All right. Thanks everybody for, for joining us for second session of today at, day one of the, Citi 2023 Global Technology Conference. I'm Steve Enders, as part of the software research team here at Citi. With us today, we have Adam Ante from, from Paycor. Adam, thank you so much for being here. Yeah, thanks, Steve. Maybe just to start off here, you know, maybe just give a little bit of a company overview, recent history for some of the people who might be newer to the Paycor story. Yeah, sure thing. So we are a HCM software company focused on the SMB market, sort of 10 to a couple thousand employees, is how we frame the market up. We, you know, really help to modernize all aspects of the employee management lifecycle, from talent attraction, recruiting, onboarding, through performance management and performance management of the organization, including OKRs. And we, we've been... We're like a 30-year-old startup company is sort of how it feels. We were founded, you know, 30 years ago in Cincinnati. And part of our strategy has really been to, over the last four years or so, really expand outside of the Midwest and get into the rest of the country. We've executed on that strategy over the last handful of years. It's a pretty competitive space, but what really differentiates us is that we're focused on building into leaders, empowering leaders within organizations. We've really invested deep in talent management and performance management. We've also really built out one of the most interoperable systems, meaning just the ability to connect to any of the other pieces of software and solutions that you're using, that have to do around, you know, sort of employee management. Okay. All right. That's great to, great to hear. Maybe you can just, like, walk us through the most recent quarter. I guess, how have things changed in the macro landscape? And maybe how are they different today versus, you know, last quarter, last year? Just what's kind of been taking place in the landscape? Yeah, I mean, we sort of think about the market with two dynamics. One is the demand broadly for software and HCM solutions, and then the labor market specifically, and how the labor market from a more macro perspective, is growing. And over the last, I mean, the last four years, really, has been pretty interesting in terms of the broader macro labor market growth- Mm-hmm. and dynamics. It continues to be, like, an incredibly resilient market, the labor market. But we've seen the growth slow in the labor market, and our revenue model is built on, you know, the number of employees at a company, and we bill them for, you know, access to the software. And so as that growth has accelerated over the last couple of years, really catching up through COVID, we felt a tailwind of a couple points of growth. And over the last, like, really in calendar 2023, each quarter it's been slowing, and you could see this in the broader, you know, macro, non-farm payroll growth rates, getting down close to, you know, 1%-2%. And so we felt that pressure just in terms of a slower growth or less of a tailwind. Mm-hmm. It hasn't declined necessarily, but we've just felt, you know, a little bit, less of a tailwind from that. From a demand perspective, it's been really strong. I mean, every company in the country has to pay their employees, or should at least. You can't do that for very long otherwise. And so they... You know, our solutions really work in a growing environment or a recessionary environment. Nonetheless, you still have to have the software. And talent, you know, as a solution, as a focus, has been... It's one of the top risks and execution risks that CFOs, COOs are thinking about every day, is, you know, managing talent, finding talent, and keeping talent. And so we've been able to capitalize on that, and I think that's kept demand broadly, you know, fairly strong. Okay. I do want to ask a bit about demand for HR software, payroll, especially, you know, coming off of COVID and all that. I guess, how has it kind of changed for you know in the past three years? And how were you able to help your customers manage through hiring challenges and everything that happened with the Great Resignation? And I guess, where do things kind of stand today in that regard? Yeah. It was, it was interesting. Right during COVID, demand for everything stopped. I mean, generally, nobody bought anything. And we found a talent solution. We already had some talent solutions, but we found a company called 7Geese that we ended up acquiring at the end of 2020, really before this sort of huge talent issue came about. So it was a little, you know, lucky strike for us, I guess. And when we made that investment, over the last three years now, you know, our talent suite of products is now the fastest-growing part of our portfolio and makes up a... Payroll and HCM core still is the number one in terms of total size, but talent is now the second largest, and by far, relative to workforce management and benefits. And so I think you see that, especially through the great resignation, as folks were trying to hire back, they were losing a lot of employees, great employees, too, for potentially huge changes in salary or opportunity, all that sort of stuff. When the executive teams and managers across the organizations