Earnings call transcript Q3 2023

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Operator

Ladies and gentlemen thank you for standing by and welcome to Paycor's Third Quarter Fiscal Year 2023 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.

I would now like to turn the call over to Rachel White, Vice President of Investor Relations.

Rachel White

to year call March XXXX, welcome quarter the XXst. and fiscal of which afternoon Paycor's for earnings third Good ended on

Paycor's On Raul Adam me with Paycor's Chief Jr., Ante, Officer. the and Executive Financial today Chief Officer; call Villar, are

of found be be following Investor today, recorded the our press section and call. is available being of website our the a can which results release conclusion available will is on financial our the in Our call replay on Relations issued website. Today's

today Statements customer other as statements to results, statements on date. made relied and include not to related be may forward-looking be subject not the assumptions of as statements on management's of updated our this demand, call representing any should are current our financial based upon risks, are matters. products, expectations subsequent views uncertainties, and and and future. as operations, in Therefore These these

refer to GAAP business on and a to provided and website. measures key of certain metrics financial information We press our in of is measures our Definitions to non-GAAP additional also investors. reconciliation provide will non-GAAP non-GAAP metrics measures and business release key to

turn Raul. over call I'll to that, With the

Raul Villar

quarter us Thank to thank for you fiscal third you, Rachel all results. discuss and joining Paycor's

suite As people. HCM their are that dropped nearly retain enables seeing effectively employee in to optimize, modern to we and differentiated engagement leaders nationwide a robust our decade, the level lowest and demand coach, for more

With are retention increasing their employee XX%. of these the and essential leaders tools, frontline their talent our customers critical strength improving by core

in marks improvement investing XXX market. and expansion progress great increasing as basis quarter of over Paycor coverage margin XX% the in further sales this points the quarter expanding consecutive make grew to Revenue differentiate that while of fourth continue PEPM. capabilities year-over-year This also delivering our we

results consistent enterprise. are evidence execution strong of the across Paycor's

we capabilities Win deal are rates continues to growth track remain seller and expand We remains for expand size another third bookings. report go-to-market headcount record on average high continue quarter to pleased our to for XX%.

generation These efforts relationships are underpinned drive that by lead opportunities. investments sales brand and broker awareness in

We proprietary a create microlearning Verb, of are development science to and behavioral best-in-class thrilled with platform workplace the incorporating training. acquisition content people

will acquisition HCM pathways. them learning by acquisitions PEPM our suite develop we other increase their with personalized to tools empowering broad of with providing Paycor's leaders associates and The technology Like integrate innovative fully channel. distribution plan mission our into enhance development leveraging our recent Verb's to

be bundle Within in of half available expect management Paycor We we of Sourcing. management bundle AI-driven first as our recruiting to completed our the talent the recently the Smart XXXX. technology year fiscal offering talent new integration integrated part of our

existing our into they're in introduced continue we this and Paycor's natural to on with resignation, provide strong foster reviews and feedback customers Smart processing culture. evaluation initial scheduled more Sourcing activation. frontline performance Paycor engines and see sentiment leaders solution for the real-time more predictive for language using artificial analysis demand engaging language work Building humanized innovation XXX intelligence than to We on

generative using in We to along process generating descriptions efficiently roadmap. the by will our exciting our on other job leverage like several leaders to AI continue platform AI innovations to aid product empower recruiting with

our API added industry partners, the In network to over integrations, our our most to two-way customers. the expand unique deep to with needs. the continue new provide and ecosystem we value last extensive XXX business for and reach meet we and to partners Furthermore, lead of our points capabilities clients' connectivity year,

frontline Smart business these thank like analytics its Paycor differentiated Paycor recognized was leaders best-in-class that entire to that would insightful Sourcing, management decisions. platform talent for optimize Titan Lastly, our with for we help team proud modern Awards Intelligence six Paycor the Business are and for amazing solution, I results. and

to over to call I'll results Adam our that, guidance. turn financial discuss the and With

Adam Ante

Thanks, of remainder the Raul. fiscal year. our results discuss the third quarter for outlook and I'll

on a We prior growth measures XX% reminder, and financial related team. and testament increase a non-GAAP year, to recurring our of sixth basis. XX%-plus $XXX the quarter our million, XX% As the delivered of comments with year-over-year target consistent marking over another my revenue straight of from to a are the total strong revenues a achieving quarter execution

the wins driven by with than customers. on more nearly continues million, growth platform revenue X% to prior our number Our growing cross-sells, to of XX,XXX up and be new employees business over $X.X the year

