Earnings Call Transcript
ASURE SOFTWARE INC (ASUR)
Earnings Call Transcript - ASUR Q1 2023
Operator, Operator
Good day everyone, and thank you for joining us. Welcome to the First Quarter 2023 Asure Software Earnings Conference Call. I would now like to hand the call over to Mr. Randal Rudniski. Please go ahead, sir.
Randal Rudniski, Director
Thank you, operator. Good afternoon, everyone, and thank you for joining us for Asure's first quarter 2023 earnings call. Following the close of markets, we released our financial results. The earnings release is available on the SEC's website and our Investor Relations website at investor.asuresoftware.com, where you can also find the investor presentation. During our call today, we will reference non-GAAP financial measures, which we believe to be useful to investors and exclude the impact of certain items. A description and timing of these items along with a reconciliation of non-GAAP measures to the most comparable GAAP measures can be found in our earnings release. Today's call will also contain forward-looking statements that refer to future events and as such, involve some risks. We use words such as expects, believes and may to indicate forward-looking statements, and we encourage you to review our filings with the SEC for additional information on factors that could cause actual results to differ materially from our current expectations. Finally, I'd like to remind everyone that this call is being recorded, and it will be made available for replay via a link available on the Investor Relations section of our website. With that, I would now like to turn the call over to Pat Goepel, Chairman and CEO. Pat?
Patrick Goepel, CEO
Thank you, Randal, and welcome, everyone to Asure Software's first quarter 2023 earnings call. I will begin today's presentation with an update on our business highlights and strategy. Then I'll turn the call over to our CFO, John Pence for a more detailed review of our financial results and outlook for 2023. We will then conclude the session with time to answer your questions. As is demonstrated from our results, the strong momentum we built in the business in 2022 carried through to the first quarter of 2023. Our revenues exceeded $33 million for the quarter, rising by 36% relative to the prior year's quarter, all of which was organic. Net income of $300,000 was a $3.4 million improvement from last year. Adjusted EBITDA more than doubled to $8.2 million from $3.4 million for a margin of 25%. It is also notable that our first quarter adjusted EBITDA was higher than we delivered in all of 2021, showing the growing significance of our scale and investments. Our non-GAAP gross profit margin climbed to $26 million from $17 million for a margin of 78% versus 68% in the prior year's quarter. We believe these results are the product of a very strong client reception to the investments and product enhancements we made across the business. It also reflects our efforts to streamline and consolidate our business processes, so that we can take advantage of new opportunities, such as those in the Asure marketplace. The strength of client reception to our solutions is notable in our new sales bookings, which grew by 163% in the quarter relative to the prior year. The enhancements that we've made to our sales programs are working and the upgrade to our solutions are attracting strong demand. I also want to point out the growth we achieved this quarter is over and above the 43% growth rate we reported in new sales bookings in the comparable period last year. Our revenue and margin performance, which was entirely organic, were driven by strong contributions from several parts of the business in the first quarter. The first is HR compliance. Our HR compliance solutions are resonating strongly in the market. In the quarter, our compliance revenues more than doubled relative to the prior year as our solutions continue to drive cross-selling activity and attract new clients. These solutions ensure small and midsize businesses can navigate the increasingly complex regulations and federal, state and local jurisdictions helping businesses to remain compliant in a very effective and scalable manner. Next is our Asure marketplace solutions. Asure marketplace contributed meaningfully to our revenue performance in the quarter. We launched Asure marketplace in 2022 on the belief that our data and automation will enable us to broaden the scope of our solutions so we can offer new value to our clients and of course their employees. Asure marketplace leverages the vast amount of data in our domain and allows us to explore, test, and create new sources of revenue. We continue to believe it could represent upwards of 30% to 40% of our overall revenues in the future. We are also continuing to expand the number and types of integrations we offer and expect to have further announcements in 2023. Interest revenues were also a strong contributor to revenue performance in the quarter. The rise in the yield curve has been a significant driver in this area. However, the real story is that the upside we're achieving is a result of our success in consolidating our back-office systems and bank accounts. These efforts have enabled us to drive higher investable balances and revenues. And John will talk more about this in his section. Lastly, I