were finding people, going into 2022, they really did not want to lose anybody. And I think that's part of the reason why we're seeing the labor market be so resilient, is that you just- you have companies who might be feeling pressured on the top line, who, in 2020, were quick to cut and get down to, you know, the right sort of capital level or whatever the issue was there. But they're not making those decisions quite as quickly, now. So you see, you see hiring, and you see, you know, continued hiring, and less, you know, terminations. You see it larger in some of the larger software companies, and I think those hit the headlines, but the majority of the U.S. is not, you know, those companies. It's SMB organizations. So talent, access to talent, managing, managing your pipeline of talent, and then once you are able to onboard somebody, really then, like, being able to do performance management and one-on-ones, and drive engagement through coaching and... you know, people management- Mm-hmm. - is what we've seen be, you know, really successful over the last couple of years. Okay. And I guess as we think about the pipeline today and the opportunities that have come in, has there been any change in the modules that you're seeing adopted or the mix of, you know, adjacent products that you're being able to pull in, based on kinda where things are in the market today? Yeah, we go to market with really four key solutions, and we have other, wraparound, products as well. But four key modules where we have our HCM core solution- Mm-hmm. which includes payroll and HR, onboarding, analytics, and everybody buys that. Effectively, every new customer buys that solution. Then you have our talent management solution, workforce management, which is primarily timekeeping, tracking, scheduling, and then benefits management, which does all the administration. And with benefits, you either offer benefits or you don't, and we give our customers the option to be able to use another benefits tool that they might want, because we feel like it's a competitive disadvantage to force them to use one tool. So we enable them to use other benefits solutions. And so I think, like, the adoption there is probably where it's gonna be. It's not gonna accelerate necessarily unless we make, you know, a different decision on how we wanna go to market with that. On the workforce management side, it's a little bit of the same. It's a little similar in that there are lots of vertical-specific time tracking and timekeeping solutions, workforce management solutions, like in healthcare, as an example, that has its own. You have lots in restaurant that are POS-focused. And so, again, you either need it to track time or you don't. Nobody in here, you know, has probably ever clicked into your time tracking solution. But on the talent management side, we think that every customer, you know, needs to be managing their employees. They wanna manage their business better. They have, you know, the opportunity to manage their through OKRs, their organization. And so we've seen a really strong adoption of that early- Mm-hmm. - and it's progressed over the last, you know, couple of years. It's gone from maybe 25% adoption, 35% adoption now, as we see that, you know, early success- Okay - on that. If there are questions in the room, we'll make sure to get to those. So, yeah, feel free to hop in where it makes sense there. I do wanna ask across the HR landscape, you know, it seems like both you and your peers are talking about decelerating growth, at least on the subscription line, over the past year, and kind of expecting further decel going forward, at least based on what you're guiding to. I guess, did something change in the macro or the demand environment that's kinda leading to that? Or, like, how should, you know, investors broadly be thinking about what that would look like going forward? Yeah, I think there's... There were some tailwinds, and we're not seeing the same level of tailwinds- Okay. You know, coming into 2020, our FY 2024. The last two years, we grew our subscription revenues 22% on a recurring basis both years, which, by the way, is it, you know, there's opportunities to continue to grow about 20%, which is what we wanna drive to. Yeah. But, you know, we're at the early part, the earliest part of our guide, you know, looking out the longest part of the guide. And we feel some of those tailwinds that we, that we enjoyed in 2022 or our FY 2022 and 2023, we don't see the same level right now with the labor market. There's also, like, some very specific things around, like ERTC, which has been a marginal tailwind for us, and, you know, it's gonna, it's slowing down broadly, which is like a tax credit as part of the CARES Act. And so that's starting to slow down. Then currently what we have, like, as we go into the earlier part of the year, is that we have, we've picked up a couple larger partner deals that just take a little bit longer to bring over. As we continue to sell more in the mid-market and the upmarket, the larger end of the mid-market space, those deals tend to just take a little bit longer to board. Mm-hmm. You have, you know, a really strong pipeline set up right now for January, but all of those dynamics are sort of pressuring Q1- Okay ... specifically. We don't