As per year. now focus on increase, customer our from resources average XXX size XX with our we shift continues and up upmarket employees customer, portfolio at employees, to our clients greater last than XX

guidance. intentional while the the this level in X% This segment, enterprise we the in to moderation micro quarter, see segments with strategic growth number our over prior continue increased the year-over-year. shift, and employment and employee flat expectations prior was Aligned employees with past in mid-market our clients' line essentially of in quarter,

typically organic our like impacted revenue by have customer two anomaly among existing or an only point of reminder, employment a outside levels base As one COVID. growth

bundle cross-sales All including point Effective marginally benefits pricing of favorably sale. organic initiatives the trend and is growth three increased XX% over PEPM in, year-over-year $XX cross-sales, from at of retention offset our continues by hiring. primary increases, net adoption and customers' relative for PEPM comprised pricing with quarter. to higher to the drivers, just softness in

filing This was growth PEPM some form from quarter. benefited fourth we forward from pulled also strong which revenue, of the believe quarter,

progress our made the in with possible our the expanding by made pleased partner investments we've engine. program, interoperability also We're

services clients growth revenue New revenue streams, other our increasingly year. will are our and such to contribute next and services as into incremental partner employment income and expanding partnerships verification software to

and with to nationally. of team expense XX% and Adjusted last we to long-term line expand revenue margin improved demonstrated was in marketing gross points we our we continue invest scale. growth, profit and depreciation have targets million higher amortization we $XX In to sales the steady excluding Sales revenue, our consistent or nearly basis to continue year, margin as also XXX addition XX.X%, as expansion. than

$XX or revenue, similar R&D basis, long-term to in gross a of line XX% in year our targets. a level with last million and we On invested

development through tuck-ins our and our opportunity. efficiently organic create Our new PEPM expand team product for partnerships continues to and clients value functionality best-in-class add that

G&A expense 'XX. basis of of or was the XXX in revenue, down third nearly quarter from points XX.X% million $XX XX.X%

sales progress income of operating have driving Adjusted XXX up We significant of points than as year, more percentage scaling down basis to from more $XX continuing year. of is than in nearly revenue marketing margins and while XX% last million, XX% with G&A R&D. expense investments points XX%, made to and a and expand than last increased G&A lower as a Year-to-date, XXX basis percentage recurring revenue.

to balance the close generated a our free be quarter, cash million $X and net We flow. of Shifting remain sheet flow of balance cash We of with cash to free adjusted million positive no to At on our the the $XX track spend $XX year-to-date. plan the full increased for year. cash deliver million to fiscal flow, debt.

under majority capturing faster This remain quarter, we client funds of more $X.X interest approximately effective income on of of which $XX Fed just in basis rate an billion, million generated our just completely. and fund are of yielding accounts, funds rates, points. The client overnight XXX average over

of quarter, workforce payables to to strong quarter. or this the and really no mind environment demand nonfarm moderated. are which market, flat organic quarter anticipating are consistent remains our fourth employee remains that on had a the openings last growth compared our guidance through of has third XX% in the as material quarter though year, growth not outlook levels participation customers keep Please that has second outsized increase remains balance HCM we form benefit positive. for two-year well. to labor been and had the at Job revenue change labor continue same demand broader in among the CAGR filing Similar existing Our the assumes and recurring tight year. we market The we elevated fairly environment last

the while Verb, it are of enthusiastic today. operations about will be Separately, our to immaterial we acquisition

With in fiscal we are these again raising 'XX. once factors guidance our mind, for

or and the income of $XX adjusted $XXX of growth expect $XX revenues and between at operating we million the of between total fourth and $XXX end quarter, range the million. For high million million XX%

and be balances accelerate of scaling one-third will in average our expand for of marketing $X range income programs billion. the business. over to $XX on to and range product to temporary end the in For full of We to million. just interest about our $XX at of adjusted increase operating track the funds $XX income to $XXX in we interest quarter. or revenues programs growth remain year million full effective the income expect map, to we million marginally invest reinvest the anticipate anticipate client to the interest $XXX top income, With respect we And million we at million million year, and rate of $XX fourth expect rates, the road XX% on of our today's

retention In customers. platform summary, and frontline that empowers HCM is engagement our modern resonating employee to with leaders improve

Our We've for we team believe continues the significant demonstrated growth. to margin expansion runway execute. business further scale is there and as

believe As continue expanding market. a of the the to cloud, HCM capturing the early its we our to within in mission-critical transition and the still opportunity durability applications $XX category in share billion

Operator? that, With call for open questions. the will we

Operator

Mark you. comes question first Please with [Operator from your Our Murphy question. Instructions] JPMorgan. Thank state

Mark Murphy

is then I just in with what are look on patterns are there verticals manufacturing at the bit economy? have that broader very across they're showing what And the the your food shows and For nice healthcare softer. Congrats I results. all of a a we your trends you. PMIs the manufacturing up of the in kind wondering, I'm patterns services core employment see services you quick professional trends? bookings if Thank aligning follow-up. the when mean, Raul, at instance or spread expansion, PMIs kind bev demand

Raul Villar

performance any component across across strong seeing and market our in four No, material big beverage really percentage. manufacturing and resurgence Obviously changes our we a still the in haven't addressable a food platform we're healthcare our overall and accommodation verticals. total seen of the

in seen we cadence. haven't or our changes any our base So in

Mark Murphy

Yeah. Understood.