want to highlight the contribution to revenues from the processing of employee retention tax credits, or ERTC. We have leveraged our differentiated tax processing capabilities to tap into this program on a very efficient basis. Notably, we converted 55% of each incremental dollar of revenues into adjusted EBITDA in the quarter relative to the prior year's quarter. This high flow-through is a direct result of our enhanced automation within our systems, our improved efficiencies via consolidation, and increased penetration from high margin revenue segments. Now, I will turn to the initiatives we have underway in 2023, and our progress in achieving the milestones on our journey. Let's begin with sales development. Our focus in 2023 is on bundled offerings and new innovative products to drive value and diversify revenue streams. Behind these initiatives we're driving performances by expanding our sales force and supporting our team with more effective marketing and sales lead development. Our bundling success has been particularly strong in HR compliance, where the value of the solutions is resonating with clients. We're also utilizing ERTC to cross-sell compliance and other solutions, which we expect to drive future recurring revenues. Our product initiatives have focused on the introduction of Asure marketplace and enhancements to our tax and treasury platforms. We believe that the Asure marketplace has the potential to transform our business in significant and positive ways. The Marketplace supports a wide range of business-to-business and business-to-consumer applications. Business applications can include income verification, tax preparation, retirement solutions, and earned wage access. We're also developing consumer applications and expect those to be part of the Asure marketplace in the future. Asure marketplace supports Equifax's work numbers solution where we work with Equifax to provide data to help consumers with their mortgage applications, car loans, government benefits, and other end uses. Earlier this year, we also announced our partnership with ZayZoon to allow customers to offer their employees earned wage access. Earned wage access allows employers to pay their employees in real time. This separates or differentiates employers in a competitive labor market and provides flexibility to employees. We believe earned wage access will be an increasingly common benefit moving forward and we're very excited about our work with ZayZoon and the opportunity in this area. Another key initiative we've been working on is our strategic enhancements to the tax platform to capitalize on our unique position in the market. We're consolidating to a single tax engine, introducing a new tax portal, and improving technology to facilitate integrations including ERTC processing. Overall, we anticipate this area of our business to deliver strong double-digit revenue growth in 2023, reflecting the enhancements we have made. Let's now turn to the enterprise efficiency initiatives. The goals of our efficiency plan are to create a leaner and more flexible organization to create a technology foundation to support longer term growth and to reduce costs. In terms of cost savings, our plan anticipates approximately $5 million in annual savings. We expect to implement the plan by year-end 2023 and we are on track to achieve this goal. Cost reductions have already begun from these initiatives. The consolidation of human capital management platforms to reduce duplication of efforts and accelerate product development, the increased use of robotics to enhance efficiency and improve automation, and the standardization of processes and data to give us greater flexibility in operations and reduce costs. Beyond costs, these initiatives are expected to enable us to accelerate product development, enhance margins, and improve quality and service delivery with increased revenue retention. The acceleration of our sales activity and efficiency gains from our enterprise initiatives is a positive start to the year. Based on our performance and our current expectations, we are now introducing revised higher 2023 financial guidance. We are now guiding for revenues of $111 million to $113 million and an adjusted EBITDA of 17% to 18%. Our previous guidance was for revenues of $105 million to $107 million and an adjusted EBITDA margin of 15% to 17%. Our 2023 guidance reflects our organic performance and does not include acquisitions. We're also introducing second quarter 2023 guidance of revenues of $25 million to $26 million, which is approximately 25% higher than the second quarter of 2022, all of which is expected to be organic growth. For adjusted EBITDA, we're guiding to $2.5 million to $3.5 million in the second quarter. As you can see, from our guidance, we expect 2023 will be a strong year for revenues and adjusted EBITDA margins. We're excited about the year ahead and believe our investments and sales successes will drive performance in 2023 and beyond. Macroeconomic complexities continue to be on our radar, but we believe our expanding portfolio of growth solutions, our highly targeted sales initiatives, and the business momentum will continue to drive performance in 2023 and beyond. Now, I would like to hand it off to John to discuss our financial results in more detail. John?