think that there's anything beyond the labor market, anything more macro or structural that's changing in the market. So it's really about the labor market growth. Okay, gotcha. And so the way to think about it is that maybe next couple of quarters, because some of those larger deals that have already closed just take longer to ramp up, there's a little bit of a gap there, but then second half of the year, it's already booked and well set up. Yeah, I mean, that's why when you sort of unpack our guidance and, like, what we've done over the last couple of years, it would imply that there's, like, some acceleration through the year, and it's really driven by that dynamic. Okay. We have, you know, that business coming on in the back half of the year. Okay. All right. That's helpful. Maybe switching gears a little bit, I do wanna talk a little bit more on kind of the product side and, you know, PEPM, module adoption, and I know that there has been a ton of innovation that's come out here. I guess, what's kind of the bigger areas that you've been focusing on from a new product perspective, that that's now coming out, and how do you kind of view the levers of further PEPM from here? Yeah, I mean, as you can imagine, it's mostly around talent management and organizational management capabilities. We don't really have any gaps, as we would call it, against our competitors. We have invested in things. The last product that we added was expense management. That was really a gap that we needed to catch up on. Mm-hmm. And since then, we've really invested much more deeply in talent and capabilities around it. And so when you sort of compare from a competitive landscape, we're, you know, complete, complete in a sense that we're, we're all covering the same capabilities, and then we go much deeper into this talent solution. So we, we continue. And now with the onset of AI, we really enabled a lot of AI capability within the talent solutions specifically. And I think as you look forward, that's where- really where we're gonna continue to probably invest the most- Mm-hmm ... will be around capabilities like, you know, to support recruiting through, incremental AI, which is an investment we just made, called-- now it's called Paycor Smart Sourcing, to talent management, and you can get into things like, like mentoring or coaching.... through either partnerships or building directly. So we're gonna continue, I think, to focus primarily on that talent space. Okay. Mm-hmm. So, we're gonna have some more time later on AI, but have a few other questions before digging down there. You know, you announced Embedded HCM, I think, last week. I guess, what is this? How does it augment what Paycor is currently doing and versus what was in the portfolio before? Yeah. I mean, it's really an incremental go-to-market strategy that enables us to get to market, after... You know, we sort of split the market up into a couple different segments. The largest piece really being what we call regional and in-house providers. Mm-hmm. These regional and in-house providers make up something around half of the entire market. So you have lots of software companies that either used to provide payroll, or they're providing it right now through a third party, or they've built their own, and they're trying to manage it in, and they're losing effectively. They're losing share. I think that's really that part of the market is where it's losing the most share against the cloud competitors. That's why ADP, you know, as much as we like to think that we've everybody's been taking share from ADP, they continue to grow, and it's because that's not who's losing share. It's really this mid-market or the regional and in-house providers. And so we wanted to enable a solution that really goes to market through these other software providers so that they can really focus on whatever differentiates them, and then we could be the, you know, the payroll provider, HCM provider. And when we started having the conversations a couple of years ago, I mean, we saw this huge opportunity. And again, it's primarily because these companies are trying to do it, and they're running into tax issues, they're running into service issues with their clients. It's sort of messy. Like, the payroll side of the business is complicated. You have to have a lot of scale. So we've had a lot of success already in terms of, you know, identifying companies who want this capability and who need to be able to go to market this or who want this additional solution. And as you think about, like, it should be that these solutions are better positioned for the customer because the customer now gets a more holistic solution with whatever their ERP system is, or inventory management, or POS, whatever the most critical part is for the customer, and then this is fully integrated, the additional payroll, HCM solutions, onboarding. You know, they have full access. The software provider has full access to our solutions. And, you know, I think, like, one of the challenges of HCM broadly is that it's hard to grow at 100%- Mm-hmm. Because you have to implement everything, you have to get it set up. It's primarily been a direct distribution market, and we think that this enables us to expand our distribution. We're still gonna have direct, expand