Ladies and gentlemen, thank you for standing by, and welcome to Paycor's fourth quarter and fiscal year 2023 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. 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. Good afternoon, welcome to Paycor's earnings call for the fourth quarter and fiscal year 2023, which ended on June 30th. On the call with me today are Raul Villar Jr., Paycor's Chief Executive Officer, Adam Ante, Paycor's Chief Financial Officer. Our financial results can be found in our press release issued today, which is available on the investor relations section of our website. Today's call is being recorded, a replay will be available on our website following the conclusion of the call. Statements made in this call include forward-looking statements related to our financial results, products, customer demand, operations, and other matters. These statements are subject to risks, uncertainties, and assumptions are based on management's current expectations as of today and may not be updated in the future. These statements should not be relied upon as representing our views as of any subsequent date. We also will refer to certain non-GAAP financial measures and key business metrics to provide additional information to investors. Definitions of non-GAAP measures and key business metrics, and a reconciliation of non-GAAP to GAAP measures is provided in our press release on our website. With that, I'll turn the call over to Raul. Thank you, Rachel, and thank you all for joining us to discuss Paycor's fourth quarter and full-year results. Revenue grew 26% for the quarter and 29% for the year, driven by solid execution against our strategic growth levers, namely expanding our sales coverage and increasing PEPM. We're also expanding margins as we scale and delivered nearly 400 basis points of improvement year-over-year, while investing in capabilities that further differentiate Paycor in the market. I would like to take this opportunity to thank each of our associates for their role in contributing to these outstanding results. Demand remains strong for our modern, innovative HCM solution that empowers leaders to unlock the potential of their people and business performance. Using our unrivaled talent tools, frontline leaders are improving employee engagement, which is increasing employee retention by 10% and helping drive better business outcomes. Our team has consistently executed against our go-to-market strategy. We expanded our sales force by 22% to approximately 560 sales associates. Most of our in-market sales hires have been in Tier one cities, increasing our Tier one sales coverage in the largest 15 cities in America from 28% - 36%. Sales coverage refers to the optimal number of prospects per seller, and we could effectively fill double or even triple the number of sellers we have today. Brokers remained an integral part of our go-to-market motion and influenced over 40% of our field bookings this year. As a result, average deal size continued to expand nicely this year. Our pipeline and win rates remain strong. We are proud to announce a record Q4 bookings performance, which was our highest quarter on record. All these factors contributed to robust bookings growth of 23% year-over-year. We continued to expand our modern HCM suite by launching differentiated technology that powers people and performance. In the last year, list PEPM increased $3 or 7% and now stands at $48, which equates to a PEPY of $576. This month, we introduced Engage, which is a single platform to elevate how leaders communicate with and motivate their team. The new solution empowers leaders to share company news, communicate with teams, and recognize employees across both mobile and web applications. Further strengthening our suite of artificial intelligence solutions, we also launched an AI-enabled job description generator. This offering strengthens our suite of artificial intelligence solutions, which includes Paycor Smart Sourcing and Predictive Resignation. By merely providing a job title and required experience, the integrated solution will create compelling job descriptions, empowering leaders to attract and hire top talent faster than ever before. The robust development of our interoperability engine is a key differentiator of our modern HCM platform. We continued to lead the industry with the most extensive network of partners, deep two-way integrations, and API connectivity points to meet our clients' unique business needs. In the last year, we added over 130 marketplace partners and nearly doubled the number of API endpoints available in our system. For fiscal 2024, we are going to continue to focus on execution. For us, that means continuing to increase sales coverage to capture share in the SMB space and expand PEPM with innovative solutions that empower frontline leaders. Successful execution of this strategy will position us well to achieve our target of 20%+ sustainable revenue growth, while expanding margins with greater free cash flow generation this year. With that, I'll turn the call over to Adam to discuss our financial results and guidance. Thanks, Raul. I'll discuss our fourth quarter and full year results, then share our outlook for the first quarter and next fiscal year. As a reminder, my comments related to certain financial measures are on a non-GAAP basis. We posted another strong quarter, delivering total revenues of $140 million, a 26% increase year-over-year. Recurring revenue grew 18% year-over-year, in line with our expectations, slightly lower than prior quarter growth, due to a combination of an incredibly strong fourth quarter last year, moderating labor market growth, and form filing timing. For the fiscal year, total revenues were $553 million, increasing 29% year-over-year. Our revenue growth continues to be driven by new business wins and PEPPM expansion. This year, our bookings grew 23% versus the prior year, setting us up nicely for continued strong revenue growth into fiscal 2024. We also surpassed 2.5 million employees on our platform, up 8% over the prior year, with more than 30,000 customers. As we shift our portfolio upmarket and focus our resources on clients with greater than 100 employees, our average customer size continues to increase, and now stands at 82 employees per customer, up from 77 last year. Aligned with this intentional strategic shift, we continue to see moderation in employee growth in the micro segment, while the number of employees in the mid-market and enterprise segments increased 9% year-over-year. Net Revenue Retention increased to 100%, setting a new record driven by gains from cross-sale and pricing initiatives. Effective PEPPM increased 11% year-over-year to just over $18 for the quarter. We continue to expand our product suite, PEPPM growth is driven by cross-sales, pricing initiatives, and higher bundle adoption at the point of sale. This quarter, we recognized $11 million of interest income on average client funds of just over $1 billion, at an effective rate of about 415 basis points. In addition to driving steady top-line growth, we've also delivered consistent margin expansion