John Pence, CFO
Thanks, Pat. As Randal mentioned at the beginning of this call, several financial figures discussed today are given on a non-GAAP or adjusted basis. You will find a description of these GAAP to non-GAAP reconciliations in the earnings release that was made available earlier today. Reconciliations themselves are also included in our most recent investor presentation posted on the Investor Relations section of our website at investor.asuresoftware.com. Now, on to the first quarter results. Revenues reached $33.1 million in the first quarter, rising by 36% relative to the prior year, all of which was organic. Recurring revenues rose 22% relative to the prior year to $28 million, while non-recurring revenues more than tripled to $5.1 million. Our revenue improvement was broad-based and was made up of similar drivers as the fourth quarter of 2022 revenue growth with notable contributions from our recurring HR compliance business, which has seen success in their differentiated solution as well as being bundled with our ERTC offerings. Increased interest revenues, with average client balances exceeding $220 million for the quarter; and a contribution of revenues from Asure marketplace, which was introduced in the third quarter of 2022. Finally, we also experienced a nice uplift, generating revenues from the processing of earned retention tax credits and you can see that impact on our professional services revenue. It's also important to keep in mind that the first quarter's results are seasonally strong as recurring year-end W-2 ACA revenue is recognized in this period. We do expect our 2023 revenues to show normal seasonal fluctuations. Net income for the quarter was $0.3 million, a $3.4 million improvement over the prior year's loss of $3 million. This is a notable achievement and reflects our scaling of our business as well as our improved operational efficiencies. Gross margins rose by 10 percentage points to 74% in the first quarter relative to the prior year, while non-GAAP gross margins rose 9 percentage points to 78%. This reflects our strong revenue gains, the high margin mix of our growth, and the impact of our standardization and consolidation efforts. EBITDA for the quarter was $6.8 million, a $4.3 million improvement from prior year's quarter of $2.6 million. Adjusted EBITDA rose by $4.8 million relative to the prior year to $8.2 million. Our adjusted EBITDA margin reached 24.8% in the quarter compared with 14% in the prior year. Margin expansion was driven by growing high margin revenue streams, continued progress with our efficiency initiatives, and scale benefits from our growth. These gains more than offset the investments we are making in the expansion of our sales and marketing activities as well as the development of technology to drive revenue success. We continue to believe there's substantial margin upside over the longer term as the business scales. We ended the quarter with cash and cash equivalents of $21.4 million. We also had $35.9 million of debt, which is comprised of $30.5 million drawn under our senior credit facility, with the remainder made up of seller notes from acquisitions. Now in terms of our guidance for the second quarter and the full year 2023, our guidance is offered with a backdrop of continued economic uncertainty and a dynamic labor market. We are raising our full year '23 revenue guidance to a range of $111 million to $113 million and adjusted EBITDA margin to a range of 17% to 18%. We are also introducing guidance for the second quarter revenues of $25 million to $26 million and adjusted EBITDA of $2.5 million to $3.5 million. Our revenue performance was strong in multiple categories in the first quarter with trends building on the momentum we develop in the second half of 2022. These results are encouraging and inform our outlook for 2023. We expect continued positive momentum and bundling success with our HR compliance and tax processing solutions. We believe our multi-tiered HR offerings and automated ERTC filing capabilities are resonating with our small and midsized business customers. Asure marketplace is also expected to be an important driver in 2023. We are growing our list of partners and expect strong momentum from the solution. This is the result of a dedicated effort to enhance our technology and to leverage the data we have in our business. Further projects are anticipated to go live in the coming quarters. Regarding interest income, we are enjoying our best quarter yet with float as our consolidated efforts have enabled us to take full advantage of rising rates. We believe float revenue will be a strong contributor to our revenue performance in 2023. We are also continuing to advance our product development, sales development, and our centralization initiatives as we focus on high margin revenue streams and generating efficiencies and operating savings. In terms of acquisitions, while nothing is imminent, we will continue to be prudent in evaluating targets and will execute if the right opportunity arises to create value for our shareholders.
