Q1 2025 Asure Software Inc Earnings Call
Good afternoon, and welcome to assures first quarter 'twenty 25 earnings conference call joining us for today's call are chairman and CEO, Pat Goepel, Chief Financial Officer, John Pens, and Vice President of Investor Relations Patrick Mckillop.
Following their prepared remarks, there'll be a question and answer session for analysts and investors.
I would now like to turn the call over to Patrick Mckillop for introductory remarks.
Please go ahead.
Patrick McKillop: Thank you operator, good afternoon, everyone and thank you for joining.
Patrick McKillop: Osborn <unk> first quarter 2025 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 web website, and our Investor Relations website at Investor Doc assure software Dot 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 a.
Patrick McKillop: 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 use words such as expects.
Bleed in May to indicate forward looking statements and we encourage you to review our filings with the SEC for additional information on factors that could cause actual results to differ materially from our current expectations.
Speaker Change: I will hand, the call over to Pat in a moment, but I just wanted to take a moment to remind people of our upcoming investor relations activities on may 13th we will attend the 20th annual Needham Tech Media Consumer conference in New York.
Speaker Change: On May 28, we will attend the 22nd annual Craig Hallum Conference in Minneapolis.
Speaker Change: On June 3rd to the fourth we will attend the Stifel Cross sector insight conference in Boston Mass and finally, we will participate in the Northland capital markets Virtual growth conference on June 25th.
Speaker Change: We are also working on a few non deal roadshows during the month of May invest.
Speaker Change: Investor outreach is very important to be sure and I would like to thank all those that assist us in our efforts to connect with investors.
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.
Speaker Change: With that I would now like to turn the call over to Pat <unk>, Chairman and CEO Scott <unk>.
Speaker Change: You Patrick and welcome everyone to assure software's first quarter 2025 earnings result call I'm joined on this call by our CFO, John Pets, and we will provide a business update to our first quarter 2025 results as well as the outlook for 2025 following our remarks.
Speaker Change: We'll be available to answer your questions. We are pleased to report that our first quarter revenues were very strong coming in at 34.9 million, an increase of 10% versus our first quarter prior year.
Speaker Change: Our revenues reflect strong performance from our payroll tax management product as well as contributions from our payroll benefits and marketplace offerings. We believe that our strong results. This quarter are reflective of the investments we've made in the business. We've invested in our technology to create a more unified <unk>.
Speaker Change: <unk> experienced as well as adding new products to our solution set our payroll tax management product has continued its momentum and we've gone live with our first phase of our partnership with strata as you may recall from last quarter's earnings call. We just got to deal with a large well known audit.
Speaker Change: Tax and advisory firm and we expect implementations from this client as well as others such as venture to ramp up this year. We've hired staff I had up there to ensure that we are ready for an increased volume throughout the year, while speaking of our payroll tax managed threat product I would also like to high.
Speaker Change: Alright that we recently announced new capabilities with the solution designed for large Canadian companies and global enterprises with employees in Canada.
Speaker Change: Solution offers seamless integration of payroll tax services with major platforms like Workday Oracle and Sap's. We're excited to offer clients is critical solution to enable them to maintain strict compliance with the tax laws that they must adhere to the Canadian government.
Speaker Change: And Shar Pei continues to be rolled out to our client base and we remain pleased about the opportunity we plan to expand the wider groups as this year progresses, while it's still early in the product launch we're witnessing very positive trends and example is a gradient greater than 70% of our <unk>.
Speaker Change: Active card users are using it over three times per month.
Speaker Change: <unk> pay offers businesses our competitive edge in the war for talent as many employees are looking for more benefits from their employers with a sure pay employees get an alternative online banking delivered via smartphone app.
Speaker Change: Free ATM access debit card capabilities, plus the ability to get advances on their payroll checks and more <unk>.
Speaker Change: Many of you already know we have a multi pronged approach to our growth strategy, which includes both organic enhance organic and inorganic methods. We plan to continue this approach. During 2025, we recently entered into a credit agreement, which will provide us more.
Speaker Change: For additional capital to drive inorganic and enhance our acquisitions of this approach. The enhanced component is comprised of us acquiring primarily our reseller network partners in which we gained clients. One of these deals. Once these deals are completed we focused on cross selling up.
Speaker Change: <unk>, which can add to our profitability as we scale the business. Our team has been focused on driving increased attach rates. It has delivered thus far early in the year and we believe that the rates that we should improve our <unk> will increase in the double digits as the year progresses.
Speaker Change: Our sales efforts during the first quarter of 2025 resulted in a 45% increase in new bookings versus the prior year. Our contracted revenue backlog has gone up 339% year over year to $82 million, which gives us greater <unk>.
