PYCR - Earnings call transcript Q4 2023

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Paycor's Fourth Quarter and Fiscal Year 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

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

Rachel White

Good afternoon, and welcome to Paycor's earnings call for the fourth quarter and fiscal year 2023, which ended on June 30.

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

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

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

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

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

Raul Villar

you and year discuss full to fourth you, Paycor's Rachel, us joining and all for quarter results. Thank thank

Revenue solid against increasing strategic grew for levers, and quarter coverage growth sales expanding execution namely our PEPM. our driven year, XX% and the the for by XX%

market. outstanding of thank We contributing in results. would delivered while to points the for of differentiate like these we investing further opportunity are improvement to associates this each in scale expanding I as nearly their also in to Paycor year-over-year, margins take and XXX basis our capabilities role that

leaders improving drive XX% retention business talent potential increasing is for unlock solutions employee of people outcomes. Demand engagement, performance. better that by and are our frontline which remains empowers the HCM unrivaled helping innovative our tools, Using and business to strong their modern, employee leaders

our increasing Tier to in sales hires coverage We X XX%. X against our in cities, the by to force XX% Most cities strategy. our team our in associates. Tier sales have XX% approximately go-to-market executed been from XXX largest expanded XX sales consistently of has Our in-market sales America

number and integral per sellers of motion triple seller, Sales refers year. of today. could over an and remained our the this to still the optimal influenced or coverage go-to-market our field effectively of even Brokers number part of we double prospects have we bookings XX%

continue to We as upmarket and, tend deal more a size solution clients strategically continued result, average shift nicely expand purchase to where to year. complete this a

these a growth win on are year-over-year. QX and quarter Our rates to announce our bookings highest we record. proud factors pipeline All and remain to record contributed robust which was strong, bookings XX% performance, of

We and continue modern year, $XX, powers equates differentiated or suite X%, people list to increased performance. that of a PEPY In to stands $XXX. HCM expand technology PEPM which $X, launching by and now the last at our

which we teams and applications. mobile their introduced single leaders a The new with to recognize team. both leaders communicate This to Engage, elevate motivate and empowers company month, news, platform how share across web is communicate employees and with solution

create and than This generator. we hire a of title intelligence Paycor artificial AI-enabled and job includes experience, solutions, attract description intelligence suite solution launched and ever to which suite our Sourcing strengthening solutions, required Resignation. strengthens offering an empowering integrated Further job artificial providing before. merely job faster Predictive our top the By also of descriptions, leaders will Smart compelling talent

our engine of differentiator is HCM a of modern development robust interoperability our key The platform.

API partners points the integrations and unique lead in added network of the nearly our number industry to API over deep extensive endpoints In needs. last year, clients' partners, our XXX meet doubled positivity continue to and the of with the we We available system. business most X-way marketplace

going 'XX, For on focus are to execution. to we continue fiscal

space SMB sales achieve our increase to in to margins plus this will frontline the cash with innovative well flow expand while leaders. us and Successful with revenue expanding target year. For us, continuing XX% strategy of that means generation position execution that greater free to this PEPM of coverage empower solutions share sustainable capture growth

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

Adam Ante

I'll and year our the discuss Raul. share fiscal quarter outlook and results Thanks, then our for quarter fourth first next and full year.

As comments measures a certain to my on a reminder, financial related basis. are non-GAAP

market our lower labor total last another to a expectations prior filing Recurring XX% delivering quarter year-over-year. form than strong an $XXX and growth fourth increase moderating line of in and quarter grew year-over-year, timing. strong combination of year, revenue posted XX% quarter, a slightly growth million, We due revenues with incredibly

year, XX% increasing For total million, the fiscal year-over-year. revenues were $XXX

revenue our bookings driven year, strong for PEPM us prior and the continues This growth be up new to by grew into wins nicely expansion. continued 'XX. setting growth Our versus revenue year, fiscal XX% business

up X.X prior surpassed customers. also employees more We year, XX,XXX the over X% million our on platform, than with

strategic the the resources Aligned of employees customer in and number XXX clients with segment, average greater per on our moderation As employees than from continue in mid-market continues the up stands upmarket XX micro we our this increased intentional to focus XX enterprise year-over-year. to size portfolio employee with while shift, employees, at our customer, shift increase now see last X% and and we year. growth segments in

from $XX increased to setting PEPM increased Effective by driven a quarter. to pricing year-over-year the record, for gains XX% and initiatives. just Net revenue cross-sale XXX%, new retention over

at pricing suite, and growth sale. of driven As initiatives by to product PEPM our we bundle is expand adoption higher continue the point cross-sales,

recognized $X points. an This we of basis average rate interest of quarter, XXX about just over at income on of effective million $XX client billion, funds

excluding margin basis scale. nearly and Quarterly as driving top consistent gross year. depreciation adjusted profit we've improved also line growth, we delivered In to margin, expansion continue points addition last XX.X%, amortization, than steady to higher to XXX

year. our to margins in our have experience continue this job model expand the we invest support customers We great teams done service gross elevating customer and our as a of for

revenue, invest revenue. in R&D team as On or XX.X% a to we invested continue share. sales million expense our capture year marketing market expanding was similar of and ago levels to of Sales $XX in or basis, we million XX.X% a gross $XX to

team Our create expanded expand functionality that consistently that deliver clients our products with as for customers. is new value efficiently and PEPM continues new and our we our features, resonate leader annually opportunity, release advancements which to