distribution to enable us to sort of open up the platform a little faster, which we think, you know, could be a real competitive advantage. Okay. Sure. So how do you view the kinds of customers that you would be going after changing because of this new product? And I guess, how should we be thinking about monetization potential, with this, you know, solution and with the partners that you're going after now? Yeah. I mean, the earlier conversations that we've had, and most of the clients that we've, you know, that we've won, really, their clients are in the mid-market- Mm-hmm SMB segment, so, you know, 100 to a couple thousand, really lines up with us. And I... You You know, I don't think that going to enterprise solutions would necessarily be the best bet for us, really. Mm-hmm. You know, we don't have a desire to really get into the under 10, so we're not looking for software companies who have under 10, you know, in terms of the size of those customers. So I think it primarily is gonna be in that very similar customer base in terms of the SMB, which would be important because all of the payroll capability that we have and the processing capability would fit those SMB customers specifically. In terms of the economics, I mean, the unit economics are going to, they're probably gonna change- Mm-hmm ... as we look at just the overall, because we're onboarding customers or these software companies who could bring 20,000, 100,000, 200,000 employees over time. And, of course, you know, a company that size would, would demand, you know, different economics. So I think you're gonna see those economics slightly shift, and it's nothing that we've needed to talk about yet. It's, it's still fairly early- Yep ... but we'll, we'll provide some more insight as we build that out. Okay. All right. That's helpful. Maybe you can touch a little bit on, on the go-to-market. I mean, there's been, you know, a huge push on driving 20%+ rep growth, huge push on entering more of these Tier 1 cities. I guess, where do things stand, today, within that kind of broader Tier 1 coverage, and how are you thinking about further investments in that area versus maybe some of the other, areas in the go-to-market that would need to be focused on? Yeah. So a couple of years ago, we were, we call it covered, at less than 20%, and coverage is really like, how many reps can we fit into a market based on its size? And so for this Tier 1, which is the top 15 largest MSAs in the country, we were under 20% covered, and now we're sort of sitting in the mid 30%, 36%, coverage. So most of the hires, not all of them, but most of the new hires have really been in expanding our coverage across Tier 1 markets. And that strategy has worked. I mean, in 2019, we didn't have anybody in California. We've built, you know, quite a few reps into California now, and we're seeing that be part of the success of the new business growth. But we also invest back into Tier 2 and Tier 3 markets. Mm-hmm. You know, Tier 2, the smallest company in it, or, MSA in the Tier 2 is Cincinnati, actually, and of course, we have Cincinnati well covered. We also, you know, have, probably the most reps in Grand Rapids, than any of our competitors, right? Just because of the footprint that we've had. But you have other markets like, Tennessee and, Nashville has been a great market, and we've grown that one just a little bit faster than we probably would have otherwise. It's a tier three, city, but you-- there's been a lot of growth there. So we, we're trying to be intentional about, you know, matching up growth of the markets with, where we should put place reps. But, you know, the primary driver is, first, you have to have an ability, like, in terms of the size of the market, that's got to be there. But then you really need a leader. We call them, you know, RSDs or Regional Sales Directors. You have to have a strong RSD in-market that you can put a seller against. If you don't have a strong leader there, it's really tough to bring reps in and get them, you know, get them scaled up. Okay. How do you go about finding a good RSD to then be able to target that geography and make sure that you have good coverage from that standpoint to make an effective sales executive in, in that region? Yeah, I mean, we, a couple of years ago, we started to bring in RSDs and leaders from primarily HCM-focused companies, and we were sort of hoping in that sense that they'd be able to step in and help lead through, you know, the sellers to scale, and it didn't work as well as we wanted it to. Mm-hmm. So we have switched that strategy over the last like 12-18 months, really focusing more on, you know, building leaders from sellers, right? And finding great sellers, and then it’s not always the best seller who becomes the best leader, but bringing in or building into the leader so that they can take that role. And we’ve seen that be a lot more successful. I think it’s, like, really important that you understand the product, you understand the value prop, you understand how to get things done and navigate the organization. That we’ve seen has been, you know, more important than bringing somebody in with sales leadership experience. Okay. So that's what we're gonna continue to focus in it. And that's been tough, too, because we've just been growing