Asure Software Inc

NASDAQ:ASUR

good afternoon, and welcome to Asure's Fourth Quarter and Full Year 2024 Earnings Conference Call. Joining us for today's call are Chairman and CEO, Pat Goepel; Chief Financial Officer, John Pence; and Vice President of Investor Relations, Patrick McKillop. [Operator Instructions]

I'd now like to turn the call over to Patrick McKillop to [indiscernible] for fourth quarter earnings conference and [indiscernible]

Thank you, operator. Good afternoon, everyone, and thank you for joining us for our fourth quarter and full year 2024 earnings results call.

Following the close of the market, we released our financial results. The earnings release is available on the SEC's website and our Investor Relations website at investor.asuresoftware.com, where you can also find the investor presentation. During our call today, we'll reference non-GAAP financial measures, which we believe to be useful to investors and exclude the impact of certain items. A description inning of these items, along with the reconciliation of non-GAAP measures, to the most comparable GAAP measures can be found in our earnings release. Today's call will also contain forward-looking statements that refer to future events and, as such, involve some risk. We use words such as expects, believes and may to indicate forward-looking statements, and we encourage you to review our filings with the SEC for additional information on factors that could cause actual results to differ materially from our current expectations.

I will hand the call over to Pat in a moment, but just wanted to take a moment to remind folks of some upcoming investor relations activities. On March 9 through the 18th, we will attend the 37th Annual ROTH Conference in Dana Point, California. We also plan to do some mondial road shows later this spring as well. Investor outreach is very important to Asure, and I would like to thank all of those that assist us in efforts to connect with investors. Finally, I would like to remind everyone that this call is being recorded, and it will be available for a replay via a link on the Investor Relations section of our website.

With that I would now like to turn the call over to Pat Goepel, Chairman and CEO. Pat?

Thank you, Patrick, and welcome, everyone, to Asure Software's Fourth Quarter and full year 2024 earnings results call. I am joined on this call by our CFO, John Pet, and we will provide a business update for our fourth quarter and full year 2024 results as well as our outlook for 2025.

Following our remarks, we'll be available to answer your questions. As you can see from our reported results, we executed quite well against the plan we laid out for 2024 and delivered strong results. Our '20 -- total revenue increased modestly in 2024 to $119.8 million. Excluding ERTC revenues, total revenues were up 17%. Recurring revenues for the full year 2024 grew 15% versus the prior year. And I would like to highlight that our recurring revenues, which carry higher value than onetime revenues as a percentage of total revenues increased to 96% versus 80% in 2023. During 2024 we focused on the continued growth of our business and replacing onetime ERTC revenues with higher value recurring through a combination of organic growth and acquisitions.

The drivers of our success in 2024 were broad-based with a strong contribution by our payroll tax management products as well as contributions from recent acquisitions. Over the past year, we added to our product portfolio with items such as employee recruiting technology benefit brokerage capabilities, pretax and preventative health care solutions and our 401(k) offering. Recently, we launched SurePay. This is an innovative alternative to online banking, which we expect to help employers with retention, reduction in loss paper check and attract new employees. It provides employers with the ability to offer on-demand pay as also known as earned wage access, Assure Pay is delivered via easy-to-use mobile app and offers debit card capabilities free ATM withdrawals plus more.

We're in the early stages of the product rollout with launches to strategic groups thus far. We made great strides with our acquisition strategy during 2024 primarily acquiring our payroll resellers. Under this approach, we're acquiring new clients and such transactions are not too much acquisitions in the traditional definition. We anticipated and acquisition during the fourth quarter, which did not materialize. However, in the first quarter, we replaced the value of the deal with 2 additional acquisitions, and our pipeline for future deals remains robust.

These client acquisitions can be efficiently integrated into our existing business, and we can cross-sell additional capabilities, which we believe drive future profitability as we achieve scale. As we continue our efforts to enhance client experience, we've been working to integrate all Asure solutions in a con modern user interface. Additionally, we recently introduced Luna, the industry's first AI agent for payroll and HR. Unlike traditional generative AI chatbots, [indiscernible] is an advanced agent that understands Asure's suite of products and more importantly, can act on behalf of both employees through self-service and business owners and administrators. Employees can simply ask Luna for help and she can take care of items like updating personal details, changing benefits, elections;. certainly, we've experienced momentum with new payroll units increasing at a strong rate during the fourth quarter, and that sets us up nicely 2025. Also, our 401(k) product had a strong business results in the fourth quarter as we look forward to seeing that trend continue during 2025. As you know, our 401(k) offering leverages the U.S. government secured 2.0, which provides funding and encourages adoption of the 401(k) plans by businesses in the U.S.