G&A expense was $XX an points revenue, improvement or million the basis XX.X% year. XXX of prior of from

points full year, business. scale year For continue basis as the recurring of the prior we revenue XXX the to G&A a percentage expense improved as over

remains with scale up margins operating nearly increased XXX income XX%, our intend $XX we XX% growth, margins to expand XX% year. plus points to of business. X.X% basis million, last Quarterly primary While the we adjusted objective revenue as from sustainable steadily nearly

basis full points continuing nearly income in adjusted year, the to almost sales up product increased For our million, innovation. key and $XX investments drive organizations to while operating service as as XX% make well XXX

generated quarter great a free so We've last during fiscal and year, the flow adjusted journey to target scale positive $XX our for achieving also million and for of achievement the for been the cash million We years, it's a X and business the the on transform us. year. milestone $XX to be over

or cash flow of points was expansion quarter this XX% an year-over-year. free Our X margin

the At with no expanding $XX continue to scale quarter, margin faster cash of the we balance increased close than debt. income the million flow cash free our expect business. adjusted as operating We to

fiscal remains Our positive. 'XX for outlook

is resilient to strength in our is proposition paying see to the attracting, highly HCM continue environment. great we demand foremost, as and and talent. value First retaining HCM mission-critical

Second, although fiscal this the labor tight, that year. we remains market expect moderated, and has growth to continue

declines Fed funds anticipates with moderate generate expect current outlook fiscal expectations, revenue the in the rate, of to half decreases 'XX. with funds income our marginal market we marginal consistent Even interest fiscal Fed in Lastly, second the in growth would year.

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

year, of operating million $XXX we million $XXX XX% of anticipate million the revenues $XX income adjusted For of end the full And the to growth expect million. at we top range. to $XXX or

At of the bookings growth data time bookings the moving as that some forward. the reaccelerated plan also would sales we not do front-end like gave to of engine. to into I note the success insight we provide investors IPO,

revenue growth our understand metric to most believe success. the we Now important is

our we as HCM summary, ever strong. are remains optimistic Demand opportunity in been. we've In as about

in HCM innovative solution leaders market. Our win that the empowers winning to teams to continues build

are focused scaling expansion. and execution, margin on business We the driving

market. we As application cloud, a growth HCM mission-critical still the is its early further to believe in that transition runway billion $XX for significant the in there

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

Operator

you. Instructions] JPMorgan. with of question the Thank line [Operator first Mark comes Murphy from Our

Arti Vula

Arti Mark is This for Murphy. on

quantify that you full First expecting that the from we question the kind about labor think of of or in guys you are on just moderating year in growth the book guide? Are headwind ready to is market. the as kind

Adam Ante

that low contribution is sort what year-over-year looking -- Arti, single-digit now we're labor for X- right And from the the to a now, market. at we're right X-point you're seeing the to quarter, headwind. like growth seeing no of

of On the guidance. same on we've level of contribution in factored the year, the full sort

something to growth. growth in bit full contribution single-digit low headwind couple sort from little headwind tune of labor be which versus overall X% a points year, market, of to 'XX growth, So less to the X X% the a of the will a

Arti Vula

in little suite? moderation, Got market it. patterns buying the of and talent are like seeing And kind for more among labor solutions terms any side the that of you just in of your differences helpful. then with That's super a things, customers getting bit talent

Raul Villar

outstanding continue We rates. attach see to No. actually

quarter-over-quarter. are still Our actually attach rates increasing modestly

sales So we difference seen the rates. of paid, dynamics, price any in haven't attach length or of buying any cycle,

Operator

line Sachs. question Gabriela of the comes next Goldman Borges Our from with

Kevin Kumar

expectations particularly context of This just Gabriela. little that's is seller 'XX, deceleration. a in Maybe of bit showing on guide hiring a Kevin of the on a kind one for for

just seller about hiring into So as you're we head XXXX. curious how thinking

Raul Villar

feel targeting. comfortable something guidance head previous is with that growth we XX% we're think I count we think that our

availability, Now a a upon demand that based in based few or can based flex marketplace, the seller up churn. points few upon points upon down

at significant So there's market opportunity. factors. there's still this different I a a we But say like look would of lot

share continue rates, available. really strong have opportunity to believe the is We win and we to win

Kevin Kumar

then, And the for the helpful. Adam, one guide particularly on guide, operating That's QX. margin maybe

I implies a little full of implies decline some maybe the improvement. I a bit And that year think year-over-year. think

the of? just on the curious should and maybe throughout of operating seasonality of any aware pieces be moving we kind year So expenses

Adam Ante

opportunity the grow. feel and full this of look out to came feel as Yes. still investments, about into we had discussed. we of demand some the here as year, to see And as running a QX. 'XX, But about 'XX, margins income we continue positive to interest like environment. I the we headwinds were some an continue really little make We those in positive into bit expand of we're to leveraging mean we momentum. on And the continuing we both

And little operating expansion a should so the the well to we're QX income growth in margin free on bit as and the to about expansion, going on little a there seeing good of just hitting we'll we're that see cash bit what We the that it's growth feel and which full of continue pressure as do faster. flow margin manage the be year.