as we continue to scale. Quarterly adjusted gross profit margin, excluding depreciation and amortization, improved to 79.4%, nearly 300 basis points higher than last year. We continue to expand gross margins as we invest in our service model, and our customer support teams have done a great job elevating the experience for our customers this year. Sales and marketing expense was $47 million, or 33.8% of revenue, similar to levels a year ago, as we continue to invest in expanding our sales team to capture market share. On a gross basis, we invested $23 million in R&D, or 16.5% of revenue. Our team continues to efficiently deliver leader advancements that create value for our clients and expand our PEPPM opportunity, which has consistently expanded annually as we release new features, functionality, and new products that resonate with our customers. G&A expense was $21 million, or 14.9% of revenue, an improvement of 100 basis points from the prior year. For the full year, G&A expense as a percentage of recurring revenue, improved 115 basis points over the prior year as we continued to scale the business. While our primary objective remains sustainable 20%+ revenue growth, we intend to steadily expand margins as we scale the business. Quarterly Adjusted Operating Income increased nearly 70% to $15 million, with margins of 11%, up nearly 275 basis points from 8.3% last year. For the full year, Adjusted Operating Income increased nearly 75% to $83 million, up almost 400 basis points, while continuing to make key investments in our sales and service organizations, as well as drive product innovation. We also generated $19 million of Adjusted Free Cash Flow during the quarter, and $10 million for the year, achieving our target to be positive for the fiscal year. It's been on a journey to transform and scale the business over the last four years, it's a great achievement and milestone for us. Our free cash flow margin was 14% this quarter, or an expansion of 9 points year-over-year. We expect free cash flow margin to continue expanding faster than Adjusted Operating Income as we scale the business. At the close of the quarter, our cash balance increased to $95 million with no debt. Our outlook for fiscal 2024 remains positive. First and foremost, we continue to see strength in the HCM demand environment. HCM is highly resilient as our value proposition is mission critical to attracting, paying, and retaining great talent. Second, the labor market remains tight, although growth has moderated, and we expect that to continue this fiscal year. Lastly, consistent with current market expectations, our outlook anticipates moderate Federal Funds decreases in the second half of the fiscal year. Even with marginal declines in the Federal Funds rate, we would expect to generate marginal interest income revenue growth in fiscal 2024. For the first quarter, we expect total revenues of between $138 million and $140 million, or 18% growth at the high end of the range, and Adjusted Operating Income of between $9 million and $10 million. For the full year, we expect revenues of $644 million- $650 million, or 18% growth at the top end of the range. We anticipate Adjusted Operating Income of $97 million - $100 million. I would also like to note that we do not plan to provide bookings data moving forward. At the time of the IPO, bookings gave investors some insight into the success of sales as we re-accelerated the front-end growth engine. We believe revenue growth is the most important metric to understand our success. In summary, we are as optimistic about our opportunity in HCM as we've ever been. Demand remains strong. Our innovative HCM solution that empowers leaders to build winning teams continues to win in the market. We are focused on execution, scaling the business, and driving margin expansion. As a mission-critical application still early in its transition to the cloud, we believe that there is significant runway for further growth in the $35 billion HCM market. With that, we'll open the call for questions. Operator? Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. If you'd like to ask your question, you may press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Mark Murphy with JPMorgan. Please proceed with your question. Hi, thanks for taking the question. This is Artie on for Mark Murphy. First question is just on the headwind you guys are kind of expecting from the moderating growth in the labor market. Any way to kind of bookend that or quantify that as we think about the full year guide? Thanks. Yeah. Hey, Artie. What we're seeing right now is that we're seeing sort of low single digit to no growth contribution from the labor market. Right now, year-over-year for the quarter, you're looking at, like, a 3-4 point headwind. On the, on the full year, we've sort of factored in the same level of contribution on the guidance, so low single digit to zero growth, sort of 0-1% growth contribution from the labor market. Which will be a little bit, a little bit less of a headwind overall in the full year, something to the tune of a, of a couple points headwind versus 2023 growth. Got it. Thank you. That, that's super helpful. Then, just in terms of, you know, that, that kind of side of things, with the labor market getting a little bit, you know, more, more moderation, are you seeing any differences in the buying patterns for customers among, like, your talent solutions and talent suite? No, we, we actually, continue to see, outstanding attach rates. Our attach rates are actually still increasing, modestly quarter-over-quarter. So, so we haven't seen any difference, in any of the buying dynamics, length of sales cycle, price paid, or, attach rates. Perfect. Thank you. I'll step back in the queue. Yeah, thank you. Our next question comes from the line of Gabriela Borges with Goldman Sachs. Please proceed with your question. Hi, this is Kevin on for Gabriella. Thanks for the question. Maybe just one on kind of seller hiring expectations for 2024, particularly in the context of, you know, a guy that's showing a little bit of a deceleration. Just curious how you're thinking about seller hiring as, as we head into 2024. Thanks. You know, I think we, we feel comfortable with, you know, our previous guidance, that we, we think 20% headcount growth is, is something that we're targeting. Now, that, that can flex down a few points or up a few points, based upon demand in the marketplace, based upon seller availability, based upon churn. There's a lot of different factors, but I would say we still look at this like there, there's a significant market opportunity. We have really strong win rates, and we, you know, we believe the opportunity to continue to win share is available. That's helpful. Adam, maybe one on the, the guide, particularly the, the operating margin guide for Q1. I think that implies maybe a little bit of a decline year-over-year, and I think the full year implies some, some improvement. Just curious on kind of maybe the seasonality of operating expenses throughout the year and any moving pieces we should be aware of. Yeah, I mean, as we came out of 2023, we