of strong bit And in on at which areas wondering I'm the are product in remain seems larger become you're when And Okay. and -- on looking module you mix most that map? attach Paycor. what feeling about to could you I'm like of then rate just see R&D if revenue talent could road do ceiling look if they ever and pretty an ultra those stream? for that a kind a the reviews touch have ratings we just the and excited you that at wondering high around

Raul Villar

Yeah.

to obviously to finding So as about in most expand is platform is easiest competitive set. thing continue marketplace we're but powerful the only use, excited the most the not in our we're our we the that

we're that. mix So about most already grow. It to continues we Talent a in excited good talent. of about feel workflow From management. clearly really our is part what it's bigger

to be and HR. big capability the we has so as as And believe talent payroll

So to continuing component Verb our be there the HCM employees we're to components we're a the And are going to that, niche that employees out so that there's acquisition in there, add components. but platform. that module. going and continue demand can it's we to focused of into source build on And to over believe you time, with many on retain also to both ecosystem strong because core next of see

sold and this being platform you're HR we believe on benefits core talent the management the part of what HCM few HR we will And payroll is a that the category based of so needs and industry the when be next serving. I of still over future payroll definition workforce decades. started And became with payroll

Mark Murphy

much. you Thank very

Raul Villar

you. Yeah. Thank

Operator

comes question Borges Gabriela next Goldman Our from with Sachs.

Unidentified Analyst

Kevin Thanks double for click This just question. on on to Gabriela. I wanted guidance. is the taking Hi. for

implies years. than revenue it XQ higher sequential in recurring in think a I prior decline

in pulled thinking the you're how maybe forward, revenue going moving pieces curious recurring and just growth about was terms much forward? of revenue So, normalized how

Adam Ante

of We've the sort we've guidance growth that consistent key quarters. change no what been the that's broader with years. environment last the off The the more of Yeah. that consistent. last A of The the put though tried employee demand material trended over seeing couple organic over market, out which fairly and in labor in couple to list the we've prepared recently is couple flat has remarks. the of been revenue be assumes guidance things

So QX to isn't we're revenue And into assuming next quarter. like that in form year going I the filing strong this then with we mentioned, that some believe we have that a QX. persist persists last quarter into did

the guide QX And on margin seeing of QX so from the or you're forward not pull there's part material, little as the a quarter. fourth just but that bit into the

Unidentified Analyst

on Got it. hiring And That's looks then like Yeah. helpful. it seller track. is

that with is in Just two? been your have expectations line ramp year curious in holding or Thank up? then tracking particularly how more retention you. And reps ramp sales a around is productivity that for

Raul Villar

Productivity overall seller have despite productivity On significantly higher. strong retention our up year-over-year. Yeah. is continue hiring strong to we retention,

is doing anniversary-ing second that is So third -- the that or better. Tier what reference are year -- X people that into would year are

So, operate designed. to productivity continues as

Unidentified Analyst

my Thanks taking for questions.

Raul Villar

you, Yeah. Kevin. Thank

Operator

Samana next comes Your Jefferies. question with from Samad

Samad Samana

micro afternoon. Thanks the for up target two, it move as are just part trying hire? maybe through one less that that And naturally it to taking and investing first letting maybe companies. Raul, you're you the to you maybe change try type relates One, Good to Maybe of XXX Hi. away, just dynamic? guys for about something my or the you, that behind the of attrit questions. does that just business, where you're is employee-plus market seller as and think

Raul Villar

years when sellers seller kept we've first we XX some came profile and high over really board, profile. to the teach on sales. the or question the is And we we want software -- them three demographics. changed Chuck And of velocity business two them ago, first months. teach years when that ago, About that with experience, on HCM want I'll and focused to the to Yeah. about nine profile start years three and

And find we've and been drive able successful a We've able for applicants to been productivity. so model to retain We've to us. able been it's been those applicants.

feel that. segment scale that we think -- So that through the good And we're today. we those covering will can reps about entire

resources segment. into intentionally as say What XXX-plus goes, As the we're more far declining is segment. micro investing we're the would segment I the not

upmarket obviously like segment same with we're SMB replacing natural than have cetera on going low-end SMB, a replace the leaves replacing that five-employee that a our end we're we used at focus and that the at not company. so the segment of higher your because just is that like the XXX-employee paychecks rate And peers company et low to segment to rate churn

Samad Samana

not Great. on as is will view that an margin rates have floats might getting in peaked. the Adam least And from about is how stabilization curious, that? idea operating I'm I'm versus side. we then thinking I get like seems maybe for how leverage shifting maybe your overall And what prevailing it but mindset should rates just core a contributing? if no follow-up have margin you're we think at economist, do, rates short-term what about and a the

Adam Ante

Samad. Yeah. Hi,

going would say I first, So not our shift strategy. that no we're to

want some Our recurring strategy on the of income expansion investing continue has been the or to business, expense intentionally interest interest margins. into -- about back to but that drive we

well. of a see And so course expanded you year-over-year. on G&A, And expanded you of income It the in -- as see with on the can adjusted should interest where we additional strategy. gross margins some that's that basis actually expanded And leverage, recurring specifically interest basis. part recurring that a our

going that to So to continue we drive want forward.

marketing product programs and and then we into the pulling investing taking the and back then road the that And expanding map. forward income opportunistic also were interest some about it of sales

you margin. intentionally our today up on But turned a did showing those of P&L to that flow we down be to be see those expand. that so designed able decided programs to that let rates not we off inside basis when either wanted where or peaked recurring have were to And

on is how for So business a that's the run we we to that have and sure. continue opportunity basis recurring

Samad Samana

Great. Thanks so much.