Operator

Our the with Samad of next line comes Samana question from Jefferies.

Samad Samana

Maybe first you. one, Raul, for

is who Just the success organization up. have upmarket, you're of getting then that Adam? as average goes? And far of changing as is bit a sales little that follow the mentioned how bookings? a up Is maybe more you And the for changing mix customer I the type customer or of number hiring employees maybe per

Raul Villar

Yes.

upmarket. to So shift we continue

the majority field, greater the deploy customers our of to XXX in than resources continue targeting employees. We with

size into continue thousands and organization. And salesperson. haven't And effectively, we're see would the differentiated we seen time, need at sales this say employee point we with current XXX our I our that in a grow. for low competing from average so to a

not push dollars, if enterprise-type marketing into that continue range, resources suggest continue higher an perspective, were From a may expand we upmarket, to the that we're organization We're different going So sales there. cetera. to our to it our in et type, going and X,XXX-plus to future, our team. shift

the opportunity about the are talent really upmarket. solutions good pushing really and feel we resonating us and So

Samad Samana

follow-up. a Great. And then, just Adam,

maybe I'm ex interest growth guidance, recurring what you about if the could help revenue thinking you're us ex float curious just On understand revenue. or the

and how guidance how we items just into line about rolls the year So think growth gave? the full those should of you that just that X separate

Adam Ante

Yes.

year. similar our this XXX probably generated on thinking to the about income income, basis something full So factor couple we couple tried might as on for a points And year, as quarter, full you increases, interest we're about see of client that the funds. we're decreases. we into And guide that our expecting to interest

we you'll second and But of a performance contribution of to to the the year. see to our the So a overall the year, bit broadly, company. to and the of not say than relative that's incremental last half same then public will to cadence a as try going I we've in in course, half our of years going first think you achieve growth. And what ton of over to see to couple I lift marginal the as little want would guide keep been more our be a the able

a So we want we include labor overperform bit upside to the as little to market conservative, course, get growth, of year. the be bit into there's a in but not room, of little

Operator

Bank. line Shah with next the Bhavin Our question Deutsche comes of from

Bhavin Shah

uptick, in versus little are prior, of XX% to an chart, of driving seeing least you previously? just versus slide guys better vendors. legacy Raul, you're XX% looking at improvement them winning you And your trying to bit your what's of a in on incumbents maybe of from against? of they sources at kind Like were wins in sits terms their cloud any who it to noted customers than hold the closer change maybe looks now the versus while like deck, terms

Raul Villar

largest Yes. provider year. last Actually, this increased versus year legacy against rate our the win

infrequently against So we them. some continue them we to would with slight cloud increase from competitors, saw a very of the perspective. compete displacement a say I

our comprising them spiked solution. and primarily that But Paychex an regional business and X are literally, in with wins really We XX -- are bureaus, -- XX% with ADP. XX of fourth and they new see over bit an they're the wins some as in-house distant We a under are those X kind because generation. we of would sources quarter. PEO little And a month-to-month, legacy under really service solution, being say, see they're compete don't by takeaways large, of I the interchange up top

Bhavin Shah

productivity, it. about kind there. following mean a XX% I helpful guys count. this That's growth just sales Got you seller of And up type talked in of year, of bookings similar terms of kind head

about years? of see we over the of about the excess we can do growth do kind year? think next how seller of the in think And that And how growth? sales terms leverage of of kind over Just productivity when this recurring course we few in

Raul Villar

Yes.

count, of in a perspective because a is XX-plus So year-over-year percent really we actually a year from had first slightly growth in productivity head X-year the positive positive sales in our despite ramp. bringing people which you're

ultimately, anniversary to so we're started adding since And cohort we count, head FY largest our going start to 'XX. year from this

see to start of the we'll gains so productivity And some there.

of hiring still able increase our productivity year slightly And significant lot we're organization amount entire to despite But the sales for average of people. first adding cohort. a we've been

doing and our prior. third than year people doing year the So second are were they that more means

seeing still we're And just of in so natural that We're this unique organization. our lift. phase sales growing

as Paylocity example. XX% We're smaller than still an

we'll year leverage continue And in years sales following start sales And marketing think I this plenty so continue and see count. to we as to the over opportunity we and add to scale. still to have of head overall

sales And the with leadership some scale functions operations organization. a nicely larger sales and of sales functions

So to and we'll productivity. we're to at sellers drive that today. get continue And scale starting see closer to XXX meaningful we'll

Operator

Our of question from with Terry Truist. next comes line Tillman the

Terrell Tillman

Yes.