were continuing to make some investments, leveraging some of the interest income like we had discussed. As we look into 2024, we still feel really positive about the momentum, we feel positive about the demand environment, and we're running into a little bit of those headwinds here in Q1. On the full year, you know, we see this as an opportunity to continue to expand both margins and continue to grow. So it's a little bit of just hitting the pressure of what we're seeing on the Q1 growth. We'll continue to, you know, manage that in on the full year. We do feel good about the operating, you know, income margin growth and expansion that we're gonna see there, as well as the free cash flow margin expansion, which should be a little bit faster. Thank you both. Thank you. Our next question comes from the line of Samad Samana with Jefferies. Please proceed with your question. Great. Good evening. Hi, gentlemen, thanks for taking my questions. Maybe one, Raul, first for you. Just, you know, you mentioned getting more success upmarket. The average number of employees per customer has melted up. Is that changing maybe the, the type of customer or the mix of bookings? You know, how is that maybe changing who you're hiring as, as far as the sales organization goes? Then I have a follow-up for Adam. Yeah, I. We continue, you know, to shift upmarket. We continue to deploy the majority of our resources in the field, targeting customers, you know, you know, with greater than 100 employees. You know, we continue to see our, our average employee size grow. And at this point in time, you know, we, we haven't seen a need for a differentiated salesperson. You know, I, I would say that, you know, we're competing, you know, from 100, you know, into the, you know, low thousands, and effectively with our current sales organization. If we were going to push higher in the future, you know, into that 5,000+ range. You know, it may suggest a different type, an enterprise-type team. We're not there. You know, from that perspective, we're gonna continue to expand our sales organization, continue to shift our resources upmarket, our marketing dollars, et cetera. We feel really good about the opportunity, and the talent solutions are really resonating and pushing us upmarket. Great. Then, Adam, just a follow-up. On the guidance, I'm curious if you could just maybe help us understand what you're thinking about recurring revenue growth, X, the interest, or X float revenue. Just how should we think about the growth of those two separate line items then, and how that rolls into the full year guidance that you just gave? Yeah. As we're thinking about interest income, this quarter, we generated about 414 basis points of interest income on our client funds. On the full year, we're, we're probably expecting something similar to that, as you might see a couple increases, a couple decreases, and we've tried to factor that into our guide for the full year. Not, not gonna see a ton of incremental lift, and, and you'll see a little bit more in the first half of the year, of course, than you will in the second half of the year. I think that's gonna be marginal contribution to the overall growth. I would say, broadly, we wanna try to keep our performance relative to our guide and our cadence the same as what we've been able to achieve over the last, you know, 2 years as a public company. You know, we, we wanna be a little bit conservative, not include in, you know, upside in the labor market growth. There's a little bit of room, of course, to overperform as we get into the year. Understood. Thanks for answering my questions. Appreciate it. Thanks, Matt. Our next question comes from the line of Bhavin Shah with Deutsche Bank. Please proceed with your question. Great. Thanks for taking my question. Raul, just looking at your slide deck, it looks like your, your source of wins versus incumbents now sits closer to 75% versus maybe 80 prior, while you kind of noted an uptick, at least in the chart, versus cloud vendors. Like, what's driving the little bit of change in terms of who you're winning against? Are you seeing maybe any improvement from the legacy guys in terms of them trying to hold on to their customers better than they were previously? Yeah, actually, our, our, win rate against the largest legacy provider increased this year versus last year, so we saw a slight increase against them. I would say, you know, some of the cloud competitors, you know, we, we continue to, to compete with them very infrequently from a displacement perspective. You know, we see new business generation. We see some PEO takeaways that kind of spiked up a little bit in the quarter. I would say by and large, you know, our top 3 sources of wins are, and, and they're literally, they interchange month to month, are regional service bureaus, in-house, and ADP. And there's... Those three are, you know, comprising, you know, over 60%, you know, of the legacy wins, with Paychex being, you know, a distant fourth because we don't, we don't really, you know, compete with them as they're primarily an under 50 solution, really an under 15 solution. Got it. That's helpful there. Just kind of following up in terms of sales productivity, I mean, you guys talked about kind of 23% bookings growth this year, similar type of seller, a headcount. Just how do we think about sales productivity over the course of this year, and how do we think about that over the next 3 years? And kind of when can we see the leverage in terms of recurring growth in excess of kind of stellar growth? Thanks. Yeah. We, we actually had slightly positive sales productivity year-over-year, despite, you know, a, a, a 20%+ growth in headcount, which is really positive from our perspective, because, you know, you're bringing in people in, in the 1st year of a 3-year ramp. Ultimately, you know, since we started adding headcount, we're, we're gonna start to this year anniversary, our largest cohort from, you know, FY22. You know, we'll, we'll start to see some of the productivity gains there. You know, we're still hiring a lot of people, and we've been able to, you know, slightly increase our average productivity for the entire sales organization, despite adding significant amount of 1st-year cohorts. That means our second- and third-year people are doing more than they were doing the year prior, and so, you know, we're seeing that natural lift. We're just in this unique phase of, you know, still growing our sales organization. We're still, you know, 25% smaller than, you know, Paylocity, as an example. And so, you know, we still have plenty of opportunity to continue to add sales headcount. And, you know, I think, you know, we'll start to see, you know, overall, you know, leverage in sales and marketing, you know, over this year and the following years as we continue to scale. Some of the, you know, sales operations functions and sales leadership functions scale nicely with a larger sales organization. You know, we'll see that, and we'll continue to drive productivity, and we're starting to get closer to, you know, meaningful scale at, at 600, you know, sellers