Our sales efforts during the year 2024 resulted in an 86% increase in new bookings versus the prior year. Also, our contracted backlog is strong, has grown 17% since our third quarter earnings report. Based on our current business trends, we are reiterating our 2025 revenue guidance of $134 million to $138 million. with EBITDA margins of between 23% and 24%. As a reminder, this 2025 guidance excludes any contribution from future potential acquisitions. As we look at the business plan for 2025, our guidance implies a mid-teens growth rate, which is very positive. Finally, we're excited to share that we signed a multiyear agreement with a firm that is the industry leader in audit, tax, consulting and advisory services to resell our payroll and payroll tax management solutions. This agreement will enable the firm to deliver our comprehensive solutions to their firm's clients for the first time.

Now I'd like to hand off to John to discuss our financial results in more detail as well as our quarter 1 guidance. John?

Thanks, Pat. As Patrick mentioned at the beginning of this call, several of the financial figures discussed today are given on a non-GAAP or adjusted basis. You will find a description of these GAAP to non-GAAP reconciliations in the earnings release that was made available earlier today. Reconciliations themselves are also included in our most recent investor presentation posted in the Investor Relations section of our website at investor.asuresoftware.com.

Now on to the fourth quarter and 2024 results. Fourth quarter total revenues of $30.8 million, grew by 17% relative to prior year. While recurring revenue rose by 14%, excluding nonrecurring revenue from ERTC total revenue rose by 22%. For the full year, total revenue grew slightly to $119.8 million despite a $16.5 million decline in ERTC revenue. Recurring revenue for the full year rose by 15% relative to prior year to $114 million. Fourth quarter recurring revenue growth was led by our payroll tax management business where our enterprise solutions have gained great traction on the strength of our offering. We also do revenue in payroll, time and attendance and benefit groups. We are particularly excited about the future growth potential of our insurance offerings which is a new business for us.

We have had some challenges in our HR compliance group in 2024 related to ERTC upsell activity in 2023. We expect to pass this issue this year. Despite rate reductions, our float revenue may remain stable in the quarter relative to prior year. Gross profit for the fourth quarter was unchanged at 68% compared to the prior year by the decline in ERTC revenue. Full year gross margins decreased to 69% from 72% in the prior year period. Non-GAAP gross margin for the fourth quarter was 73% versus 72% in the prior year period. Non-GAAP gross margin for the full year period decreased to 74% from 76% in the prior year. We continue to believe there is room for margin improvement over the longer term as the business scales. Net loss for the fourth quarter was $3.2 million versus $3.6 million during the prior year. The net loss for the full year was $11.8 million versus a prior year loss of $9.2 million.

EBITDA for the fourth quarter was $3.4 million, up from $1.1 million in the prior year period, and EBITDA for the full year was $11.4 million versus $14.3 million in the prior year period. Adjusted EBITDA for the fourth quarter increased to $6.2 million from $2.8 million in the prior year period, and our adjusted EBITDA margin was 20% in the fourth quarter compared with 11% in the prior year period. Adjusted EBITDA for the full year was $22.5 million versus $23.3 million in the prior year period.

Adjusted EBITDA margin for the full year was 19% versus 20% in the prior year period. While discussing adjusted EBITDA, we often get questions regarding our free cash flow. The way we think about it is essentially adjusted EBITDA minus software capitalization and net capitalized sales commissions. We ended the year with cash and cash equivalents of $21.4 million and we had debt of $12.7 million. As we have previously discussed, we are thinking about entering into a credit facility. The company has been in discussions with a number of lenders. Based on these discussions, we are contemplating a facility between $20 million to $60 million with a rate of SOFR plus 4% to 7%. The company has agreed to negotiate exclusively with 1 lender until April 13, 2025. The company is in the very early stages of negotiating a credit agreement with this lender and no definitive agreements have been reached. Accordingly, there can be no assurance about the timing or terms of a definitive credit agreement.

Now in terms of guidance for the first quarter of 2025 and the full year 2025, Our outlook is based on a strong momentum we have built in our sales organization with a contracted backlog of $79 million, up from approximately $20 million at year-end 2023. About 1/3 of this backlog is anticipated to be recognized in 2025. We expect to achieve continued synergies, both revenue and cost relating to our customer acquisition activities. With our expanded product offerings, we also expect to accelerate our cross-selling activity success. This will be a strong focus in 2025. We anticipate revenue growth across the organization with continued challenges in our top in the first half of the year. We are estimating the first quarter revenues to be in the range of $33 million to $35 million. Adjusted EBITDA for the first quarter is anticipated to be between $6 million to $7 million, roughly stable versus Q1 2024.

We anticipate EBITDA growth will be more subdued consistent with the revenue profile first half of the year as we invest in infrastructure to support large enterprise deals, product and technology. We are leaving our 2025 revenue guidance unchanged with revenue in the range of $134 million to $138 million. with adjusted EBITDA margins of between 23% to 24% at these revenue levels. Also, as Pat mentioned in his comments earlier, this guidance figures exclude any contribution from future potential acquisitions. In summary, 2024 was a busy year as we grew past the wins of ERTC. We are excited about the momentum we have entering into 2025.