Patrick Goepel, CEO
Thanks, John. I'd like to conclude by saying we are very pleased with our performance in the first quarter of 2023 with notable successes in the following areas. First, we grew revenues organically by 36% year-over-year in the first quarter, driven by new sales bookings growth of 163% across multiple products. The successes that we had are the result of a lot of hard work over several quarters to enhance our products and focus on our sales efforts in building out our sales team. We're continuing to invest in product and technology to create a foundation for sustainable growth, and we made strides in enhancing our human capital management tax and treasury systems. These enhancements will help bolster our suite of offerings and provide our sales force with increased cross-selling opportunities. We also improved our cost structure and efficiencies by pursuing consolidation and standardization initiatives. As a result, we are on track to deliver annual savings of $5 million annually once the implementation is complete. These efforts enabled us to deliver margin expansion with quarter one adjusted EBITDA margins reaching 25% and non-GAAP gross margins reaching 78%. For 2023, based on our current outlook, we anticipate delivering double-digit organic revenue growth and strong adjusted EBITDA margin gains. Our revised higher revenue guidance anticipates positive momentum with our HR compliance and our tax solutions, reflecting the upgrades we have made at leveraging our prior success in bundling our solutions. We also believe Asure marketplace is a game changer for Asure as it enables us to leverage our technology and data to deliver new high-margin revenue streams. Interest revenues are also anticipated to continue to increase due to the rise in rates and investable balances. As we continue to grow in 2023 and beyond, we expect efficiencies through the scale and consolidation to drive continued margin expansion, ultimately guiding us to sustainable positive net income and free cash flow. In conclusion, we're very excited about the performance of the business and our future direction. We're eager for the quarters and years to come and remain focused on delivering consistent results for our stakeholders.
Operator, Operator
We will now start the question and answer session. Our first question or comment comes from Joshua Reilly from Needham & Company. Mr. Reilly, your line is open.
Joshua Reilly, Analyst
Hey, guys, thanks for taking my questions. Great job on the execution here in the quarter. It's fun to see these other items layering in the model. I guess just on the ERTC, as we see that coming through the rest of the year here, maybe you can help us with how we should think about how the ERTC is going to be layering into Pro services and other revenue? Can you just review, are some customers bringing you large batches at once and then there's a steady state amount after that? Did they bring you or how is that working exactly?
Patrick Goepel, CEO
There's a lot of questions there. Josh, I'll try to address them. As it kind of factors into the balance of the year, we've not taken a ton of extra credit into the balance of the year for ERTC. We think there'll be some, but probably not at the same levels that we've had in Q4 and Q1, at least that's not what we've modeled at this point. And they’re are all different flavors. We have some where we do have these minimum relationships. And then we have some where we're just directly contracting with the customer. So it's all a little bit of all different flavors.
Joshua Reilly, Analyst
Got it. And then follow-up on EBITDA guidance here. It implies pretty healthy margins, which is great to see the nice uplift here. Can you just help us parse out how much of the uplift specifically this quarter in the EBITDA margin guidance for the year is from higher interest income assumptions in the model versus other sources of margin accretive revenue like ERTC and marketplace entering the model.
John Pence, CFO
I’ll give it a try, and Pat can share his thoughts. In terms of our model, we've aimed to show in both Q4 and Q1 that as we add new revenues to the top line, we believe we have a very efficient operating model. It’s like the FIFO concept; I can’t pinpoint which specific dollar adds to the incremental dollar for the margin. It’s a mix of marketplace contributions and high-margin offerings. ERTC has a high margin, and HR compliance is also quite profitable. Essentially, we are incorporating various revenue streams that all have high margins. I don’t believe the increase in our guidance and the subsequent performance can be attributed to just one revenue stream.
Patrick Goepel, CEO
Yes, I agree with John. Looking at the first quarter, we recorded around $5 million in W-2s compared to $4.2 million last year. This increase is expected to contribute to a high margin for the quarter. Regarding ERTC and one-time revenues from professional services, we typically anticipate around $1.5 million from ongoing operations, with the remainder coming from ERTC. We believe our guidance for Q2 and the rest of the year is appropriate based on the visibility we have, especially considering the operational and gross margin improvements we've achieved over the past couple of years. We see potential for upside based on volume if it materializes, but for now, we believe our guidance is fitting, and we're pleased to have raised our guidance for two consecutive quarters.
Joshua Reilly, Analyst
Got it. Thanks, guys. Fun to see the strong results.
Patrick Goepel, CEO
Thanks, Josh.
John Pence, CFO
Thanks, Josh.
Patrick Goepel, CEO
Appreciate it.
Operator, Operator
Thank you. Our next question or comment comes from the line of Bryan Bergin from Cowen and Company. Mr. Bergin, your line is now open.
