How do you continue to change workflow with the customer? So, more change management. I would say that’s the biggest takeaway that we got from the conference. And obviously, we’re focused on providing them tools to be more successful in that area, and we’ll continue to work with our clients to help them with that change management as they continue to buy more products from us.
Daniel Jester: Great. Thanks. And then maybe just another one on the sales force and maybe more from a productivity angle. I mean, if you exclude the portion of the sales force that you talked about with regards to churn today, can you just focus on the rest of the sales force. Maybe any sense about productivity levels and your confidence that you can continue to sustain improved productivity into next year? Thank you.
Raul Villar Jr.: Yes. So, even the entire field sales organization, despite our elevated churn, we are increasing our tenure, and we have increased our productivity. And so we actually feel really good that it works. It’s about graduating people into the next year. And so our overall productivity continues to increase as we’re growing the sales organization and despite the churn that we have, which is why we’re bullish, because we have a winning value prop in the market that resonates, and we just had some internal execution issues that caused a slight delay.
Operator: Thank you. Next question comes from the line of Steve Enders with Citi. Please go ahead.
Steve Enders: Okay, great. Thanks for taking the questions here. I guess maybe to start, understand the factors going into the guide for 4Q, but I guess as we’re thinking about the models moving forward, how should we be thinking about those factors maybe impacting the quarters after that?
Adam Ante: Well, I mean, we clearly haven’t given any guidance for ‘25. I mean, we continue to be bullish on the embedded channel and we have a couple of partners that are not even boarded yet, right, just booked, haven’t added anything yet and we’re going to be in the process of implementing those and standing up those partnerships over the next couple of months. And those will begin to be additive next year. And then we have a partner who’s going through the migration right now. And they’re coming on line here this quarter and next quarter. And that the whole process when you bring over a portfolio takes six to nine months usually, and maybe a little bit longer with some of the details of the portfolio. So, I think we have we’re expecting an ongoing ramp probably for a while and we’ll love to share I think more at Analyst Day as we sort of onboard these clients and new partnerships and really we can start to unpack them in a little bit more detail as we step into ‘25 and beyond.
Steve Enders: Okay, that’s helpful there. I think you called out seeing continued healthy top of funnel activity or maybe you said it was better than it was a year ago. If any segments or geographies or anything to call out there for maybe what’s helping support the better levels there?
Raul Villar Jr.: Yes, I mean, we’ve been focused, we’ve had really strong execution, generating MQLs and first appointments. So, our top of the funnel growth has been excellent and that’s growth on a per seller basis. So, not just overall growth, but growing as we continue to grow the sales organization. So, our marketing team has done a great job of generating top of funnel demand. And so that gives us a lot of confidence that as we continue to fix our tenure and increase our tenure, that will drive FTAs through the pipeline into closed one.
Operator: Thank you. Next question comes from the line of Matt VanVliet with BTIG. Please go ahead.
Matt VanVliet: Hey, good afternoon. Thanks for taking the question. Curious on how much you feel like you are able to add to the pipeline and sort of to the overall opportunities coming out of the user conference? Obviously, not a like-for-like comparison year-over-year, but that’s to your benefit, I assume. So curious on what the key takeaways are in terms of business development?
Raul Villar Jr.: Yes. I mean, on the user conference, obviously, it’s a huge opportunity for our client team. We have an amazing client sales team. And for them, they have the ability to spend time with our clients there. It does generate more opportunities to cross sell and folks some of our great solutions like talent and workforce management and benefits and analytics. And so, we’re excited about it. But it was a relatively small conference. And so, we’ll continue to grow that conference, we got great feedback on it, we will hopefully double that conference next year and continue to increase the number of clients that we’re able to touch and impact. But it’s a great lead generator, obviously, for our client sales team.
Matt VanVliet: And then you called out enterprise as being particularly strong. Curious, what the trends were at the lower end of the market. We’ve heard other companies continuing to struggle recently on the S&B side. So on the smallest area, how much of a headwind is that now and sort of baked into the fourth quarter?
Adam Ante: Yes, I mean, we definitely see in the micro segment, I mean, is declining marginally. Now that still only represents like mid-single digits in terms of our total revenue, but it grows at a much smaller pace. And then in terms of the number of customers, it’s actually marginally declining. And that’s been the case for a while. So, that’s not necessarily a new trend, but it’s definitely persistent. And we’ve seen some lower growth really up into the 50. So, that sort of 10 to 50, which we call like the lower part of the small market, that segment is growing much smaller or much slower than our mid-market. And that’s from either a turnover perspective, but also like on a net new business, of course, we see a lot more growth in that mid-market. So, the same store sales growth in that segment is a little bit slower and we see the losses at a little bit higher rate of course in that micro segment.
