Chad Richison: Yeah, so we’re very focused on our go-to-market strategy. We focus on the revenue opportunities available to us. I wouldn’t say it’s just a unit game. But you’re playing both sides of that, obviously, because it’s unit does help with the revenue. And so, we’re not changing a whole lot when it comes to our strategy. I think our message is getting cleaner. And like we like I said in the call, I mean, we just put out another report in regards to Beti’s value. We do continue to have a lot of interest about businesses using Beti and then again just a single database system.
Jason Celino: Okay. Great. Thank you.
Operator: Our next question comes from Arvind Ramnani with Piper Sandler. Please proceed.
Arvind Ramnani: Hi, thanks for taking my question. I had a couple of questions on Beti. I guess, like have you seen any sort of client attrition, that’s like attrition from existing clients or some clients — prospective clients who are choosing to kind of go a different direction, because they don’t like Beti. I mean, has there been any kind of negative or pushback on Beti from customers or is that largely been quite positive?
Chad Richison: No, we’re having a lot of success with Beti. I think you’re talking about head-to-head where someone might choose not to use Beti and continue to do it the way it’s been done traditionally. That really comes down to the sales person, and having somebody that understands the value and then also spending the time with the client and all the stakeholders and working through that, so that you know they can actually see the ROI available for them.
Arvind Ramnani: Great. And I guess that some kind of want to kind of use the latest version of Paycom, do they have the ability to use Beti, but say like, hey, in terms of like us self-certifying the payroll, if that’s something they want to give the employees, is that — are you able to turn-on and off that option where you say like even all of Beti accept this turn-on, turn-off option?
Chad Richison: So, we have 31 modules and those are chosen by the client, how they use those. Now, many of our modules are tied together. And so, it’s through one module that you get the value of the other, but that wouldn’t be the case with all 31. I would say there’s some 34 — sorry 34 modules, I would say there’s some core modules that are going to be critical for a client to be able to actually process a payroll for tax depositing and everything else. And then there’s some other modules, you know that that’s more driven at the client choice of whether or not they want to provide that solution to their organization or whether or not they have that covered in another area.
Arvind Ramnani: Just last question here is like, if someone has payroll but they are basically not the ability to kind of run payroll through all but seem like employees are not required to certify their paycheck every two weeks. Is that a possibility or no?
Chad Richison: Yeah, that’s client dependent on exactly what they require in that. That’s up to them.
Arvind Ramnani: Perfect. Thank you.
Operator: Our next question comes from Bhavin Shah with Deutsche Bank. Please proceed.
Bhavin Shah: Great. Thanks for taking my questions. Chad, I think you spoke about some of your strategic initiatives kind of impacting 2024 topline. Can you maybe just provide a little bit more further insight into which ones are having the greatest impact on revenue and how long do you think these kind of headwinds from these strategic initiatives last, is it a one-year thing, or do you think it will take multiple years to play-out?
Chad Richison: Yeah, in terms of our strategic initiatives for ’24, I mean obviously it could have an impact on the topline as well as some of the expenses as well and I would say that a lot of those are going to impact ’24 and maybe have a small tail on that?
Bhavin Shah: Got it. And then. I guess maybe one clarification, I think from what at least I understand and please correct me if I’m wrong, it appears like for your messaging today that you’re perhaps a little bit less aggressive in terms of pushing Beti into the customer base versus your prior commentary. If that’s true, why wouldn’t this decrease some of the kind of revenue headwinds that you talked about last quarter that Beti might be creating in fiscal ’24?
Chad Richison: Yeah. I mean, we talked about some of the headwinds that Beti maybe creating, we’ve talked about that last quarter, and I mean, Beti has a great benefit to the customer. I mean it eliminates errors and those accrue as value to the customer. And we’ve looked at that and what that as a headwind that might be to us and really that’s from eliminating some of those services that we charge for, and we’ve estimated that to be approximately 5% of revenue. But we wouldn’t expect all of that to go away. So that’s kind of as we’ve gone through and really looked at those areas of our business, that could be impacted, that’s kind of what we looked at.