today. Super insightful. Thanks for taking my question. Yeah. Thanks, Bhavin. Our next question comes from the line of Terry Tillman with Truist. Please proceed with your question. Yeah. Hi, good afternoon, Raul, Adam, and Rachel. Hey, Terry. Thanks for taking my questions. ... Yeah, first, first question, maybe it, it's actually a follow-up to the prior question, Raul, in terms of sales productivity. you know, as you layer on this large cohort of new sellers from last year, and you're gonna keep adding this year, is there the potential, though, I know you're not gonna give us, like, the end-of-the-year bookings growth, but potentially you could even see some acceleration in bookings? The second part is, of the top 15 cities, those key Tier 1s, you know, I really don't have any idea, like, you know, where you are with each of those markets. Are, are some you're, you're starting to get some pretty good coverage, or are there still some that you're really paltry in terms of coverage? Yeah, I mean, I, I'll start with the coverage perspective. you know, we, we, we've moved our coverage, in Tier 1, you know, another, you know, 8 points, excuse me, seven points. We're up to 36%. you know, a little over a third is what we would consider coverage. I would say, it's fairly, you know, equal across, the 15 markets, as we continue to scale. I, I would say, you know, we still have opportunities in all 15 markets to add sellers. I would say, you know, we're probably at the high point, you know, in the, you know, 40 percentile range, like in Chicago, area, where, you know, we've been a little longer, since it's a Midwestern city. We have a lot more room to go in California, in the Northeast, and in the Southeast, just based on, you know, the, the time and, and territory. Lots of opportunity to continue to grow in the Tier one markets. You know, we're seeing really good success. All the metrics are holding up. The average employee size, average deal size, all very similar across the organization. The one thing we would see is a slightly, you know, higher attach rate in Tier one markets, subtly bigger, you know, aligned with, you know, more talent purchases than maybe in some of the other tiers. Yeah. Hey, Terry. In, in terms of our ability to continue to accelerate bookings growth, and potentially even at a faster pace, I mean, I think that is the thesis for sure. As we look at the new, new cohorts that we've added, and a lot of those sellers have been in the Tier one markets, there are lots of opportunity for those cohorts to continue to, to grow. It's, it's really important, of course, to have the time in the market and the time with the brokers, in building out those relationships. You have a lot of those cohorts in 2022, 2023, in those Tier one markets, where there's lots of opportunity. The, the territories are still really big for them, for that acceleration to come through 2024, 2025. I think that, that's part of the investment thesis of why we continue to make the investments that we do around sales and marketing, because we think that that's part of the, the long-term acceleration for sure. That's, that's very helpful but for both of you. Maybe, Adam, the question I was gonna also ask you, though, was: It's good to see the breaking 100% on the NRR. In any perspective, directionally, on how to think about that, as we round out the end of FY24? Thank you. Yeah. As we head into FY24 relative to the 100%, I mean, we saw some really strong contribution, of course, from, from some of the pricing actions, the new products that we've released on, on our, on our cohorts in, in the 23 number. A little bit of contribution from the same-store sales or, or the labor market growth, that's going to dissipate. Not that we wouldn't target or continue to press to 100%+ growth, I mean, that, that is our aim to get to 100% - 105% as sort of like a management target. There's gonna be a couple of those headwinds that'll put pressure on the net, net, retention number, specifically the labor market growth, which, which is primarily, you know, of course, against our base. Thank you all. Thank you. Our next question comes from the line of Bryan Bergen with Cowen. Please proceed with your question. Hi, guys. Good afternoon, thank you. First one, just on the outlook, really the near-term guidance. If, if you can unpack this a bit here, looking at the 1Q guide, shows an quite a decent deceleration in the year-over-year growth rate compared to how you exited strong in 4Q, and it seems relatively quite sequentially. Just trying to unpack what's different there, what's driving that, just given that cornerstone appeared to differ? Yeah. Hey, Brian. We're, we're just continuing to see that pressure on the labor market growth. I mean, you're, you're losing a couple of points of deceleration, of course. We dealt with the form filing revenue here in, in terms of a pull, pull forward in Q4 to Q3. We're seeing those form filing revenues will become a headwind, going into 2024 as well. You're, you're picking up a little bit more of that headwind, that we didn't necessarily have in the same sense in our Q4 period. Those are the two biggest dynamics for sure. You know, in 2023, we did see some larger deals, that are going to come through maybe at a little bit different timing than we would have on, on a more normalized basis or in prior years for 2023. Some of the strength of the bookings, of course, a lot of it comes through in Q4 as our largest quarter, and so some of those larger deals just take a little bit longer to implement. I mean, nothing new or nothing different, just a little bit more of a mix in that upmarket segment for us as well. Okay. Just to be clear, are those deals related to client, like list acquisitions or organic acquisitions? No, no, in terms of client. Yeah, in terms of new, new business, just signing new business. I mean, we just continue to mix a little bit more in that, you know, upmarket segment, which again, it, it fits squarely within the strategy and everything we're talking about. It's just as we continue to mix up, that, that market a little bit more, we just see that those, those deals tend to take, you know, towards the longer end of our implementation cycle. Okay, understood. Then just to follow up on margin, can you bridge the margin walk from, from fiscal 2023 to fiscal 2024? Just the drivers of that EBIT expectation there. I thought I heard a relatively similar client fund interest assumption. So if you could just clarify that and the remaining factors that give you the expansion. Thanks. Yeah, absolutely. So i-in terms of the client funds interest, right, we generated about 415 basis points or 14 basis points of interest incoming Q4. So we're expecting, like, on the full year, something similar to that, which will be marginally additive in terms of to revenue, but, but not material overall, especially not to the same level as in 2023. As you look at our full year income guide, we're, we're driving for continued margin expansion on Adjusted Operating Income margin expansion, as we guide up to, you know, $100 million of Adjusted Operating Income on the $650 