Speaker Change: Site into our outlook for the remainder of the year, we've incurred incremental costs as we've been preparing for the year ahead. However, as we look forward, we believe our cost structure to be relatively flat going forward as we experienced improved profitability as the revenue growth.
Speaker Change: Continues to improve throughout the year based on our current business trends, we're reiterating our 2025 full year revenue guidance of $1 34 to 138 million with adjusted EBITDA margins of 23% to 24%. This guidance excludes any revenue from <unk>.
Speaker Change: So acquisitions the guidance for the full year 2025 implies a double digit growth rate, which we believe is positive now I'd like to hand, it off to John to discuss our financial results in more detail as well as our Q2 guidance John.
John Pets: Thanks Pat.
John Pets: As Patrick mentioned at the beginning of this call. Several other 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.
John Pets: Reconciliations themselves are also included our most recent investor presentation posted in the Investor Relations section of our website at Investor sure software Dot com.
John Pets: Now on to the first quarter results.
John Pets: First quarter revenues were $34 9 million, increasing by 10% compared to the prior year period.
John Pets: Excluding your TCE revenues were up 13% from the prior year period.
John Pets: Recurring revenues for the first quarter grew 10% versus the prior year to $33 2 million.
John Pets: And where 95% of our total revenue in the quarter.
John Pets: We achieved 10% total revenue growth despite the wind down of the <unk> C program revenues, which negatively affected our revenue growth by 300 basis points in the quarter.
John Pets: Our revenue results reflect growth in our payroll tax benefits and marketplace groups HR compliance remains depressed as a result of the ERP related product attachment activity in 2023, although we expect relatively better performance in the back half of 2025.
John Pets: <unk> revenue was down slightly relative to prior year, owing to the rate reductions made in the fall of 2024 to the federal funds rate.
John Pets: However increases in our average fund balances and our ladder investment portfolio has mitigated most of that impact.
John Pets: Gross profit for the first quarter increased 9%.
John Pets: $224.6 million.
John Pets: Versus 22 6 million in the prior year first quarter and gross margins for the first quarter were relatively consistent with prior year period at 71%.
John Pets: non-GAAP gross margins for the first quarter were also consistent with the first quarter of the prior year at 75%.
Net loss for the first quarter was $2 4 million versus a net loss of 308000 during the prior period.
John Pets: EBITDA for the first quarter was $4 1 million down from $4 four.
John Pets: $4 4 million in the prior year.
John Pets: Adjusted EBITDA for the first quarter increased to $7 3 million from $6 8 million in the prior year and our adjusted EBITDAR margin was 21% in the quarter compared to 22% in the prior year.
John Pets: Sure financial performance in the quarter reflects growth across most revenue groups.
John Pets: Sure I'd like to say a few words about our tax.
John Pets: And benefits businesses in particular, which we see meaningful long term growth potential in tax our unique market position dedicated sales and technology investments have opened up new enterprise revenue opportunities that we have begun to capitalize on them.
John Pets: We believe our enterprise tax solutions had multi year growth opportunities ahead, and we are focused on making that happen.
John Pets: And benefits, we acquired an insurance broker of record business in 2024 and are going after new business and is highly profitable segment. The 'twenty 'twenty four introductions of new benefit solutions, including our foreign K solution are also contributing positively to our revenue growth.
John Pets: Turning now to the balance sheet.
John Pets: We ended the first quarter with cash and cash equivalents of $14 1 million and coincidentally, we had debt of $40 million as well as of March 31, 2025 and.
John Pets: In April we finalized a new $60 million credit facility and drew down $20 million at close we intend to use this facility to fuel our customer acquisition model over the past 18 months, we have made 16 acquisitions.
John Pets: These had been mostly customer acquisitions, but we are have also had a few.
John Pets: Acquisitions to expand our product suite.
John Pets: Guidance.
John Pets: First of all I'd like to provide the backdrop for our 2025 guidance.
John Pets: We have been focused on building on the capabilities of our solutions expanding our solution set.
John Pets: Cross selling into our base and creating efficient platforms that will enable us to achieve our longer term revenue and margin goals.
John Pets: These activities required investments in our sales team investments in technology and in many other areas of the business.
John Pets: At this point.
We believe we have gotten a lot of the heavy lifting behind us and so we believe our cost structure will be more stable going forward into 2025 permitting more operating leverage from revenue growth to generate adjusted EBITDA. Additionally, we expect revenue growth will accelerate as we move through 2025.
John Pets: And our existing solutions gain traction in new solutions are introduced into the market.