Bryan Bergin, Analyst
Hey, guys, good afternoon. Thanks for taking the question. I guess just wanted to start off at a high level on the demand environment. So you clearly carried strong momentum here. But would value perspective on any changes at all versus let's say 3 months ago, just given the U.S. banking volatility since we last spoke. So any nuances in client behavior that's changed, and then anything you can comment on through April?
Patrick Goepel, CEO
Yes, we haven't seen it. I mean, I think volume has been really positive in the small business marketplace. I think there's trepidation in, obviously, the regional banks and some of that stuff. But as far as just creating buying behavior, we just haven't seen it right now. Our clients still can't find enough employees. Maybe when they would look for five, they're looking for three, but they're still looking for employees. I think the trepidation is more what will come and if two or three regional banks is in, or is it going to be eight more down the horizon, I think those are the questions that they have. But as far as running their business, growing their business, we haven't seen a great deal of behavior change lately.
John Pence, CFO
The only thing I would add, potentially is you’re reading the same stuff that we are. I think, just what goes on in Congress with the debt ceiling, and do they, in fact, create a recession by their behavior, I think that's the other thing that's kind of going on in the background. But again, to Pat's point, I think we've seen it manifest in our results yet. But I do think that's at least what everybody is talking about when we talk to people.
Bryan Bergin, Analyst
Okay, okay, understood. And then pivoting to margin, maybe margin progression, so can you just talk about your investment initiatives as you're going to progress through the year? Just looking at the EBITDA look, EBITDA margin 2Q and then the implied second at the EBITDA margin, any key considerations we should be mindful of whether it's revenue mix or timing of investments as you move through the balance of the year?
Patrick Goepel, CEO
No, I think John can answer as well. At a macro level, we're investing in products and salespeople. We've made some solid investments so far and will continue to invest in areas related to growth drivers, HR compliance, the marketplace, tax and ERTC, and float, in addition to expanding our offerings of products and services. We will stick with that approach. We believe we have a good understanding of not only revenue but also margin. We will keep making investments to grow the business.
John Pence, CFO
I believe that the current employment environment has worked in our favor. We’ve had the opportunity to add some personnel to both the operational and sales teams. Although we hadn’t planned for these additions this year, we've managed to bring them on board sooner than expected. I’m actually optimistic that these new hires will start delivering results sooner than anticipated, which ties back to Pat’s earlier comments.
Bryan Bergin, Analyst
Does that go for sales as well, or was that mostly dev?
Patrick Goepel, CEO
We have some good sales hires as well, of course.
Bryan Bergin, Analyst
Okay, great. Thank you very much.
Patrick Goepel, CEO
Thank you.
Operator, Operator
Thank you. Our next question or comment comes from the line of Eric Martinuzzi from Lake Street Capital Markets. Mr. Martinuzzi, your line is open.
Eric Martinuzzi, Analyst
Yes, my congrats as well on the quarter and the outlook. Just curious about regarding the cost structure. This $5 million of annualized savings by the end of the year, are there people-related cuts that are coming here? Is this all on the back of integrated systems and the elimination of maybe some consultants? Where's that savings coming from?
John Pence, CFO
Yes, that's accurate. It's a combination of factors. This isn't a sudden change; we've been working on this for the last couple of years to make our business more standardized and national. We're just beginning to see some of the benefits, both in terms of our systems and operations. I believe we're starting to see the results of our efforts. Additionally, we're reinvesting those funds into our products and sales efforts, which we hope will build momentum for us moving forward.
Patrick Goepel, CEO
Eric, I'll provide an example that relates to your question to some extent. We have spent time and effort on developing an internal treasury system, which allowed us to reduce our bank accounts from 125 to fewer than 20. This system change helped us save on bank fees, totaling around $800,000. Additionally, we implemented a more automated check reconciliation process, which enabled us to accomplish more with fewer resources by simplifying the process and increasing automation. We also managed to quickly identify issues with some accounts at regional banks without needing much manual intervention. This is just one instance among several significant projects where we not only achieved cost savings but also, as John mentioned, reinvested those savings into development and sales resources.
Eric Martinuzzi, Analyst
Understand. Thanks for taking my question.
Patrick Goepel, CEO
Thanks, Eric.
Operator, Operator
Thank you. Our next question or comment comes from the line of Jeff Van Rhee from Craig-Hallum Capital Group. Mr. Van Rhee, your line is open.