Raul Villar

Thank you.

Operator

Shah next with comes Bank. question Deutsche your question. Bhavin state Your from Please

Bhavin Shah

strong sources to behind just Great. of there's during coming And growth forward? of kind kind It's but any of and on break of down XX% should my we I PEPM nice think strong from? the congrats quarter. are And know to Thanks plenty where that, way how see about growth the PEPM drivers taking of for the question the results. growth going

Adam Ante

at We I sale, clients who one-third, add buying in cross-sell mean look of they down in the more about additional represent basis upsell to the increases say it sort on total pricing well. leaving areas. on be we each would also break that the they are putting And one-third clients to groups. in as each point I we Yeah. a over three of net might those the of at opportunities. stack terms and are they growth of when typically come as PEPM then

bit on we saw quarter, form This a outsized the little filing.

and single-digit that cross-sell, a low-teens those I in -- bit we then be the high typically think sort all underlying of persist rate rate and in term. was seen can -- again And new rate, the the business that to PEPM but of -- that coming one-thirds, a breakdown growth upsell little those think so not it's near across at traditionally going is that in in higher the PEPM terms growth and persist we've those pricing, the

Bhavin Shah

think seller That's super that track kind continue seller you follow-up of helpful. one then Is going you talked growth. starting of for side is on forward kind And the dependent the about on should employment you macro And still of on seeing of how some just hiring we How you're earlier. XX% maybe point? growth XX%-ish plans And much good or be mentioned what a to perspective? going about forward? that the on

Raul Villar

and growth. on in mean to I line our we're revenue focused order to top Yeah. driving accelerate bookings continue

We're to suggest that add that we've not anything can confident to headcount. the continue been seeing seller we're that's so we on back that what coverage we macro fairly focused pull in And and want on. would

Bhavin Shah

Thank you.

Raul Villar

Yeah, thank you.

Operator

Terry Securities. with Tillman Your Truist comes next from question

Terry Tillman

you're had quarterly versus from Hi, into is, capacity but these for really Tier good comment were traditional putting how Rachel, and terms expectations? the time me long maybe growth we X of strengths Raul do kind performance. Yeah, as new record you first that Tier the X your X? Lakes and if markets higher dissect in you of and congrats market bookings that you on well butter the did question ago Raul, Great your seller guess, know then I X, Adam opportunities Tier some could Midwest, strength versus Tier like overall And those maybe of a bread I

Raul Villar

strong the I our over performance board. across of X Yeah, we in have bookings. mean fairly Tier results new is Clearly XX%

started on away Midwest being drive that just growth. from the to bookings we've dependent see So to transition

continue balanced our to that. and so And Tier of seeing about but we're to We're forward. XX% from X participation pretty drive bookings coming that going is we feel more good

Terry Tillman

great. Smart That's sounds about and how going or the on this know maybe you have bullish. se Raul's but I follow-up you've I just think don't was Thanks or to and if activating. a quantifying got rolling for guess, for XXX Smart I that. in Sourcing prepared expectation It is activation didn't Sourcing heard customers pretty on But per I Adam, out you're Raul go. that I remarks an

that's So an thoughts at or lift Thank how employee. that on this that's per ARPU not is average or customer side. versus that value in of your driving you. contract you'd where And the every lift? point? assume folks in the be is ASP Maybe I just recruiting for terms initial What

Adam Ante

Yeah. Hey, Terry.

first and were a strong. then that planning yeah Sourcing. what little perspective the get we're faster then excited been has say integration from Smart products specifically seeing really able and So really the AI we customer the of to a I'd through that with We've there first excitement about been our all the place traction in we're on adoption and for than the

anticipated we than earlier what So XXX-unit faster. we're mark getting a at little that there had we're

of part seen going And of seen selling Again into we've going now. bundle a taking suite couple our as -- sell terms market, itself. it's per effectively attraction the how in in talent it employee of that's And it's that. we've be it we're terms of to and it how we're dollars to

I the it folks And it. talent. time then time for I is perfect product AI. access looking course, just think of Of well. at with are comes to are it market hunts where really well struggling great They're Folks for at as the interested. mean, the the really really

we're where is space taking today. to $X that it so market And

Terry Tillman

Thank great. you. That's

Operator

question. comes next question with state Your Cowen. your TD Bergin Please from Bryan

