Paycor HCM (PYCR) Q4 2023 Earnings Call Transcript

Paycor HCM (PYCR 1.36%)
Q4 2023 Earnings Call
Aug 16, 2023, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to Paycor's fourth quarter and fiscal year 2023 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to Rachel White, vice president of investor relations.

Rachel White -- Vice President, Investor Relations

Good afternoon and welcome to Paycor's earnings call for the fourth quarter and fiscal year 2023, which ended on June 30th. On the call with me today are Raul Villar Jr., Paycor's chief executive officer; 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 in this call include forward-looking statements related to our financial results, products, customer demand, operations, and other matters. These statements are subject to risks, uncertainties, and assumptions 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 is provided in our press release on our website. With that, I'll turn the call over to Raul.

Raul Villar -- Chief Executive Officer

Thank you, Rachel, and thank you all for joining us to discuss Paycor's fourth quarter and full year results. Revenue grew 26% for the quarter and 29% for the year, driven by solid execution against our strategic growth levers, namely expanding our sales coverage and increasing PEPM. We are also expanding margins as we scale and delivered nearly 400 basis points of improvement year over year while investing in capabilities that further differentiate Paycor in the market. I would like to take this opportunity to thank each of our associates for their role in contributing to these outstanding results.

Demand remains strong for our modern, innovative HCM solution that empowers leaders to unlock the potential of their people and business performance. Using our unrivaled talent tools, front-line leaders are improving employee engagement, which is increasing employee retention by 10% and helping drive better business outcomes. Our team has consistently executed against our go-to-market strategy. We expanded our sales force by 22% to approximately 560 sales associates.

Most of our in-market sales hires have been in Tier 1 cities, increasing our Tier 1 sales coverage in the largest 15 cities in America from 28% to 36%. Sales coverage refers to the optimal number of prospects per seller, and we could effectively still double or even triple the number of sellers we have today. Brokers remained an integral part of our go-to-market motion and influence over 40% of our field bookings this year. We continue to strategically shift upmarket where clients tend to purchase a more complete solution.

And as a result, average deal size continued to expand nicely this year. Our pipeline and win rates remain strong, and we are proud to announce a record Q4 bookings performance, which was our highest quarter on record. All these factors contributed to robust bookings growth of 23% year over year. We continue to expand our modern HCM suite by launching differentiated technology that powers people and performance.

In the last year, list PEPM increased $3 or 7%. It now stands at $48, which equates to a PEPY of $576. This month, we introduced Engage, which is a single platform to elevate how leaders communicate with and motivate their team. The new solution empowers leaders to share company news, communicate with teams, and recognize employees across both mobile and web applications.

Further strengthening our suite of artificial intelligence solutions, we also launched an AI-enabled Job Description generator. This offering strengthens our suite of artificial intelligence solutions, which includes Paycor Smart Sourcing and Predictive Resignation. By merely providing a job title and required experience, the integrated solution will create compelling job descriptions, empowering leaders to attract and hire top talent faster than ever before. The robust development of our interoperability engine is a key differentiator of our modern HCM platform.

We continued to lead the industry with the most extensive network of partners, deep two-way integrations, and API connectivity points to meet our client's unique business needs. In the last year, we added over 130 marketplace partners and nearly doubled the number of API endpoints available in our system. For fiscal '24, we are going to continue to focus on execution. For us, that means continuing to increase sales coverage to capture share in the SMB space and expand PEPM with innovative solutions that empower front-line leaders.

Successful execution of this strategy will position us well to achieve our target of 20%-plus sustainable revenue growth while expanding margins with greater free cash flow generation this year. With that, I'll turn the call over to Adam to discuss our financial results and guidance.

Adam Ante -- Chief Financial Officer

Thanks, Raul. I'll discuss our fourth quarter and full year results and then share our outlook for the first quarter and next fiscal year. As a reminder, my comments related to certain financial measures are on a non-GAAP basis. We posted another strong quarter, delivering total revenues of $140 million, a 26% increase year over year.

Recurring revenue grew 18% year over year, in line with our expectations and slightly lower than prior-quarter growth due to a combination of an incredibly strong fourth quarter last year, moderating labor market growth, and form filing timing. For the fiscal year, total revenues were $553 million, increasing 29% year over year. Our revenue growth continues to be driven by new business wins and PEPM expansion. This year, our bookings grew 23% versus the prior year, setting us up nicely for continued strong revenue growth into fiscal '24.

We also surpassed 2.5 million employees on our platform, up 8% over the prior year, with more than 30,000 customers. As we shift our portfolio upmarket and focus our resources on clients with greater than 100 employees, our average customer size continues to increase and now stands at 82 employees per customer, up from 77 last year. Aligned with this intentional strategic shift, we continue to see moderation in employee growth in the micro-segment, while the number of employees in the mid-market and enterprise segments increased 9% year over year. Net revenue retention increased to 100%, setting a new record, driven by gains from cross-sell and pricing initiatives.

Effective PEPM increased 11% year over year to just over $18 for the quarter. As we continue to expand our product suite, PEPM growth is driven by cross-sells, pricing initiatives, and higher bundle adoption at the point of sale. This quarter, we recognized $11 million of interest income on average client funds of just over $1 billion at an effective rate of about 415 basis points. In addition to driving steady top-line growth, we've also delivered consistent margin expansion as we continue to scale.

Quarterly adjusted gross profit margin, excluding depreciation and amortization, improved to 79.4%, nearly 300 basis points higher than last year. We continue to expand gross margins as we invest in our service model, and our customer support teams have done a great job elevating the experience for our customers this year. Sales and marketing expense was $47 million, or 33.8% of revenue, similar to levels a year ago as we continue to invest in expanding our sales team to capture market share. On a gross basis, we invested $23 million in R&D or 16.5% of revenue.

Our team continues to efficiently deliver leader advancements that create value for our clients and expand our PEPM opportunity, which has consistently expanded annually as we release new features, functionality, and new products that resonate with our customers. G&A expense was $21 million, or 14.9% of revenue, an improvement of 100 basis points from the prior year. For the full year, G&A expense as a percentage of recurring revenue improved 115 basis points over the prior year as we continue to scale the business. While our primary objective remains sustainable 20%-plus revenue growth, we intend to steadily expand margins as we scale the business.