our reps so quickly, trying to add to it. We just didn't have the bench before- Yeah ... to really be able to build that out. So we're starting to get a little bit better there. We're starting to get faster at being able to bring in leaders. Okay. All right. Great to, great, great to hear there. I do wanna talk about the upmarket investments you, you have been making. How do you view on the progress you made in terms of moving into some of these larger customer entities? I guess, is it more about go-to-market capabilities that had to be augmented to be able to target those, or were there things in the product that needed to come in to be able to capture those bigger, you know, 1,000-plus seat customers? Yeah. I think there's really, I mean, both of those dynamics are true. You have to sort of change your go-to-market just a little bit and make sure the product, product's rounded out. I would say it was more of a natural extension of what we've already been working on, though. Mm-hmm. We have about 10% of our revenue above 1,000 customers. So it's not like we're nascent there, and we're trying to get into it. I mean, we sell into these customers, and it's more about the complexity of the business. If the business is overly complex and needs, you know, pieces of the product that we don't have, then we're not gonna win that deal. But if the model works, which you can scale up to, I mean, we have customers who go up to 20,000 employees, and so if their complexity fits, then we can win that business. But what we've really been focusing on is just making sure that the processing capabilities, the reporting capabilities are there. You know, there's always sort of niche pieces of functionality that customers want. We see that in the mid-market, but then in the enterprise or when you start to get larger, they'll just demand it, and some folks will live without it, but then when you get to that size, they require it. And so some of those we'll work on, some of those we'll continue to, you know, the investment doesn't make sense for us just yet. But then on the go-to-market side, it's really... There's sort of two dynamics. We've segmented a little bit with our sales team. They're not enterprise-focused sellers, but we really segmented about 250 employees. So you have new sellers come in, we'll try to focus them on the 50-250- Mm-hmm ... segment, and then we'll have like, it's not really an enterprise rep, but it's like an upmarket rep that would focus on 250+. And really, the primary driver there is you just don't want a six-month seller talking to a, you know, multiple thousand employee customer. Yeah. So that's. I think it's a little early to see if that's, like, really been massively successful or if it's gonna work out, but that's been typical in the market. It's been a typical segmentation, and so we think that's probably smart. Then there's a piece of the implementation where you just wanna make sure that you have the right touch, you have the right service model. You got to be a little bit higher touch, and customer, and customers are willing to pay for that as well. Yeah. So we've seen that we've been able to manage it without having to overinvest- Okay ... necessarily. Okay. I do wanna ask on cross-sell, 'cause, you know, really strong net retention, you know, just had a 100% this past year, which, you know, pretty solid across the industry. How developed is the cross-sell motion at this point to drive some of those modules deeper into existing customers? And how should we think about, I guess, about the puts and takes of what drove that 100% net retention number? Yeah. So first, on the cross-sell motion, we brought somebody in a couple of years ago now who was who's run, like, huge inside sales organizations, and he's been slowly building that. It's not been our primary focus to invest in the cross-sell capability, but he's set up, you know, better processes, organized the team. He's got a great team. So I think that that is a really positive motion, and you've seen maybe like 15% of our business come from cross-sell motion now to maybe tick up to about 18%, so it continues to grow. Mm-hmm. And I think that the... It's because of a lot of the great products we've added to the suite, for sure. But, but there's a long way to go. I mean, we think that at scale, you could get to 40% or half of your... Like, ADP probably sells close to half, if not more, of their new business or their business comes from cross-sell. And, so, so there's lots of room to expand there, and especially as we've added a lot of these-... new talent solutions, Paycor Smart Sourcing, we, we start to get into that motion, but we've really not. It's still, I think, underdeveloped- Okay. Generally. So we see that as an opportunity that we'll continue to build into. Okay. At this point, how is Paycor thinking about international opportunities? Because, you know, I think some of the peers have recently gone into the international side and- Mm-hmm. made investments there. How are you thinking about what international could do for the Paycor business and, and that kind of longer-term opportunity? Yeah. There's, there's a couple dynamics to it that, we feel are important. The first, for us, is that we have a system that can manage global, employee records. Mm-hmm. So, you know, we