Bryan Bergin

afternoon. guys. Thank Hi, you. Good

one from us here. Just

now around and right thoughts fiscal taking into should think Just Thanks. here demand and environment forward mindful for and XQ your as be view everything growth in margin? account the you're seeing any considerations we XXXX, for we

Adam Ante

the half has want guidance for think I I quarter Yeah. important XXXX continue in the the And to been to XXXX pressure through given specific it's of second mean, about so that to haven't talking sure. the give to I'd what for us happens say we going August yet. July, wraps we be to how June, see we anything year, up. see as into everybody

we opportunity nature good the I to say opportunity. would still long-term And demand massive HCM want think -- environment the for feel the business. recurring the we We broadly be about is and a of

think be want we're So we're to And year. to going next consistent going to continue there. bullish to into I be

decisions the trying continuing been drive year. we'll months. then make think to into going into evaluate guidance going the growth plus and consistently growth to accordingly expand we've next the the XX% That's we revenue to recurring So and summer business. across And have strategy demand about to as environment margins our broader be

Bryan Bergin

Okay. more squeeze in. Actually one going I'm to

Just mindful you compared to give retention a how or the changes versus sub-XXXX on gross retention. in Just -- XXXX-plus mix? of sense revenue any year? retention be on last us Can

Adam Ante

it's Bryan, business the across Well, been really consistent. Yeah.

the say have where retention And the seen our we a couple in last of control little seeing to in little that, of XX% it's segment a I'd we've segment and high overall in be talked right? So are pace about consistent that we seen you've per not micro net affecting The numbers. in softening the retention continue that hiring the organic of range, over micro that bit really dip like we quarters. bit but their

been So overall it consistent. has

Bryan Bergin

Thank great. you. Okay,

Operator

question Needham. with your Berg Scott Please next from question. state comes Your

Scott Berg

taking and my couple. on quarter, Adam Raul, congrats questions. thanks I Rachel, and got guess, I Hey a a nice for

as to have in particular to jump stood spend number wanted jump bigger help for from second model. I my understand model what back want your and marketing in it your I means, in with that far First, sales start out the the just because try sequential a you quarter. just than goes. quarter as to had It

Adam Ante

hiring a the that Yes. press the the we've of been that we've that and or beginning middle mean, in as additional demand the continued about first into expansion, year incrementally, well new quarter. sort talking sales as I bit been into some running, of of of in we is the layered it programs

And the of were so swing year, then that some last those November for in quarter period. programs full timeframe towards end really here full the QX of really the December in and

Scott Berg

Got it. Helpful. be And XX, understand, what us then these from a AI follow-up HCM these think question, impact on as days. newer the over we Help you the XX the all from space. are last getting XX, would solutions generative

the HCM opportunity. opportunities? looks there's do space I've a that benefit lot at of those from as a around I think the but technologies. you last investor sector couple on a think I maybe these have really for this can don't been all sniffing viewpoint, kind average weeks, a of of or How

Adam Ante

how releasing reviews write came us to around Sourcing it how applicant you out for into really the just it mean Scott, tracking. performance it associates. they're We've sentiment things helping not understanding, up we're think some brand-new and bringing last well. I years. for Sentiment other of their folks a couple as describing AI employees and and we're the the We're analysis, the that to how And for It's space like show us. and Talenya Smart I been in could Yes. see solutions the excited. in investing idea of

years been predictor and in the for the Churn has couple product well. the as churn prediction of last

a So, that's playing. that been been place we've

coming that's job real real description generators. soon, is or Something out recent

able line industry descriptions best quickly you'll so across our And enabling, some more customers more stuff be job effectively up and and practices. write us see more to from to it around

support And product, for then couple well. come of additional it there's And about we customers infrastructure, our course can for -- on inside we're are the to how our use it but of a other for internally that things, for productivity, assist drive the better internally thinking reps. of us as

continue opportunity it. the and excited making years really the last leverage to we're been for about we've couple accelerate to So, we're continuing of the investments to

Scott Berg

That’s for Great. Thanks have. taking my all questions. I

Raul Villar

Scott. Thanks,

Operator

comes Your Stifel. question. Please from Reback your with state next question Brad

Brad Reback

upper Great. in guys next guided yet, being to Thanks piece think about the recurring sort to but with year the very know starting comps place for there the business, some of pull recurring But roughly, much. revenue of and haven't I that teens next know as the you are the parts guided this we year? I forward. quarter, for a good is Thanks. of difficult because

Adam Ante

we to recurring any diligence different quarter, the have we'll drive going continue of Yes. give mean, guide right we're guidance, quarter we strategy through mean, -- period is to strategy Brad. it. still it and we to up. Hi, take we'll I In get how say, I to to our would the overall over to to margin expansion. when clearly into -- and our we'll first the I one a get shape level of -- in continue drive terms XX%

about now. strategy a be in right is changing, to of environment, the our But changing face that. And demand not of considerate we'll course have

going and a not strategy, that's I shifting what's to look opportunity. and longer differently macro think be broader any we for happening, that as the the at take So we think in the about in us But have that's think of the in environment, the composition, it. the broader business, to important structure that to see the material the make near way about term us

Brad Reback

That’s much. great. Thanks very

Adam Ante

Brad. Thanks,

Operator

Brian ahead. with Your Peterson next comes Raymond James. question Please from go

Brian Peterson

Thanks Congrats the a quarter. strong on lot.