Quarterly adjusted operating income increased nearly 70% to $15 million, with margins of 11%, up nearly 275 basis points from 8.3% last year. For the full year, adjusted operating income increased nearly 75% to $83 million, up almost 400 basis points, while continuing to make key investments in our sales and service organizations, as well as drive product innovation. We also generated $19 million of adjusted free cash flow during the quarter and $10 million for the year, achieving our target to be positive for the fiscal year. We've been on a journey to transform and scale the business over the last four years, so it's a great achievement milestone for us.

Our free cash flow margin was 14% this quarter or an expansion of 9 points year over year. We expect free cash flow margin to continue expanding faster than adjusted operating income as we scale the business. At the close of the quarter, our cash balance increased to $95 million, with no debt. Our outlook for fiscal '24 remains positive.

First and foremost, we continue to see strength in the HCM demand environment. HCM is highly resilient as our value proposition is mission-critical to attracting, paying, and retaining great talent. Second, the labor market remains tight. Although growth has moderated than current market expectations, our outlook anticipates moderate Fed funds decreases in the second half of the fiscal year.

Even with marginal declines in the Fed funds rate, we would expect to generate marginal interest income revenue growth in fiscal '24. For the first quarter, we expect total revenues of between $138 million and $140 million, or 18% growth at the high end of the range, and adjusted operating income of between $9 million and $10 million. For the full year, we expect revenues of $644 million to $650 million or 18% growth at the top end of the range. And we anticipate adjusted operating income of $97 million to $100 million.

I would also like to note that we do not plan to provide bookings data moving forward. At the time of the IPO, bookings gave investors some insight into the success of sales as we reaccelerated the front-end growth engine. Now, we believe revenue growth is the most important metric to understand our success. In summary, we are as optimistic about our opportunity in HCM as we've ever been.

Demand remains strong. Our innovative HCM solution that empowers leaders to build winning teams continues to win in the market. We are focused on execution, scaling the business, and driving margin expansion. As the mission-critical application is still early in its transition to the cloud, we believe that there is significant runway for further growth in the $35 billion HCM market.

With that, we'll open the call for questions. Operator.

Questions & Answers:

Operator

Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. [Operator instructions] Our first question comes from the line of Mark Murphy with J.P. Morgan.

Please proceed with your question.

Arti Vula -- JPMorgan Chase and Company -- Analyst

Hi. Thanks for taking the question. This is Arti on from Mark Murphy. First question is just on the headwind you guys are kind of expecting from the moderating growth in the labor market.

Any way to kind of bookend that or quantify that as we think about the full year guide? Thanks.

Adam Ante -- Chief Financial Officer

Yeah. Hey, Arti. What we're seeing right now is that the -- we're seeing sort of low single-digit to no growth contribution from the labor market. And right now, year over year for the quarter, you're looking at like a 3-point to 4-point headwind.

On the full year, we've sort of factored in the same level of contribution on the guidance. So, low single-digit to zero growth, sort of 0% to 1% growth contribution from the labor market, which will be a little bit less of a headwind overall in the full year, something to the tune of a couple of points headwind versus '23 growth.

Arti Vula -- JPMorgan Chase and Company -- Analyst

Got it. Thank you. That's super helpful. And then just in terms of that kind of side of things, with the labor market getting a little bit more moderation, are you seeing any differences in the buying patterns for customers among like your talent solutions and talent suite?

Raul Villar -- Chief Executive Officer

No, we actually continue to see outstanding attach rates. Our attach rates are actually still increasing modestly quarter over quarter. So -- and we haven't seen any difference in any of the buying dynamics, length of sales cycle, price paid, or attach rates.

Arti Vula -- JPMorgan Chase and Company -- Analyst

Perfect. Thank you. I'll step back in the queue.

Raul Villar -- Chief Executive Officer

Yeah. Thank you.

Operator

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

Kevin Kumar -- Goldman Sachs -- Analyst

Hi. This is Kevin on for Gabriela. Thanks for the question. Maybe just one on kind of seller hiring expectations for '24, particularly in the context of, you know, a guide that's showing a little bit of a deceleration.

So, just curious how you're thinking about seller hiring as we head into 2024. Thanks.

Raul Villar -- Chief Executive Officer

You know, I think we feel comfortable with, you know, our previous guidance that we think 20% headcount growth is something that we're targeting. Now, that can flex down a few points or up a few points based upon demand in the marketplace, based upon seller availability, based upon churn. So, there's a lot of different factors. But I would say, we still look at this like there's a significant market opportunity.

We have really strong win rates. And, you know, we believe the opportunity to continue to win share is available.

Kevin Kumar -- Goldman Sachs -- Analyst

That's helpful. And then, Adam, maybe one on the guide, particularly the operating margin guide for Q1. I think that implies maybe a little bit of a decline year over year, and I think the full year implies some improvement. So, just curious on kind of maybe the seasonality of operating expenses throughout the year and any moving pieces we should be aware of.

Adam Ante -- Chief Financial Officer

Yeah. I mean, as we came out of '23, we were continuing to make some investments, leveraging some of the interest income like we had discussed. And as we look into '24, we still feel really positive about the momentum. We feel positive about the demand environment.

And we're running into a little bit of those headwinds here in Q1. But on the full year, you know, we see this as an opportunity to continue to expand both margins and continue to grow. And so, it's a little bit of just hitting the pressure of what we're seeing on the Q1 growth, and we'll continue to manage that in on the full year. We do feel good about the operating income margin growth and expansion that we're going to see there, as well as the free cash flow margin expansion, which would be a little bit faster.

Kevin Kumar -- Goldman Sachs -- Analyst

Thank you both.

Raul Villar -- Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Samad Samana with Jefferies. Please proceed with your question.

Samad Samana -- Jefferies -- Analyst

Great. Good evening. How you all doing and thanks for taking my questions. Maybe one, Raul, first for you.

Just you mentioned getting more success upmarket. The average number of employees per customer has melted up. Is that changing maybe the type of customer or the mix of bookings? And how does that maybe changing who you're hiring as far as the sales organization goes? And then have a follow-up for Adam.

Raul Villar -- Chief Executive Officer

Yeah. I -- so we continue, you know, to shift upmarket. We continue to deploy the majority of our resources in the field, targeting customers, you know, with greater than 100 employees. And so, you know, we continue to see our average employee size grow.