First in maybe question, sales Raul, follow-up the of productivity. it's to question, terms actually a prior

terms is are don't from sellers Or but last even year those the with not acceleration Xs, cohort starting markets. I going you're you there us is really idea this in end-of-the-year new like you some I see layer the to give some where you're of really growth, part potentially, of some though, each this going coverage? on know coverage? the some bookings Are any of there you're large good those top the in to that could Tier have pretty to like cities, key second get you XX still are you're keep adding As year, potential, and bookings? And of paltry

Raul Villar

I X in excuse to coverage points the We've Tier We're Yes. coverage start another with -- X me, I'll points. XX%. our X perspective. moved mean up

in it's would consider where would in would in and range the say opportunities I point, we at in equal on high just area the room based Chicago we've continue all a I we're percentile So I a like California, since across have as the sellers. territory. over Southeast, XX city. the we a little in And to longer say say to we been And we coverage. a go more Midwestern time in XX in have the the scale. markets XX markets to Northeast would it's lot what is X/X little add fairly probably still

across of opportunity higher similar subtly markets. all metrics Tier good see X Tier So some talent bigger, very lots in is the slightly than really we're one deal organization. The aligned to would thing size, other average the seeing in are success. the in But we a holding The attach purchases rate up. size, grow tiers. average with maybe continue of X to more the employee All markets,

Adam Ante

Yes. Hey, Terry.

terms faster accelerate even potentially to pace, mean I at thesis, that possibility continue In bookings of and growth sure. I is the a for think to

have really time lot in with at time and new look there to brokers we those cohorts out been for in important, to X added, the those sellers are relationships. building that opportunity lots of we've and the Tier the the grow. to markets, of a those the course, market And As it's have and cohorts continue of the

continue 'XX of there's big territories through lot of for opportunity. long-term in of really and cohorts sales acceleration marketing investments part that them why that those because we the 'XX, the investment in 'XX that that's come acceleration for sure. where lots we to that's a markets we that the of to The around think make part 'XX, think I have for and still do of X you are so thesis And those Tier

Terrell Tillman

That's very helpful.

to maybe, end to you, was of though that to NRR. round it's the see FY good as the of we that about both Adam, the ask For I Any was going how out directionally you XXX% on think on perspective question also breaking 'XX?

Adam Ante

Yes.

as we same-store 'XX some of from the from we've So the in to the saw new released course, FY or growth. some going that the on products of market the really into the head strong actions, mean That's I of bit to little dissipate. XXX%, cohorts contribution, A 'XX sales pricing our number. relative contribution we labor

continue press that that XXX% -- I to So our growth. wouldn't to not is management or our headwinds sort target pressure is going number, our to primarily, we a specifically net to to be To is there's target. on the labor of plus which those that against course, XXX% a will market But that XXX% base. of like mean couple is growth, put of get aim. retention the

Operator

Bergin Bryan Our comes Cowen. the of next from question with line

Bryan Bergin

the this First one, unpack the on if here. a just near-term outlook, can bit really you guidance,

at a in to you the guide, XQ how sequentially. rate in Looking the strong it it exited XQ. compared year-over-year flat relatively seems deceleration imply And doesn't growth

that what's driving to there. given the trying unpack just appear just different So different? What's comps too don't

Adam Ante

we're of headwind those here become going of form QX. form terms with And growth. losing revenues revenue to We well. will to into the you're in a I 'XX a just labor QX points as we're seeing filing couple continuing of deceleration, the Bryan, in market filing course. on pressure forward of that pull a see mean dealt

of bit the biggest headwind a that the for didn't necessarily that are sure. X little more our we up dynamics So in same Those sense have period. you're in QX picking

we a basis timing years maybe come did some going -- or we to would have that on bit 'XX, a for different normalized see larger we more prior 'XX. deals are In in were than than at through little

the as the QX And strength lot comes quarter. of of our through it largest some of bookings, course, so a in in

It's And us for a bit nothing so or of of I more just that those some larger mean, a bit little nothing a implement. segment little just deals upmarket new to as in mix different. take well. longer

Bryan Bergin

organic Okay. additions? list those client be acquisitions or to clear, related And are just deals to

Adam Ante

No, no.

of signing new mix continue just little client within It's mix implementation take to we market about. business. which, that the of towards squarely bit I terms those that talking of as up we we're more little we everything see terms in segment, to deals fits -- just yes, upmarket the our a more, to mean, business, In new continue in just again, longer and a bit it cycle. tend just strategy that end

Bryan Bergin

walk the and from Okay. then So Can I factors client I just just fiscal heard just Understood. fund you gave thought you EBIT if a And expectation the relatively similar assumption? fiscal margin a on 'XX remaining to interest of follow-up that margin. that And that drivers bridge the 'XX, there? you could clarify the expansion?

Adam Ante

Yes, absolutely.

terms points So we XX or client right, the income of points in basis basis about QX. of in interest interest, funds generated XXX

terms like will expecting a the as level but especially not in revenue, that, something we're marginally so to 'XX. full year, to to be similar And which of in same overall, on additive material not

expansion And on guide driving to continued as at we margin income income you for the $XXX full income expansion margin on adjusted million $XXX of of look up as operating revenue. guide, million operating year just our we're

as the we're amortization continuing rest build of And opportunities about in, then investments and to to pressure seeing to from expand, we're continue scale as the the think the those of some actually business. we

the margin, drive and in that see then to from We not those R&D and G&A. We'll from drive look margin those marketing. that we're out point. or You'll expansion similarly expansion at And expansion for the sales on continued then on drive out and of G&A investments. of to investments. this leveraging continued gross necessarily like And looking continue

been we've so public And capital in continue to outsized, company. consistent key think, with we areas, be a allocating as X those how I