John Pets: As we go past these investments, we expect to see accelerated revenue and adjusted EBITDA generation, particularly in the back half of 2025 and.
John Pets: In addition, we will consider acquisitions that makes sense from a strategic and tactical perspective in order to cross sell and expand our solution capabilities.
John Pets: Now in terms of guidance for the second quarter 2025, we are guiding second quarter revenues to be in the range of 30 million to $32 million.
John Pets: Adjusted EBITDA for the second quarter is anticipated to be between 5 million and $6 million.
John Pets: As we discussed on our last call, we expect EBITDA growth to be more subdued in the first half.
John Pets: As we invested in the infrastructure to support more enterprise deals technology and products.
John Pets: We are maintaining our 2025 revenue guidance to be in the range of 134 to 138 million with adjusted EBITDA margins of between 23% to 24% at these revenue levels.
Patrick McKillop: As Pat mentioned in his comments earlier these guidance figures exclude any contribution from potential future acquisitions.
Patrick McKillop: Our pipeline of potential acquisitions remains strong and we feel confident about reaching our objectives.
Patrick McKillop: In conclusion, we are excited about the remainder of 'twenty 'twenty five and look forward to 2025 has been a great year for sure and driving profitable growth and leveraging the initiatives, we have implemented across the business to drive long term sustainable growth.
Patrick McKillop: With that I will turn the call back to Pat for closing remarks.
Patrick McKillop: Thanks, Chad.
Speaker Change: We are pleased to have delivered great results in the first quarter of 2025, our business is experiencing positive momentum and as a result of the efforts that we've made to improve our technology and brought to broaden our product portfolio. We believe we've executed well on our strategy to deliver growth our pipes.
Speaker Change: Line of opportunities remains robust as the team here at assure remains focused on execution of those opportunities during our past, earning calls we've highlighted a number of new product additions such as recruiting broker of record 401, K and assure pay just to name a few we're at.
Speaker Change: Different stages of these product launches. However, we feel we're experiencing good trends overall given that some like to sure pay for example are still in the early days of the launch cycle. Our team now has more opportunities to drive cross selling activity, which can have a positive impact on margins.
Speaker Change: We've witnessed examples of clients that were initially taking one or two products transition to using our full suite of offerings, thus, increasing our clients' value proposition and of course, our revenue our attach rates, meaning clients that take more than one product from us.
Speaker Change: <unk> increased by double digit percentages from last year's first quarter to our first quarter of 2025. The sales team has made good progress on those efforts and we have created some specialized sales groups, which will help drive those efforts in the future we anticipate that the increased folk.
Speaker Change: <unk> on attach rates. This year will result in further increases by year end achieving scale. In this business is one of our main goals and we believe we have a good line of sight into reaching.
Speaker Change: Yeah.
Speaker Change: That level of 180 to 200 million in revenues over the medium term, whereby we would expect to see adjusted EBITDA margins of 30% or possibly more we're pleased to have recently signed a credit agreement, which will aid us in our efforts in driving the inorganic.
Speaker Change: <unk> of our growth strategy, we have a robust pipeline of potential reseller acquisitions will continue to work throughout the year, we're making strides with our efforts in artificial intelligence, we're collaborating with Amazon web services or AWS, we're using artificial intelligence to.
Speaker Change: Better understand trends in our own customer interactions our pipeline opportunities and we prioritize those trends using Ada AI for product development and a more proactive approach in supporting our clients also.
Speaker Change: Last quarter earnings call, we discussed our AI agent Luna the industry first AI agent for payroll and HR Wow Theres lots of discussion on the macroeconomic front with tariffs leading stock market headlines. We believe we're relatively insulated from any potential impact we have a world of.
Speaker Change: <unk> U S client base, our revenues are more than 95% reoccurring, we've modeled conservatively for employment growth and the impact of potential interest rate cuts in the future. In summary, we're very pleased to delivered a strong performance in Q1, our guidance for the full year.
Speaker Change: 2025.
Speaker Change: Flex our expectation for double digit growth or bookings growth during first quarter was solid increasing by 45%. We have a healthy contracted revenue backlog of $82 million, which is up 339% versus last year, our reoccurring revenues, which carry.
Speaker Change: Higher value are now greater than 95% of total revenues, we've experienced great momentum in our payroll tax management product line as well as contributions from our other products, which include 401K payroll benefits in the marketplace. We expect improved performance of HR compliance.
Speaker Change: As we enter the second half of the year and on the cost front as we think about the remainder of the year. We believe that the incremental expenses, we incurred in preparing for this year have seen their peak and our costs should be relatively flat for the balance of the year, our focus on cross selling additional products.