And at this point in time, you know, we haven't seen a need for a differentiated salesperson. You know, I would say that, you know, we're competing, you know, from 100, you know, into the low thousands and effectively with our current sales organization. So, if we were going to push higher in the future, you know, into that 5,000-plus range, you know, it may suggest a different type, an enterprise-type team. We're not there.

You know, from that perspective, we're going to continue to expand our sales organization and continue to shift our resources upmarket, our marketing dollars, etc. So, we feel really good about the opportunity, and the talent solutions are really resonating and pushing us upmarket.

Samad Samana -- Jefferies -- Analyst

Great. And then, Adam, just a follow-up, on the guidance, I'm curious if you could just maybe help us understand what you're thinking about recurring revenue growth ex the interest or ex float revenue. So, just how should we think about the growth of those two separate line items and how that rolls into the full year guidance that you just gave?

Adam Ante -- Chief Financial Officer

Yeah. So, as we're thinking about interest income, this quarter, we generated about 414 basis points of interest income on our client funds. And on the full year, we're probably expecting something similar to that, as you might see a couple of increases, a couple of decreases. And we've tried to factor that into our guide for the full year.

So, not going to see a ton of incremental lift, and you'll see a little bit more in the first half of the year, of course, than you will in the second half of the year. But I think that's going to be marginal contribution to the overall growth. And then I would say, broadly, we want to try to keep our performance relative to our guide and our cadence the same as what we've been able to achieve over the last couple of years as a public company. So, you know, we want to be a little bit conservative, not include, you know, upside in the labor market growth, but there's a little bit of room, of course, to overperform as we get into the year.

Samad Samana -- Jefferies -- Analyst

Understood. Thanks for answering my questions. Appreciate it.

Raul Villar -- Chief Executive Officer

Thanks, Samad.

Operator

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

Bhavin Shah -- Deutsche Bank -- Analyst

Great. Thanks for taking my question. Raul, just looking at your slide deck, it looks like your source of wins versus incumbents now sits closer to 75% versus maybe 80% prior, while you kind of noted an uptick, at least in this chart, versus cloud vendors. What's driving a little bit of change in terms of who you're winning against? And are you seeing maybe any improvement from the legacy guys in terms of them trying to hold on to their customers better than they were previously?

Raul Villar -- Chief Executive Officer

Yeah. Actually, our win rate against the largest legacy provider increased this year versus last year. So, we saw a slight increase against them. I would say, you know, some of the cloud competitors, you know, we continue to compete with them very infrequently from a displacement perspective.

You know, we see new business generation. We see some PEO takeaways that kind of spiked up a little bit in the quarter. But I would say, by and large, you know, our top three sources of wins are -- and they're -- literally, they interchange month to month, are regional service bureaus, in-house, and ADP. And there's -- those three are, you know, comprising, you know, over 60% of the legacy wins, with Paychex being, you know, a distant fourth because we don't really, you know, compete with them as they're primarily in under 50 solution -- really in under 15 solution.

Bhavin Shah -- Deutsche Bank -- Analyst

Got it. That's helpful there. And just kind of following up in terms of sales productivity, I mean you guys talked about kind of 23% bookings growth this year, similar type of seller headcount. Just how do we think that sales productivity over the course of this year and how do we think about that over the next three years? And kind of when can we see the leverage in terms of recurring growth in excess of kind of seller growth? Thanks.

Raul Villar -- Chief Executive Officer

Yeah. So, we actually had slightly positive sales productivity year over year despite, you know, a 20-plus percent growth in headcount, which is really positive from our perspective because, you know, you're bringing in people in the first year of a three-year ramp. And so, ultimately, you know, since we started adding headcount, we're going to start, to this year, anniversary our largest cohort from, you know, FY '22. And so, we'll start to see some of the productivity gains there.

But, you know, we're still hiring a lot of people, and we've been able to, you know, slightly increase our average productivity for the entire sales organization despite adding significant amount of first-year cohort. So, that means our second- and third-year people are doing more than they were doing the year prior. And so, you know, we're seeing that natural lift. We're just in this unique phase of, you know, still growing our sales organization.

We're still, you know, 25% smaller than, you know, Paylocity as an example. And so, you know, we still have plenty of opportunity to continue to add sales headcount. And, you know, I think we'll start to see, you know, overall leverage in sales and marketing, you know, over this year and the following years as we continue to scale. And some of the, you know, sales operations functions and sales leadership functions scale nicely with a larger sales organization.

So, you know, we'll see that, and we'll continue to drive productivity. And we're starting to get closer to meaningful scale at 600 sellers today.

Bhavin Shah -- Deutsche Bank -- Analyst

Super insightful. Thanks for taking my questions.

Raul Villar -- Chief Executive Officer

Yeah. Thanks, Bhavin.

Operator

Our next question comes from the line of Terry Tillman with Truist. Please proceed with your question.

Terry Tillman -- Truist Securities -- Analyst

Yeah. Hi. Good afternoon, Raul, Adam, and Rachel.

Raul Villar -- Chief Executive Officer

Hey, Terry.

Terry Tillman -- Truist Securities -- Analyst

Thanks for taking my questions. Yeah, first question, maybe it's actually a follow-up to the prior question, Raul, in terms of sales productivity. You know, as you layer on this large cohort of new sellers from last year and you're going to keep adding this year, is there the potential, though, I know you're not going to give us like the end of the year bookings growth, but potentially you could even see some acceleration in bookings? And the second part is of the top 15 cities, those key Tier 1s, you know, I really don't have any idea like, you know, where you are with each of those markets. Are some you're starting to get some pretty good coverage or are there still some that you're really paltry in terms of coverage?

Raul Villar -- Chief Executive Officer

Yeah. I mean, I'll start with the coverage perspective. You know, we -- we've moved our coverage in Tier 1, you know, another, you know, 8 points -- excuse me, 7 points. We're up to 36%.

So, you know, a little over a third is what we would consider covered. And I would say, it's fairly, you know, equal across the 15 markets as we continue to scale. I would say, you know, we still have opportunities in all 15 markets to add sellers. I would say, you know, we're probably at the high point, you know, in the 40 percentile range like in Chicago area, where, you know, we've been a little longer since it's a Midwestern city, and we have a lot more room to go in California, in the northeast and in the southeast, just based on, you know, the time in territory.