And with that, I will turn the call back to Pat for closing remarks.

Thanks, John. We are pleased to have executed well on our plan during 2024, which delivered strong results despite balances we faced in replacing onetime ERTC revenue. During the past year, we've invested in the business by expanding our product portfolio, which will help drive new client additions as well as cross-selling within our existing client base. Our product additions in 2024, including recruiting solutions, benefit brokerage capabilities, 401(k), preventative and pretax health care offerings plus Asure Pay, which began its launch in November 2024. We feel really good about our product portfolio and remain focused on executing on the opportunities that we have in front of us for 2025.

In addition, our payroll tax management product experienced very strong momentum in 2024 and with several major multiyear agreement signed, such as Venture Strata, the grocery store chain Kroger and Nucor, just to name a few. We believe that the growth of the tax business will continue to be a driver for us in 2025. During 2024 we have invested in the business. And while this partly impacted our margins, we believe that we have laid the foundation that over a medium-term time period revenues approach around $200 million, we can achieve 30% plus adjusted EBITDA margins, which would be a significant improvement from current levels. we remain focused on achieving these goals and the combination of the investments we made, plus the continued customer acquisitions will help us achieve that goal. As we move into 2025, We're excited with the opportunities we have in front of us with all the new products we added and we'll be looking to cross-sell and our attach rate is 1 of our measures of success, an increase of overall attach rates will yield increasing margins, which will translate to the benefits of scale in the business. We believe this will help develop a clear understanding of our business and be more beneficial for investors. In summary, we have delivered strong results with reoccurring revenues, the most valuable part of the business growing 15% during the year and becoming 96% of total revenues versus 84% in the prior year. Our bookings growth of 86% was very good. Our contracted backlog is very strong and grew approximately 300% and from 23% to 24%.

Our guidance for 2025 of $134 million to $138 million in revenue implies a mid-teens growth rate, which is very attractive and the headwinds from ERTC are now gone. We'll continue to provide innovative human capital management solutions that our businesses thrive, human capital management providers grow their base and large enterprises streamline their tax compliance. Thank you for listening to our prepared remarks. And so with that, I will send the call back to the operator for a question-and-answer session. Operator?

[Operator Instructions] Our first question is coming from Joshua Reilly from Needham & Company.

Maybe just starting off, how should we think about the progress you're making on the pipeline for enterprise payroll tax opportunities in 2025? We know there's a lot of opportunities there. And then maybe along with that, like how are you thinking about getting the salespeople who are focused on ERTC, are they fully productive now in terms of the enterprise payroll tax opportunity or what level of progress have you made there? Maybe an update there would be helpful as well.

Yes, Josh, thank you for the question. And with me primarily answering questions today is myself, Pat Goepel, Chairman and CEO; John Pence, the CFO. And then with us, we have Eyal Goldstein, who's President and in charge of the sales organization, so I'll let him take some of those questions as well. But just on a whole, from an enterprise perspective and a tax perspective, we're making really good progress. We've sold a couple of deals where we have licensing deals to start out with -- but we're starting -- and through the year, you're going to see us have more and more volume and more and more customers on the platform. So those are going along really, really well. We're really happy with that. We have implementations now with an Oracle system, SAP system, a Workday system. So the interfaces are in place. .

The infrastructure is in place, and we're doing really well in that area. I think you will see kind of the fruits of the revenue be more consistent in the book-to-bill timing coming in, where you may have a longer book-to-bill is if somebody is converting to an ERP solution or enterprise resource planning we're not going to put that in an immediate background backlog because that contracted account is going to take some time to get live with the enterprise resource planning software and then install our tax filing. So that was a learning in 2023.

And then as far as the salespeople moving past ERTC, I got to tell you this year was a really good year. We did some acquisitions. And we look at sales both from an organic sales perspective or kind of one by one and partner-related system, but we also look at it with our client acquisition strategy of our resellers. And then what we do is really cross-sell and really look at how we drive the value of our attach rates, which start out at about 17%, and we'll continue to drive that in '25, '26. And I'll let the conversation go to Eyal here for a second because it has done a really nice job of top grading the sales staff. And as we moved on from ERTC to selling the whole solution, perhaps you can expand on that.

Yes. Josh, so a couple of things. Just to recap on payroll tax management. That team is very well up to speed. We've got a really good marketing approach where we're driving demand for that group, both for enterprise pursuits as well as remarketers or other payroll platforms that are leveraging -- deleveraging our tax platform. So that one is going to continue to see tremendous growth pipeline is growing. And like Pat mentioned, we're in some really big implementations right now that will only continue to drive more referrals from the big Tier 1 software players where we're integrating into those platforms. And then on the other -- the sales team side, outside of payroll tax management. We're probably a year in post ERTC where that was our sales motion. So the team has done a really good job. We've top graded a lot of talent on the leadership side. And 1 of the things we've done now that we've rounded out the solution set with benefits with retirement solutions with SurePath HR compliance is we've specialized as well. So we've got some dedicated specialized sales groups that, that is their sales focus. That is what retires their quota. That is what they get compensated on. And it was the right time for us to do that now that we've got some of these different solution sets that we didn't have in the past, where it will give us great ability to have that focus to drive cross-sell into the customer base.