call that sort of the system of record. It's a global system of record, and we continue to unpack that and offer more global capabilities for our customers. But then as you think about processing payroll in another country, which is the biggest dynamic there, really, nobody has an international platform or a fully global platform. Nobody does it. Mm-hmm. It's because it takes specific payroll processing and money movement within each region. You have to have a deep and scalable platform there. And so most folks have some level of sort of global system of record capability, and then they'll they may have some capability inside of one country or a couple of countries, and then they partner through most of it. And I think that I would not expect us in the very near term to be standing up and managing payroll capabilities and HCM capabilities specific, in specific countries. It's probably gonna be. It's probably gonna look more like global system of record capability and then partner around the globe where our customers have more of a need, right? We're sort of following our customers where they wanna go. You know, especially versus, like, landing in a country and then beginning to acquire customers in that country. I don't think that that's a near-term opportunity for us. And primarily because the SMB market in the U.S. is still massive. I mean, we have, like, less than 2% market share, and the cloud providers have less than 10% market share. Yeah. So there's still this huge opportunity to grow here. And so I think you'll see us continue to expand the functionality, but it's not gonna be, you know, to step into new countries... Okay. at this point. Okay. I guess with that point of, you know, cloud providers still being 10% penetrated in the market, I think you mentioned 50% of the market is coming from some of those regional providers. As you think about where your customers are coming from and net new opportunities are coming from, how has that mix kind of changed and evolved, and especially as you kinda go upmarket, where are those newer customer opportunities coming from? Yeah. So it looks an awful lot, you know, similar to that makeup. You have, you know, like, 25%-30% coming from folks like ADP and Paychex. Then you have, like, 50% coming from these in-house and regional providers. Mm-hmm. And then we get a little bit of trade between the cloud providers, not, not a ton, and a little bit of brand-new customers, like new, new, businesses and a little bit from PEO. So the majority, the bulk of it, is still coming from these regional in-house providers. About half of all of our new business comes from those providers. And that dynamic hasn't shifted a ton. I think that we've seen a little bit more take from, like, PEOs, a little bit more trade between the cloud providers, so it, it's been 75%-80% for the... You know, coming from in-house, regional, ADP, and Paychex for the last handful of years. Okay. Yeah. Okay. All right, that's helpful. Maybe switching gears a little bit, let's go back to the, I guess, topic of the moment of AI. I guess, where does the portfolio stand today, and how are you thinking about the use cases that Paycor would be kinda focused on and targeting to capture this AI opportunity? Yeah. We think there's a couple of dynamics that we're excited about. And we've been investing in AI. We have some capability already. We think that, you know, there's stuff like Paycor Smart Sourcing, which enables customers to identify candidates, passive candidates, faster. Mm-hmm. It gives them immediate access to profiles, like global profiles, that they can, that they can target and go after. We've seen some success there, and that's, that's not like GPT, capability or generative. It's more machine learning- Mm-hmm ... and traditional, more traditional ML. And then what we've been able to do, like, we already stood up a job description generator, which is effectively became... You know, it's, it's more like, prompting. It's a prompting capability that we've enabled into the product, where you can write a job description in real time, immediately, and then you can just edit it and load it, and it saves... I mean, it, it's arduous, right? Like, writing anything anymore, especially when you know that you have this capability. So the team really wrote this in, within just, like, two weeks, using, like, a GPT model- Mm-hmm ... through Azure, and now we've enabled that. I think that you're gonna see more and more like that, where it's not overwrite or, like, rewriting a whole system as much as it is, like, enabling either generative or traditional ML-type models to make the functionality smoother or make, you know, make a workflow a little bit easier. And it, there could be massive rewrites to the way that, you know, HCM works, but right now, we're seeing more, like, it's just about making it simple, making it easier to use, making the software more intuitive, and creating faster capabilities there. And then we're looking at stuff like we previewed an HR assistant, which we haven't released, like, the branded name. There's gonna have to be some branded name, but- Mm-hmm ... you know, it's an HR assistant that sits inside the platform that you can chat back with, and you can either ask questions about policies, you can. And that will evolve