Paycor HCM Inc

NASDAQ:PYCR

Ladies and gentlemen, thank you for standing by, and welcome to Paycor's Second Quarter Fiscal Year 2024 Earnings Call. [Operator Instructions] I would now like to turn the call over to Rachel White, Vice President of Investor Relations. Please go ahead.

Good afternoon, and welcome to Paycor's earnings call for the Second Quarter of Fiscal Year 2024, which ended on December 31. On the call with me today are Raul Villar, Jr., Paycor's Chief Executive Officer; and 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, and a replay will be available on our website following the conclusion of the call. Statements made on 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 and are based on management's current expectations as of today and may not be updated in the future.

Therefore, 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 are 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 fiscal second quarter results. We had another strong quarter with revenue growth of 20% year-over-year. Margins expanded 130 basis points over the prior year, while we continue to invest in sales expansion and in our innovative HTM suite. HCM demand is healthy. Our deal pipeline is up significantly year-over-year, and our win rates remain strong. We continue to excel upmarket, especially among the higher end of SMB and enterprise customers with thousands of employees who tend to purchase a more holistic solution and are driving higher attach rates and higher average deal sizes. Our results demonstrate our consistent execution against our two primary growth drivers: increasing the number of employees on our platform and expanding the amount we charge per employee per month or PEPM. First, we are expanding employees on the platform through a combination of direct and indirect sales efforts. We remain on track to grow our direct sales force approximately 20% this fiscal year to strategically increase our sales coverage in the largest U.S. metropolitan areas.

As we expand our sales coverage, we are also increasing our broker coverage. We increased the number of active referring brokers by over 25% from the prior year, and 50% of our field bookings in the quarter were broker influenced. We are also experiencing great traction with our embedded HCM solution. The indirect go-to-market channel we announced in August. Leveraging our industry-leading interoperability engine, we enable software partners to embed our HCM solution within their platform for a seamless client experience.

In Q2, we had robust new sales among existing partners and expanded our pipeline of interested partners. Second, we continue to enhance our lower winning HCM suite with new capabilities that increase the value to our customers and expand our future PEPM opportunity. In the second quarter, our lift PEPM was $51, which equates to 16% growth year-over-year. This month, we introduced two powerful data-driven analytical tools that empower frontline leaders to unlock the potential of their people and business performance.

Pay benchmarking enables leaders to optimize compensation strategies and pay decisions based on industry standards and market data. We also launched labor forecasting within workforce management to help customers plan optimal staffing schedules for their businesses based on key demand drivers such as revenue, sales volume or customer foot traffic. These innovative modules will contribute to future PEPM expansion. Paycorp recently received 5 branded hall technology awards which on our HR technology trailblazers.

While we were acknowledged across our HCM suite, the core leadership framework that we launched a year ago won gold for the best advance in online coaching tools. The framework enables customers to evaluate the efficacy of their leaders, reinforce leadership best practices and to trigger development paths based on areas of growth identified. These tools are already making an impact in helping educate customers on how to transform their managers into effective leaders. Since joining Paycorp in 2018, Ryan Bergstrom has been vital in driving the company's growth and shaping our HCM suite into the market leader it is today. Under his leadership, list PEPM increased more than 75% since fiscal 2019, and I am thrilled we will now oversee our product and technology groups.

Combining these functions will enable greater synergies and strengthen our capabilities to seamlessly power people and performance for our clients. I would also like to acknowledge our product and engineering teams for their unwavering dedication to building our award-winning platform and enabling its rapid expansion. We continue to strategically incorporate AI to add value to customers within our HCM suite, elevate our customer experience and improve our efficiency. And our customer experience organization we deployed AI agent assist technology, which empowers advocates to resolve customer inquiries faster and ensure consistent, high-quality experiences as we scale.

I would like to thank all Paycorp associates, especially our implementation, service and success teams for their contributions during our busiest time of year. Year-over-year, we improved execution, truly making it the most efficient and best year-end experience for our customers.

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

Thanks, Raul. I'll discuss our second quarter results, then share our outlook for the third quarter and fiscal year. Paycor delivered another strong quarter with total revenues of $160 million, an increase of 20% year-over-year. Recurring revenue grew 18% year-over-year, an acceleration of 2 percentage points sequentially driven by continued success of market and strong year in form filings. As Raul mentioned, our growth is fueled by expanding the number of employees on our platform and the amount we charge per employee per month. Employees grew 10% over the prior year primarily from new logos and to a lesser extent, organic labor market growth, which has continued to slow.