Got it. That's super helpful detail. And then maybe just 1 quick follow-up. How important is it to close the credit facility for you to do more M&A in 2025 and -- is the right way to think about it that you're kind of waiting to see how that financing works out before you were to do any more material size deals, whether it's a reseller or some other type of technology or functionality.

Yes. Definitely, that's the main impetus for doing the credit facility is to put the gas on the customer acquisition model that we've been doing for the last couple of years. I think I was looking at the stats. We did 14 customer acquisitions in the last 18 months than we did 2 kind of technology extensions. So a total of 16 deals. But a vast majority of them are customer acquisitions. And so yes, the -- most of those sellers want a component of their proceeds upfront. Typically, we've structured the solar nodes to give us some protection on the back end. But in general, most of that is an upfront cash payment. And so to fund those upfront cash payments and continue that cash, those customer acquisition model, that's the main purpose of the facility.

And we talk about it all the time, but we really feel like we've spent a lot of time and energy building out the back office and the infrastructure to accommodate really adding those books very quickly and efficiently. So yes, that's definitely one of the main thoughts behind considering that facility, assuming we can get it, put together over the next [ quarter ].

Yes. And the only thing, and John hit it on all the right points. The key point, though, that I want to make sure that we reinforce is we're fine to client acquisitions out of the business and on a run rate, if you will. The real impetus though for the facility is we look at scale. In 2021, we were somewhere around $79 million or so of revenue at about 10% adjusted EBITDA.

This past year, close to $120 million and close to 20% adjusted EBITDA. At $180 million to $200 million, we're at 30% adjusted EBITDA. We got the model right. We've really laid the foundation, and we want to continue to go stronger. We also think from an equity perspective, that we're not interested in raising money. So a proper kind of business line for us to go faster, but cash flow wise, we feel really good about the business and the moves that we've done. And and laying the foundation, especially just recently signing this other big deal. When we look at this, the ability to grow faster is something we're interested in, and this line gives us that flexibility. And then finally, we wanted to raised it on the call. We think we're going to close it fairly soon, if everything works out, and we didn't want to have a call and not let investors know that this was in our thinking.

Got it. And then actually, one last quick point. I just wanted to clarify. I think you said that you've done 2 customer acquisitions year-to-date. Are those -- I assume those are factored into the full year guidance? And was that a material amount, those 2 customer acquisitions in terms of revenue? .

So rough order of magnitude, Josh, I think when we last spoke probably at the third quarter call, we mentioned that we had 1 acquisition under LOI. And honestly, I think it's the first 1 that's fallen out where we didn't close after we got to a letter of intent. We were anticipating that deal closing in November, and that was going to be a contribution to the quarter of approximately, I'm going to say about $0.5 million. Is that right, Pat? Yes. And so what we did is we replaced that revenue with these 2. And so again, I think it doesn't impact the current year guide because we kind of already have that in our mind when we were here in the third quarter. But yes, that's the story on that. .

Our next question is coming from Bryan Bergin from TD Cowen.

I wanted to get a question here on the demand environment, given all the volatility that is out there. Can you just comment on what kind of you're going out there on Main Street just amid everything being driven through D.C. Has it changed any demand cadence in the SMB pipe? And then also, can you comment on just how client hiring has progressed in this year thus far?

Yes, Brian, that's a great question. And if I listen to CNBC, the world is changing in the last whatever 6 weeks. But if you look at Main Street, people really are continuing to hire. I do think that there is a divide pick your number, if it's under 80,000 in salary versus over 80,000.

I think you have more of your layoffs in a white-collar recession at this point in time. than a blue collar or gray collar. There is just still, at this point, more jobs than people. And COVID took to kind of cohorts out of the workplace, the people are 55 to 64 that had enough to that kind of said, hey, that's it. And then the second working spouse who had a home school to kids and/or take care of the parents. And those folks still haven't quite yet gone back to the workplace. And then that in simple demographics.

We watch the numbers pretty closely. We modeled a flat employment kind of plan. We see no reason why we should kind of go away from that plant in the last couple of weeks, we have daily calls every morning on employment. I would say in some industries that are tied to the government or tied to, let's say, home building where you have lumber, there's people that are maybe a little bit cautious, but I do think there's a big divide of the stock market, let's say, or the news on kind of on TV versus Main Street. And right now, we're just not seeing that area of trepidation as much as you hear on TV. But I would tell you, we're watching it daily, and we want to make sure, and then we modeled a pretty conservative flat growth. So we weren't expecting big changes.