Speaker Change: Two existing clients has shown very good early results and this will remain a focus which we believe will lead to further improvements as we move through the remainder of the year. We believe we will experience improved revenue growth and adjusted EBITDA in the second half of the year and we feel that the business as well.
Speaker Change: <unk> position for the future. We will continue to provide innovative human capital management solutions that help businesses thrive human capital management management providers grow their base at large enterprises streamlined tax compliance. Thank you for listening to our prepared remarks, so with that.
Speaker Change: I will send back the call to the operator for the Q&A session operator.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Well now 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.
Speaker Change: Press Star two to remove your question from Ikea for participants using speaker equipment. It may be necessary to pick up the handset before pressing your star keys one.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: Our first question is from Joshua Reilly with Needham <unk> company.
Joshua Reilly: Alright, Thanks for taking my questions here, maybe just starting off what are you seeing in terms of productivity now that you've put in place. Some dedicated sales teams for some of the different product areas that I know it's early so maybe you can just give us a sense of when that might actually make a difference in the business.
Speaker Change: Yes, Josh first of all thanks for the question.
Speaker Change: We have highlighted attach rates as a primary driver and we think having the sales specialists drive attach rates is going to be important we mentioned that we had double digit improvement in the overall attach rate in the twenty's and and we've been going up 2% per year I'd like to see.
Speaker Change: <unk> adoption I think we're positioned well you know one thing that really gave me. Some encouragement we add an individual client that was about $4000 annually and they were a payroll only customer and then they bought.
Speaker Change: Time, and attendance 401, K and HR compliance and all of sudden you know there are $40000 customer and then within 15 days. They ended up engaging with us on a broker record. So now they're close to $120000 customer that was just you know kind of a play.
Speaker Change: Playbook that we've seen coming for a long time now those deals are still early in it but it's the exact reason we involved some specialists who see exact reason we build out the product suite, we want to ultimately be the business owners almost back office. If you will to allow them to grow and that would be a key.
Speaker Change: <unk> study of all we'd like to see over and over again, so real good progress, but we're.
Speaker Change: Early in the movie.
Speaker Change: <unk> got them trained up and now we're going to look for the fruits of the labor.
Speaker Change: Got it so that's on the come in terms of some of the benefits store, which is great.
Speaker Change: How much progress have you made on maintaining HR compliance with customers, who had the ERP and HR compliance bundle, maybe you could just give some context here for investors on how this dynamic started how it's playing out and what you've kind of CMV end game for working that out for you.
Speaker Change: Yes, I'll, let John jump in as well, but a couple of things first of all it is you know we have a core competency and tax filing in.
Speaker Change: We are we bought that Tic Tac system out in <unk>.
Speaker Change: From a purchase in 2020 and kind of in the middle of Covid. We then took that tax filing product in.
Speaker Change: Now integrated into all of US sure and then when <unk> T C or the earned retention tax credit came out we sold that and now its a one time benefit for clients, where we were unable to connect them to to get money. When we've looked at it we said, okay, we're providing those kind of <unk>.
Speaker Change: Services, how do we help them over the long term and how do we attach that product and HR compliance turned out to be we thought a very good product well typically our average retention rates are close to 90%, but what we did see is we thought the goodwill of burn retention tax credit.
Speaker Change: Would stay when we attached it to HR compliance are 90% or so average retention rates went down quite a bit. So what happened was after a year of the services people really wanted to get their refund and they werent using the service like our cohort of HR HRC.
Speaker Change: <unk> clients normally so with that we've now in the second quarter lap that compare if you will so the second half we can already see in fact, we're starting to see it in April where we're starting many more customers than we're losing and we think the traditional growth which over a year.
Speaker Change: Even without <unk> TC went from call. It 3 billion to a little over $8 million, we think will be back on track with a strong second half and then in the third a 26 will grow double digits. So that's how we see it play out the worst is over from that cohort and a cohort.
Speaker Change: Just bundling in with our repetitive products, we see an advantage in fact, we just had a very strong.
Speaker Change: We ended the first quarter and just bundling with the sales specialists are our products I don't know John If you have anything you want to add I think I think you did a good job there Pat I think from my perspective.
Speaker Change: The height of.
Speaker Change: The ERP see sales efforts back probably Q4 of 'twenty three we peaked in HRC and so I think what I tried to highlight in my prepared comments was that is a little bit of headwind into the growth of the overall business, but but to pat's point.
Speaker Change: Back to the pre ERP C levels and the run rate of that business and so the hope is that now that compares gone you'll see some of that the growth come back in in the back half of the year there.