So, lots of opportunity to continue to grow in the Tier 1 markets. But, you know, we're seeing really good success. All the metrics are holding up. The average employee size, average deal size, all very similar across the organization.

The one thing we would see is a slightly higher attach rate in Tier 1 markets, subtly bigger, you know, aligned with more talent purchases than maybe in some of the other tiers.

Adam Ante -- Chief Financial Officer

Yeah. Hey, Terry. And in terms of -- probably continue to accelerate bookings growth and potentially even at a faster pace. I mean, I think that is the thesis, for sure.

As we look at the new cohorts that we've added, and a lot of those sellers have been in the Tier 1 markets, there are lots of opportunity for those cohorts to continue to grow. And it's really important, of course, to have the time in the market and the time with the brokers and building out those relationships. And so, you have a lot of those cohorts in '22, '23 in those Tier 1 markets where there's lots of opportunity. The territories are still really big for them for that acceleration to come through '24, '25.

And I think that that's part of the investment thesis of why we continue to make the investments that we do around sales and marketing because we think that that's part of the long-term acceleration, for sure.

Terry Tillman -- Truist Securities -- Analyst

That's very helpful. For both of you, maybe, Adam, the question I was going to also ask you, though, was it's good to see breaking 100% on NRR. Any perspective directionally on how to think about that as we round out the end of FY '24? Thank you.

Adam Ante -- Chief Financial Officer

Yeah. So, as we head into FY '24 relative to the 100%, I mean, we saw some really strong contribution, of course, from some of the pricing actions, the new products that we've released, on our cohorts in the '23 number. A little bit of contribution from the same-store sales or the labor market growth. That's going to dissipate.

So, not that we wouldn't target or continue to press to 100%-plus growth. I mean, that is our aim. To get to 100% to 105% is sort of like a management target. But there's going to be a couple of those headwinds that will put pressure on the net retention number, specifically the labor market growth, which is primarily, of course, against our base.

Terry Tillman -- Truist Securities -- Analyst

Thank you, all.

Raul Villar -- Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Bryan Bergin with Cowen. Please proceed with your question.

Bryan Bergin -- Cowen and Company -- Analyst

Hi, guys. Good afternoon. Thank you. First one, just on the outlook, your near-term guidance, if you can unpack this a bit here.

Looking at the 1Q guide, it doesn't imply a deceleration in the year-over-year growth rate compared to how you exited strong in 4Q. And it seems relatively flat sequentially. So, just trying to unpack what's different there. What's driving that just given the comp [Inaudible]

Adam Ante -- Chief Financial Officer

Yeah. Hey, Bryan. We're just continuing to see that pressure on the labor market growth. I mean, you're losing a couple of points of deceleration.

Of course, we dealt with the form filing revenue here in terms of a pull forward in Q4 to Q3. And we're seeing those form filing revenues will become a headwind going into '24 as well. So, you're picking up a little bit more of that headwind that we didn't necessarily have in the same sense in our Q4 period. Those are the two biggest dynamics, for sure.

You know, in '23, we did see some larger deals that are going to come through maybe at a little bit different timing than we were -- than we would on a more normalized basis or in prior years for '23. And so, some of the strength of the bookings -- of course, a lot of it comes through in Q4 as our largest quarter. And so, some of those larger deals just take a little bit longer to implement. I mean, nothing new or nothing different.

It's just a little bit more of a mix in that upmarket segment for us as well.

Bryan Bergin -- Cowen and Company -- Analyst

OK. And just to be clear, is -- those deals are related to client list acquisitions or organic additions?

Adam Ante -- Chief Financial Officer

No, no. In terms of client -- yeah, in terms of new business, just signing new business. I mean, we just continue to mix a little bit more in that, you know, upmarket segment, which again, it fits squarely within the strategy and everything we're talking about. It's just as we continue to mix up that market a little bit more, we just see that those deals tend to take, you know, toward the longer end of our implementation cycle.

Bryan Bergin -- Cowen and Company -- Analyst

OK. Understood. And just to follow up on margin, can you bridge the margin walk from fiscal '23 to fiscal '24, just the drivers of that EBIT expectation there? And I thought I heard a relatively similar client fund interest assumption. So, if you could just clarify that and the remaining factors that gave you the expansion? Thanks.

Adam Ante -- Chief Financial Officer

Yeah, absolutely. So, in terms of the client funds interest rate, we generated about 415 basis points or 414 basis points of interest income in Q4. And so, we're expecting like on a full year something similar to that, which will be marginally additive in terms of -- to revenue but not material overall, especially not to the same level as in '23. And as you look at our full year income guide, we're driving for continued margin expansion on just operating income margin expansion as we guide up to $100 million of adjusted operating income on the 650 of revenue.

And as we think about some of the opportunities to continue to expand, we're actually seeing pressure from the amortization as those investments build in. And then we're continuing to scale the rest of the business. You'll see continued expansion and drive for that in the gross margin, continued expansion and drive from that out of G&A or leveraging G&A. And then, you know, we're not looking to necessarily drive expansion in -- out of the margin in R&D at this point.

We like those investments. We'll continue to look for those investments. And then similarly on the sales and marketing. And so, we continue to be outsized, I think, in those two key areas, consistent with how we've been allocating capital, you know, as a public company.

Bryan Bergin -- Cowen and Company -- Analyst

Thank you.

Raul Villar -- Chief Executive Officer

Thanks.

Operator

Our next question comes from the line of Scott Berg with Needham. Please proceed with your question.

Michael Rackers -- Needham and Company -- Analyst

Hi, guys. Thanks for taking my question. This is Michael Rackers on for Scott today. You mentioned a slight improvement quarter over quarter in attach.

You know, give us a little bit more color on that. And then maybe where do you think attach rates can stand the most in the upcoming fiscal year and how do you think about it normalizing [Technical difficulty]

Raul Villar -- Chief Executive Officer

Hey, Michael.

Michael Rackers -- Needham and Company -- Analyst

Yes.

Raul Villar -- Chief Executive Officer

Michael, we lost you after attach.

Michael Rackers -- Needham and Company -- Analyst

Sorry about that.