I'd partners as just from the unpack is scale education? that geographic that are love those bit. just Thanks, become or portfolio it me. up. of the partners Raul, for quicker, same mentioned kind the kind in little curious, guys. presence to I'm So, the ramping you does you revenue product of to one a maybe the ramp

Adam Ante

as Yes. some timing, to take in. software are little layer I different we're that mean, going -- there a we of where partners bit are them

to see you our relationships, and talked the our the the expand a really little up. bit and historically, then bit stand both software that to we continue we're those And the have opportunity in might creating, think market exciting to so what and longer customers. then they're I providing little to a we're that take partnerships for some customers services of about

So, what a about in it been seeing is little enterprise the space. part of especially we've bit

those sort into a prepared take had the just little mentioned will broader the Some of like XXXX, up XXXX and beyond. of ramping partnerships revenue we bleed bit remarks, longer, in really into

Brian Peterson

Got it. Adam. Thanks,

Operator

question. question next Marcon from Please Mark with Baird. comes your state Your

Mark Marcon

Hi, or as being good within with that existing to and existing eventually talent clients going taking payroll up talent, up? to afternoon what's the client for big HR. plot is and right you one, to mentioned, could back thanks the ramp my now, questions. as Number regards it How Raul for end base penetrated

Raul Villar

I mean cross-selling base. into it the innings, in is the -- Yes. talent early we're of

we it back As clients. we've continued great to have to opportunity into expand our the suite, a cross-sell

And our so cross-sellers over new focuses a bringing solutions that of -- into team these client on have of we base.

And which there, penetration talked to good our it. one about of the Adam that It's continuing so, -- growth. is three and see we continue we're to driving lifts of components see that PEPM

Mark Marcon

it course But Great. form from in a of terms of revenue growth, in Obviously, as what logos new about in last filings opposed was cross-sell? bit the there. this little terms And quarter? you recurring just talk then thinking about there's year-over-year the over can of percentage to

Adam Ante

about PEPM Yes. one-third What opportunities. typically cross-sell, that growth is is Mark we the upsell from the Yes. see of from comes growth

we in upsells. growth from that's areas a that a see we so how in typically what It's couple you of of that's about one-third outsized the than might less little But this XX%. sort And think cross-sell, quarter. because the other

Mark Marcon

assuming $XX the what just Great. to quarter million of how revenue And the implied relative revenue was was million, terms we're $XX the – then the much year guide, in for much income year we're how expecting going million in float ago the be if to $XX you're this year? recurring form if to

Adam Ante

mean other Yes. I what of form to the quarters. low sort quarter recurring teens of see we then non-QX third in in high you that filings. And total our we're revenue get generating related normally is is single-digits especially and

period. we look which back little more the period, then we so moderated be and just QX high the of lower as the maybe a be And QX for one definitely were that QX in it to point two tends bit side here we'll in or at typically

Mark Marcon

Thank you.

Operator

And with question. our from question your McVeigh comes next Credit Please Suisse. state Kevin

Kevin McVeigh

the think just way like the Thank factors? any there maybe size? mean the the relative of size client's from the Thanks. much driving natural of How client employees, to I around opposed that in PEPM average the to to XX up Great. opposed average about growth as growth to you. as other XX. the I evolution PEPM client you think is Is

Adam Ante

much Hey, have actually PEPM. Yes. clients larger smaller a

a pay to is strategy is base buying they're see in three But solution. really like we happening on, two times basis what as clients that tend what's new of the as part micro on So pricing PEPM fee those coming because those to complete clients. the clients much more has in space smaller a that right are the larger

and clients So have strategy more they the bundle adopt solution tend our have. to They talent not products. historically of pick a up we that all

coming sized are clients client peers average they're the grow to those and buying continue we as size, similarly to products. on their relative more so And

So scale the little increases. to larger really dynamic. a power. It's they The get of as clients that bit not necessarily tend have the PEPM that's pricing

Kevin McVeigh

that? it force rate sales drive if And to should we slow sales going able going would or you itself, as kind this I to keep it. you we – be to How Got efficiency of be growth? sales of about the is revenue permeates it AI accelerates as at still force and maintain then Just growth guess more rate the the ChatGPT, force the overall? think in there hire more are constant

Raul Villar

way still out expanding The we we great are making sales force think progress. but it Yes. our we're is about

where it to different product, components would or the hiring acceleration more could There's make more sales that can drive continue the So or be that's a next point and productive through that rate. start whether team selling be after year of continued strong having drive win productivity. productivity. drive through a we we're decelerate year individual and that's help to whether programs the productivity, through lot productivity closer of more to can that getting And will more tenure very

how that's back yield the is And to have then can we productivity, the covered would so business. we we more as out territory kind margin of map which flex future that every the