Okay. Okay. That's helpful. And then as you look at $25 million. Can you put some finer points on how you're expecting the contribution of revenue across the payroll tax management business and the marketplace really just any sense of scale you can share collectively between businesses like that versus your traditional SMB business?

Yes. I think from the tax filing business, et cetera, will continue to grow. I mean we announced we announced the deal, we can't give the name yet, but even even after the quarter, we have a number of different enterprise deals. And in some of them are licensed deals that then are going to bring on to customers over the next couple of years. So we have a feeder channel that's pretty strong. I think order of magnitude, we'll probably give that in the first quarter kind of more specifics. But clearly, we're growing at a very healthy rate in that tax area, money movement area. And then as far as the core business, we have some headwinds on the around interest rates potentially going down. I don't know if it will go down. We modeled that at 3, 5 towards midyear with a couple of 3 cuts I don't think that might be conservative, but that certainly on tax filing flow will be a little bit of a headwind, and we modeled it that might be too conservative. On the home buying of, let's say, the Equifax relationship is less of a guarantee and more of a tied to mortgages.

So that might be a little bit of a headwind. John mentioned the RTC, a little bit of a headwind with human resource compliance. Now that being said, payroll units are up, and we feel really good, and we think we'll grow in payroll in a meaningful way over -- from the start of the year to the final of the year and that process has really been underway here in the last 6 months or so. So -- and then obviously, the cross-sell component is huge for us. We believe that the work we did to integrate the technology as well as launch some of the new products and buy the new product, we're going to really focus on attach rates and it's going to start out at a number, and we're going to give you the progress each quarter. And I think you'll see that the contribution margin and that will increase each quarter of the year.

Next question is coming from Eric Martinuzzi from Lake Street.

I was wondering if you could bifurcate or pick a part that the outlook for Q1, just between the recurring revs and the interest sorry, the recurring resin interest and the kind of seasonal parts of the business, the ACA and the [indiscernible] .

Yes, I would say, I think last year, it will be pretty flat. We think to last year, I think, roughly $5 million of that annual W-2 ACA and probably about the same this year.

Yes. And one thing I would say, Eric, one of the dynamics that we have both in our payroll business and our tax business, is we're starting to price in kind of over an annual fee as opposed to have a onetime year-end fee, there's still a certain amount of clients that have that. And -- but a lot of the newer deals are coming in with a per employee fee either quarterly or annually. So the flattish or so W-2 revenue is really -- is being masked by the pricing end of some of this new way of pricing where it's more a kind of a PEPM or kind of more repetitive pricing model. And some of our acquisitions are like that in addition to some of our go-forward business. So -- and then we have not modeled a ton of business in the first quarter around professional services. We do lot of work, and we will do a lot of work in professional services in the second, third and fourth quarter. The first quarter, we may, and some of it depends on milestone billing, et cetera. We just have taken a very conservative stance in that area around first quarter. .

Okay. Just a follow-up. So at the midpoint of the $34 million, we'd be talking about roughly $29 million of the recurring and that would be up about $0.5 million sequentially from Q4. Is that correct? .

Yes. I try to think what do we have in for fourth quarter and PS. Yes. So I think fourth quarter, what I'm seeing is about 28.5% is the recurring .

Right. That's the reported number. I'm saying based on what you just answered my my question. .

About 20 -- yes, about 29%, but I would also tell you, first quarter, a couple of things fourth quarter is sometimes a little bit stronger based on bonus and employment. Just because there's extra runs, et cetera. I mentioned kind of W-2 anomaly. And then I would say the first quarter Usually, the checks are a little bit down in first quarter versus fourth quarter. And that, coupled with growth leases to a conservative guide, but I would tell you, I think there's probably more upside to downside.

Next question is coming from Jeff Van re from Craig-Hallum Capital Group. .

This is Daniel on for Jeff. Just on the Sherpa introduction. Maybe you can just tell us a little bit more about the go-to-market there what the drivers are in terms of the end users and businesses adopting how that will roll out, just how that will look and ramp. .

Yes. Just from a sure Pay, right now, we have approximately $500 million end clients on Asure pad. And what we're doing is really testing the value proposition. We're going through, make sure the pipes are as advertised, make sure everybody's got their system working. And then we already have taken quite a few sign-ups for people that want to start here in the second -- early in the second quarter. So we'll roll that out. We anticipate in a lot of areas that will replace card revenue that we already have and bring that in-house. We also believe that from a check revenue, this will be an excellent card for that. So we have some clients, some industries. We have people on the system today. And for us, it's kind of an all-in-one card where they can use it as certain wage access. They can use it as a banking account. They can use it as a debit card. And then even a charge card that they can pay in the future, it might even be a credit card. So we think that this thing has a ton of legs and will be the way that people use this within the Assured payroll family. But we're still early days. 500 are using it thus far. And then will kind of announce our progress each quarter. And we feel pretty good about where we're going to be, but more to come here in the next quarter's earnings. .