Speaker Change: Got it very helpful. Thank you guys.
Josh: Thanks, Josh.
Speaker Change: Our next question is from Eric Martin Newsy with Lake Street.
Eric Martin: Yes, I wanted to revisit your commentary Pat regarding tariff impact just kind of.
Eric Martin: Macro high level question you guys typically serves the service oriented smbs any slowdown in pipeline based on economic uncertainty there.
Pat: Eric It's a really good question and I'm looking for it because I read the news every day and you know if I listen to CNBC I'm ready to jump off a bridge here, but main Street America, we feel pretty good about that we model you know I'd just remind you we modeled about flat employment. So we don't have.
Pat: Anything of ROIC and the assumptions we model there are a couple of rate cuts and we'll see how that plays out in July and October but.
Pat: As far as sales cycles, the pipeline has been up.
Pat: <unk> and SQL are up quite a bit.
Pat: Productivity was good I would say you know maybe a.
Pat: Deals.
Pat: <unk> set a bid on pipeline.
Pat: But as we drill into it I don't see anything abnormal or not.
Pat: Do think Theres, probably a question later in the year as people work through inventory et cetera, and you know the tariffs really kick in.
Pat: But as far as our customer base and small businesses, we don't have anything aligned.
Pat: Super strong the government contractors and stuff like that so right now.
Pat: We've seen a small business in action and then in some cases as I was talking to a pretty.
Pat: Pretty good customer today, there was manufacturing and in the heart of our Middle America.
Pat: They're talking about bringing some jobs back and they think they have a competitive advantage because their U S made so there's some cross winds around that but clearly we're watching it pretty closely.
Pat: Got it thanks.
Eric Martin: Thanks, Eric.
Eric Martin: Our next question is from Charles <unk> with Stephens.
Charles: Hey, good afternoon, and thank you for taking my question.
Charles: I wanted to ask about some of the investments you are making was hoping you could double click on that as well as talk about your your product roadmap and how you think about that from an organic and an in or inorganic standpoint.
Charles: You've come out with some interesting cot products over the past couple of years, including assure pay so just curious what next and how Youre thinking about the road ahead from product standpoint.
Charles: Yeah, I think we.
John Pets: We've been pretty transparent this is jon on kind of the strategy.
John Pets: We knew kind of going into last year, we had a couple of <unk>.
John Pets: Gas, we felt in the overall suite.
John Pets: We acquired the Burger record business and got fully licensed.
Into the third quarter, beginning of fourth quarter of last year. So that's pretty nascent business, but you know the example that Pat Pat Rattled off I mean, just shows you that the effect of being able to sell insurance into this space.
John Pets: And it's a pretty good kind of greenfield opportunity.
John Pets: The applicant tracking obviously its a front end of a hiring process right. So we've rounded off that part of the suite. So we really feel like we're getting to a point, where we've got a very very compelling robust resolution.
Speaker Change: One of the thing again that you touched on too.
John Pets: There is a movement I think the I.
John Pets: I think as your IRS, that's saying that they are going to quit cutting paper checks at the kind of fourth quarter of this year. So I think there's a movement to get away from paper checks right now in our customer base we have.
John Pets: Just in our direct customer base, probably 40000 people a month they get paper checks, though so assure pay really really ties into that so if you're an unbanked individual or where you have a way to get your pay quicker.
John Pets: And in a vehicle to to move it around a lot easier than having to go and deposit a paper check we think theres some compelling solutions there so.
John Pets: That's on kind of just the the the near term products.
John Pets: We're going to always kind of keep an eye on the resellers and.
John Pets: I mean, that's that's a key part of the strategy.
John Pets: Because I think about it these are already our customers.
John Pets: Have an intermediary between US right. So you have a.
John Pets: Another.
John Pets: Business, that's servicing them. So when we can bring these customers into our ecosystem. It goes back to the point that I was making earlier, we can start to have our sales team go in and start to attach other products and again, that's it's all kind of hopefully ties together, we're building products to cross sell into the base, we're trying to add the base.
John Pets: Bad more price into the base and does it.
John Pets: That's kind of the circle that we're trying to create.
Speaker Change: Yeah, and then Charles the only thing I'd add to that is everything we look at it as build partner or buy.
John Pets: We decided to.
John Pets: By in the case of broker of record in the recruiting from a partnership perspective.
Speaker Change: Okay sure pit, we have gone with a partner, but we have the right set of source code.
Speaker Change: And then the only other thing I'd talk about it really ties into the second half of the year and is we do have operational efficiency and in our technology.