We now have approximately 2.6 million employees across more than 30,000 customers. As we continue to expand our product capabilities and move up market we are experiencing outsized growth among customers with 100 to multiple thousands of employees. In the quarter, we grew customers with more than 1,000 employees by 18%, highlighting the success of our product and service investments. We gained momentum with our embedded HCM solution, which contributed 2 points of employee growth this quarter, up 1 point sequentially.

The average size of customers within our embedded channel is more than double our average customer size today. While we're encouraged by the early momentum, these larger embedded deals will begin to contribute more meaningfully to our revenue growth in fiscal '25 and be accretive to margins as the partnerships ramp over time. Effective PEPM increased 7% year-over-year to more than $19 for the quarter. Excluding embedded HCM deals, effective PEPM increased 9%, driven by expansion of our product suite, effective PEPM growth has been powered by a combination of cross-sales pricing initiatives and higher bundle adoption. We expect more moderate PEPM growth contributions moving forward as we onboard larger enterprise customers and embedded HCM partners with volume discounts, which will be offset by their higher average deal sizes and stronger margins.

In addition to driving steady top line growth, we've consistently expanded margins as we scale the business. Adjusted gross profit margin, excluding depreciation and amortization, improved to 79%, 110 basis points higher than the prior year, while elevating our client experience. Sales and marketing expense was $50 million or 31% of revenue, similar to levels a year ago to achieve our sales force expansion targets. Comparable to prior years, we invested 16% of revenue or $25 million in R&D on a gross basis to differentiate or HCM suite with valuable capabilities for our customers.

We are gaining economies of scale in G&A as we grow. G&A expense was $22 million or 13.5% of revenue, an improvement of 100 basis points from last year. Adjusted operating income increased more than 30% to $23 million with margins of 14.6%, up 130 basis points from last year, while we continue to make strategic investments to expand our sales force and deliver product innovation. We generated $15 million of adjusted free cash flow or 9% mark in this quarter. We ended the quarter with $62 million of cash and no debt.

As we look ahead, demand continues to be healthy for modern HCM solutions. The labor market remains tight our guidance assumes flat organic employee growth among existing customers for the rest of the fiscal year. The combination of steady labor market growth and our backlog of Enterprise and Embedded HCM deals provides confidence in our second half. For the third quarter, we expect total revenues of between $185 million and $187 million or 16% growth at the high end of the range and adjusted operating income of between $45 million and $46 million.

For the full year, we expect revenues of $650 million to $656 million or 19% growth at the top end of the range, and we anticipate adjusted operating income of $104 million to $108 million. This quarter, we generated $12 million of interest income on average client funds of approximately $1.1 billion, an effective rate of just under 450 basis points. Based on current rates, we expect interest income in the range of $45 million to $46 million for the full year.

We remain optimistic about our opportunity in HCM. There's plenty of runway for sustainable growth as the vast majority of U.S. employees are still being paid by legacy systems. It's an essential capability for any business, and we're delivering compelling ROI for clients to switch. Adding to our opportunity is the continual expansion of our HCM suite, which has increased over 75% since fiscal 2019.

We are demonstrating margin expansion as we scale the business and believe there is significant opportunity to drive further leverage. We believe we are well positioned to deliver strong revenue growth and improve profitability over the long term. With that, we'll open the call for questions. Operator?

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

Congrats on a nice consistent performance. I wanted to try to double-click on the embedded HCM solution. You mentioned it once or twice, I recall the announcement last summer, I think you've been refining the product in the go-to-market. Do you have any line of sight into maybe some larger partners that might take it live and start generating bookings for you maybe later this year or as you get into the early part of next year?

Yes. Mark, Absolutely. I mean we have a pretty strong pipeline right now for new deals as well as with the existing partners, just the number of deals that they're booking has been really strong and beat our expectations early. Of course, it's still relatively small, but relative to the rest of the business. But we've seen some really success. We're really excited about how the pipeline is building on both the existing clients and future partnerships already.

Yes. Mark, what I would -- what I would add is that the -- signing the partnerships is lumpy, right? It just takes a lot of time to get those through. And so we've built up a really nice pipeline that we're hoping that will start to go from pipeline to deals closed over the next 60 days.

I see. Okay. And just to double check on this, that we think that it's going to be kind of margin neutral or slightly margin accretive? Once that gets going at the gross margin level?