Okay. That helps. And then on the 401(k) in terms of the impression, I think I got was that the initial momentum there wasn't maybe as expected when it launched, but it sounds like it's accelerating there. Just help us what sort of the learnings are there, where sort of the momentum is coming from? And what is it sort of that are the key drivers in terms of getting small businesses to want to adopt the new plants.

Yes. I'll let Al talk as well on this one. But first of all, we pivoted from RTC in fourth quarter of 23 now and really launch 401(k) right around the January time frame. So it's been kind of a year with it. I would say interest level was super high. What I would say is our partner, Vestel, is really nice technology partner, and we've worked together well what I would say we've had a lead. We've had to learn how to sell it and you have an admin component and you have a fund lineup component. We had to kind of learn the ins and outs of that. And then from an implementation or book-to-bill, we had to make sure that we really kind of locked in on a book-to-bill. And I would tell you, we've had a lot of interest. And from a compliance perspective, on the Secure 2.0 kind of rules. Some of that was changing in the first year where the ease of kind of compliance and maybe the carrot and the stick weren't quite well known. So we had to evangelize that. We found our rhythm here a little bit and coming from 1 of my past lives, was at Fidelity where we had a lot of 401(k) customers. It's just really a learning curve. But I will tell you, we're starting to get it, and we're starting to get the book to build out. I think the admit piece, we have a pretty good job. And then now as we move funds from the other providers, that will start to pop revenue in the future. So it's just a learning curve. We have expanding now our sales motion in that area as well as our operation expertise. But Al, maybe if you want to jump in on that. .

Yes. I think any time you roll out a financial product, I think you could probably took us a little bit longer than I would like. But just to piggy back what Pat was saying, we've got a dedicated retirement sales group now that, that is their sole focus. They've got the ability -- first of all, they've got experience selling retirement solutions. And so they're able to jump into the pursuits that we're -- that we have referrals into the customer base and new deals. -- and transact and drive those value propositions much more effectively than we were a year ago when we rolled it out. So we're seeing the momentum in pipeline both in leads and conversion of the leads. And we'll have this month more unit sales of 401(k) than we've had in the past. It will be a record for us. So the momentum is just starting. I think we now have the value proposition down. And again, the more we have some of these specialized sales teams that, that is their sole focus I think it's just going to continue to drive the demand in our execution to add not only to new deals coming in, but more penetration, like Pat mentioned in the customer base. SP1 Our next question is coming from Richard Baldry from Roth Capital Partners. .

Yes. When you look at the new bookings growth last year, was that more a function of unit growth or ARPU? And the reason I'm asking is it feels like with your broadened offerings, that gives you an opportunity to go a little bit more upmarket larger numbers of employees because of the broadened suite that you've got is more complete now. So I was just sort of curious how you think about that and how you think about that growth driver for 25 and forward between sort of .

Rich, you could have been in our Board meeting. So the real, I would say, first of all, a lot of progress, a lot of credit goes to all in 2024, 86% up is -- what is it about 86% you don't like. If there's anything we didn't like -- we thought it was a big deal tax filing enterprise, we thought that had a disproportionate amount. And then on the small business, we felt really good about the unit growth, but now we have to expand our ARPU and when we looked at the capability, we consciously went after the benefit area, the recruiting area, we really want to round out the solution. So now as we introduce kind of next year, we introduced product attachments and the overall attach rate, that is the focus. And then we looked at an organization of reorganizing because at the high level, we were driving really big deals. But now what we want to do is bring along those multiproduct solutions to the company and really drive the value of the deals. And maybe -- you've done a really nice job of of hiring the right people to do that, but let's talk about that for 25. .

Yes. Yes. And Rich, that was a big reason for part of the reorganization of the sales team to some specialized sales groups. So again, on the high end, we had 2 common deals, big 6-figure deals on tax. That's continuing right now in a big way. And then when I look at the pipeline, actually our units are up quite a bit, 40-something percent here from a pipeline perspective. So we're getting the units -- the big opportunity for us -- for us was, okay, now how do we attach all these other solutions that we have, that we've rounded out as part of the offering to these payroll units. And that's a big piece for us, right? Once that linkage happens now, if we can continue the pace of payroll units and continue to grow that the way we have been and attach benefits broker, 401(k) each our compliance time and attendance, which we've done with some bundles. Now you'll really start to see keen he ARPU go up and to the right in a big way. The other aspect, Rich that we're really working on is just not only a sales and marketing function, but with our technology, in our new Singla, we're starting to introduce vent-driven marketing and using our data -- so if somebody, for example, processes determination, they have the ability to use our COBRA services right away or there have a life event, we immediately can market to them. So -- this is a strategy we've been working on for multiple years. And we feel like sometimes luck's preparation meeting opportunity. We're prepared, and we're hoping for some real good luck here in the attach rates in 2025. A .