over time, like, how much you can chat, that, that the company can expose the information that they want to be able to share through that, through that capability. A lot of it, I think, is early on, is policies. None of you have probably worked in HR, but they get literally thousands of questions from their associates about how, you know, how policies work, what do they have available, that sort of stuff. And so, you know, reducing the amount of time that they have to spend answering questions.... is a really simple use case because now you can make it generative, and I think that that's, that has evolved actually pretty quickly internally for our ability to put that out. So we're looking forward to releasing that. Okay. How are you thinking about the monetization potential for these things? Like, do you view this as being a price uplift lever, kind of longer term, and you can go back to customers and sell them on that? Or is this about driving separate modules and more SKUs that should increase the PEPM potential longer term? I think for us, it's still a little early to tell exactly, but it's probably a combination of both of those things, where, you know, you release a job description generator, and nobody would pay incremental for that. They're not gonna say: Yeah, I'll pay $2 so I can click a button for the couple times I need to create a job description. But, you know, over time, you build enough of that capability, and when you increase the price and you know, give annual price increases, it just feels like you're getting more value. And so it makes those conversations easier. And we've seen that. We've seen a lot of success with that over the last couple of years as we've released lots of different functionality. So I think you're gonna see a lot of that, just go into the natural price that folks are willing to pay. But then you have something like an HR assistant that may be a little bit more involved, maybe takes some set up, and it has lots of capability that has real value that you can point at and say, "You know, you're gonna reduce 2,000 calls, you know, a month or whatever." And we'll probably look for opportunities to, you know, add PEPM and list how we price it. Okay, that makes sense. We have less than 10 minutes here. Just wanna make sure there's any questions in the room, that we can get to them. Yep, right here. We have a mic coming. I need to shout. Hi. Thanks, Janesh from Manulife Investment Management. Just on new customers, is it easy or maybe? On acquiring new customers, have you been able to take customers from your competitors, or is it, you know, is the market just so big that you know effectively taking new people or new customers, rather? We compete with our, you know, cloud providers on almost every single deal. So heavy competitive environment from that perspective. But we tend not to take back and forth. I mean, there are trades between the cloud providers. I mean, and this is primarily like Paylocity and Paycom are the closest cloud providers. And ADP is the same way. I mean, we still trade deals back and forth with ADP. But amongst the cloud providers, it's very small. I mean, it, again, less than 10% is really trading back and forth between providers. Most of it is new business through in-house solutions, which folks could be using, like Excel. We signed an NBA franchise earlier this year, and they were doing all of their payroll in Excel. You just, you're amazed to hear these stories, and I was amazed, too, but they, they were. And so we, we still see that. And then regional providers can be like payroll service bureaus who are, like, only focused on providing payroll, sort of like a CPA would, and they don't have the capabilities on the HR side, on the recruiting side, on the talent management side, or they have, you know, underdeveloped solutions at best. And then they get behind on compliance. They, they can't keep up with compliance or a changing regulatory environment, and so we take a lot of share from those, from those customers or those competitors. So LeBron James getting paid through Excel. All right, good, good question. I do want to ask on maybe switching gears to the financial side a little bit, a little bit now. You know, can you help us bridge the gap a little bit between the 20% rep growth that you've been having for a couple of years? I think it was low 20s bookings growth in Q4, and along with kind of the higher flow that's come in, versus the high teens revenue growth you're giving for next year. I guess, what's kind of being assumed in there for rep productivity, or is there anything else that we should be thinking about in there, or is it just adding conservatism on some of the macro factors? Yeah, I mean, of course, from a guide perspective, we take an appropriate amount of conservatism, especially at this point in the year when, you know, the guide is so far out. Yeah. You know, as you think about rep performance and rep growth, the first cohort of sellers that we really added was in FY 2022. It was the first year we really grew. We grew the sales team by over 20%, and before that, it was effectively flat, 6% growth the year before. And so it really takes, like, two full years for a rep to become fully productive. The first three to six months, maybe they're, you know, they're