Jeff Van Rhee, Analyst
Great. Thanks. Thanks for taking the question, guys. Congrats. A number for me. First, obviously, Pat, you've done a lot on the product side, you've had a lot of capabilities; I think the pace of innovation is probably the highest I've seen. Have you seen specifically as it relates to new customer capture changes in win rates to the degree you can track them and measure them?
Patrick Goepel, CEO
We have definitely noticed a significant increase in volume; our pipeline is very strong. The pace of change is evident in nearly every area of our business. We've invested in software tools for marketing, and marketing lead sources have increased by over 40%. Currently, marketing leads account for a larger portion of our new sales, up from about 18% a year ago. This focus is continuing to yield results. Our win rates are increasing, especially when we lead with ERTC or HR compliance, allowing us to capture business owners rather than just functional leaders. These factors contribute to our success. Additionally, as we enhance our user interface and modernize our system, our win rates continue to rise. We believe we are just beginning this journey, and we're optimistic about achieving breakthrough results throughout this year and into the next. This is an ongoing process involving small improvements across all areas, and we are very pleased with our current position.
Jeff Van Rhee, Analyst
It makes sense. You're clearly experiencing good cross-selling, upselling, and likely an increase in the number of larger deals. What about the processing of tax ID numbers on a weekly or monthly basis? What kind of year-over-year growth have you seen recently, and how does that compare to three or six months ago?
Patrick Goepel, CEO
I would say we generated $4.2 million in W-2 revenue last year and approached $5 million this year. This indicates that we are earning more revenue from W-2s, which serves as a good indicator of the number of payrolls we manage. Additionally, our HR compliance services have more than doubled. This shows that not only are more companies using our payroll services, but there has also been a significant increase in the use of HR compliance services, despite our still relatively low market penetration. Our focus is on expanding the marketplace, increasing the number of companies on our platform, and fostering strong cross-sell opportunities that encourage them to utilize a broader range of our products and services.
Jeff Van Rhee, Analyst
Okay. Just two other quick ones for me then just sales headcount now and goals maybe by year-end. And then the last would be, Pat, you mentioned some consumer apps that you're thinking of with respect to the marketplace. I don't know if you want to tip your hand, but even giving a broader sense of what might be to come there would be interesting.
Patrick Goepel, CEO
Yes, I think, first of all, sales headcount, I think March 31, we're at 94; we will be over 100 to here in the second quarter. We'll give you a kind of a proxy in the third and fourth quarter, but I would assume we'll be in the low hundreds with the rest of the year. As far as consumer apps, et cetera, I think one of the areas where we roll out the ZayZoon relationship, which is earned wage access. Obviously, our employees now have access, if they want to get paid on an off-cycle payment to 12 times a year to deal with rent, they have the opportunity to do that. And they can do that with a click of a button. That's an example of it. I think you'll see a more formal rollout of the employee and employer portal that really addresses that. But that's probably the second half of the year. So I'll raise that in one of the future earnings calls. But that's kind of a ticket to where we're going.
Jeff Van Rhee, Analyst
Fair enough. Real nice work. Thanks.
Patrick Goepel, CEO
Thank you. Appreciate it.
Operator, Operator
Thank you. Our next question or comment comes from the line of Greg Gibas with Northland Capital Securities. Mr. Gibas, your line is open.
Greg Gibas, Analyst
Great, thank you. Good afternoon, Pat and John. Congrats on the quarter. Wondering what do you expect maybe the marketplace to contribute to the top line this year as a percentage of the total?
Patrick Goepel, CEO
Yes, Greg, first of all, welcome to coverage universe. We appreciate you, Northland covering us, and Northland is a great firm. So thank you. What I would say in the marketplace, we announced a couple of press releases here with Harbor Compliance and ZayZoon. I think the rollout of ZayZoon is just starting to happen. I think you'll see more revenue in the back half of the year. A rollout of the marketplace is company-specific; it's a technical interface as well as in some areas, like ZayZoon and consumer adoption. So it takes some time. I think it'll be more meaningful in '24, but it will continue to be revenue in 2023. I think you'll see announcements at the pace of about two a quarter throughout 2023, and more to come in that area. But the marketplace is strong. We see some really nice opportunities. It does take a while to set them off, but once you do, you have some meaningful revenue. So we're excited about the model, and you'll see some activity and we'll telegraph that. And then over time, you'll see more revenue; and we'll provide updates quarterly on that.