Operator

line comes Scott Needham. Berg Our the question with from of next

Michael Rackers

for This Rackers on is Michael Scott today.

do about normalizing in Give a think it color the maybe improvement a you year? that. more You And upcoming you where little fiscal And in do attach. quarter-over-quarter on bit us think slight the rates withstand most how mentioned attach then can

Gap] [Audio

Raul Villar

you we lost Michael, attach. after

Michael Rackers

that. about Sorry

Raul Villar

that. worries. Yes, Sorry no about

Michael Rackers

most guess of growth FY wondering where connection. about think normalized expand the attach was in PEPM effective think how then But should just the you can kind rate, And growth I rate? rates we 'XX? Bad I PEPM

Adam Ante

Yes.

we continuing leading -- it's with attach, engaging mean, and our leaders organizations of Thanks. across yes, about performance focus continue think their the recruiting. As strategy think really about our management talent about around to how we business, to opportunity talent, they and expand Michael. as I on manage OKR, --

And so focused talent you're that on management.

The think lots there. be to well. that that there's We rate growth already. of room a attach of lot lots seen as there's of continues for We've strong, us and we think there headway

even module, I our we our continue But mean, expand about think on core. core platform, core we as that to that,

and so been things ADS, us our combined you really to size lift as to those and enable PEPM average look our our expand. continuing of our deal at overall story ADS, And both part our of that's

our also, see not, because we bookings. not offer don't we or management sort not we should more there or investments. headroom see our clients those management of in or of just benefits whether base to grow and the management solutions or of the We with and our with same talent need continue course, in But see solutions level as and workforce attach make expansion. client the the to of Those that continue of benefits administration. strategies headroom We workforce don't same

Michael Rackers

done you've great of that. job then And a

Raul Villar

Michael. Thanks,

Michael Rackers

Yes.

Raul Villar

ahead. Go

Michael Rackers

Oh.

about Sorry that.

you as have for end reps a larger you or upper done end reps range? reps specifically your adding great Do of enterprise in these strategy of move cities. like Tier plan your upmarket is targeting there? the or adding on You've But accounts upper this job X what

Raul Villar

that I size we Yes. today the reps of focus prospects range. on the larger mean, have at end

by targeting So are that that geography.

market, target others we above lower low above thousands, reps the field So end the into above that target in have XXX, and XXX our earlier. of that mentioned XXX I the organization, as

Operator

line comes Our Stifel. Brad next with from question Reback of the

Brad Reback

little there is into guide? Adam, income a XQ any are to trying if op figure the OpEx, just $XX Revenue million I'm up deeper year-over-year, the items. like onetime OpEx out is flat. but can we dive

Adam Ante

product I key QX sales items we in onetime necessarily. that through R&D, pull headwinds the no back that we've there's seeing of that, revenues, mean of and made we've some I we're even of to -- mean and on marketing specific new been some investments Yes. we though those to those want didn't sort investments. talking expansion,

layer that the have we'll to think to see have to in over that continue also year. expand of I And new speaks that the the opportunity a balance and of for we revenue for optimism to outlook margins the we the the better rest business we as that year continue the

So we see broader investments of on it's based more pull that just in right demand those a ongoing to really and market wanting back the the not now. timing

Operator

question line next Our Raymond comes from Peterson the James. with of Brian

Brian Peterson

recorded folks. So talking I've a should because using annualizing marginal that Or you got run say using on the kind XQ it 'XX was be and to that of be for clarification from Adam, just you a for are interest year? I next just year fiscal for about clear what you in -- fiscal couple additions, When income, we rate fiscal are 'XX? talking and of taking that. year want about

Adam Ante

here Yes, QX, points think. XXX-plus in to see In QX, of basis point, we closer, sort right? It's to be going of the be will off what course, I yes. jumping

going you're more a see so And as QX to line point. it in stepping with off

Brian Peterson

Okay. All Raul, for right. Got clear. it. maybe And you. one That's

get there significant how X Just on to versus a the that. other think in ramp Just curious rep you color that is a to Tier speed looks sales the difference full as for in markets? hires, productivity about ramp from

Raul Villar

The to very haven't tiers. point on we this is the all averages time. and ramp seen I similar in mean, No. that markets seller across all

Operator

Mark Robert the with Marcon from Baird. Our of next W. line question comes

Mark Marcon

to that float would expect you So just recurring with balance, line in Adam, terms of the grow basically in revenue?