Yes. I mean we are really excited about the margin opportunity here. Between the gross margin and the adjusted operating income, I mean, I think you're going to see a little bit more favorability on overall adjusted operating income. Over just the gross margin side of the house, but that's primarily driven by the really low sales and marketing costs. I mean it's like multiples lower in terms of the sales cost to bring the clients on.

And depending on the size of the client, if they're bringing the portfolio on, you still might see some more implementation costs associated with that. And that's what we've actually experienced thus far. So when we talk about margin expansion really into '25, it's because there's a little bit more upfront costs associated with bringing those portfolios over, but the ongoing sales cost is significantly lower for the new business.

Okay. And one final one. I noticed you mentioned that you're strategically incorporating AI into the business, which is great to hear. Are you seeing efficiencies from those products or initiatives that are significant enough to allow you to cover more ground or write more code per developer, provide more support per person or that type of thing. I'm just wondering if the -- I'm wondering if you are sensing any kind of noticeable uplift that might either be helping to drive some of the margin expansion or alter hiring plans or even just kind of change your growth algorithm in the next several years? .

Yes. I think it's -- we're still in the very early innings, and I think we're leveraging the technology in all those areas. And I think as we move forward, we'll start to model that into our future guidance from that perspective. But ultimately, it's helping us -- our #1 priority, is to deliver a better user experience. The #2 priority is to become more efficient. And we think both are in line of sight, but we want to make sure the user experience is great. And then ultimately, we think as we continue to grow, we'll be able to do it more efficiently.

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

I want to stay on this topic of growth algorithm and specifically, the delta between how you're thinking about hiring, I think you mentioned that 20% benchmark pretty consistently versus the 18% recurring revenue growth this quarter and where that can go longer term. Maybe you could comment a little bit on how you're seeing tenured sales reps ramp within the sales force, how you're thinking about improving churn. And any other data plans that we should have as we think about your overall sales force productivity over the next couple of years?

Yes. Gabriel, it's Raul. We just see such a big opportunity in the marketplace in Tier 1 and also in Tier 2 and Tier 3 that we believe 20% is an optimal number for us to hire. And as we've talked about previously, reps, their productivity increases with their tenure. And so we're excited that we're seeing our average tenure grow year-over-year. And we believe that's what we're focused on is to continue to grow our average tenure, which will drive more productivity, which will drive long-term sales and marketing efficiency.

Great. That makes sense. And then as a follow-up, I know in the past, you made some interesting observations on hiring and labor trends within the SMB ecosystem versus maybe slightly above in the mid-market and enterprise. I know you mentioned broadly the commentary of the demand environment is healthy. Would love to share a little bit more within that? Any vertical specific color and any comparing contrast between the lower end of the market and the mid-market.

Yes. I think we've seen demand in all three of our segments. The low end of SMB, the mid-market and the enterprise market, we've seen really strong top of the funnel demand. So that's exciting. Nothing has changed there. I think when you break it down from an industry perspective, we've seen some unique trends in new bookings like we're seeing real strength in food and beverage and professional services. We've seen, what I would say, year-over-year modest performance in manufacturing. So from that perspective, it kind of mirrors some of what you would read in the newspapers. But overall, demand has been strong across all nthree segments that we serve.

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

Great. Starting with that, just looking at kind of guidance for the back half of the year. Can you maybe just dive into the assumptions that are embedded in terms of the numbers? It seems like there's a little bit of a deceleration in 3Q that might be just a tougher comp with forms. But more broadly, as we think about embedded payroll kind of continue to take off, looking at how you performed in the quarter relative to the raise in the guide. It seems like there's a little bit more conservative here. Can you just provide more insight?

Yes, yes, we try to keep a consistent level of conservatism and so not really changing any philosophy here. We do see that and expect that in Q3. The forms filing generally is going to drive a slightly lower growth rate, right, because form filings are going to grow more at the rate of employee growth, plus or minus sort of any pricing changes that may be happening, and we're seeing less related to ERC.

Of course, so that dynamic is going to slow down slightly in Q3. And then we also just had a little bit of overperformance of form filings that came into Q2, which is part of the guide as you look at the total beat from Q2 into the full year, a portion of that is related to the form filings. And so we just -- we aren't going to see upside to the full year for that which we think makes sense just given some of the performance. So just a slightly slower growth rate in Q3 with the form filings, which are outsized in Q3.