Raul Villar -- Chief Executive Officer

Sorry about that. Yeah, no worries.

Michael Rackers -- Needham and Company -- Analyst

Bad connection. But I guess I was just wondering where you think attach rates can expand the most in FY '24. And then how should we think about kind of the normalized PEPM growth rate -- effective PEPM growth rate?

Adam Ante -- Chief Financial Officer

Yeah. As we think about -- hey, Michael. Thanks. I mean, as we think about the opportunity to continue to expand attach, it's really about our -- continuing our strategy of, you know, focus on talent, leading with talent, and engaging leaders across organizations around how they manage their business, OKRs, performance management, and recruiting.

And so, you're focused on that talent management. We think that there's lots of room there. I mean, we've seen a lot of growth already. The attach rate continues to be strong, and we think that there's lots of headway there for us as well.

But even on our core platform, I mean our core module, as we think about that. We continue to expand that core. And so, both of those things combined really enable us to, you know, lift our overall ADS, and that's been part of our story. You look at our ADS, our average deal size, and our PEPM continuing to expand.

We also, of course, offer workforce management solutions and benefits administration. We don't see the same sort of headroom in the attach there just because of our strategies and whether or not clients need workforce management or not or benefits or not. We don't see the same level of expansion. Those should continue to grow with our client base and with our bookings, but we see more of that headroom in the talent management solutions as we continue to make those investments.

Michael Rackers -- Needham and Company -- Analyst

Great. Thank you. And then you've done a nice job of that --

Raul Villar -- Chief Executive Officer

Thanks, Michael.

Michael Rackers -- Needham and Company -- Analyst

Yes.

Raul Villar -- Chief Executive Officer

Go ahead.

Michael Rackers -- Needham and Company -- Analyst

Oh, sorry about that. You've done a great job of adding reps in these Tier 1 cities. But what is your strategy as you move upmarket for like larger enterprise accounts or, you know, the upper end of your range? Do you have reps specifically targeting this upper end or plan on adding reps there? Thanks.

Raul Villar -- Chief Executive Officer

Yeah. I mean, we, today, have reps that focus, you know, on prospects at the larger end of the size range, so -- that are targeting that by geography. So, you know, in our field organization, we have reps that target the lower end of the market, you know, above 100, and others that target, you know, above 250, above 500, into the low thousands, as I mentioned earlier.

Michael Rackers -- Needham and Company -- Analyst

Great. Thank you.

Raul Villar -- Chief Executive Officer

Super. Have a great night.

Operator

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

Brad Reback -- Stifel Financial Corp. -- Analyst

Great. Thanks very much. Adam, can we dive a little deeper into the 1Q opex guide? I'm just trying to figure out if there are any one-time items. Revenue is up like $20 million year over year, but opex -- that op income is flat.

Adam Ante -- Chief Financial Officer

Yeah. I mean, there's no one-time item necessarily. We've made some of those investments that we've been talking through specific to R&D, new product expansion, and sales and marketing that we -- you know, even though we're seeing that -- the sort of headwinds in Q1 revenues, we didn't want to pull back on some of those key investments. And I think that also speaks to the optimism that we have over the balance of the year and the new business that we'll continue to layer in that we see opportunity to continue to expand margins as we have a better outlook for the revenue for the rest of the year.

So, it was more -- it's more just a timing of those ongoing investments and not really wanting to pull back based on the demand that we see in the broader market right now.

Brad Reback -- Stifel Financial Corp. -- Analyst

Great. Thanks very much.

Raul Villar -- Chief Executive Officer

Thank you.

Operator

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

Brian Peterson -- Raymond James -- Analyst

Hi. Thanks for taking the question. So, Adam, just a clarification because I've got it from a couple of folks. When you say marginal additions, are you talking about -- for interest income, are you talking about taking what was reported in fiscal year '23 and using that for fiscal year '24 or should we be using the fiscal 4Q run rate and kind of annualizing that for next year? I just want to be clear on that.

Adam Ante -- Chief Financial Officer

Yeah. Yeah. It's going to be closer, of course, to what we see here in Q4, right? In Q4, 400-plus basis points will be sort of the jumping-off point, I think. And so, you're going to see it more in line with Q4 as a stepping-off point.

Brian Peterson -- Raymond James -- Analyst

OK. All right. Got it. That's clear.

And, Raul, maybe one for you. Just as you think about the ramp in productivity for the sales hires, is there a significant difference in how that ramp to full speed looks for a Tier 1 rep versus other markets? Just curious to get color on that. Thanks, guys.

Raul Villar -- Chief Executive Officer

No. I mean, we haven't seen that to this point in time. You know, the seller ramp, you know, on the averages, you know, is very similar across all markets and all tiers.

Brian Peterson -- Raymond James -- Analyst

Great. Thank you.

Raul Villar -- Chief Executive Officer

Yeah. Thank you.

Operator

Our next question comes from the line of Mark Marcon with Robert W. Baird. Please proceed with your question.

Mark Marcon -- Robert W. Baird and Company -- Analyst

Hey. Good afternoon and thanks for taking my questions. So, Adam, in terms of just the float balance, would you expect that to basically grow in line with recurring revenue?

Adam Ante -- Chief Financial Officer

The float balances actually should grow a little bit more in line with employee growth than recurring growth because the recurring revenue, of course, includes the expansion of stuff like talent and workforce management and benefits that don't necessarily drive the client funds growth. So, what you would expect is it's a little bit more focused on employee growth and then plus or minus, you know, wage inflation, which, of course, we've seen some of the wage inflation in the market data more broadly.

Mark Marcon -- Robert W. Baird and Company -- Analyst

OK. Great. And then with regards to kind of another one of the margin questions because everybody's been asking that, would you expect the gross margin to basically stay fairly consistent with the fourth quarter level in fiscal Q1 of this year?

Adam Ante -- Chief Financial Officer

Yeah. I mean, of course, we don't guide to gross margin, but I wouldn't expect the gross margin -- I mean, our aim broadly on gross margin is to continue -- excuse me, to continue to drive operational expansion, you know, by scaling that business. And so, there are some seasonality, of course, that comes with the gross margin numbers. But there's no incremental or one-time investments that would drive our gross margins, you know, at a different pace.