Adam Ante

expansion should and management like little growth benefits the recurring bit workforce stuff a necessarily of float employee that growth line revenue, course, grow actually funds of and includes than drive because The the in with the don't more recurring balances talent client growth.

inflation So seen course, what and the broadly. in the minus a wage more plus which, you more little on inflation, wage employee is growth would or some we've focused bit of data it's then market expect of

Mark Marcon

regards been consistent quarter the basically everybody Okay. margin you Great. asking with fourth of gross because expect questions fairly to then in kind the stay And of one that, has to margin would level another year? this with of QX the fiscal

Adam Ante

wouldn't operational Yes. to gross the margin guide margin business. on margin, I don't by but scaling we broadly mean, mean, of is our that â€“ continue drive I to gross gross I course, expect aim expansion to

are at investments margin comes no And is with course, different onetime is lined seasonality, the primarily pace. that a that gross so there but some our there or And with up of gross would growth. incremental customer margins our that numbers, business drive

So our in numbers. anything expect wouldn't gross I margin abnormal

Mark Marcon

then can a having got And continuing would of those? specialized that bit describe clients you to with just How connection you're the share partners with packages those? those? servicing you the how were see you growth industry. also, you by And with gain Did you've stronger about dual the to regards other talk your important Great. Are with? little importance

Raul Villar

Yes.

perspective, XX% key bookings really So is And an Mark, in line it's of X over of our Raul. part growth come it rates. that's industries, from cornerstone a go-to-market. our our From industry the with

is then there. solutions, And and segments. really And in deliver to seeing driving solid partners. integrations understanding we're X So nomenclature combination building those to our effectiveness it's industry-specific key their that continuing really about participation their overall what's

Mark Marcon

sort and people markets, describe share? Great. up Midwest? productivity, who've seeing to Southeast the been perspective? ramping And from how a and experiential not core you productivity you're sales well the the the you incremental are gain what would you well-established in quite while terms of your around of for the And there? you an continuing can could established in necessarily of describe you Are What gains -- both are and seeing Raul,

Raul Villar

performance Midwestern stalwart really, our Louis. Yes. mean we I some like had of and we've great St. have in -- cities Cincinnati

And we see X strong so most them what call would really are Tier markets. to we continue and of performance

so to really to our And there. think designed, and strength of as take I advantage continues that continue we operate

that well of tenure excess are. obviously, you productivity at From in are an months, tenured. perspective, are kind you are of full million selling of who we the you when overall And people have XX end seller get X that to

really significantly we're the so in average. outperforming the seeing where growth sellers the And we're tenured really line seeing organization

that our help us to excited we're to to long-term doing out will continue that in which and improve productivity. performers average, scaffolding we're to our build so and about And the going that, solid continue line build continue are organization

Operator

Our line the Daniel with Capital BMO question comes of Markets. next Jester from

Daniel Jester

Great.

'XX that on are to the Raul. more I in building maybe last of to in you've Just like years? I mean, productivity in sales couple the guess made? just seller productivity get the as increase maturity force investments guidance comment, you of sales what you around productivity relative shouldn't terms And embedding sales continue

Adam Ante

and why time. learning are at productivity, who would book. And to you're when what building previous sellers absolutely drive newer the that's cohorts, it on of Daniel, in they adding and the in expect continue their the the over terms other right. cohorts, we productivity XX%, of you're as thing the weighs when The expansion Yes. productivity, at continue force sales you just sales to grow continued absolutely. we look overall yes, I That's mean, is the

In 'XX, not of productivity or we're terms on se. per improvements expecting impact

continued into and all and that we through Of and expectations environment we how course, not sort be think anything continued of say our bookings in we manage not for the we have We're that that and risk would to we guide. bookings of in bookings of And demand there's over revenue our how generate expansion what or expecting expectations appropriately we're our including adjusted. would visibility components guide is 'XX outside much have growth. the of I

Daniel Jester

expect on we how double-click than expect at think you you improve kind operating color translate free of Great. to you rate And then to cash to a faster as fiscal maybe margins? more margins. But that should I made in can 'XX? a a little that just them comment flow

Adam Ante

Yes.

couple a years. related to don't the those the key course, cost to get Of -- the sort over of investments sales pieces that items get of fulfill, X and amortized and are amortized capitalized and that or

our flow scale And the free operating So investments. business the we're cash on so now, right? impact out of on income, amortization benefits that and leveraging we're of it's as the builds as driving of those into here picking some up adjusted an same less

we're continue we're business. as what and out So income investments we you'll just investments, investments But the you'll operating see to -- to costs making, to of see better scale fulfill expansion, of the the continued driving going to we're that see adjusted at. start some the leverage those R&D or that's product

So through to at faster just slightly that those margins. a flow expand will flow see going you're cash to start free to clip, which

Operator

Our next question comes Suisse. from the line of Kevin McVeigh with Credit

Kevin McVeigh

headwinds. may a the relative 'XX. thinking couple growth pricing it's looks a are 'XX? ring can it less you know. you it to 'XX XX% the little like about just like basis right? just XXX Great. just deceleration? This it at Adam, I versus the It just sounds And of what from XXX, other Adam. midpoint, there, some revenue XX% in there's don't unpack I'm conservatism for be about guidance if components fence maybe in Is of employment Can points the

Adam Ante

interest of 'XX. strong picked growth pretty course, up we income Yes. of a from in contribution Well,

And so of see on of points income saw that not from And growth about you're that XX%. 'XX. to into X we growth level contribution interest going

X those of And the drivers. are so numbers, biggest course,

We're seeing We're we're 'XX. 'XX. a just points, maybe in couple growth rate interest couple, going the see And income a of in to to then -- of points about contribution those headwinds form labor those putting about, the some headwinds especially that filing about of talked we year. first seeing the pressure, that you're talked we really that X market half are on of

factors. a So key mark of -- couple those key are the or

the guide, not we change of are into guidance to last the of then, our get philosophy couple on course, years. as versus And we looking

