Great. Thank you so much. So look, we're just delighted. Wait, we gotta change the slide though. There we go. So look, we're just delighted to have Paycor joining us at the JMP, the Citizens JMP Technology Conference here at the Ritz-Carlton in San Francisco. Adam sitting to my left is the CFO. And so we're gonna get to know Adam a little bit, and then we're gonna find out how business is going. We're gonna talk about how Paycor is differentiated from some of the other SaaS payroll companies, and then we're gonna find out one of them is kind of blowing up, and we're gonna find out if that's been helping your business at all. So first of all, Adam, where are you from? So I actually grew up not too far from here in a little town called Antioch and then moved to Cincinnati where my family was from since I was a teenager. I've been there. So I spent my whole adult life in Cincinnati rooting for the Bengals against the Browns, against Pittsburgh as well, but—and I've been there. My wife and I have been in Cincinnati and around that area for a while now. Yeah. Yeah. And walk us through your work history. I started in finance with a company, well, Fifth Third Bank, based out of Cincinnati, headquartered in Cincinnati, and lucked into this opportunity with a division called Fifth Third Processing Solutions, which became Vantiv and spun out of the bank in the financial crisis in 2009. We took that company public in 2012 and then acquired a handful of companies, but I was running M&A with them for a couple of years. We acquired this company called Mercury Payments, which I rolled off and started running as the sort of line of business CFO there for a couple of years before jumping back over into Cincinnati in. So Mercury Payment Systems was when? What year? That was 2014. Yeah. Yeah. And then Vantiv acquired Worldpay or merged with Worldpay right as I was leaving in 2017, moved over to Paycor. I started with Paycor running analytics and establishing their data office and then soon took over FP&A, and we did the Apax acquisition in 2018 and recapped the business. And then a couple of transitions: our new CEO came in in 2019, and I transitioned into the CFO role in 2019 full-time. Actually, we're gonna go. It's super interesting. Okay. So the first role when you joined in 2017, that was pre-Apax, right? It was. It was an analytics role. What were you hired to do? What was going on at Paycor back then that you were helping with? Yeah. I mean, we were trying to get our hands around the business. They were really trying to figure out how to scale. This company? How old is the company? Yeah. At that point, I mean, we were, I guess, 27 years old. Yeah. So it's an older company, right? But it took them maybe 10 years to get to $1 million. 1990, it was started, and 2000, I think, is when they hit about $1 million of revenue. It went to about $10 million of revenue over the next couple of years, and then by when I got there, it was $200 million. It was just about $200 million in 2017. So they had grown considerably. The HCM market really grew sort of the late 2000s, I guess, through this point, 2017. Of course, you had ACA in there as well that was really helping to expand and creating a tailwind. And then you had Workforce Management Solutions. I mean, the product set was continuing to expand. And then you had Paycom and Paylocity, both, of course, close competitors even at the time, who had taken or who had gotten recapped and taken majority share from private equity firms in like 2012, 2013, and then went public in 2014. I think this put a lot of pressure on Paycor at the time and the founder to begin to scale the business, and they just were maybe a couple of steps behind at that point, still working on similar strategy, distribution expansion, but really hadn't expanded much out of the Midwest at this point. That was 2017. Then Apax comes in in 2018. What was different after that? Well, their thesis was really about expanding our sales capability and distribution. We didn't have any sellers in California, for example, which seems like a natural step for a technology company and if not the start for most technology companies, of course. So it was really about the sales efficiency and expansion, getting the revenue growth, sort of catching up with some of our peers who we had been effectively beating 10 years prior. Then the CEO at the time, Bob Coughlin, he was the original founder, was looking for an opportunity to transition out and transition to either executive director and then formally out of the business. That's when they found Raul Villar in early 2019. Of course, he comes with a long ADP background, sales distribution expansion background, and it was a really good fit for him as he was looking for an opportunity. It wasn't really looking for an opportunity. He tells his own story much better, but had this opportunity with Apax to get back into HCM and help grow a company. Yeah. When was the first time you met Raul? I guess. I guess we hadn't met him. A high-energy CEO for a year. High energy. Yeah. Lots of energy. Very exciting. It's fun. He's. Was it at work? Was it maybe the first time you met him in the office one day? Yeah. I think it was the first time in the office one day. It was like July 1st. He started, and we started reorganizing the business right away, making decisions a lot faster, as you can imagine, with a little bit more of a professional sort of CEO and leadership. It was easier to make a lot of changes. We started working on the culture right away, changed the business expectation and performance, and really set the company on a different trajectory pretty quickly. Pretty quickly. Pretty quickly. When did you become CFO? In late 2018. In late 2018. Or, excuse me, 2019. Late 2019. At the time, I was interim CFO in early 2018. Okay. And so Raul came in, you were interim, and then he was like, "This