Super helpful here. Just one quick follow-up. It's great to hear the additional broker traction. Can you just dive into a little bit of your efforts here? And what's driving the increased kind of adoption within the active brokers that are kind of referring clients to yourselves?

Yes. I think we've just really focused our direct sales team on the best targets. And so we have 4 national partnerships that we're really focusing on to drive opportunities. As we expand our sales headcount, obviously, it gives us an opportunity to expand how many people are reaching into the broker network. And so I think the value proposition works. They love the platform, and it's just about us continuing to focus on the benefit brokers that have the most clients in our target market.

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

Solid execution here in the quarter. I did have a question on a follow-up. I would say the first question almost might be a 2-parter, but hopefully, it counts is just one question. Raul, in terms of like do you need a little bit of an evolving or different go-to-market and kind of product requirements for 1,000-plus employee deals? And then the second part of that first question is, I mean, if we're looking at 3Q and even early part of 4Q in terms of signing business? I mean will you actually not maybe even see that much recurring revenue this year for those kind of bigger transactions? And then I had a follow-up for Adam.

Yes. On the enterprise side, the product -- the clients are pulling us into the enterprise. So the platform hunts in the enterprise space, lots of feature functionality on the talent side, which is really attractive to those customers. And so that's what's taking us there. We also have reps, our most experienced reps are really focused on the enterprise accounts. So we've slightly segmented the sales force from that perspective to make sure that we have the right skill level that are calling on those accounts.

Okay. Got it. And I guess maybe just a follow-up, Adam. It kind of relates to the prior question, looking at the full year guide and then the over performance in 2Q. Has anything notably changed for the full year form filing assumptions? Or any kind of delta in terms of your internal recurring revenue assumption?

Yes. Terrel. No, nothing's changed. I mean, we see it's really -- there's a bit of operational performance that goes into getting the W-2s prepped and shipped. And we just -- we had some overperformance there towards the end of December where we were able to be a little bit more effective at getting those out the door. And that helped the overperformance here in Q2. So nothing on the full year that we would expect to be any different. And in fact, that's why we see the continued -- feel good about the continued guide and raise for the full year on both the recurring and overall.

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

Hi, everyone. Really nice results this quarter. Congrats. A couple of questions for me. Let's start on the broker channel. I think you said 50% of your bookings in the quarter were a contribution from the broker channel there. How should we think about those contributions going forward? Because 50 seems like a very high number. Do you expect that pace to continue? Or does it moderate from there?

I think we've continued to think it would slightly moderate, Scott, but it's remained really strong. I think as we think about our 3-year outlook, we think high 30s, mid-40s is probably where we'll be as we continue to scale bookings. But that being said, we're still in the early innings.

We're there's tons of white space in the broker opportunity. So we're kind of just getting started. And our execution has gotten significantly better this year. And so the team that we have driving these programs for us has done a phenomenal job, and we're really proud of the results.

Got it. Helpful. And then from a follow-up perspective, staying on the sales kind of route. Can you give some commentary on progress around back to the base selling, selling to your existing installed base? You mentioned your PEPM is up 75% over the last several years, gives you certainly a lot more to sell. But any changes with the way that existing customers or maybe what their appetites look like for buying additional modules?

No. We -- I mean, it's been consistent. We're continuing to subtly improve modules sold. Obviously, talent has a significant attach rate workforce management, also significant attach rate. And so we feel good, both at point of sale that we're delivering a bigger bundle but also our cross-selling team continues to really hit the ball out of the park. And so continuing to work with our clients to make sure they're optimizing the latest technology that we offer. So it's been really successful, and we still have a lot of opportunity in that channel.

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

Great. Thanks very much. Well, obviously, in fiscal '23, you increased or we'll say, entering fiscal 2040, your sales head count was up about 22%. And you're going to grow high teens this year all up, so there's about a 5-point delta. How should we think about those converging on a go-forward basis? What needs to happen to get those two to me?

Yes. It's really about us continuing to grow the tenure in our sales organization. And as we continue to focus on driving that tenure, which is really growing the person months worked which has grown year-over-year, and it's moving in the right direction. That tender drives productivity. So as we anniversary these large, what we would call, head count classes, year-over-year, we're going to see improved productivity. And so it's really about us driving them from year 1 to year 2 to year 3.

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

Brian, your line may be muted.