Greg Gibas, Analyst
Okay, sounds good. I wanted to follow up on kind of the increased margins. Great to see the expectations for the year going up. Wondering, how much of that improvement is a result of increased scale from revenue growth versus maybe the improving operating efficiencies you've been talking about?
John Pence, CFO
Yes, I think it's important to address this again. It's a combination of factors. The revenues we're incrementally adding are very high margin and show a strong fall through. We're working on reducing costs and reallocating those savings into research and development and sales. At the same time, we're adding revenue streams to the top line that also exhibit a healthy fall through. Therefore, it's both of these elements working together.
Patrick Goepel, CEO
Yes, and the one thing I would add is, I think we've talked about this before, but it's a high fixed cost business with the platform investments. And, for example, you have a tax change, the programming and the tax change, whether you have one client or 100,000 clients, it's the same amount of work. We feel like we've gotten through the high fixed costs, and we're getting into a kind of rhythm of some incremental fall through, and we're pleased with that fall through. And as we get scale, the benefits of scale if we do this right, every piece of work becomes a little bit cheaper at scale than the previous, and we believe we're on that track. And as John said, the mix has been favorable as well for us where we've been able to layer in higher margin products. So really excited about the opportunity and where we could go; we're just getting started, and to be able to raise margin again, it's very rewarding for us.
Greg Gibas, Analyst
Got it. Helpful. I guess the last one for me just relating to the recurring revenue growth. Nice to see up 22% year-over-year. I notice that was a little bit lower than the 25% growth you saw last quarter. Just wondering if you can give a sense of maybe what that driver was?
Patrick Goepel, CEO
Yes, I don't know, quarter-over-quarter. I mean, as sales have been very strong, bookings have been strong, retention was a little bit to add. I don't think there was anything super notable. I think for us, we were happy with the results and happy with the growth; maybe there was a little anomaly in the compare, but I don't think there was anything that stood out that we were concerned about.
Greg Gibas, Analyst
Okay, fair enough. Appreciate it, guys. Thanks.
Patrick Goepel, CEO
Yes, thanks, Greg. Welcome.
Operator, Operator
Thank you. Our next question or comment comes from Rich Baldry from ROTH MKM. Mr. Baldry, your line is open.
Rich Baldry, Analyst
Thanks. Can you maybe talk about the growth in the new sales bookings? I think you said it was 163% on top of a pretty tough compare year-over-year. How do you feel about your ability to keep growing that? Is that an area where maybe you're understaffed or stressed? And maybe you can talk about sales tenure in that area. Is that one of the things that's helping you? Sort of trying to get a gauge for how much capacity you have to keep that up. And then maybe tag that with, how broad you saw that new sales bookings was in the concentrator on verticals, or geographies or in the enterprise partner side? Or do you feel it was pretty broad-based? Thanks.
Patrick Goepel, CEO
Yes, thanks, Rich. Thanks for the thoughtful question. First of all, I think, from a numbers game, we're going to continue to invest in sales from the numbers. But what I'm most pleased with from the sales perspective is our marketing programs are really starting to pay off. Our cadence is really good, our pipelines growing. And then what I would say the investment we made really since December of '19, our turnover has been low, people are successful; they're achieving. We just came off our Summit Awards meeting, and people are starting to talk about that they're going to reach the next Summit Awards next year, potentially in early second half of the year. So people are winning, they're excited, they're winning, and they have visibility. And as you know from covering the space, years two and years three, you get exponential productivity improvement because once you understand the space, you're able to really drive results. And I would say it's been a broad swath of sales reps that have led to this performance. Really good marketing, really good bundling activity, and excellent leadership. The combination of Eyal Goldstein, our President and Chief Revenue Officer; and Mike Vannoy, our Marketing Lead. They've really got a nice rhythm going, the people are excited. And by the way, the next level management is recruiting really good people. They're seeing the results. They're seeing success. They have bigger territories than most of their competitors. They have bigger bundling opportunities than most of their competitors, and people are gravitating where they can win. So I think series of keeping our people with us engaged. They're getting good leadership. They're getting the good bundles; they're getting good tools to be successful. Pipelines are strong, and we're having success. So we don't want to mess with, they're happy. We want them to continue to drive excellent results, and we see that for the foreseeable future.