Speaker Change: We're rolling out internally, a client lifecycle management, where a customer can manage through the lifecycle.
Speaker Change: So what that means is you know today you have different either departments are different people involved it could be a credit check could be MLB.
Speaker Change: It could be.
Speaker Change: We're just entering into P O as for tax filing, we'll know more and more we'll let the client be able to do that or if we do it we have validation on the front end, where we know what good looks like and you know it doesn't enable us to go forward unless we have the right stuff. So what that means is it cut down cuts down on rework.
Speaker Change: It cuts down on you know kind of people getting involved in the process and increases our scale. So we're investing quite a bit we think we have a really strong development team and.
Speaker Change: We continue to rollout assure central matter, we rolled out a sure now we get to know like if you come into our our system what products, you have and which ones you don't have and now we can kind of drive towards event, driven marketing, where we have the ability.
To get to you about.
<unk> service when that event qualifies you for it. So for example, if you had 20 employees in your Cobra you have to provide Cobra by law.
Speaker Change: <unk> to do that for you. So those are some of the things will work out and we're pretty excited about it we work towards this for a couple of years and we think its paying off already and it will continue to pay off dividends for us So long time to come.
Speaker Change: Right.
Speaker Change: Super helpful color I'll hop back in the queue. Thank you guys.
Speaker Change: Thank you.
Speaker Change: Our next question is from Jeff Van <unk> with Craig Hallum.
Speaker Change: Hey, This is Daniel Schmidt on for Jeff. Thanks for taking my questions guys just on the acquisitions and the M&A vision.
Speaker Change: I believe it was two and a quarter just wanted to confirm that and then looking forward.
Speaker Change: Should we be thinking about this week with the new credit facility, that's going to be a sort of a similar cadence to 'twenty four accelerated decelerate just in terms of the appetite and the opportunity there relative to 'twenty four where M&A is headed.
Speaker Change: Yeah, No I appreciate it I'll, let John jump in on the facility, but but just in general we were pleased to get that done in April.
Speaker Change: I think for US a year and is a pretty tough part of the year I do want to confirm as telegraphed on last call. It was two.
Speaker Change: Two acquisitions in the first quarter I think Youll see acquisition cadence ramp up here in the second half of the year, we have a pretty good pipeline.
Speaker Change: Based on the timing of payroll and sometimes the business severe and where volume is pretty heavy youll see second quarter to be a little bit light, but third and fourth quarter I think youll see strong and then with the facility. We have the ability to go after the deals we want to go after very pleased.
Speaker Change: I think sometimes there's a little bit of a pause on the macro but all in all pipeline is good we will continue to grow we have the people the technology in place to execute and we're pretty far along I don't know John maybe if you want to talk about the facility or the pipeline, yes, I mean, the facility we took down.
Speaker Change: $20 million at the close and it has the flexibility for us to go up to 60.
Speaker Change: Pat it's been pretty clear I think we're all pretty clear we want to get bigger quicker and this is going to give us the flexibility to do that so we have a healthy appetite. We think we have a healthy pipeline.
Speaker Change: Obviously nothing too.
Speaker Change: Telegraph that we have ready to announce but we put a facility in place to give us the flexibility to go quicker not slower.
Speaker Change: Yeah.
Speaker Change: Great. That's helpful. And then just in terms of the cash deals, which seem like they continue to be some of the biggest opportunities like cninsure.
Speaker Change: We're looking at.
Speaker Change: How thats going to ramp ramping to revenue and just the opportunity there what's the best thing for us.
Speaker Change: Watching is that the contracted backlog in our contracted backlog in next 12 months deferred revenue bookings, how should we be thinking about that hitting what are sort of the forward indicators and what will be the size of that ramping.
Speaker Change: Yeah.
Speaker Change: First of all our contracted backlog has grown.
Speaker Change: Bet you.
Speaker Change: And I think the per set within the year has grown as well so I think for now.
Speaker Change: We have 82 million I think we had something like 31 in this year that's up.
Speaker Change: And we will continue to be up so that's that is a area and then somebody is.
Speaker Change: These bigger you know whether its venture of strata et cetera, you know they are phased in installations.
Speaker Change: Some of the PFS work is being done in and there will be some add on work over time here and then we announce that we have a large accounting partner, we've gotten a couple of small deals and those are really to test the model and I think the second half you'll see bigger opportunities.
Speaker Change: But we'll let you know each quarter I'm you know I think the backlog is is one tell John.
Speaker Change: John I don't know if you have any other thoughts only thing I was going to suggest maybe not everybody in the calls as intimate with the industry. As you are we are maybe give a little color about venture in strata. So they kind of get a sense as to kind of what who those partners are shot is a good example, you know they're a former Hewitt associates are a light.