Sorry, I'm bamboozled by the new button. Sorry about that, guys. So just one for me on the embedded channel. So I'd love to understand as you think about the 2% of lies of the platform already. Is that fairly concentrated within a couple of customers? Or is it maybe a little bit more diverse and then there's kind of an opportunity to expand with some of those partners over time?

Yes. Brian, yes, I mean it's just with a couple of partners right now. It's still really early with us in terms of the number of active partners that we have on our platform. And so yes, there's only a few partners that are really generating that sort of growth for us. And of course, as we continue to sign new partners, we're going to see a lot more expansion. There's not really a concentration from an end customer perspective. They do look a lot like the customers that we have today, they're strong middle market and enterprise customers. But the partners themselves are, there's still just a few.

And Adam, maybe a follow-up. So how do we think about the land and expand in that channel. So when you kind of get launched with one of those customers did it get fully implemented across the customer base? Or is that something that gradually folds in over time?

Yes. Every agreement is unique. The ones that we have today were -- had existing customer bases that they're converting over. And then they sell on a go-forward basis to new and so we've been really pleased with the cross-selling ability of our partners to sell new on a go-forward basis outside of the existing base. And so that's kind of exceeded our expectations.

Our next question comes from the line of Jared Levine with TD Cowen.

This is Zack [indiscernible] again out for Jared. First question on demand. Any change in the pace of prospective client decision-making relative to prior quarters? And further, any change in attach rates on new client sales? If so, what modules and functionality or what you think a change in attach rate?

Yes. As far as deal cycle time frame, on the entire base, there's no change. However, if you break it down by size, I mean there's a subtle elongation in the enterprise space. year-over-year, but we're on a smaller sample size. So -- but ultimately, our core overall base, the same, no changes in the mid-market or SMB space. And as far as modules go, we continue to slightly tick up. So they're not ticking down. They're actually -- we're seeing slightly better attachment across the board.

Got it. And a follow-up on retention. How do the Januarys gross revenue retention compare year-on-year? And if it was consistent Were there any underlying changes based on employer size segment or based on controllable versus uncontrollable churn?

Yes. I mean we haven't shared like month specific month retention results, but gross retention has been consistent in January, of course, is a big month for us, both on the starts and losses. And I'd say that it's been in line with our expectations broadly, especially is how we're thinking about guidance for the full year as well. So no significant changes one way or the other on retention broadly.

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

Just wanted to ask one on embedded HCM. It would be helpful if you could just help us understand the cadence of when a partners signed, how long it takes for them to build pipeline and then how long it takes for them to convert that pipeline. So the partners that are currently converting when did they originally start using the embedded HCM functionality. And then how long before we start to see a material contribution to growth from the partners that are in the pipeline and the ones that you currently signed?

Yes. Every deal is slightly different. In the sense that some have existing client bases that need to be converted. And so that may take a little longer upfront work on the implementation side. And then others are looking to sell new and that's a quicker go-to-market motion. So it really depends on the type of partner. And so I think from our perspective, we're looking to continue to expand the partner base and then continue to expand the penetration of existing partners and new partners, once they're up and running, they have contributions on a monthly basis. So it's -- the speed to success is relatively short. It's no different than the sales cycle of a normal mid-market rep in the industry.

Our next question comes from the line of Matt VanVliet with BTIG.

I guess one more on the embedded channel. Just curious, I know it's early, but what kind of attach rate of multiple products are you seeing? Is it drastically different than sort of the overall average? And then maybe how do you see that trending? Is there something that is maybe more specifically needed in that embedded channel that maybe is less common or more common. So I'm just curious on how the number of products is per customer.

Yes. When we entered it, it was really, Matt, was primarily payroll and -- which is what we were focused on. And what we found is that people also want workforce management and some of the other services. So it's actually a broader suite than we anticipated when we started the venture. So payroll definitely is the driver of the conversation, but many are focused on workforce management, reporting, analytics, a lot of the other ancillary services that our clients talent, that our clients are purchasing they're wanting as well. Because the end client doesn't really -- isn't any different than the end client we sell. It's just a different way to go after the end client.

Okay. Very helpful. And then when you're looking at the roughly 20% head count growth that you're looking for on the go-to-market team, any particular focus around whether it's the top 50 markets that you're targeting? Is it a little more top heavy -- are you trying to kind of reach out and further the breadth there. Just curious where you have a need for more capacity across those key markets?