is going to work. It was going to work. Yeah. I mean, he's really easy to connect with, good to connect with. We have a good relationship, and so yeah, it started to work out pretty quickly. Lucky for me. All right. This is actually super helpful. So let's keep going. So the very short version, what happens in 2020, 2021? Well, the first thing a brand new CFO wants to do is go through a global pandemic with the company. Yeah. Top of the Yeah. Top of the list, right? Yeah. A new leadership team. I mean, it really helped to catalyze our team, that's for sure. We invested in a brand new leadership team, sales leader, new service leader, implementation leadership, myself as well, along with a couple of other roles, new legal officer, HR. We really redid the entire team. Oh, really? really? Wow. Yeah. And then COVID hit, of course, and I think it was right after I left this conference a couple of years ago. You remember that? Yeah. Yeah. Yeah. It was becoming evident. It was crazy because by Monday so Dan Springer, who at the time was the CEO of DocuSign, was sitting in that chair, and he's like, "Yeah, you know, it's funny, Pat. I got an email from our Japanese team, and I'm supposed to fly there after this conference, and they told me not to come. Yeah. It was. They said it would be perceived as being really rude if I were to come. That was when we started. By the end of Tuesday, right? Yeah. People were both. Yeah. Yeah. Yeah. Yeah. I forget who that was. Nobody was shaking hands. Wow. Wow. Okay. But I mean, it helped us to, again, catalyze the team and set new expectations in the organization. We, of course, were making cuts, trying to figure out how to manage the revenue in and the capital structure and everything. We didn't have to raise any additional capital, but that was pretty tough. And then we immediately began, we thought the market, of course, was going to go in a different direction, but in the summer of 2020, we set out to take the company public. Of course, it was perfect timing, and we ended up in July of 2021 taking the company public. Yeah. Okay. And how's the business today? What would you say? Yeah. I mean, I think one of the things that we've been able to do and accomplish over the last couple of years now, 2.5 years, is hitting all of the milestones and the objectives that we set out on. And it's been about steady execution, which has been fantastic because it was not what the company's culture was previously. But you've seen over the last 2.5 years now, we've been really steady in our execution, continuing to grow the business, prioritizing growth while also expanding margins, and that's come on the reshaping of the strategy. So it's been great to see it really come together, culminating, of course, in this last quarter that we were able to outpace our peers and accelerate that revenue growth on the recurring side both. It's been a pretty fun 2.5 years, and we feel like we're sort of on the front end of it still. Let's talk about that more. Why do you feel like you're still on the front end of it? Well, the sales distribution and the expansion has been important for us. We've grown our sales headcount more than 20% for the last couple of years, and it's really been about what we've called tier one coverage, tier one being tier one cities, the top 15 cities. We were really undercovered, and we determine that by saying how many sellers can we fit inside of a market, how big is the market, how many can we fit in the market. And we were sitting at something around 15%-18% coverage a couple of years ago. We've gotten it to over 30%, but that still means we have a lot of, one, a lot of room, but then also a lot of young sellers in tenure. And it's. It's 15-18 basically in 2021 or 2021? That's right. right. Yeah. The end of 2020 and into 2021. Yeah. Right now it's 30 to. Over 30%. Yeah. So we've doubled our coverage. But again, I'd still say we're inefficient in our ability to make those sellers efficient overall. There's still lots of room there. So we're really excited about what the next couple of years can bring as we continue to age those cohorts, so to speak, as they get more tenure and we're able to drive more productivity there. And we've seen the same thing on the product side. We've expanded the product considerably over the last 4 years, adding talent, getting deeper into our talent solutions, and adding a lot of capability. We've grown the product suite by effectively double as well over the last handful of years. Yeah. We'll get to the price. Just the sales distribution alone is super interesting. So first of all, what's tier one? How do we define tier one? Yeah. So tier one would be the top 15 cities by MSA or top 15 MSAs, of course, or cities like New York and LA, San Francisco, Houston, Chicago, where historically we've been underrepresented. Let's pick one. What's one that we should talk about? Well, I mean, we're here in San Francisco, and it's one of our newer markets. So when did you enter San Francisco? It's been about 2 years, 18 months or so. First thing you do is hire someone, I guess, or do you hire a city manager? How do you go into a new city? Yeah. It's really around sales leadership. You have to start with good leadership, and we call them regional sales directors. These regional directors can manage somewhere between 6 and 8, sometimes up to 10 sellers in a region. Then in San Francisco, we could fit maybe 2 teams. Cities like LA, you can fit quite substantially more, but. You could have up to 20 sellers. That's what 2 teams is? Something like that. Yeah. Just in San Francisco? Just in San Francisco. Yeah. Was the regional manager for San Francisco, was it someone who's already at the company, or? No. And that's actually one of the things we've been working on, finding really strong RSDs and/or sellers who can become leaders is part of the scale challenge that