Speaker Change: They.
Speaker Change: We have customers that are you know kind of big enterprise customers on workday Oracle or SAP.
Speaker Change: They've gotten.
Speaker Change: For customers' lives now with us so continue to grow throughout the year.
Speaker Change: The nice thing about that is we go to those enterprise customers direct and then we have a solution set with jointly with strider that we'll continue to phase out through the year and you know really strong opportunity and feel good about the partnership venture is a private private company.
Speaker Change: It's actually it's funny there there are a little bit like us in the sense that they serve about $2 3 million employees.
Speaker Change: They have a reseller networks similar to us.
Speaker Change: They are you know have gone live with US here and we will continue to grow throughout you know they have an ASO business, which is a kind.
Speaker Change: Kind of a.
Speaker Change: Payroll HR business. In addition to our PEO business and so we're excited with the opportunity to serve them and that's gone very very well.
Speaker Change: And then you know if you think about payroll companies a lot of them, we'll contract with other tax filing companies. We're unique in the sense that we're a payroll company that does tax filing, but we also do tax filing for 27 other payroll companies I think you'll see us lean into that.
Speaker Change: That model more and more.
Speaker Change: Into some pretty good sized payroll companies, where they want somebody that knows payroll and they don't necessarily want to compete with them. So if you think about where we are in the midmarket or the enterprise space or even the PEO space, where the PEO. We don't play other companies like that are wanting to talk to.
Speaker Change: So it's about back end tax filing because we know what good looks like with the 14000 U S agencies that are locally that chapter Pan were met your funds and and you have to do your filings. The 50 States. You know we have a caf connection in TDI routes and so we're unique in that aspect that we built this out and we'd see.
Speaker Change: This is a tremendous opportunity going forward.
Speaker Change: I mean kind of talk a little bit about the customer lifecycle management as an example, that's a tool that we built for our own internal use but.
The way.
Speaker Change: Dev team built it it's actually a product that can be sold to.
Speaker Change: Two other customers you know they they need the same solution that they're going to service their customers. So way, we've architected and we've done the same thing I assume some refactoring of our account Tien tsin.
Speaker Change: Just created a lot of products.
Speaker Change: That serve us and our customers but.
Speaker Change: Also kind of allowed for an extension to an embedded strategy right. So say for example, I'm going to be in a vertical and I want to be the be all end all ERP solution for our plumbers.
Speaker Change: Can incrementally add functionality that they don't need to go do it and our area of expertise and kind of be behind the scenes almost like.
Speaker Change: Think about it like the source of truth and sales taxes that Valera I mean, I think we're trying to create solutions, where we can be invisible and be in a lot of different situations and you won't necessarily know us in the background.
Speaker Change: That's helpful. Thanks, Pat Thanks, Tom.
Speaker Change: Thank you.
Speaker Change: Our next question is from Greg <unk> with Northland Securities.
Speaker Change: Hey, good afternoon, Pat John Thanks for taking the questions.
What kind of from a high level wanted to.
Speaker Change: Just see if you could discuss where you I guess go over the primary drivers of your expectations for accelerated year over year revenue growth in the back half of the year.
Speaker Change: Is it primarily attach rate in cross sell driven I know that there is some impact from <unk> in the first half, but what kind of gives you confidence in the full year outlook.
Speaker Change: Yeah. Thanks, Greg first of all your T. C. We talked about the cohort that was attached to our human resource.
Speaker Change: Clients consulting that's definitely going to grow into the second half we see that already the contracted backlog has been growing and the second half story. This partner, we talked about with <unk>.
Speaker Change: Counting the first four deals here or it's starting this quarter, we'll see bigger deals in the second half of the year.
Speaker Change: Where we are on on you know first of all our cross sell attach rates or attach rates are going up I gave you. The example around.
Speaker Change: You don't kind of broker of record as well as HRC and.
Speaker Change: 401, K attach rate so some of those in the sales team's momentum.
Speaker Change: We feel pretty strong about that so it's a combination of you know the the sales team ramping in a big way the backlog hitting the beach in the second half of the year some of our partners chat outline some of the embedded strategy, we feel pretty good about it and then just as a reminder.
Speaker Change: That none of that includes.
Speaker Change: Acquisitions, which we just got a facility for so.
Speaker Change: I think you'll see some pretty good movement and we feel good about what we're doing.
Speaker Change: Great. That's very helpful and if I could follow up as it relates to the higher the hiring of additional staff and the other investments in infrastructure that you mentioned to support these enterprise deals.