Kevin McVeigh

you. Makes sense. Thank

Operator

ahead. next Your Please Daniel BMO comes question go Jester Capital Markets. from with

Daniel Jester

Thanks to about through and environment feels your their just that we the of what's And just concern local you being some the evening. customers, for like? Can for should formed It the of patchwork level you has kind of introduce and how AI regulatory taking with around how Hey, impact the see this forward? moment good this. toolkit wonder, going environment? regulatory you for regards reviews of into walking as hiring my question. spend rules much think us a I a that and there's an performance like are the And state

Raul Villar

top it. how been do of really what end, Yes. feedback taking the Obviously, we're the about from hiring for. And we're really we've Great on looking mind it's front they're managers we question. on and everyone's thoughtful on

is source, to scrutiny. an that has more to just select, it's So far not which it's area

it's coming then coach, And how review reviews careful very across. who their write? Does far sentiment evaluating review all secondly, we've Obviously, you're helping feel the verbiage we we continually been make on on to match and Is good kind frontline our legal the in are team helping on ultimately products of use. be with different and their laws leaders technology really jobs that that about sure select. the it selecting we jurisdictions. it as focused that in to And regulations Is performance not that so effective we're we're of really as those to the like and about is is the a trying performance the negative? more comply positive? frontline place But leader

Adam Ante

Hey, Dan.

working how explicitly of they're we state, so more good level to whether we're ethically think going we or come like the think that of it that and And of they that how exist about we about applying not customers I do intentionally We're inside in I are out As help that so sourcing, we and right? regulators mean, there's may feel interested that models it. important those complicated, to understand about things it's our understand we're sort may it's and to biases AI transparency think provide any and candidate it. whether what can it's transparency people federal

AI the I where the to leaders. of concern a on forward. But people focused ethically almost understand. for HCM that's that people about said into say we being It's When us continue us and primary not like drives I product would build hear product I they're an as responsibly what don't entirely sure we're see it. they mean, really it make excited especially and important folks. we want to

Daniel Jester

customers journey model you. second remind Got Can answer PEPM the we Where there? from Thank you. to one. shifting -- model? are are on there. detailed the Appreciate you paycheck per to a Maybe just the from me the the where we

Adam Ante

Yes.

of longer. really would SMB That focused micro going have market take most has shift to models. our clients enterprise XX in moved of we clients. our segment. when strategies take under that the in majority approach up and sort been the into the subscription So we call the the those bundle and mid-market We're in will what get over of to direct not that And we

intentional about current So is. more specific to just status because and their be contracts those billing -- how we want

they're migrate when And right over they're client, those more when or so it's evaluating. interested when time in for the products we'll

much going continue through clients. sort And in we those will over bundles. the over And the of terms well today begin to portfolio enterprise we're, into moving is of, so as XX% XX% mid-market revenue progress of how and that

Daniel Jester

Great. much. Thank very you

Operator

comes question question. Robert next Davidson. our Please state Simmons D.A. from with your And

Robert Simmons

Hi. Thanks my taking question. for

to speaking you revenue So how given rates revenue. approximates was float do kind growth? seem of of normalizes float when and stabilizing revenue think I wondering growth be recurring

Adam Ante

Yes.

around flat over sit should some year. growth or -- be were in still primarily. will rates the -- over this were there's QX first be into if they they terms say would rates effectively variables next next So environment I ultimately. if goes where where there that at of think will of in today rate of year course, to sit -- rate the I growing But lot And, quarter to a be normal they

dollars marginal couple just a with that more -- point I the XX basis growth And increase we're there's there's QX. going see into to mean here

we to of rate. a flatten with going there. we're ourselves of put going in not not different then out. next see You're We're you on chase try just curve going don't what they And of and to to if do. going at Fed's position. much would unhedged to to yield the But I think there that sort be look so change perspective sort has sort market the the aggressive deal course a But of it year

Robert Simmons

what then in terms are in And that? you're talk about Great. terms it. your of some offerings from competitors changes what Got fairly you or doing price of can like seeing anything of

Raul Villar

from There hasn't Yes. the competitive would last it's really any been say I fairly shift quarter. environment in static.

Robert Simmons

very much. you Thank Great.

Raul Villar

Thank you.

Operator

Your state your Citi. comes Steve Please next question Enders with from question.

Steve Enders

Hi. I Great. new the in here. bookings appreciate the quarter. strength Thanks or for bookings in questions the taking

upper market guess does And drive wondering execution I kind about of the think we translate that strength? customer different how quarter should the that across in Just how to sizes? this past

Raul Villar

our enterprise strong market grow at mean, quarters our SMB team. strong all segment our And three really team our segments a to rate. Yes. mid-market cross-sell team really of our I and had continues

the board across had in we all segments. the strong really So quarter

remain strong. ever rates it's deal as is strong win pipeline Our as And our been.

feel really we about good So we are the where in demand environment.