And that business is primarily lined up with our customer growth. So, I wouldn't expect anything abnormal in our gross margin numbers.

Mark Marcon -- Robert W. Baird and Company -- Analyst

Great. And then can you just talk a little bit about, you know, you've got the specialized packages by industry, how important were those? Did you see stronger growth with those? Are you continuing to gain share with those? And also, how would you describe the importance of having the dual connection with regards to other partners that you're servicing your clients with?

Raul Villar -- Chief Executive Officer

Yeah. So, how you doing, Mark? The -- you know, from an industry perspective, you know, that's a really cornerstone part of our go-to-market, and, you know, it is over 50% of our bookings come from the four key industries, in line with our growth rates. So, we're seeing really solid participation in those four key segments. And it's really about continuing to deliver industry-specific solutions, understanding, you know, their nomenclature, and then building integrations to their partners.

And that combination is what's driving our overall effectiveness there.

Mark Marcon -- Robert W. Baird and Company -- Analyst

Great. And can you -- Raul, could you describe what you're seeing in terms of your core well-established markets, both in the southeast and the Midwest? What sort of incremental gains are you seeing there? Are you continuing to gain share? And how would you describe the productivity -- the sales productivity of the people who've been around for quite a while and are well-established and not necessarily ramping up from an experiential perspective?

Raul Villar -- Chief Executive Officer

Yeah. I mean, we, you know, have -- really, we've had great performance in some of our Midwestern stalwart cities like Cincinnati and St. Louis. And so, we continue to see really strong performance.

Most of them are what we would call Tier 2 markets. And so, I think that continues to really operate as designed, and we continue to take advantage of our strength there. From an overall seller productivity perspective, obviously, you know, when you get to full tenure, you know, at the end of 24 months, you kind of are who you are. And we have people that are, you know, selling well in excess of a million that are tenured.

And so, we're really seeing the growth in the organization where we're seeing, you know, tenured sellers really significantly outperforming the line average. And so, we're excited about that, and we're going to continue to build that scaffolding in our organization and continue to build, you know, long-term solid performers that are outdoing the line average, which will help us continue to improve our productivity.

Operator

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

Dan Jester -- BMO Capital Markets -- Analyst

Great. Thanks for taking my question. Just maybe building on that sales productivity comment, Raul. I mean, shouldn't seller productivity continue to increase as you just get more maturity around the sales force investments you've made? Like what are you embedding in the guidance in terms of sales productivity in '24 relative to the last couple of years?

Adam Ante -- Chief Financial Officer

Yeah. Hey, Daniel. In terms of the continued expansion of the sales productivity, I mean, absolutely. The thing is when you continue to grow the sales force at 20%, it just weighs on the productivity overall as you're adding in, you know, the newer sellers who are learning and building their book.

And that's why when we look at the other cohorts, previous cohorts, yes, they continue to drive productivity. And you're absolutely right, that's what we would expect over time. In terms of -- or impact on '24, we're not expecting productivity improvements per se. Of course, we have expectations over the demand environment and how much bookings we generate and how we manage through all of the components of our revenue growth.

And I would say that, you know, there's expectations for continued bookings and continued bookings expansion into '24 in our guide. We're not expecting -- or we're not including anything in our guide that would be outside of what we think that we have sort of visibility to and is appropriately risk-adjusted.

Dan Jester -- BMO Capital Markets -- Analyst

Great. Thank you. And then can we just double-click on free cash flow margins? I think you made a comment that you should expect them to improve at a faster rate than operating margins. But, you know, maybe a little more color as to kind of how you expect that to translate in fiscal '24? Thank you.

Adam Ante -- Chief Financial Officer

Yeah, of course. You know, a couple of the key pieces that don't -- or that get sort of capitalized and amortized are related to the sales investments and the cost to fulfill. And those items get amortized over six years. And so, as that amortization builds into the adjusted operating income, it's less of an impact on our free cash flow now, right? So, we're picking up the benefits here as we're leveraging and driving scale out of the business on some of those same investments.

So, you'll start to see -- or you'll see continued adjusted operating income expansion. That's what we're driving at. But we're going to see the better leverage out of some of those costs to fulfill investments and the R&D investments, the product investments that we're making just as we continue to scale the business. So, you're going to start to see that flow through to free cash flow at just a slightly faster clip, which will expand those margins.

Operator

Our next question comes from the line of Kevin McVeigh with Credit Suisse. Please proceed with your question.

Kevin McVeigh -- Credit Suisse -- Analyst

Great. Thanks so much. This is may be for Adam. Hey, Adam, can you just unpack the revenue guidance for '24 relative to '23? It looks like, at the midpoint, it's about 17% growth versus 29% in '23.

And it sounds like there's a couple 300 basis points, 400 basis points from just employment headwinds. Can you ring fence just what the other components are of the deceleration? Is it just some conservatism in there, maybe a little less pricing, if I'm thinking about it right?

Adam Ante -- Chief Financial Officer

Yeah. Well, of course, you know, we picked up a pretty strong contribution of growth from interest income in '23. And so, we saw about 7 points of growth from interest income on that 29%. And you're not going to see that level of contribution growth into '24.

And so, those two numbers, of course, are the biggest drivers. We're seeing about 7 points in '23. We're going to see maybe a couple of points, just a couple, of interest income contribution to the growth rate in '24. And we're -- you know, then you're seeing those labor market headwinds that we talked about, some of those form filing headwinds that we talked about that are really putting pressure, especially on the first half of the year.

So, those are a couple of the key factors. And then, of course, as we get into the guide, you know, we are not looking to change our philosophy on guidance versus the last couple of years. And so, we want to continue to create some of the space for us to overperform where we can, and we want to be consistent, of course, in that approach throughout the year.

Kevin McVeigh -- Credit Suisse -- Analyst

Very helpful. Thank you.

Raul Villar -- Chief Executive Officer

Thanks, Kevin.

Operator

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

Steve Enders -- Citi -- Analyst

OK. Great. Thanks for taking the questions here. I do want to ask on the Tier 1 investments that you're continuing to make and a good 7-point increase here.

But how should we think about how much more room there is to expand in those areas? And I guess, what would those levels look like over the next couple of years here?