Okay. So the 86% increase in bookings are it's not luck, right? You've done it pretty strong. It also -- it seems to me you're guiding up on revenue seasonally just like you would in any other year, but you're holding the earnings out. So you've proactively decided you're going to spend that to support what looks like an acceleration to your wins and stuff. Can you talk maybe a little bit more specifically about where you've decided to spend that money what you think you get out of that increased sort of short-term investments. .

Yes. I think, Rich, from my perspective, -- we continue to invest in the technology. As Pat mentioned, I mean we're really trying to unify the customer experience, so that's an ongoing spend. And we weren't -- we were in the payroll tax management business for a while, but we weren't in the big enterprise business. So I think we really tried to step up our game when you're dealing with Kroger's and new cores and Workday clients, customers of that ilk, you really need a different kind of staff. So we've put some dollars to work. We think it's not it's going to be money well spent. We haven't been able to give you the name, but there's other large enterprise that was closed this quarter. But again, we really need to have some good people to interface with them. So I think that's where we're putting a lot of our money.

And Rich, just to give a finer point of that. We know we have some of the license revenue, but we don't have all the clients there. And now the clients as they feather in, we've staffed ahead of some of that. And then the other thing I would say with some of the technology spend, and we were historically a kind of point solution company that now is a total solution company. there's ability to really automate a lot of functions. And then with AI, we can now look at doing things quite a bit more efficiently, where instead of setting up 3 products, we can set it up once, and some of those kind of investments have been made, but they start getting rolled out. And then things -- if you look at either Asure Pay, that is something where the infrastructure is already there. It just comes almost really high-margin revenue in the second half of the year, but that cost to get there really was born in the second half in the first quarter. .

Congrats on the great outlook. .

Our next question is coming from Charles Nabhan from Stephen.

Wanted to ask about the outlook for margin expansion through the year. I think you had indicated that there were some investments coming in the first half, followed by some acceleration in revenue growth operating leverage as some of the -- some of your new bookings go live. But I just wanted to get a sense for as we model the year, should we think of margin expansion as being linear? Or could we expect any variability through the quarters? And then secondly, if you could talk about how much we could expect to come from OpEx versus gross margin just for modeling purposes? .

Yes. A couple of things. So I think what we're trying to do is -- and it's in the 10-K, I think our headcount at year-end was roughly 35%. I would say we're going to try to hold that's a pretty good indicator for us in terms of our cost structure. So I would say that we're going to try to hold the line in that general vicinity for the year.

There'll be some ebbs and flows to it. But I think that's what we're trying to do from that perspective. And so I think the -- from my perspective, the margins flow with the revenues. But if you think about that relatively flat cost structure for the year, as the revenues increase, you're going to get that fall-through. So that being said, I think it's more back-end loaded in terms of it's not a linear progression because we'll be down more likely than not in Q2 versus Q1, just because of that normal year-end transition for those year-end fees. So I think it will be kind of more of a third, fourth quarter margin, and that's where you're getting most of your lift. Is that fair Pat?

Yes. No, I think so. The only other thing I would say is if you think about sales take count, we really ramped up in the second half of the year and first quarter. So a lot of that kind of we ran into it. And the reason we did that also from an implementation perspective, et cetera, we knew some of these deals were coming. That's the benefit of the enterprise deal. So as you get the license fees, but now you have a backlog that 79 versus a year ago, I think it was somewhere around or something end of the year. 20 at the end of the year. We just have a lot more visibility into the revenue and what it's going to be. And then we've also -- some of those partners have asked us to help them on some implementation pursuits and revenue, and you'll see that in the PS line. So it's almost kind of presold in some cases. So that was the thought process around it.

And just a quick follow-up on M&A. Could you talk about what you're seeing from a valuation or maybe like an inbound interest standpoint relative to where things have been over the past couple of years? And secondly, outside of the reseller acquisition strategy, could you maybe talk about what's on your road map or wish list from a product or a solution standpoint?

I'll hit the first couple of points and then I'll let Pat talk about the pipeline. But I'd say of those 16 deals, I mean, I was just looking at the metrics, I mean, we've always kind of said that we're kind of 2 to 3x what we think in terms of revenue. I mean it's literally 2.5 when you take all those acquisitions across that we did last year over the last 18 months. So very, very consistent on that front. And then I'll let Pat talk about kind of the kind of pipeline and what he sees. .