Speaker Change: How much I guess of that of these increased costs are reflected in Q1 versus anything that is maybe to come or isn't fully reflected in financials yet.
Speaker Change: Yeah. So I think again, we mentioned this last.
Speaker Change: Call, we probably have an inflection point in the first quarter of cost.
Speaker Change: We're going to try to run the business.
Speaker Change: Roughly the same head count we entered the year with and that's the biggest driver of our cost structure right.
Speaker Change: Our employees and those employees.
Speaker Change: So I think we had a little bit of a spike in the first quarter. We think it will kind of get normalize back down to that kind of head count range for the balance of the year. So that gives us again.
Speaker Change: A relatively flat to down cost structure for the back half of the year with increasing revenues.
Speaker Change: That's the impetus for the floaters. So if the revenues come we think the cost structure will produce those kind of EBITDA margins in the back half and if you think about you know kind of we telegraph. Some of these deals that are relatively new to us whether they're acquisitions around broker of record or recruiting or are there some of the attack.
Speaker Change: <unk>. So we talked about you don't bring some of the customers that we're talking about going live with new people see what you want to do is a higher ahead of the revenue we've done that over the second half of the year in the first quarter now do we have those people in place now we have the opportunity to.
Speaker Change: To position and grow with scale.
Speaker Change: And you know as the revenue continues to grow we can grow without adding head count because those areas of growth to areas of the business that we didn't have that collar in place. We now have so.
Speaker Change: I think youll see a lot of expansion model. This is what we've telegraphed all along.
Speaker Change: Long term plan or midterm plan 180 to 200 million with 30% plus margins on how we define it as our adjusted EBITDA you know we're right on track to doing that this would be a good proof point by the end of the year.
Speaker Change: Yeah.
Speaker Change: Got it very helpful. Thank you.
Speaker Change: Thank you. Our next question is from Vincent Colicchio with Barrington Research.
Vincent Colicchio: Yeah, Pat could you provide more color on the Canada tax product. For example is there an early pipeline, whereas competition look like as well.
Vincent Colicchio: Yeah actually it's interesting bets I. Appreciate the question you know already first of all some customers there.
Vincent Colicchio: We had come in from strata adventure they had Canadian tax. So if you think of strata in the case those are enterprise customers.
Vincent Colicchio: You know they had a north America footprint.
Vincent Colicchio: We could provide historically the U S taxes now we can't provide cannot Canada and then.
Vincent Colicchio: Debenture PEO group, you know they had a Canada PEO and and we have.
Vincent Colicchio: <unk> turned on that capability for them as well and their clients and then some of our clients.
Vincent Colicchio: A lot of them are very close to cross border pretty good opportunity there, so and what I love about it too is we have a kind of a look and feel the design with the team around Canada. It's a very modern look and feel and it's one that we will continue to grow out throughout the organization.
Vincent Colicchio: So a pretty strong pipeline, we've already had some inquiries on it from just we haven't ventured into Canada, you know yet.
Vincent Colicchio: Compared to where we were and already people are asking us and then we already have a readymade client base that is turning this side. So really pleased with development organization, then and the capability here.
Speaker Change: And then lastly, any updates on the competitive environment.
Vincent Colicchio: No I think you know what I would say is.
Vincent Colicchio: You know I think.
Vincent Colicchio: From from what I saw and have been seeing I think are are in new are new engagements were really strong in the first quarter.
Vincent Colicchio: Our pipeline our close rate was really good sales cycles, maybe five to seven days long gated which in each segment has different kind of avenues.
Vincent Colicchio: The enterprise space, We watch closely just based on our tax deals and where we're at there but interest level is very very high.
Vincent Colicchio: I do monitor it just based on some of the volatility of the situation but.
Vincent Colicchio: You know kind of our bread and butter marketplace Theres no change in the competitive environment.
Pat: Thanks Pat.
Speaker Change: Thank you Beth.
Speaker Change: Thank you there are no further questions at this time I'd like to hand, the floor back over to Pat couple for closing comments.
Speaker Change: Yeah, well, we got another quarter in the books really.
Speaker Change: I appreciate you guys listening in on the journey.
Speaker Change: We do think it's a journey that has a lot of upside and a lot of the.
Patrick McKillop: Heights of which we haven't reached yet, but we will and are and it's kind of a fun story for me to be involved with as we continue to make progress and we really appreciate your interest along the way and your investment along the way. So until next time I I know Patrick mentioned, we have a.
Speaker Change: Some pretty good investor outreach here over the next quarter and look forward to talking to you soon.
Speaker Change: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.