Yes. I mean we can add sales reps in almost every market in the U.S. still. There's so much opportunity available. The way we think about it and the way we've allocated our resources over the past few years is that about 70% to 75% of the hires go into a Tier 1 market, which we define as the 15 largest cities in America. And then the balance go into Tier 2 and Tier 3, which are the next largest cities in America. And that combination is kind of the formula that we're executing against today.

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

This is George on for Steve. I think, first, there's been some noise with some of your peers in the payroll space. I'm just wondering if that's caused any incremental shifts in the competitive landscape and where you're sourcing bookings from?

I didn't know there was any noise going on in the category. But that -- we compete against everyone in the category. And we take share from everyone in the category. And we'll continue to do that. In a quarter, you don't really see any material changes that bounce around. Most of these decisions take a quarter or 2 to happen. And so we'll see as we go forward if that changes. At the end of the day, what we're really focused on is our value propositions on delivering a perfect payroll every time. That's not that complicated and really delivering tools for leaders so they can power their people and performance. And that's what we go to market with. We have a modern tech stack. We deliver the most PEPM in the category. And so we're going after all competitors. We're not focused on any one.

Great. That makes sense. And then just a follow-up on Embedded. I think you've talked about how each of these deals tend to be somewhat bespoke and there's a bit of an onboarding process, but I'm just wondering if you can talk about the learnings you've had from the partners that are ramping so far, if there's any kind of commonalities that you can leverage to kind of smooth the onboarding process for future partners and kind of speed up the flywheel of the product?

Yes, for sure. I mean I think we're starting to understand the framework while every partner is different, they do get bucketed into what type of partners. And a lot of that is what type of partners. Is it a workforce management solution? Is it a vertical software solution? Is it an ERP? Those kind of things, they all have slightly different needs and we're building playbooks by partner type to help make the implementation more efficient and to make the cross-selling more effective over time.

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

This is [ Kyle baster ] on for Dan Jester. On the two new launches, benchmarking and forecasting, I was wondering if you could provide any further color here. Are these two new modules? Are you charging for them? And then how you're thinking about the growth opportunity relative to other modules? And then my second question, just if you could dig a bit deeper into the booking conditions you saw during the quarter, maybe a shift as 4Q progress.

Yes. So the two new products will each add incremental PEPM. I believe it's a $1 PEPM for each of the new products. And they're really a combination of taking our data analytics capabilities and providing insights for frontline leaders so they can be more effective with compensation strategies and scheduling strategies with their employees. And so it fits right in line with our strategy and where we're trying to help our customers.

Our second quarter or calendar fourth quarter bookings consistent, consistent across all of our segments and we didn't have anything that jumped off the page from that perspective. And so it's kind of what we expected.

Thank you. Our next question comes from the line of Mark Marcon with Baird.

Wondering with regards to the enterprise accounts, you talked about them a little bit more. And I'm wondering how far upmarket could you be pulled? And to what extent are you managing the sales force in terms of making sure that they stay within the target market? Or how are you thinking about that?

Yes. I mean, as you know, as a savvy long-time HCM analyst, while we define ourselves by size, like clients don't define themselves out with their needs to find what kind of platform they can use. So it's really a needs analysis that we look at. And we sell into the thousands. We have clients with over 10,000 employees and so it really depends on what the client -- what needs the client is looking for and we presented it that way. Obviously, our most tenured reps are the ones that are focused on the enterprise accounts. So they understand the power, the Paycorp platform, and they help the customers make sure that we can meet all their needs. So it's obviously we're in the early innings here.

But over the last 4 or 5 quarters, we continue to get pulled up market based on the power of the platform. And we've continued to educate our reps and segment our reps to be able to meet the opportunity.

That's great. And you mentioned the tenure of the sales force. Can you talk a little bit more about the sales force just in terms of your increasing effectiveness with regards to selecting training and keeping them?

Yes. I mean so that's the #1 priority. And what I would say is we've increased our person months' worth by over 15% year-over-year. And so that's really positive for us. And we're really focused on onboarding and activating the reps and making them successful. And so that's an ongoing process. We could clearly do better there. We want to do better. And -- but I think we're making good progress. And if we continue to see this kind of progress, it will continue to drive productivity year-over-year. .

There are no further questions at this time. I'd like to turn the floor back over to Raul Villar for closing comments.

Yes. Thank you again for joining us this evening. Demand remains healthy with plenty of runway for sustainable growth, and we remain focused on executing our strategy to capture market share. We look forward to connecting with you at several upcoming events, including the JMP Securities Technology Conference in San Francisco. Have a great night, everyone.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.