Yes. And I think from a pipeline perspective, first of all, we view -- if you think -- if you step back from its client acquisition from a sales perspective as well as our reseller network, the value is scale. We want to get to $180 million to $200 million, and we want to drive 30% margin. So that kind of drives the opportunity. How we get there is clients and the best clients that we can get is either sell them or get them from the reseller network because it's the same technology. As we built around capability when we going to cross-sell the heck out of it. And if we cross-sell the heck out of it and provide value to clients we already have, it's a lot easier and more profitable to sell cross-sell clients we already have that go out and getting the new. And then we want to build on our kind of core competencies around money movement and tax filing and we'll continue to drive that. And then finally, from a cost perspective, we've invested in technology, and we want to make sure that we automate and drive efficiencies, and we're well on our way to do that and have identified areas where we can automate, including Luna and introducing AI. Finally, from a capability perspective, I think you'll see us lean in continued leaning in on the benefit area. There's some things that we want to do there. And we look at things around build, partner, buy. And we prefer to partner to understand and then over time to buy. But I think right now, we're going to go vertical for scale and then horizontal, I think we have enough to sell. We just now want to rinse and repeat and get to the 180 to 200 scale, but we'll look and be opportunistic around growth possibilities in the business because we believe it's a public company, the highest best use from an investor perspective is to get scale.

Our next question today is coming from Greg Gibas from Northland Securities. .

You mentioned another large enterprise customer that you closed in Q1. I guess I wanted to get a sense of kind of the -- how much sensitivity to maybe revenue performance in your guidance there is that kind of depends on the implementation of those deals? Just considering in the past, there's been a little bit of a challenge in terms of forecasting the timing of implementation?

Yes. And we'll see, Greg, we did close 1 in Q1. We have a couple of hundred thousand in license fees to start out, let's say. And we know we're going to be on pursuits. We don't have a ton modeled in. We have a little modeled in around fourth quarter, but really, that's a 26 initiative. If we get it early, that's great. and we'll let you know that. But we're relatively new into it. So we set the guide, we didn't put a lot of dollars in it. We're working with them over the last 6 months. So we had some visibility. But we're not counting a ton on that one. We're really just trying to -- we're really excited about it. We think that they have the ability to extend our reach, and we're really positive about it, but we don't have a tough model then.

Great. That's helpful. I assume so, Pat, and nice to hear that you're kind of conservative in terms of that from a forecasting perspective. I wanted to follow up on kind of your commentary on the retailer acquisitions. Obviously, they're not included in the guidance this year, but I wanted to get a sense of maybe what you're expecting in terms of acquired revenues or how active you expect to be in terms of reseller acquisitions this year? .

I'll give you my perspective and impacting -- I think it depends on, honestly, if we're going to fund it out of our cash flow, we'll be a lot more muted if we get this credit facility done, we're going to go a lot quicker. So I'm sorry to hedge, but it really depends on our capabilities. So we can obviously do these acquisitions on our own, but we have to be a lot more deliberate in our pace. -- again, the past point, we're trying to get there quicker. So again, that's the reason for the facility. And that's why I can't give you a definitive answer until as a done deal?

Yes. I would tell you, I think after the first quarter earnings call, I think we could be a little more definitive on that. But we're we're not lacking for things to do, and we wouldn't pursue this strategy if we didn't believe we had opportunity. .

Next question is coming from Vincent Colicchio from Barrington Research.

Yes, Pat, what was the bookings growth rate in Q4?

Q4 was -- do we have that? And I apologize we -- so it was 28% in Q4. We had, as you know, some pretty big deals in Q2 and Q3, Q4, 28%, and that was primarily in our core business. And then obviously, we closed a really nice year here in the first quarter. So 28 was good momentum in our core payroll business. We did not -- we had a couple of outliers in Q2 and Q3.

And the partnership with the tax and audit firm, is that exclusive? And also, what are your thoughts on when that may ramp? .

I think we're already in pursuits right now. It's just by the nature of what Gils we're pursuing. I think we'll give you updates as we go. But feel really strong about some of the deals we have and the partnership that we're putting together more to come. I would -- like I said, it was probably more at 26%, but we -- certainly, by the pursuits that we have, there could be some second half or fourth quarter revenue. But right now, we're early days in it. .

We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further closing comments. .

Yes, [indiscernible] here, long and meaningful call. I'm sorry it took so long, but really had a lot to share. Again, scale getting more clients, whether it's the reseller network or sales is important to us. building on the capabilities that we work for so long in the making here and work we did in '24, and we're going to measure that by attach rate and cross-sell. Money movement and tax filing are going to be important to us and a sure pay we're pretty excited about launching that and already have 500 cards in use. And then finally, cost, we're going to be important around automation and some of the work we've done. And we think that allows us to scale. And then finally, from a debt perspective, we think that's the right capital call. And we want a little bit more flexibility to go faster because scale is important to us. And from an investor perspective, I see 10% plus margin expansion as we get to the next scale. I've been here quite a while. I'm pretty excited about the business, and I really feel good about the people that work here, the executive team as well as management. We've upgraded our talent over the course of the last couple of years, and we think that talent matches this opportunity. So we hope you agree, and we appreciate your time today. Thank you. .

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.