million of revenue. As we think about, you know, some of the opportunities to continue to expand, we're actually seeing pressure from the amortization as those investments build in. We're continuing to scale the rest of the business. You'll see continued expansion and drive for that in the gross margin, continued expansion and drive from that out of G&A, or leveraging G&A. You know, we're not looking to necessarily drive expansion in out of the margin in R&D at this point. We like those investments. We'll continue to look for those investments. Similarly, on the sales and marketing. We, we continue to be outsized, I think, in those two key areas, consistent with how we've been allocating capital, you know, as a public company. Thank you. Thanks. Our next question comes from the line of Scott Berg with Needham. Please proceed with your question. Hi, guys. Thanks for taking my question. This is Michael Rackers on for Scott today. You mentioned a slight improvement quarter-over-quarter in attach. Can you just, you know, give us a little bit more color on that, and then maybe where do you think the attach rate can expand the most in the upcoming fiscal year? How do you think about it normalizing? Hey, Michael? Yes. Michael, we, we lost you after attach. Sorry about that. Sorry about that. Yeah, no worries. Bad connection. I guess I was just wondering where you think attach rates can expand the most in FY24, and then how should we think about kind of the normalized PEPM growth rate? Effective PEPM growth rate. Yeah. As we think about... Yeah, hey, hey, Michael, thanks. I mean, as we think about the opportunity to continue to expand attach, it's really about our continuing our strategy of, you know, focus on talent, leading with talent, and engaging leaders across organizations around how they manage their business, OKRs, performance management, and recruiting. Your focused on that talent management. We think that there's lots of room there. I mean, we've seen a lot of growth already. The attach rate continues to, you know, to be strong, and we think that there's lots of headway there for us as well. Even on our core platform, I mean, our core module, as we think about that, we continue to expand that core. Both of those things combined really enable us to, you know, lift our overall ADS, and that's been part of our story. As you look at our ADS, our average deal size, and our PEPM continuing to expand. We also, of course, offer workforce management solutions and benefits administration. We don't, we don't see the same sort of headroom in the attach there, just because of our strategies and, and whether or not clients need workforce management or not, or benefits or not. We don't see the same level of expansion. Those should continue to grow with our client base and with our bookings, but we see more of that headroom in the talent management solutions as we continue to make those investments. Great. Thank you. Then you've done a great job of that... Thanks, Michael. Yes. Go ahead. Oh, sorry about that. You've done a great job of adding reps in these Tier one cities, but what is your strategy as you move up market for, like, larger enterprise accounts or, you know, the upper end of your range? Do you have reps specifically targeting this upper end or plan on adding reps there? Thanks. I mean, we, today have reps that focus, you know, on, on prospects at the larger end of the size range, that are targeted by geography. You know, in our field organization, we have reps that target the lower end of the market, you know, above 100, and others that target, you know, above 250, above 500, into the low thousands, as I mentioned earlier. Great. Thank you. Super. Have a great night. Our next question comes from the line of Brad Reback with Stifel. Please proceed with your question. Great. Thanks very much. Adam, can we dive a little deeper into the 1Q OpEx guide? I'm just trying to figure out if there are any one-time items. Revenue's up, like, $20 million year-over-year, but OpEx, op income is flat. Yeah, I mean, there's no one-time items necessarily, but we've made some of those investments that we've been talking through, you know, specific to R&D, new product expansion, and sales and marketing. You know, even, even though we're seeing that, headwinds in Q1 revenues, we didn't want to pull back on some of those key investments. I, I think that also speaks to the optimism that we have over the balance of the year and the new business that we'll continue to layer in, that, that we see opportunity to continue to expand margins as we, you know, as we have a better outlook for the revenue for the rest of the year. It's more just timing of those ongoing investments and not really wanting to pull back based on the demand that we see in the broader market right now. Great. Thanks very much. Thank you. Our next question comes from the line of Brian Peterson with Raymond James. Please proceed with your question. Hi. Thanks for taking the question. Adam, just a clarification, because I've got it from a couple of folks. When you say marginal additions, are you talking about for interest income, are you talking about taking what was reported in fiscal year 2023 and using that for fiscal year 2024? Or should we be using the fiscal 4Q run rate and kind of annualizing that for next year? I just want to be clear on that. Yeah, yeah. It's, it's gonna be closer, of course, to what we see here in Q4, right? In Q4, 400+ basis points will be sort of the, the jumping off point, I think. You're, you're gonna see it more in line with Q4 as a stepping off point. Okay. All right, got it. That's clear. Raul, maybe one for you. Just as you think about the ramp in, in productivity for the sales hires, is there a significant difference in, in how that ramp to full speed looks for a, for a Tier one rep versus other markets? Just curious to get color on that. Thanks, guys. No, I mean, we haven't seen that to this point in time. You know, the seller ramp, you know, on the average is, you know, is very similar across all markets and all tiers. Great. Thank you. Yeah, thank you. Our next question comes from the line of Mark Marcon with Robert W. Baird. Please proceed with your question. Hey, good afternoon, and thanks for taking my questions. Adam, in terms of just the, the float balance, would you expect that to basically grow in line with recurring revenue? The float balances actually should grow a little bit more in line with employee growth than recurring growth, 'cause the recurring revenue, of course, includes the expansion of stuff like talent, and workforce management and benefits that don't necessarily drive the client funds growth. What you would expect is it's a little bit more focused on employee growth and then plus or minus, you know, wage inflation, which of course, we've seen some of the wage inflation in the market data more broadly. Okay, great. Then with regards to, you know, kind of another one of the, the margin questions, because everybody's been asking that, would you expect the gross margin to basically stay, you know, fairly consistent with the fourth quarter level in fiscal