Raul Villar -- Chief Executive Officer

Yeah. I mean, in the Tier 1 market today, you know, we sit roughly at 36% coverage. So, you know, we could more than double the sales organization in the Tier 1 markets. And again, we're going to continue to leverage.

You know, the majority of the incremental headcount that we had each year will go into these Tier 1 markets. So, I think -- you know, we think the runway is long, and, you know, we're going to continue to pragmatically deploy the resources in these Tier 1 markets and drive productivity.

Steve Enders -- Citi -- Analyst

OK. That's helpful context there. And then I guess maybe for like the 1Q guide, just want to make sure like thinking about the float income dynamics here in a similar way that you're talking about the year. I mean, is it kind of similar like flowthrough what came in for 4Q for 1Q, and that's like the right level here, or are there other factors that we should be accounting for?

Adam Ante -- Chief Financial Officer

You know, I mean, I think it should be fairly consistent between the quarters. You're not going to see much sort of swings, mini swings. When we're changing 25 basis points at this level, you're just not going to see the same level of material swing. So, I think you're going to see quite similar to where we were in Q4.

Steve Enders -- Citi -- Analyst

All right. Perfect. Thanks for taking the questions.

Raul Villar -- Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Robert Simmons with D.A. Davidson. Please proceed with your question.

Robert Simmons -- D.A. Davidson -- Analyst

Hey, guys. Thanks for taking the question. So, last year, your seasonality was thrown off a little bit by some of the form filing fees shifting around a bit. Do you expect that to continue this year or should we expect that to normalize back to a more normal cadence?

Adam Ante -- Chief Financial Officer

Hey, Robert. I think that you're probably going to see a little bit more of a cadence like a prior year with some -- a little bit of outsized in Q3 still. So, you know, we implemented some new services and pricing that we talked about last quarter in Q3 that will persist. But as some of the form filings become a headwind and begin to go away, I think it's going to revert more to a normalized environment, so you're just not going to see quite as much sort of spread throughout the year.

So, we'll see less form filings in Q1 and Q4. And then the Q3 actually might be a little bit more consistent but still remain at a slightly elevated level because of some of the products and services that we've offered as well.

Robert Simmons -- D.A. Davidson -- Analyst

Got it. OK. That makes sense. And then -- so you kind of touched on it before, but on the competitive landscape, have you seen things change over not just the last quarter but maybe over the last year or so? Are the newer entrants getting up to size now that they matter at all or do you think they're still pretty subscale? And what are you seeing in terms of like competitive price pressures up and down?

Raul Villar -- Chief Executive Officer

We definitely don't see any new entrants, so that -- nothing has changed from that perspective. You know, we still obviously see ADP, Paylocity, and Paycom the most.

Operator

Our next question comes from the line of Jackson Ader with MoffettNathanson. Please proceed with your question.

Jackson Ader -- MoffettNathanson -- Analyst

Great. Thanks for taking our questions, guys. The first one, so, Raul, actually, if we can just follow up on the competitive comment you made about win rates that ADP is picking up?

Raul Villar -- Chief Executive Officer

Yeah.

Jackson Ader -- MoffettNathanson -- Analyst

Is this -- you know, any particular type of customer that you saw more success with this year compared to last year? Is it similar to just like winning more upmarket against ADP?

Raul Villar -- Chief Executive Officer

Yeah, and good question. It was really tied to the overall mix increase from ADP by a point or two, and it is primarily upmarket.

Jackson Ader -- MoffettNathanson -- Analyst

OK. All right. That makes sense. And then, Adam, we've talked a lot about kind of the continuing to invest in sellers, but what about -- have you given any thoughts as to the linearity, like maybe front-load things while we can kind of see what the economy looks like here in the next three, six months and then take a look at the second half of the year and make decisions from there?

Adam Ante -- Chief Financial Officer

Yeah. I mean, that is definitely how we think about it. I mean, we tend to plan it a little bit more linear, and then we make adjustments as we go through the year. And of course, we're considering seller retention and how that is trending, as well as how we're performing internally.

And then we look for those opportunities, you know, as we continue to go through the year. Also, January is a really important month for us as we think about our own seasonality in the market in terms of a lot of new business that we start in January. Of course, we see some of our larger clients' losses. They want to leave in January as well, I mean, for the same reason why we win.

And so, we do like to get through January and see how that trends before we really pull the trigger on too much -- to anything that's too outsized. So, I think -- I mean, how you're saying it is sort of how we think about it. We sort of think about it linearly, and then we make decisions on how the business is trending.

Jackson Ader -- MoffettNathanson -- Analyst

Got it. All right. Cool. Thank you.

Raul Villar -- Chief Executive Officer

Thanks, Jackson.

Operator

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

Matt Pfau -- William Blair and Company -- Analyst

Great. Thanks for taking my questions. Wanted to first ask on the relationship between bookings growth and your guidance for fiscal '24. So, bookings growth was up 23% for FY '23.

And then if you look at the sort of implied recurring revenue guidance for fiscal '24, it's probably around 17%. What are the factors there that drive that delta between the bookings growth and then what you're forecasting looking forward for recurring revenue growth?

Adam Ante -- Chief Financial Officer

Yeah. Hey, Matt. There are a couple of dynamics, of course, as we think about the rest of the business. You know, there's a lot of factors as we think about just the components of that revenue growth.

New business is a piece of it. Client sales are a component of that. And then we have, you know, dynamics like pricing that we talked through, losses or retention of our client base that we've talked through. And then, of course, there's the labor market growth and how the labor market growth is trending.

Plus other things like the form filings that we've discussed as well. And so, you know, we want to see revenue growth and it's possible that revenue should accelerate faster than our bookings growth. And there are some other dynamics, of course, in there today that are creating those headwinds that we've discussed. But we think longer term, there's no reason that that can't be part of the dynamic.

And we just need to continue to keep executing in our Tier 1 and -- or I mean our market expansion and sales expansion strategy like we've been discussing, for sure.

Matt Pfau -- William Blair and Company -- Analyst

Got it. And then just the last one from me. Sorry to ask another question about the Q1 guide specifically. But if we look at the, I guess, implied interest income that you'd be expecting in Q1, I think people would have expected perhaps more of that to flow down to operating income.

Maybe just sort of update us on how you're thinking about interest income relative to investment versus letting it flow down to operating income.