Rich Baldry, Analyst
Thanks. And last maybe, when you look into the M&A sort of pipeline, do you feel like there's been some softening of expectations from the other side? And then maybe contrast that to your internal efficiencies are improving. So does that lower the hurdle to what you could acquire because you can make it more accretive, quicker, sort of faster than you might have thought so previously? Thanks.
Patrick Goepel, CEO
Yes. So first of all, I think there's no doubt that I think there is a little bit of a softening of expectations. We've been really heads down on growing our organic revenue and getting the operational efficiencies as well as the growth engine in place. We will turn to the second half of '23 and '24 to look at acquisitions. There's nothing imminent here because we've been really focused on eliminating distractions and just growing our business and growing our revenue. I do think as we look to pop out and we've been engaged in some conversations, I do think our expectations have changed a bit. And then as far as the integration of any potential acquisitions, we are really confident that we can get those integrated in a very short order, and that's all really due to some of the system changes we made, some of the operational efficiencies. And so our people are ready to digest business when the time is right. I think the market is starting to come to us as far as future targets, but that will be a second half really 2024 conversation as opposed to right now. But when the time is right, we are definitely going to strike, and we do think expectations are starting to come in a bit.
Rich Baldry, Analyst
Thanks. Congrats on another great quarter, Pat.
Patrick Goepel, CEO
Hey, Rich, thank you. Appreciate it.
Operator, Operator
Thank you. Our next question or comment comes from the line of Vincent Colicchio from Barrington Research. Mr. Colicchio, your line is open.
Vincent Colicchio, Analyst
Yes, Pat, congrats on the quarter. Just a couple for me; most of mine were asked. Curious about the bookings growth breakdown between new and existing clients?
Patrick Goepel, CEO
Yes, I think we're about 55% to 60% existing clients, 40 to 45 new business. Maybe it ticks up a little bit on existing clients, but pretty good overall, and we are pleased with the mix.
Vincent Colicchio, Analyst
And you had mentioned a couple of times that you're happy with the marketing programs. I thought maybe you can give us more color in terms of which programs are working best.
Patrick Goepel, CEO
Yes, we have implemented sales tools like ZoomInfo, which has been very successful. The tools are in place, and Mike Vannoy's team does an excellent job with thought leadership. Mary Simmons in the HR compliance area also effectively explains what it means to be compliant in HR. We have strong campaigns and maintain a good routine of daily meetings focused on sales and marketing, discussing cadence, messaging, and scripts for going to market. Additionally, we have rolled out the Service Cloud of Salesforce throughout the organization, ensuring everyone uses a common phone system, chat system, service cloud, and Salesforce. The tools are established, and both leaders and individual contributors are executing effectively. Our focus has been clear, and success generates more success. With a strong performance, our compensation plan offers significant earning potential, and we've shifted to quarterly attainment, allowing our team to see progress in a short time frame, which aligns with the yearly quarters. Eyal Goldstein has put this program together, and he has done an impressive job.
Vincent Colicchio, Analyst
And the last one for me. I missed what you said earlier in response to an earlier question about ERTC. What is your growth expectation for the balance of the year?
John Pence, CFO
We don't have a lot. Obviously, we have a little bit played in for the balance of the year, but not having it growing off of this quarter or the fourth quarter. Obviously, when we put out our guidance at the end of Q4 for Q1, we exceeded it in terms of what our expectations were, but we've played in a ton of growth relative to this quarter for the balance of the year on ERTC specifically.
Vincent Colicchio, Analyst
Okay. Thank you.
Patrick Goepel, CEO
Vince, thank you. Appreciate it.
Operator, Operator
Thank you. I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks.
Patrick Goepel, CEO
I want to thank everyone for joining the call today, whether you are an investor, analyst, client, or employee. Asure has been on this journey for a long time, and we are truly excited about the momentum we are experiencing. We are making the right moves and starting to see the benefits, but I believe the best phase for Asure Software is still ahead. This is thanks to the commitment of those who have been on this journey and contributed their hard work. I genuinely appreciate all of you and look forward to seeing you at one of our conferences in the second quarter or during our second quarter earnings call. Now, I will turn the call back to the operator for the question-and-answer session.
John Pence, CFO
Thank you.
Operator, Operator
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.