we faced and that we will continue to evolve. We started a couple of years ago with really hiring new RSDs, new sales leaders in market, and they don't know Paycor, right? So they're coming from the outside. And sometimes you can find really good sellers who are ready for that leadership role, and they want to come from ADP or Paychex. That happens quite a bit, and we still find those opportunities. But what we've really tried to do over the last couple of years is build more sellers into sales leaders. They're not always your most successful sellers necessarily, but strong sellers who are able to, who want to step into a leadership role and then can help navigate Paycor, onboard, and then drive forward inside of these new regions. That's one of the opportunities that we have really as we see part of the efficiency that we're going to get out of the sales organization and the spend that we're making. Let's stick with San Francisco. So did you hire someone? How did you do it? We hired someone. Yeah. And then we've built up a team around them here in San Francisco. They came from Paylocity, or where did they come from? Most of our sales leaders do not come from Paylocity, and I'm not sure that we've ever hired a sales leader from Paycom. ADP? Yeah. You see a lot of ADP converts and Paychex. And then we do see our own sellers moving into RSD roles more and more now. Yeah. Does that person live here? They live here. Is it important to have them live in the city that they're covering? Especially those RSDs, for sure. I would think so. Yeah. I would think that's important. Yeah. You want them as close to the territories you can. Yeah. The weird thing about payroll is you can call some midsize company every day for 5 years, and if they're not planning on changing payroll, it doesn't matter how many times you call. Yeah. I mean, it's an issue. When they're ready to make the decision, though, you got to be there. You got to be there. Right. Yeah. That's right. I mean, that's been one of our challenges, is that we just haven't had enough at-bats. We aren't in the at-bats. And so you get the coverage and folks in the market. But to your point, if you're not actively in the conversation with those companies when they're ready to buy, then you miss out on the opportunity. Yeah. So how do you do it? So whoever parachuted into San Francisco and all of a sudden he's got to have relationships with a lot of tech startups, right? How do you build those relationships? Well, I mean, one of the ways that we go to market is through broker relationships, and the broker relationships really fit well in the SMB market where we primarily focus between 10 employees and a couple thousand employees, and the benefits broker market really covers that space. They tend to have relationships. I mean, every middle market firm has some sort of a broker or benefits broker that they work with. It's about, for us, creating relationships with them. They have insights into the business. They're working with their clients on a regular basis and going through renewals with them annually, so they'll know when they're struggling with some technology issue or they're having payroll issues or they're having benefits administration issues. And so that's one of the ways that we use to really connect in with regional portfolios and customers is to get closer with their brokers. What percentage of revenue actually comes from that relationship? About half of our field bookings or mid-market bookings come from those. Oh, it is. Oh, it is. Oh, that's more than I realized. Yeah. Okay. Okay. So stocks at $20, it's about where you reported. It's only 4x revenue, right? You sound pretty good. Why should people own this stock? Well, like we've been talking about, I mean, I think we're still on the front end of this. I think one of the questions that we get quite often is, "How big is this market really, and how competitive is it?" It's getting more crowded. Folks say like, "Oh, UKG is coming into this market. It's getting really crowded," right? And you're like, "Well, UKG has been around for 20-plus years. Paylocity, Paycom, Paycor have been around for 20-plus years." The newest person, or I mean, a firm into the space is Gusto, really, and they're a 20-plus-year company, and they really focus under 20 employees. You have another firm, of course, that's very local. I know there's something funny on Gusto, by the way. So my daughter is going to high school out here in Marin County, right, at Redwood High School, and she's like, "Oh, Dad, we had a really interesting speaker come into our economics class." And I'm like, "Oh." She's like, "Some guy who went to Redwood and he started some payroll company." And I go, "Gusto?" And she's like, "Yeah. That's him. Goes to his high school once a year and talks to 20 kids about going to start a business and payroll. Payroll. Yeah. I love it. I love it. But they're down market. Yeah. They're really down market. I mean, we don't see them often in competitive situations or really under 20 employees. And then the other newest player that we hear more about is Rippling, and they're really focused in the West Coast, East Coast. You'll see them in markets like that. But even still, we've only barely run into them. And so I say that to say that the market is still huge. Paychex and ADP represent something like 25% of the market. They cover about 25%. And then you get a smattering of other competitors like Workday, who we don't compete with. They're much farther up market in Ultimate. But that leaves effectively half of the entire market is covered by in-house providers, like third-party software providers who are like ERPs that might have a solution, and local payroll service bureaus or small CPA firms. Half of the market is covered by those firms. We run into firms every single day that have portfolios in the $5 million-$25 million