Adam Ante -- Chief Financial Officer

Yeah. I mean, so we want to continue to expand margins on a recurring basis, and that is our aim. That's how we manage the business. And we're also leveraging the interest income today to continue to expand and fuel our strategy, which we think is prudent given the environment and our ability to continue.

I mean, we see the demand, we see the product working in the market, and we -- so we want to continue to make those investments. And longer term, to the extent that that interest income goes away, which is not what we see in the near term, but to the extent that it does, then we'll be set up from a management perspective to be able to pull back on those incremental investments that we're making, again, specifically around marketing programs, digital investment, brand investment to drive that expansion and the accelerated product investments, which we've been really intentional about to drive toward what we consider our innovation buckets, which is more around new product expansion, new functionality to get the product -- to maintain our competitive advantage in that space. And so, those are the areas that we're going to continue to invest in. And again, based on what we saw for the full year and how we're thinking about our performance through the year, how bookings came in from last year, or -- and how they're going to layer in for this year, we didn't think that it was prudent to pull back on those investments and sort of disrupt the management cycle, disrupt the product innovation cycle, disrupt, you know, our marketing investments and campaigns that were running there.

And so, we wanted to continue those, even at the expense of some of that margin pressure that we're guiding to here in Q1. And then, of course, as you look at our guide and our philosophy, you know, we've -- I think we've been prudent about how we've guided, and we wanted to keep that same, you know, philosophy going forward. So, hopefully, you see the same from us as we get through '24.

Operator

Our next question comes from the line of Siti Panigrahi with Mizuho. Please proceed with your question.

Siti Panigrahi -- Mizuho Securities -- Analyst

Thank you. Most of my questions have been asked, but just wanted to dig into one comment you said. You are moving upmarket average deal size. So, how do you differentiate from your competitors? You know, what's helping you win against your competitor?

Raul Villar -- Chief Executive Officer

Yeah. I mean, I think there's a combination of things. And, you know, the wonderful thing about HCM is every company that we sell to is unique. But I would say some of the key areas that differentiate us in the marketplace are, you know, the simplicity of our platform, modern cloud platform.

We have, you know, a best-in-class talent platform that helps people source, onboard, coach, inspire, and manage their employees most effectively. So, we're really focused on enabling leaders to drive people and performance. And then we have the most open platform in HCM. So, if a customer is interested and taking the HCM system of record and integrating it with other key tools that they use, you know, they're definitely going to select us.

Siti Panigrahi -- Mizuho Securities -- Analyst

Thank you.

Raul Villar -- Chief Executive Officer

You're welcome.

Operator

Our last question comes from the line of Patrick Walravens with JMP Securities. Please proceed with your question.

Owen Hobbs -- JMP Securities -- Analyst

Hi. This is Owen Hobbs on for Pat. Thanks for taking the question. So, kind of going back to that moderating labor force growth, I was wondering if you -- if you're seeing any difference in that moderation by different verticals or if it's all kind of at once moderating?

Adam Ante -- Chief Financial Officer

Yeah. Hey, Owen. We see it matches up to the broader market. That's for sure.

I mean, we're seeing some slowness -- a little bit slower in manufacturing. Professional services has sort of bounced around a little bit and actually recovered marginally. And then food and beverage and healthcare have been -- they ramped a little bit faster earlier in '23. And those have slowed, but they sort of look -- they still look normal relative to what we're seeing in the broader market.

So, yeah, we do see a little bit of those dynamics. Our portfolio has a good mix and does represent, you know, the overall average of the economy. So, we see some of those same dynamics.

Owen Hobbs -- JMP Securities -- Analyst

Great. Thank you. And then obviously, you can't predict the future, but is there any indication based on historical patterns or any kind of analysis you guys are doing on how long this headwind will last?

Adam Ante -- Chief Financial Officer

Yeah. I mean, you can look at macroeconomic forecasts from, you know, all of the big players, and we certainly take all those into consideration. And, you know, it feels like it's everybody's guess, right? And I think that the market's been expecting a faster slowdown for a long time. We've been talking about this for more than a year.

I mean, the fact is, is that it's decelerated, labor market growth has decelerated, and we're in that low single-digit sort of growth today. And who's to say if it's going to compress further or go negative. We've tried to be as conservative as we thought has been prudent in our guide based on what those macroeconomic experts are predicting, which is varied. There's plenty of projections that, I think, the labor market is going to compress and/or decline.

And there's plenty that are a little bit more bullish. I think the folks have been leaning a little bit more bullish and dovish lately. But we've tried to be moderate in how much we've included in our guide, which we think is prudent.

Operator

That concludes our question-and-answer session. I'd like to hand it back to Raul Villar for closing remarks.

Raul Villar -- Chief Executive Officer

Thank you again for attending our earnings call. We remain optimistic about the opportunity in front of us and remain focused on executing our strategy. We look forward to connecting with you at the Stifel Tech Executive Summit in Deer Valley, the Goldman Sachs Communacopia and Technology Conference in San Francisco, and the Citi Global Technology Conference in New York in the coming weeks. As always, feel free to reach out if you have any questions.

Have a great evening.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Rachel White -- Vice President, Investor Relations

Raul Villar -- Chief Executive Officer

Adam Ante -- Chief Financial Officer

Arti Vula -- JPMorgan Chase and Company -- Analyst

Kevin Kumar -- Goldman Sachs -- Analyst

Samad Samana -- Jefferies -- Analyst

Bhavin Shah -- Deutsche Bank -- Analyst

Terry Tillman -- Truist Securities -- Analyst

Bryan Bergin -- Cowen and Company -- Analyst

Michael Rackers -- Needham and Company -- Analyst

Brad Reback -- Stifel Financial Corp. -- Analyst

Brian Peterson -- Raymond James -- Analyst

Mark Marcon -- Robert W. Baird and Company -- Analyst

Dan Jester -- BMO Capital Markets -- Analyst

Kevin McVeigh -- Credit Suisse -- Analyst

Steve Enders -- Citi -- Analyst

Robert Simmons -- D.A. Davidson -- Analyst

Jackson Ader -- MoffettNathanson -- Analyst

Matt Pfau -- William Blair and Company -- Analyst

Siti Panigrahi -- Mizuho Securities -- Analyst

Owen Hobbs -- JMP Securities -- Analyst

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