Bhavin Shah: Got it. Thanks for taking my questions.
Operator: Our next question today comes from Daniel Jester with BMO. Please proceed.
Daniel Jester: Great. Thanks for taking my question. Just on the gross margin trajectory, I know it’s less of a focus than EBITDA. But three straight years of compression exiting 2023, as we think about 2024 and some of the investments you’re making, should we think that gross margin compresses again or how should we be thinking about that for the year ahead?
Chad Richison: Yeah. I mean we don’t, we don’t guide to gross margin, only there’s several things that go into that. One of the largest impacts to gross margin is really headcount on our service side. And so, we’re well staffed going as we’re exiting 2023 and those costs continue to carry on into 2024.
Daniel Jester: Okay. Great. And then on the Global HCM, great to hear about native payroll in Canada and Mexico out there. Are you actually paying people in both those countries today and when — and if that’s the case, can you just give us a flavor for kind of who or just who you you’re displacing, is it some of your maybe US-based peers or is that maybe local providers, a little more color on kind of the international trajectory? Thank you.
Chad Richison: Sure. The Global HCM side, again, we’re talking about for Canada and Mexico. Global HCM, you can use for many of the — for all the countries, but our Global HCM side, you’re going to displace more of our typical vendors that we may see and then I would say on the payroll side, it’s a mixed bag, but it’s oftentimes we’re replacing an in-country partner or an in-country vendor on the payroll side for both Canada and Mexico, which we are up and running and now we did announced today that we’ve added UK to that. But as far as Canada and Mexico, we’re running in those countries right now.
Daniel Jester: Great. Thank you.
Chad Richison: Great. Thank you.
Operator: Our final question today comes from Adam Bergere with Bank of America. Please proceed.
Adam Bergere: Hey, thanks for taking my question. Can you talk about sales productivity and the retention rate assumptions embedded into the 2024 guide, and how that compares to what you saw in 2023? Thanks.
Craig Boelte: Yeah, I’ll take the sales productivity. I mean, we’ve got a great sales organization. We always have. We’ve had a great sales strategy. We’re continuing to get a lot of people involved with our sales organization. We’ve done a great job training them and we’re set-up to go through this year. We did a great job last year throughout the year selling, we had a lot of things working with us on that as we moved throughout the year, we kind of talked about the Beti cannibalization or the displacement of certain fees. Craig talked about that being 5% still total out there, we’ve seen portions of that 5% already down 20%. So again, that’s a successful win for the client. I do think that it takes a certain skillset to be able to go in and work with the client within our industry and we’re having a lot of success there. So we do expect that we’re going to sell more this year than what we sold last year and last year was a good sales year.
Chad Richison: Yeah, and in terms of the retention, as we mentioned, the parts that impacted retention the most this year was really at the low-end of the market. And we’re exposed to the low-end of the market very small. I mean we’re less than 5% that has under 50 employees. And it’s actually closer to 3.5%, so as we’re moving into the current year, we have already mentioned that the initial looks are positive. So that’s kind of the way we look at that.
Adam Bergere: All right. Thank you. And then just a follow-up to that last point. Are you investing a little less incrementally in that lower end of the market, then would you say? Thanks.
Chad Richison: Yes. I would say, we are investing a little less.
Operator: Thank you for your questions. This concludes the Q&A portion of today’s call. I will now turn the call back over to Mr. Chad Richison, for closing remarks.
Chad Richison: Well, thanks everyone for joining the call today. I want to congratulate the 2023 Paycom Jim Thorpe Award Winner, Trey Taylor from the US Air Force Academy. This award recognizes the most outstanding defensive back in college football and memorializes Jim Thorpe, who is one of the greatest all-around athletes in history. Jim Thorpe also happen to be in Oklahoma. We plan on participating in the KeyBanc and Morgan Stanley Conferences in March and seeing many of you in-person throughout the coming months. I like to congratulate Chris and thank all our employees for their contribution to Paycom’s success. Operator, you may end the call.
Operator: This concludes today’s conference call. You may now disconnect.