Q1 of this year? Yeah, I mean, of course, we don't, we don't guide to gross margin, but, I wouldn't expect the gross I mean, what our aim broadly on gross margin is to continue, excuse me, to continue to drive operational expansion, you know, by scaling that business. There are some seasonality, of course, that comes with the gross margin numbers, but, but there's no incremental or one-time investments that would drive our gross margins, you know, at a different pace. That business is primarily lined up with our customer growth. I wouldn't expect anything abnormal in our gross margin numbers. Great. Can you just talk a little bit about, you've got the specialized packages by industry. How important were those? Did you see stronger growth with, with those? Are you continuing to gain share with those? How would you describe the importance of, of having the dual connection with regards to other partners that you're, you're servicing your clients with? Yeah. How you doing, Mark? It's Raul. The... You know, from an industry perspective, you know, that's a really Cornerstone part of our go-to-market, and, you know, it, it is over 50% of our bookings come from the four key industries, in line with our growth rates. We're seeing, you know, really solid participation, in those four key segments, and it's really about continuing to deliver industry-specific solutions, understanding, you know, their nomenclature, and then building integrations to their partners. That combination is what's driving our overall effectiveness there. Great. Can you, Raul, could you describe what you're seeing in terms of your, your, your, your core, well-established markets, both in the Southeast and the Midwest? You know, what, what sort of incremental gains are you seeing there? Are you continuing to gain share? How would you describe the productivity, the sales productivity of the people who've been around for quite a while and, you know, are, are well-established and not necessarily ramping up from an experiential perspective? Yeah, I mean, we, you know, have really we've had great performance in some of our Midwestern stalwart cities, you know, like Cincinnati and St. Louis. So we continue to see really strong performance, the most of them are what we would call Tier 2 markets. So I, I think that continues to, to really operate as designed, and we continue to take advantage of our strength there. From an overall seller productivity perspective, obviously, you know, when you get to full tenure, you know, at the end of 24 months, you kinda are who you are. We have people that are, you know, selling, you know, well in excess of $1 million that are tenured. You know, we're really seeing, you know, the growth in the organization, where we're seeing, you know, tenured sellers really, you know, significantly outperforming the line average. We're excited about that, and we're gonna continue to build, you know, that scaffolding in our organization and continue to build, you know, long-term, solid performers that are, are outdoing the line average, which will help us continue to improve our productivity. Our next question comes from the line of Daniel Jester with BMO Capital Markets. Please proceed with your question. Great, thanks for taking my question. Just maybe building on that sales productivity comment, Raul. I mean, shouldn't seller productivity continue to increase as you just get more maturity around the sales force investments you've made? I guess, like, what are you embedding in the guidance in terms of sales productivity in 2024 relative to the last couple of years? Yeah. Hey, Daniel. In terms of the continued expansion of the sales productivity, I mean, absolutely. The thing is, when you continue to grow the sales force at 20%, it just weighs on the, the productivity overall as you're adding in, you know, the, the newer sellers who are, who are learning, and, and building their book. That's why when we look at the, the other cohorts, previous cohorts, yes, they continue to drive productivity, and you're absolutely right. You know, that's what we would expect over time. In terms of improv- or impact on 2024, we're not expecting productivity improvements per se. Of course, we have expectations over the demand environment and how much bookings we generate and how we manage through, you know, all of the components of our revenue growth. I would say that, you know, there, there's expectations for continued bookings and continued bookings expansion into 2024 in our, in our guide. We're not expecting or we're not including anything in our guide that would be outside of what we think that we have sort of visibility to and then, and is appropriately risk-adjusted. Great. Thank you. Then can we just double-click on free cash flow margins? I think you made a comment that you should expect them to improve at a faster rate than, than operating margins, but, you know, maybe a little more color as to kind of how you expect that to, to translate in, in fiscal 2024. Thank you. Yeah, of course. You know, a couple of the key pieces that get sort of capitalized and amortized are related to, you know, the sales investments and the cost to fulfill, those, those items get amortized over six years. as that amortization builds into the Adjusted Operating Income, it's less of an impact on our Free Cash Flow now, right? we're picking up the benefits here as we're leveraging and driving scale out of the business on some of those same investments. you'll start to see or you'll see continued Adjusted Operating Income expansion. That's what we're driving at. We're going to see the, the better leverage out of some of those costs to fulfill investments and the R&D investments, the product investments that we're making just as we continue to scale the business. So you're going to start to see that flow through to free cash flow at just a, a slightly faster clip, which will expand those margins. Our next question comes from the line of Kevin McVeigh with Credit Suisse. Please proceed with your question. Great. Thanks so much. This may be for Adam. Hey, Adam, can you just unpack the revenue guidance 2024 relative to 2023? It looks like at the midpoint, it's about 17% growth versus 29% in 2023. It sounds like there's a couple, 300-400 basis points from just you know, employment headwinds. You know, can you ring fence just what the other components are of the deceleration? Is it just some conservatism in there, maybe a little less pricing, if I'm thinking about it right? Yeah, well, of course, you know, we picked up a pretty strong contribution of growth from interest income in 2023, and so we saw about seven points of growth from interest income on that 29%. You're not going to see that level of contribution growth into 2024. Those two numbers, of course, are the biggest drivers. We're seeing about seven points in 2023. We're going to see maybe 2 points, just 2, of interest income contribution to the growth rate in 2024. We're, you know, then you're seeing those labor market headwinds that we talked about, some of those form filing headwinds that we talked about, that are really putting pressure, especially