Operator: Thank you. Next question comes from the line of Mark Murphy with J.P. Morgan. Please go ahead.
Arti Vula: This is Arti Vula on for Mark Murphy. Thanks for taking the question. One area I want to double click on, I think you hinted around it, but some of this kind of incremental headwinds you’re seeing in same store sales. Can you talk about how that looks across the different kind of enterprise mid and then small end of the market, please? Thanks.
Adam Ante: Yeah. Hey, so the same store sales growth, it’s fairly consistent. It’s not as much by size. I mean, we see a little bit more pressure on the smaller end of the market for sure, but it’s a little bit more distinct by industry. So, we see a little bit more like on the food and beverage has slowed down considerably. We see manufacturing sort of flipping a little bit. Professional services has been a little bit stronger actually. But those are more of the dynamics that we see. Things like arts and entertainment, the same store sales slowed a little bit and started to flip and drag just a little bit more.
Arti Vula: That’s very helpful. Thank you. And then on, if you’re kind of thinking about the talent solutions, is that something that could be kind of potentially affected by some of these durations or is the fact that there’s rescaling and upscaling kind of make it a priority for the customers anyways? Thank you.
Adam Ante: Hey, Arti, I missed the first part of what you said maybe if you’re saying if that’s an optional product, is that what you’re saying?
Arti Vula: No, I was wondering if the change in kind of the hiring pattern is affecting the interest in the talent solution suite or whether that’s kind of being offset by the fact that there’s rescaling upscaling and other factors of that customers are purchasing it for?
Raul Villar Jr.: Yes. The labor market doesn’t have a huge impact on talent in the sense that, even in a tight labor market, companies have normal organic churn of their employee base. And so they’re always looking to recruit employees. So, that tends to be fairly stable on the front end recruiting modules. And then I think in a tighter labor market, people do focus more on, hey, how do I retain the great employees that I have now? And so some of the talent retention modules that we have are really popular and helpful there.
Operator: Thank you. Next question comes from the line of Austin Gould with Citizen JMP. Please go ahead.
Austin Gould: Great. Thanks for taking my question. Raul, I’d love to get your take on how you view the AI opportunity at this stage. Are you hearing more or less interest about AI from your customers over recent months or about the same? Thanks.
Raul Villar Jr.: I think there’s a lot of excitement on this call about AI. I think there’s a lot of excitement on my leadership team about AI, the opportunities to continue to enhance the insights that we provide our customers, the opportunity to develop product faster, be more efficient with marketing, continue to provide better service with AI tools. All of those things are really things that we’re diving into and each area of the business has unique projects going on. At a customer level in the mid-market, their users or they’re experiencing it, but they’re not really asking about it, right? They’ll take the benefits of it. But most of them are consumers. They read the articles. They get worried about the pros and cons of AI.
So, we have to clearly explain in the product how we use AI etc., but I’d say in the segment we serve people are like saying, hey, can you walk us through what you have in AI in the product? It’s they’re seeing the benefits in the product versus asking for it specifically.
Austin Gould: Okay, that’s helpful. And then maybe just as a quick follow-up, do you think that in the enterprise space that might start to change a little bit or no?
Raul Villar Jr.: I think where we’re operating the enterprise space, it might come up a little bit, but it’s not going to be that prevalent. I think as you get up into 10,000 plus employees and it becomes maybe more of an opportunity for them to think about how they can streamline their products and platform. But ultimately, we’re not seeing it at all.
Operator: Thank you. Next question comes from the line of Siti Panigrahi with Mizuho Group. Please go ahead.
Siti Panigrahi: Thank you. Raul, as you see some of the payroll companies’ results and the growth guidance raise some kind of concern about growth of this cloud payroll industry and there was some concern about saturation. How do you response to that? And what gives you that confidence you can accelerate revenue from here?
Raul Villar Jr.: Yes. I think it’s more of a point in time than a trend. And when I look at the overall category, the three modern cloud providers in our space, we have about 15% to 20% of the eligible market and the lion’s share of the market is still on suboptimal regional service bureaus, ERP systems or legacy providers like ADP and Paychex. So, we view that as a ripe opportunity to continue to grow and continue to focus on disrupting the category.
Operator: Thank you. Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to turn the floor over to Raul Villar for closing comments.
Raul Villar Jr.: Thank you again for joining us tonight. We are encouraged by the underlying fundamentals of the business and remain focused on executing our strategy. We look forward to connecting with you at several upcoming events, including the JPMorgan Technology Conference in Boston, the Baird Technology Conference in New York City, and the William Blair Growth Stock Conference in Chicago. Have a great night everyone.
Operator: Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