range that we've never heard of before, and that's what covers most of the market. I think when you look at ADP broadly, they're not losing a ton of share. They are losing share in the mid-market technology space, but they're making up for it with PEO and benefits and ASO. Where we're really taking share is more from these in-house providers and payroll service bureaus, and it's still a huge opportunity. All right. So on the front end, you've got a big TAM. It's not as competitive as people think it is, right? There's a long way for you to go. Where can this business go? So today you're doing. I got you doing $654 million this year, right? How big can this business get? Where can it go? And what can happen to the margin structure? Yeah. Well, I mean, one of the interesting things about HCM is if you look back over the last really 30 years from the onset of local payroll, "I'm going to cut your check for you and processing your check too," now we're doing stuff like, well, then workforce management, benefits administration, and really talent is the latest onset here. We've acquired a platform in 2019 and then continued to expand the talent suite and broadened our product suite and got much deeper around talent. And so again, say that to say that over the last couple of years, we've doubled the opportunity that we have around the product suite. And there's a lot of stuff on the horizon as well, other ancillary products that look like they have a natural fit within the HCM solution. And so I don't think that there's an upper limit on where we can get to in any over the right period. We've been adding $3-$5 of additional product to expand our suite over each year for the last couple of years. To the PEPM? To the PEPM. That's right. It doesn't look like there's any opportunity for that, or a sort of headwind to stop that. It's a huge market. I think that there's a huge opportunity for us to continue to grow in the mid-market alone. Yeah. So when I initiated on Ultimate Software a long, long time ago, they're doing less than $100 million in revenue, and combined now within Hellman & Friedman, I think probably north of $4 billion, right? So is that sort of long-term, durable growth opportunity still possible? Clearly. Really? I mean, I love that. Yeah. I don't see there's nothing in the way of that. Again, half the market is uncovered. The product continues to expand. This is also a space where the market continues to want to invest around their employees. The labor market is pushing more and more this way around talent, especially with the products that we invest in. So I don't see any reason why that wouldn't be possible. All right. Great. Stick with it. Keep going. All right. Any questions from our audience? Just those payroll service bureaus that you're talking about where it seems like it's pretty prime territory for you to go after, what size customer? I mean, I don't generally hear people talk about it. I hear them talk about that one of your software or one of the other ADP anymore, but what are those service bureaus focused on? What size? Is it the size of the customer? Is it an industry? Where are they? Yeah. There are some that are industry-focused. There's a healthcare one that's based out of New York that just, for whatever reason, they don't have any special technology around healthcare and long-term care, but they've just hit that market, and they know the players in the market. A lot of the payroll service bureaus, you'd expect them to be extremely small, under 20 employees. It's really CPA firms. So there are CPAs who will heavily focus under 20, under 50 employees, and they'll have a couple hundred customers, 500-1,000 customers with fewer than 20 employees per customer. But then we run into payroll service bureaus, and we have acquired small portfolios previously as well that have companies with thousands of employees. And so it does happen. I think what you normally see is that there's just regional players, and they go to country club, the same country club, and their kids go to school together, and they want to know that they could shake the CEO's hand, and they're right down the street. I mean, it's where we grew up in the '90s. They just don't have any special technology. Usually, they're using another platform as a backend, and it's just built on—I mean, not just. It's built on the relationships of the local business owners and community. At some point, they're lifestyle businesses, and at some point, they can't sustain it. Either their kids don't want to run it. They can't sell it to anybody. The only natural sale is to either a firm like us or, of course, ADP does that en masse where they'll buy the whole portfolios en masse. We compete against those firms, and they can have good-size SMB customers. Yeah. One more question. We got 40 seconds to answer, just so you know. Why is the value proposition, I guess, between those types of folks that you offer? What's the perspective of the customer the first year after they sign up? What's the big difference, they know? Yeah. I mean, they buy with those regional payroll service bureaus because of the service, and it's somebody local. And when they have an issue, they know they can go somebody. The challenge is that they have issues, and they're like, "I can't keep having issues." And the technology that they can get around talent acquisition, talent management, performance management, benefits administration, workforce management, it's so much broader. And so once they come over and they see the technology, they say, "Oh my gosh, we were so far behind on the technology with the payroll service bureau that we were with previously." So this is great. Yeah. All right. Thanks so much. It's actually super helpful. I learned a lot. So I really appreciate having you here. Great. I'm glad I could surprise. It was great. It was great. Thanks. Great.