And in want be course, of the to to some consistent, continue create that we the approach space overperform us to we want we year. where throughout so And of can. for to

Operator

the Our question from Steve with of next Citi. Enders comes line

Steven Enders

continuing ask investments over in look to think the guess, increase want we on here? And how do I areas? make here. I Tier the is Great. should good next expand those there of will to to what much that X couple Okay. X-point years like room levels those But and you're about more how

Raul Villar

X today, we in markets Yes. at roughly sit Tier the I mean XX% coverage.

into So the Tier each of X And X markets. to we could to count the that more than head double the going go these markets. again, continue sales will The we in we're Tier incremental majority leverage. year add organization

drive think -- Tier productivity. to going in continue we we're pragmatically I runway and to these long, is resources So and the deploy think X the markets

Steven Enders

for Okay. flow that That's dynamics here the in similar And just sure like XQ float talking context to maybe I guess the way you're helpful about make about there. want guide, then thinking the income a level about in year. be XQ came the Or there that and what are for I similar it that's like factors should kind for? right like for mean other here? of accounting is XQ through we

Adam Ante

mean, I I think No, be should fairly quarters. Yes. the it consistent between

going you're sort going points -- You're not mini of at level, you're XX not gonna swings. When not see see swings. of material the level same basis much to see changing we're just swings, this to

So quite we to were I think QX. in similar you're going where to it see

Operator

next Our Robert question the with of D.A. from Davidson. comes line Simmons

Robert Simmons

a So bit expect to to thrown last filing by to form the we this continue was that expect year? of normalize shifting Do year, that bit. off more seasonality cadence? should back you a your around little some fees Or normal a

Adam Ante

in some you're a cadence probably bit like of of with going to QX a prior Robert, -- little I more little still. think bit see a outsize that a year

QX normalized think services of in talked not filings and implemented revert just spread go to to going going and throughout environment of quite quarter some we sort a some away, persist. more much become as to So see to the form year. pricing begin it's that that last will the a as we about headwind you're But and new I

form less well. that QX services be elevated in still we've and products little at see of then because we'll bit QX. the but of might remain a slightly and And more consistent, as a level So QX filings actually the some offered

Robert Simmons

Got it.

on you sense. entrants it change Are kind the on what price last makes the quarter, terms at but think That then of subscale? they now that you pressures so? just up all? have matter getting competitive you the things touched of down? you newer over but the maybe competitive Or not pretty up are they're landscape, like size before, seen or year still and And in over And Okay. to do last seeing

Raul Villar

We definitely don't see new any entrants.

obviously the see that We changed still most. from has ADP, Paycom Paylocity, perspective. nothing So

Operator

Our comes the next Ader with question line from MoffettNathanson. Jackson of

Jackson Ader

Great.

Raul, I follow so one, ADP just on picking win at you first up made up. actually, if The rates about competitive the comment can

Raul Villar

Yes.

Jackson Ader

to particular success year it Was just similar you like this compared winning more against -- with type this of upmarket to saw more ADP? that last customer Any Is year?

Raul Villar

tied increase really or ADP mix is and to primarily and it overall X Yes, X, a the good It by from point upmarket. question. was

Jackson Ader

in a half in maybe kind next front-load like things the of can lot Okay. while as of thoughts decisions Adam, of see look linearity? continuing the makes sellers. second the you X, months -- X at invest a Like we right. about make All what sense. given about And we've the here looks That the economy from talked what to will and you there? take any kind have But then, and like to the then year

Adam Ante

to well then to tend year. we Yes. through we're mean and that look continue considering plan about as I opportunities definitely as through as we're a more and performing we retention we go trending year. we the make the then mean, of course, how is I it. we adjustments And seller think linear we is that it bit how And for as those how internally. go little

January as Also, really own terms is that about the of in seasonality January. a we in a think us new we market our of start important for business lot month in

we larger we see in mean well. win. clients Of some I January to why losses same for course, want of the they leave as our reason

too too get and we that's before that so we to much January trigger -- how see like do on anything trends really the pull outsized. through And

make how of how mean, So it. We sort the I we we decisions think is think think how on -- saying it of it you're then is and I trending. linearly sort about about business

Operator

line of from with William Pfau comes Matt the Our next Blair. question

Matthew Pfau

guidance to first relationship and growth Wanted 'XX. Great. for ask bookings your between on fiscal the

forecasting, what XX% of So bookings there you're looking and bookings growth? What then growth FY revenue the 'XX, look at for recurring around revenue for it's delta the probably implied drive forward if sort up And XX%. was are you then, guidance the 'XX. factors that recurring that between for fiscal growth

Adam Ante

There's Matt, we dynamics, of the think lot of there of as as we a factors the that about course, couple rest a business. about think growth. are of of components revenue the just

are course, losses of talked retention talked filings Client have form there's And And through, trending piece business we've plus discussed the how of is like that. or as that growth well. and of sales the then, that the we New it. client we like base component market pricing a we've through. of that things a is our then market labor other labor growth dynamics

