we had about three and a half percent organic growth this quarter. Now it's 7%. But if you look at what we started, let's say in May and June and even July, we had a really good, you know, payroll units were at a very strong July. So the organic engine is building momentum. I mentioned the low end guidance of 23% and third quarter, fourth quarter between 32 and 44. We kind of did, you know, implied guidance of half of it being organic, half of it being inorganic.

Speaker Change: First quarter, we had about three 5% organic growth this quarter now at 7%, but if you look at what we started let's say in May and June and even July we had a really good.

Speaker Change: Our payroll units were at a very strong July so the organic engine is building momentum I mentioned, the low end guidance of 23% in third quarter fourth quarter between 32, and <unk> 44, we kind of did.

Patrick Goepel: So the organic engine is building momentum. I mentioned the low-end guidance of 23% for the third quarter, and fourth quarter between 32% and 44%. We kind of did implied guidance of half of it being organic, half of it being inorganic. We won't get it all perfect, but you can see it's an accelerating business story. And that's really, to me, the story that I want investors and yourself to take away from this.

Speaker Change: The implied guidance of half of it being organic half of it being inorganic we won't get it all perfect, but you could see it's an accelerating business story in that and that's really to me the story that I want investors and yourself to takeaway from.

Pat Gepel: We will get it all perfect, but you could see it's an accelerating business story. And that's really, to me, the story that, you know, I want investors in yourself to take away from. I think that's a good point, Pat. Thanks. Thanks for clarifying. Thank you.

Patrick Goepel: I think that's a good point, Pat. Thanks. Thanks for clarifying.

Speaker Change: I think that's a good point Pat thanks, Thanks for clarifying.

Speaker Change: Thank you.

Speaker Change: Yeah.

Robert Galvin: Our next question is from Robert Galvin. With Steve, please proceed with your question. This is Rob Horn from Brad. Thanks for taking the question. I was wondering if the updated FY24 guide fact is in any assumptions on rate cuts in the back half of the year for the flood interest. Hopefully, this seems rates remain consistent to say thanks. Yeah, we we we priced in. We you know, we have our long-term portfolio managed by Goldman Sachs. And so we had a call with them. I guess it was last week ahead of our board meeting. We did that quarterly.

Operator: Our next question is from Robert Calvin with Stiefel. Please proceed with your question. Hi, this is Rob Arndt from Brad. Thanks for taking the time.

Speaker Change: Our next question is from Robert Calvin with Stifel. Please proceed with your question.

Robert Calvin: Hi, This is Rob on for Brian. Thanks for taking the question I was wondering if the updated FY 'twenty four godfathers and any assumptions on rate cuts in the back half of the year for the floating interest.

Speaker Change: Rates remain consistent with Paul.

Speaker Change: Yes, we were.

Speaker Change: We priced and we we have our long term portfolio managed by Goldman Sachs and so we had a call with them I guess it was last week ahead of our.

Speaker Change: Board meeting and we do that quarterly.

John Pence: When we kind of took their advice with their predicting is kind of a quarter in September and a quarter in December. So we kind of ran that through our model, and that's that's that's kind of implicit in the guide. So it's not a huge impact to us, but we did factor in two cuts: one in September, one in December.

Speaker Change: When we kind of took their advice what they are predicting as kind of a quarter in September in a quarter in December. So we kind of ran that through our model and that's that's that's kind of an implicit in the guide so it's not a huge impact to us, but we did factor in the two cuts and one in September and one in December.

Unknown Executive: Great. Thank you.

Unknown Executive: Great, thank you.

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Unknown Executive: As a reminder, if you would like to ask a question, please press star one on your telephone keypad. One moment while we pull for additional questions.

Operator: As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. One moment while we pull for additional questions.

Speaker Change: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad, one moment, while we poll for additional questions.

Unknown Executive: There are no further questions.

Speaker Change: There are no further questions at this time I'd like to turn the call back over to management for closing comments.

Pat Gepel: At this time, I'd like to turn the call back over to management for closing comments. Yeah, and I won't speak too long here, but pack up all here. Really feel good about the moment of the business. You know, I think we were thinking about, you know, last year in the third, fourth quarter and, you know, how we've grown past year TC and some questions around that. We've outlined a plan, and we've executed to the plan. We feel really good about that. In some cases, you know, we're even ahead of a plan and ahead of the sales adoption.

Speaker Change: Yeah, and I want to speak too long here, but <unk> got pull here really feel good about the momentum of the business.

Speaker Change: We were thinking about last year.

Speaker Change: And the third and fourth quarter and how.

Speaker Change: How are we growing past year Tc and some questions around that we've outlined a plan and we've executed to the plan, we feel really good about that.

Speaker Change: Some cases you know we're we're even ahead of plan and ahead of the sales adoption as we get the book to Bill.

Pat Gepel: As we get the book to bill, you know, the increasing level of growth, we start the last compares. We think that'll pop out. You know, we have 20, 25 guys coming up. We'll do that as usual in the November call. But, you know, we're a company on the move. We appreciate your interest and appreciate you taking time today.

Speaker Change: The increasing level of growth we start to lap compares we think that will pop out.

Speaker Change: We have 2025 guidance coming up we'll do that as usual and then November call, but we're a company on the move we appreciate your interest and I. Appreciate you taking time today.

Unknown Executive: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Speaker Change: This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.