Steve Enders

that kind guess the last deal of digging and the I Okay. comment around into pipeline environment.

a of segments side on from on where I weakness I of micro continued the across that the if if was of side is it and you're the guess just weaker kind view any maybe some that the I bit quarter think softness micro remember pipeline there's into various the maybe some maybe seeing employee there. last it? segment little But

Raul Villar

get in bookings you're to SMB in like if mean, put you Yes. segment bookings on the average, of about to about so it under think overall Steve, XX. I going overall of our composition the perspective, X%

into You're cross-sell is going remaining XX% end XX the going and our to be to which in goes employees in low the enterprise. of get mid-market XX% from up sales, about

not that's And changing.

bookings seeing weren't segment they clients. so we large, growth been our in what the in and organic any distribution. in whether -- more the But softness fairly by where installed base the had And not so it's and consistent changes was -- mix, like we're their seeing our micro

Steve Enders

Got you.

No, me. question context last then for And Okay. very there. helpful

bit there, any much As kind across that new new How broader of coming more has talent we bundle the way adopted about year but in? bundle resonating customers bundle versus little or was a a it maybe where ago? I think is about appreciate of the today a kind to been think the being

Adam Ante

Yes.

positively. XX-point trend we're overall rate effective attach the PEPM rate, attach PEPM say, increase. movement change the And see X to continues to of not what's on the it and probably ago, versus that year driving to but up there's massive It's continue a the the We I'd positively. does well overall rate increase. picking it that part And ADS pretty to contribute a

Steve Enders

Okay. questions. Perfect. the for Thanks taking

Operator

from Ader SVB with comes question. next Your MoffettNathanson. proceed your question Please Jackson with

Jackson Ader

taking Great. evening my for Thanks Hi. guys. questions. Good

much becoming How between in guys pricing any the a and you first plays The versus and how customer up -- their But a And factor? end PEPM. competitors mid-market getting factor comment there is in made curious you enterprise? one. about on decisions? pricing customers that much difference either I'm your like-for-like is larger the how much pricing a Adam more bit scale just does

Raul Villar

see Well, power so PEPM size. any we -- larger have clearly, I category, just customers would I general it's Raul. and pricing mean, in And sales more in think in decline right?

has And kind as always It's and changed. It's been. it's of not that's it's similar, just nothing very accelerating. -- natural so

and would say every competitive individually deal negotiated. is, is I What

realized And so, that's between why That's you one maximum PEPM see right? difference component and available a PEPM. PEPM,

suite? how component. discounting buy? would whole the second the the they be, is component or And a they part One the buy of component many Do modules suite

think we've seen competitors. in no I that of any our so, and large, behavioral changes consistent pricing And and has been by

Jackson Ader

I'm -- as guys more is there some incumbents? And a Is actually I of order have it of been that curious Well, though. legacy their pricing a maybe you have been possibility from from ADP to you. to we've ticking share that weapon Got up? just rates hearing in use more take for retention because a to follow-up kind

Raul Villar

that we based focused retention, a deliver. that strategy do nothing ADP. retention at I that's does we've a that really after. with what different, prop, is what on think right? businesses on gone suggest been to mean, that of And would value have lot calculate so a I hasn't We've And number people been revenue Paycor the I how

Jackson Ader

it. Got

you. Thank Okay.

Raul Villar

Thank you.

Operator

your Pfau Matt state Blair. with from comes question Please William next question. Our

Matt Pfau

Great. Hey

was Just wanted hole platform? feel on what Verb in with to to ask an you you attracted important Verb the so options? that plug maybe one this versus other And Acquisition, why did Thanks. your

Raul Villar

from Yeah. perspective, from span minutes there's like of LMS children three the demand overall one an Most A things, an couple attention to shift ongoing three of long. is, my of Microlearning. have --

of gone. And want so, days the the probably we So right? market, going XX-minute make to is LMS meeting to courses sure online be that, training your're

want we people the so to and on then learn them and to technology provide And allow be it. bite-sized part of do to reflect you next-generation chunks of how and

being excited to female to amazing. we leadership add And were about that's really team. all team Secondly, our able them

cool us. And great for use needs in people decided was their a leaders we outcomes and modern product coach so that it a is really fit to our meeting of the perfect workforce employees better can leadership of the is that why a and the combination team to

Matt Pfau

Thank Great. you.

Raul Villar

Thank you.

Operator

no floor at Raul the I'll questions remarks. are closing There this you. hand so Thank further time, to Villar, for

Raul Villar

take conference thank contributing this to these results. Thank you, again to would to this like joining I for our opportunity evening. call associates for excellent our

focused our on business the of fundamentals underlying strategy. executing the by encouraged are We and remain

coming Boston look night, in the Media birthday, Melissa. and a in Morgan and with weeks. great the to over New to sister Consumer, Global Global Technology happy everyone We Communications J.P. Have forward and my Baird Conference York and Technology, Services at you connecting Conference

Operator

you. may today's parties evening. concludes that conference. disconnect. All a Thank And Have good

Paycor HCM (PYCR) 10 May 232023 Q3 Earnings call transcript