And that there's sure. our just expansion that reason see And possible there other our executing some should are growth X term, Tier part strategy, like no I we in we there that than or, faster need and to those revenue for dynamic. that, and can't it's so And the that to been we revenue continue sales our course, of â€“ today think mean, keep creating headwinds dynamics, discussed. in growth. market are of to want and bookings be accelerate we But discussing we've expansion longer

Matthew Pfau

And then just for one it. me. the Got last

relative to to of income interest investment how to I more But flow you'd flow expecting the be income you're that we of another operating guess, would income. specifically. it interest that Maybe people to just if at I to versus operating expected update QX, about about implied think look down income. sort down us have letting in on question perhaps guide thinking the, QX Sorry ask

Adam Ante

continue continue to aim. is fuel recurring expand Yes. today I how want our expand so working the environment And also a we make our see We and to basis. the investments. those income leveraging that the manage want mean, so interest the the continue strategy, given continue in to we -- I to we mean product demand. we ability and to That's to market, margins see on is prudent the to our we think which and we're And business.

investments what goes see pull extent term, does, not the that been digital is a we're be new about we'll product the expansion, be drive those investment, intentional incremental the to that really new it maintain to And more to but that up interest from to to what product we longer around management investments, brand able which then innovation to -- specifically competitive programs, the our drive marketing expansion accelerated back advantage investment and perspective we that, that term, which which consider on to get around that income we've to extent in buckets, is in towards set our product again, away, near space. making, functionality

And that to continue so those are the areas in. going invest we're to

to was the disrupt we disrupt pull think back and on how running of saw this prudent management year, it we for on from how those and last cycle, came in based that they're again, cycle, product that there. and what bookings performance year our full we're campaigns the and year, investments didn't about year, we're for sort And the thinking going through investments our the innovation disrupt to how layer in marketing

we're forward. those, about in going continue we've wanted guide wanted keep of some prudent we at even our to at our you the to as And guided expense philosophy course, that we here then, QX. been same philosophy, And guiding I how look so that pressure margin think that and to and of we've of

same us through 'XX. as hopefully, the So we see you from get

Operator

the comes Siti question Panigrahi next from Our line of with Mizuho.

Sitikantha Panigrahi

one questions of been but said. Most dig wanted have just comment my you asked, into to

average upmarket deal moving are size. You

how differentiate So against you competitor? What's helping you do from win your competitors? your

Raul Villar

the HCM wonderful our But platform. would company marketplace some is the And simplicity things. cloud of say are differentiate combination we to that every of a there's us is modern areas think I mean, key unique. of that I platform, Yes. thing sell in I the the about

inspire best-in-class talent effectively. helps source, people and coach, manage platform employees a that have most We onboard,

focused we're platform we drive have So most And to then enabling leaders the on open in and really people performance. HCM.

that customer other the with HCM us. integrating if they definitely record So system select is it a of going to and tools interested and they're taking key use,

Operator

of Patrick Our Securities. with last JMP question the line comes Walravens from

Owen Hobbs

Pat. Hobbs is for Owen This on

that moderated? once moderating moderation seeing So if of all verticals in to at labor kind growth, if was you're by different I it's wondering kind that going or difference of any back force

Adam Ante

slower has And Yes. mean sure. bit a then I sort some services That's recovered in Owen, of slowness, we little around bit bounced little see it matches up to and seeing for Professional marginally. we're actually the a broader they and what market. ramped health have they normal a a they bit those relative care food broader but seeing look -- little in still in sort and been market. slowed, to beverage earlier -- the have we're 'XX. And of manufacturing. faster

see yes, a bit So of we those little do dynamics.

and the a economy. average mix of Our portfolio has represent does the overall good

dynamics. of same those So we see some

Owen Hobbs

based how patterns of the you but obviously, then kind is And this on last? historical long indication doing you headwind on guys analysis can't there will are Great. predict any future, or any

Adam Ante

all everybody's has consideration. big we expecting a mean at feels macroeconomic right? slowdown time, year. talking think like players, this been I guess, long faster it a we've for of into look market all and can you been the it's and from about certainly Yes. And forecasts a for more that the take I And those than

experts has more and/or decline which fact single-digit as thought prudent that further decelerated. compress it's labor are we those or to plenty our plenty go and mean macroeconomic it a I little based sort There's compress of the market's And and decelerated, that that think in projections be is been bullish. guide going if say Labor to predicting, of conservative varied. the are negative. as on is bit there's what in who's to that market We've today. growth has tried low growth going we're to

included and have how but to been dovish folks we've is that prudent. our a leaning moderate think guide, much lately, which I in bullish think in more bit little we've tried we be

Operator

closing like for question-and-answer to I'd it our concludes remarks. Raul That to Villar back hand session.

Raul Villar

for remain of opportunity front in executing about you attending Thank our optimistic our focused remain the on We again earnings strategy. and call. us

the Technology Valley, Technology Summit in Communicopia in in the Francisco connecting New weeks. Conference Tech you the San Executive and Citi Stifel and the Global Deer look York Conference at to Goldman Sachs forward We with coming in

if As have to Have reach great any questions. evening. a free always, feel you out

Operator

you this gentlemen, participation. conclude for today's your does and Ladies teleconference. Thank

lines at a your wonderful time, disconnect may day. You this have and

Paycor HCM (PYCR) 16 Aug 232023 Q4 Earnings call transcript