Raul Villar: Yes.
Arti Vula: Helpful. Thank you.
Operator: Thank you. Our next question is from Steve Enders with Citi. Please go ahead.
Steve Enders: Okay. Great. Thanks for taking the questions here. I guess I’ll ask another question on the embedded HCM. But I guess I just want to understand a little bit more on, it seems like really good strength of the back here. But how are you feeling about what’s embedded in the outlook for the rest of the year? And then as we think about the margin profile of embedded HCM, how is that maybe different versus the core payroll solution?
Adam Ante: Hi, Steve. We feel good about the guidance that we’ve shared that it includes the future growth of these – of the channel and performance thus far. So we still feel good, and that’s really consistent with how we came into the year. In terms of the margin and the margin profile will be a little bit stronger because you don’t have quite as much on the cost of acquisition side, right? So we don’t have to maintain sales distribution, you don’t have quite the same level of implementation cost and you’re supporting the partner versus the front-end customers. So a little bit different model and a little bit better margin. I’d say earlier on, like through this year, you’re not going to see any material benefits necessarily in the margin profile as we’ve invested in the channel. But that will come really ‘25, ‘26 will continue to be additive to the margin as we grow the channel over time.
Steve Enders: Okay. That’s helpful context there. And then as you think about the Tier 1 investments that you’ve been making, and I guess, kind of the geographic footprint today. I guess where are you going to call out the – kind of any change in the pockets of strength there or any areas that maybe were a little bit softer out there? And just in general, how are you feeling about this Tier 1 investments in the ramp up there?
Raul Villar: Yes. Tier 1 continues to be the bulk of our investment. It’s also the lion share of our performance and growth. So we feel really good about that. We’re seeing really good results from an average deal size, number of employees, above the line average. So we feel like it’s really good. As far as like individual markets, when we’re performing well or poorly, it’s all about the execution of the team on the field. It’s really not – at this point, we’ve seen no macro impact in any market that we have. It’s more about – do we have a great leader, are we fully staffed and are they running the playbook. And if they are doing that, we performed really well. When we are missing one of those things, we won’t perform as well as we are in the other markets.
Steve Enders: Yes. Prefect. Thanks for taking the questions here.
Raul Villar: Thank you.
Operator: Thank you. Our next question is from Daniel Jester with BMO Capital Markets. Please go ahead.
Daniel Jester: Hey, great. Good evening, everyone. Thanks for taking my question. Maybe we can spend a minute talking about your partnership with Azure and the [indiscernible] analytics solution. I guess maybe can we generalize this, is this a type of partnership that you might see more from you in terms of going to sort of best-of-breed solutions and seeing if you can use it to accelerate your own product opportunity or is this maybe more of a one-off given the need around the [indiscernible] analytics today?
Adam Ante: Yes, I mean, we look at partnership opportunities just like we look at acquisition opportunities and/or developing the solutions themselves. I mean I think in this case, we really like the partnership with Azure. And we didn’t think we were going to be able to get to what they have built. They have been a great partner. They knew what they were doing. And we’ve been able to build something together. I mean they work with us very well and directly with our product organization to create this solution to be able to take it to market through this channel rapidly. And so we really appreciate that partnership with them. I think we would consider other partnerships, but it’s not like a change in the strategy necessarily. I don’t think that you’re going to see one direction, one way or the other, more or less.
Raul Villar: Yes. I think it’s – we identified them as best of breed. It wasn’t something we could do right away. Ryan is a great partner. We really enjoy the relationship and we’re developing stuff together, which is creating more power for both of our platform. So we’re excited about it, and we want to continue to grow our relationship with them.
Daniel Jester: Great. That’s really helpful. Thank you. And then I think you touched on this earlier, but maybe we can just circle back to it. In terms of the percent of your revenue base today, that’s still being paid on a per-check basis as opposed to PEPM, kind of where does that roughly sit today? Thank you very much.
Adam Ante: Yes. We have about quarter of our portfolio that has some form of a per-check model, although half of that revenue – they are also buying other HCM solutions that are on PEPM model. And this is really over the last 5 years, migrated from 20% or less than 20% to nearly 80% of the portfolio is now on a – on some PEPM strategy. And also 100% of the new business that we sell comes on, on a PEPM strategy.
Raul Villar: Yes. And I would just like to interject that 99% plus – 99% of our payrolls are already perfect. And so we have – we don’t really have an issue with trying to generate revenue from client mistakes.
Daniel Jester: Thanks.
Operator: Thank you. Our next question is from the line of Matt Pfau with William Blair. Please go ahead.
Matt Pfau: Yes. Great. Just wanted to ask on the customer list acquisition that you made a few quarters ago. Just an update on how that’s progressing relative to your expectations in terms of converting those customers.
Adam Ante: Yes, Matt, things are progressing really well. We had a really great success with that portfolio and bringing it over pretty quickly. It’s all really coming together here in the first quarter. So really nothing to add necessarily in the quarter, but on track for the expectations that we have sort of going into the year on that portfolio.
Matt Pfau: Great. And then just a follow-up on the employee retention credit. I think you had a small amount of revenue from that previously, it’s program has been paused now. Is there anything in guidance going forward included from that?