going through training, maybe they get a couple deals. The second year is really when they get into broker relationships and building trust with brokers, where the broker will actually refer them a piece of business, which is a big part of the go-to-market strategy. So it's really by the end of the second year where they've hit their stride, and the third year becomes their fully productive year. Mm-hmm. So you have these reps. We have a huge cohort of reps that we hired in 2022 that are really just now getting into their second year or, like, getting towards the end of their second year. So it feels when we stepped into 2022, 2023, and now 2024, in 2023, we were able to keep, like, productivity on a rep per rep basis, flat, marginally up, but effectively flat, which when you're hiring more than 20% and you're churning, you know, 30% or so, it means that half of the reps are effectively, you know, under 12 months. Yeah. Keeping productivity flat, we feel like. It's not great, it's not what we would love to see more, but it's not bad either. So really maturing into 2024 and maturing it and then that, those bookings maturing into 2025 revenue are really where we expect productivity to start to, you know, see more lift. And we don't want to hire above 20% growth. Yeah. It would be better if we could pick up some benefits on the retention side, on seller retention, and start to see, you know, the churn come down a little bit. And then when we hire, it'll all be a little bit more effective. So we're making a lot of investments around it, and we're really targeting, you know, 2024, 2025 for the productivity start to come through. Okay. All right. That makes, that makes sense. At this point, like, how do you think about the, the, you know, growth versus profitability? 'Cause, you know, really good leverage that's been showing in the model, I think maybe some flow dynamics in there. Mm-hmm. But how do you view the balance of putting more dollars to work versus letting some of that flow down to the bottom line at this point? Yeah. I mean, generally, we want to maintain 20% sustainable recurring revenue growth. Mm-hmm. And we want and continue to expand margins. That's sort of been the thesis. So, and we don't think there's anything structurally in the way of achieving that. You know, it on the margin with the labor market, I think it is a dynamic, so if we're right at 20%, it could be slightly over, slightly under, driven by, you know, labor market growth, but 20% sustainable and continuing to expand margins. And when you look at some of the competitors, their financial profile, there's not much structurally different in our model that's gonna, you know, prevent that from happening, you know, to get closer to where they are. Then add in something like this embedded channel, where the margins could be even stronger and maybe at slightly lower unit economics, but much, you know, faster growth and an ability to expand margins even further. We wanna, that's how we are thinking about the investment is, you know, continuing to expand margins on that growth profile. Cash flow is important to us, too. I mean, we generated positive free cash flow this year, the first as a public company in our audited financials. So that is also important, that we continue to expand free cash flow and margins even faster than we're expanding, you know, our profitability margins. Okay. And so as you think about embedded, do you think that could be margin accretive as, as that ramps up and really kind of helps take some of the onus off of the, the sales and marketing line there? Yeah, I think that there's an opportunity. I mean, we're still early in the days, and you know, as we wouldn't project it to be worse. Yeah. We have to manage it in, but we think there's an opportunity there for sure. Okay. Okay. And where do you expect to see the biggest degree of leverage in the, in the portfolio? Like, if we look out five years, what's gonna give the most drawdown and, and, you know, provide the most EBIT and cash flow? Yeah. I have my chief accounting officer here, and we always say, like, if we never hire another finance person again, I think it would be a better world. But we do continue to, you know, marginally hire folks. I think you're gonna see more out of G&A. We have a couple points out of G&A to continue to drive leverage, but it's really sales and marketing where you're gonna see the most leverage. I mean, we are outsized investing at more than 30%, 32%-33% of our revenue back into sales and marketing. We've taken advantage of the float that we've enjoyed to, you know, put it back into the, to, to the machine to accelerate our growth. And over time, we have to get that down. I mean, I think that's probably 8 points easy of margin. But it's gonna take some time. We got to get the sellers to evolve. We have to be able to pick up that productivity, but I think that's gonna be the primary driver of where you see the leverage. Okay. All right. It's great to hear. Any last questions in the room here? All right. Awesome. Well, I think we're running up against time. So, Adam, I wanna thank you so much for being here, and I wanna thank the everyone in the room for being here as well. So, appreciate you attending. Yeah. Thanks, Steve. All right. It was fun. Awesome. Thanks, Adam.