on the first half of the year. Those are 2 of the key mark or key factors. Then, of course, as we get into the guide, you know, we are not looking to change, our philosophy on guidance, versus, versus the last couple of years. So we want to continue to create some of the space for, for us to overperform where we can, and, and we want to be consistent, of course, in that approach throughout the year. Very helpful. Thank you. Thanks, Kevin. Our next question comes from the line of Steven Enders with Citi. Please proceed with your question. Okay, great. Thanks for taking the questions here. I do want to ask on the Tier one investments that you're continuing to make and, you know, good 7-point increase here, but how should we think about how much more room there is to expand in these areas? I guess, what would those levels look like over the next 2 years here? Yeah, I mean, in, in the Tier one markets, today, you know, we, we sit roughly at 36% coverage. You know, we could, you know, more than double the sales organization in the Tier one markets. Again, we're going to continue to, to leverage, you know, the majority of the incremental headcount that we add each year, will go into these Tier one markets. I, I think, you know, we, we think the runway is, is long, and, you know, we're going to continue to pragmatically deploy the resources, in these Tier one markets and, and drive productivity. Okay. That's that, that, that's helpful, helpful context there. Then I guess maybe for, like, thec Q1 guide, just want to make sure that thinking about, like, the float income... dynamics here, you know, in, in, you know, in a similar way that you're talking about the year. I mean, is it kind of similar, like, flow through at what came in for 4 Q for, for Q1, and that's, like, the right level here? Or are there other factors that we should be accounting for? Yeah, no, I mean, I think it should be fairly consistent between the quarters. You're not gonna see, you're, you're not gonna see much sort of swings, many swings when we're changing 25 basis points at this level. You're just not gonna see the same level of material swing. I think you're gonna see it, it, you know, quite similar to where we were in Q4. All right, perfect. Thanks for taking the questions. Thank you. Our next question comes from the line of Robert Simmons with D.A. Davidson. Please proceed with your question. Hey, guys. Thanks for taking the question. Last year, your seasonality was thrown off a little bit by some of the form filing fees shifting around a bit. Do you expect that to continue this year, or should we expect that to normalize back to a more normal cadence? Hey, Robert. I think that you're probably gonna see a little bit more of a cadence like a prior year, with some, a little bit of outsize in Q3 still. You know, we implemented some new services and pricing that we talked about you know, last quarter in Q3, that will persist. But as some of the form filings become a headwind and begin to go away, I think it's gonna revert more to a normalized environment. You're just not gonna see quite as much sort of spread throughout the year. We'll see less form filings in Q1, and Q4, and then the Q3 actually might, you know, be a little bit more consistent, but still remain at a slightly elevated level because of some of the products and services that we've offered as well. Got it. Okay, that makes sense. Then, so you, you kind of touched on it before, but on the competitive landscape, have you, have you seen things change over, not just the last quarter, but maybe over the last year or so? Are the newer entrants getting up to a size now that they matter at all, or do you think they're still pretty subscale? What are you seeing in terms of, like, competitive price, pressures up and down? We definitely don't see any new entrants, so nothing has changed from that perspective. You know, we still obviously see ADP, Paylocity, and Paycom the most. Our next question comes from the line of Jackson Ader with MoffettNathanson. Please proceed with your question. Great. thanks for taking our questions, guys. The first one... Raul, actually, if we can just follow up on the competitive comment you made about win rates at ADP... Yeah. picking up. Yeah. Was this, you know, any, any particular type of customer that you saw more success with this year compared to last year? Is it similar to just, like, winning more upmarket against ADP? Yeah, and good question. It was really tied to, you know, the overall mix increased from ADP by a point or two, and it is primarily upmarket. Okay, all right, that makes sense. Then, Adam, you know, we've talked a lot about kind of the continuing to invest in sellers, but what about... Like, have you given any thought as to the linearity? Like, we maybe front-load things while we can kind of see what the economy looks like here in the next, you know, three, six months, and then take a look at the second half of the year and make decisions from there. Yeah, I mean, that is definitely how we think about it. I mean, we, we tend to plan it a little bit more linear, and then we make adjustments as we go through the year. Of course, we're considering seller retention and how that is trending, as well as how, you know, we're performing internally, and then we look for those opportunities, you know, as we continue to go through the year. January is a really important month for us as we, as we think about our own seasonality in the, in the market in terms of a lot of new business that we start in January. Of course, we see, you know, some of our larger clients, losses. They, they want to leave in January as well, I mean, for the same reason why we win. We, we do like to get through January and see how that trends, before we really, you know, pull the trigger on too much. To anything that's too outsized. I think, I mean, how you're saying it is, is sort of how we think about it. We sort of think about it linearly, and then we make decisions on, you know, how the business is trending. Got it. All right, cool. Thank you. Thanks, Jackson. Our next question comes from the line of Matt Pfau with William Blair. Please proceed with your question. Great. Thanks for taking my questions. Wanted to first ask on the relationship between bookings growth and your guidance for fiscal 2024. Bookings growth was up 23% for FY23, and then if you look at the sort of implied recurring revenue guidance for fiscal 2024, it's probably around 17%. What are the factors there that, that drive that delta between, you know, the bookings growth and then, you know, what you're forecasting looking forward for recurring revenue growth? Yeah. Hey, Matt. There, there are a couple dynamics, of course, as we think about the rest of the business. You know, there's a lot of factors as we think about just the components of that revenue growth. New business is a piece of it, client sales are a component of that, and then we have, you know, dynamics like pricing that we've talked through, losses or retention of our client base that we've talked through. Of course, there's the labor market growth and how the labor market growth is trending, plus other things like the form filings that we've that we've discussed as well. You know, we want to see revenue growth in there, and it's possible that, you know, revenue should accelerate faster than our bookings growth. There's some other dynamics, of course, in there today that are, that are creating those headwinds that we've discussed. We think longer term, there's no reason that, that can't be part of the dynamic, and we just need to continue to keep executing, in our Tier one and, or I mean, our, our market expansion and sales expansion strategy, like, like we've been discussing, for sure. Got it. Then just the last one for me, sorry to ask another question about the, the Q1 guide specifically, but if, if we look at the, I guess, implied interest income that you'd be expecting in, in Q1, I, I think people would have expected, you know, perhaps more of that to, to flow down to operating income. Maybe just sort of update us on, on how you're thinking about interest income relative to investment versus, you know, letting it flow down to, to operating income. Yeah, I mean, we want to continue to expand margins on a recurring basis, and that is our aim. That's how we manage the business. We're also leveraging the interest income today to continue to expand and fuel our strategy, which we think is prudent, given the environment. I mean, we see the demand, we see the product working in the market. We wanna continue to make those investments. Longer term, to the extent that that interest income goes away, which is not what we see in the near term, but to the extent that it does, then we'll be set up from a management perspective to be able to, you know, pull back on those incremental investments that we're making, again, specifically around, you know, marketing programs, digital investment, brand investment, to drive that expansion and the accelerated product investments, which we've been really intentional about to drive towards what, you know, what we consider our innovation buckets, which is more around new product expansion, new functionality, to get the product, you know, to maintain our competitive advantage in that space. So those are the areas that we're gonna continue to invest in. Again, based on what we saw for the full year and how we're thinking about our performance through the year, how bookings came in from last year, or and how they're gonna layer in for this year, we didn't think that it was prudent to pull back on those investments and sort of disrupt the management cycle, disrupt the product innovation cycle, disrupt, you know, our, our marketing investments and campaigns that we're running there. So we wanted to continue those, even at the expense of, you know, some of that margin pressure that, that we're guiding to here in Q1. Then, of course, as you look at our guide and our philosophy, you know, we've. I think we've been prudent about how we've guided, and we wanted to keep that same, you know, philosophy going forward. Hopefully, you see the same from us as we get through 2024. Our next question comes from the line of Sitikantha Panigrahi with Mizuho. Please proceed with your question. Thank you. Most of my questions have been asked, but just wanted to dig into one comment. You said you are moving up market average deal size. How do you differentiate from your competitors? You know, what's helping you win against your competitor? Yeah, I mean, I think there's a combination of things. You know, the wonderful thing about HCM is every company that we sell to is unique. I would say, some of the key areas that differentiate us in the marketplace are, you know, the simplicity of our platform, modern cloud platform. We have, you know, a, you know, best-in-class talent platform that helps people source, onboard, coach, inspire, and manage their employees most effectively. We're really focused on enabling leaders to, to drive people and performance. Then we have the most open platform in HCM. If, if a customer is interested in taking the HCM system of record and integrating it with other key tools that they use, you know, they're definitely gonna select us. Thank you. You're welcome. Our last question comes from the line as Patrick Walravens with JMP Securities. Please proceed with your question. Hi, this is Owen Hobbs on for Pat. Thanks for taking the question. Kind of going back to that moderating labor force growth, I was wondering if you're seeing any difference in that, in that moderation, by different verticals, or if it's all kind of at once moderated? Yeah. Hey, Owen. We see it, it, it matches up to the broader market, that's for sure. I mean, we're seeing some slowness, a little bit slower in manufacturing. Professional services has sort of bounced around a little bit and actually recovered marginally. Then food and beverage and healthcare have been. They ramped a little bit faster earlier in 2023, and those have slowed, but they sort of look they still look normal relative to what we're seeing in the broader market. Yeah, we do see a little bit of those dynamics. Our portfolio has a, a good mix and does represent, you know, the overall average of the economy, so, we see some of those same dynamics. Great. Thank you. Obviously, can't predict the future, but is there any indication, based on, you know, historical patterns or, or any kind of analysis you guys are doing on how long this headwind will last? Yeah, I mean, you, you could look at macroeconomic forecasts from, you know, all the, the big players, and we certainly take all those into consideration. You know, it, it feels like it's everybody's guess, right? I think that the market's been expecting a, a faster slowdown for a long time, and we've been talking about this for more than a year. I mean, the, the fact is, is that it's decelerated. Labor market growth has decelerated, and we're in that low single digit sort of growth today. Who's, who's to say if it's gonna compress further or, or go negative? We tried to be as conservative as we thought has been prudent in our guide, based on, you know, what those macroeconomic experts are predicting, which is, which is, varied. There's, there's plenty of projections that, you know, think the, the labor market's gonna compress and, and, and/or decline, there's plenty that are a little bit more bullish. I think the folks have been leaning a little bit more bullish and, and dovish lately, we've, we've tried to be moderate in how much we've included in our guide, which we think is prudent. That concludes our question and answer session. I'd like to hand it back to Raul Villar for closing remarks. Thank you again for attending our earnings call. We remain optimistic about the opportunity in front of us and remain focused on executing our strategy. We look forward to connecting with you at the Stifel Tech Executive Summit in Deer Valley, the Goldman Sachs Communacopia and Technology Conference in San Francisco, and the Citi Global Technology Conference in New York in the coming weeks. As always, feel free to reach out if you have any questions. Have a great evening. Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.