Asure Software Inc

and feel good about the partnership. Venture is a private company. Actually, it's funny. They're a little bit like us in the sense that they serve about 2.3 million employees. They have a reseller network similar to us, and they have gone live with us here and will continue to grow throughout. They have an ASO business, which is, you know, kind of a payroll HR business in addition to a PEO business. And so, you know, we're excited with the opportunity to serve them and it's gone very, very well. And then, you know, if you think about payroll companies, a lot of them will contract with other tax filing companies. We're unique in the sense that we're a payroll company that does tax filing, but we also do tax filing for 27 other payroll companies. I think you'll see us lean into that model more and more. We're talking to some pretty good-sized payroll companies where they want somebody that knows payroll, and they don't necessarily want to compete with them. So if you think about where we are in the mid-market or the enterprise space, or even the PEO space where the PEO we don't play, other companies like that are wanting to talk to us about back-end tax filing because we know what good looks like with the 14,000 U.S. agencies that are locally that you have to pay and remit your funds and you have to do your filings. The 50 states, you know, we have a CAF connection into the IRS. And so we're unique in that aspect that we built this out and we see this as tremendous opportunity going forward.

Yeah, and I would add, I mean, Pat talked a little bit about the customer lifecycle management as an example. That's a tool that we built for our own internal use. But the way our dev team built it, it's actually a product that can be sold to other customers. They need the same solution if they're going to service their customers. So the way we've architected, and we've done the same thing on some refactoring of our calc engine, we've just created a lot of products that serve us and our customers, but also kind of allow for an extension to an embedded strategy, right? So say, for example, I'm going to be in a vertical and I want to be the be-all, end-all ERP solution for our plumbers. You know, we can incrementally add functionality that they don't need to go do in our area of expertise and kind of be behind the scenes, almost like You know, I think about it like, you know, the source of truth in sales tax is Avalara. I mean, I think we're trying to create solutions to where we can be invisible and be in a lot of different situations, and you won't necessarily know it's us in the background. That's helpful. Thanks, Pat. Thanks, John.

Thank you.

Our next question is from Greg Gibbous with Northland Securities.

Hey, good afternoon, Pat, John. Thanks for taking the questions. You know, kind of from a high level, wanted to just see if you could discuss or I guess go over the primary drivers of your expectations for accelerated year-over-year revenue growth in the back half of the year. You know, is it primarily a patch rate and cross-sell driven? I know that there's some impact from ERQC in the first half, but what kind of gives you confidence in the full year outlook?

Yeah, thanks, Greg. You know, first of all, ERTC, we talked about the cohort that was attached to human resource compliance consulting. You know, that's definitely going to grow in the second half. We see that already. The contracted backlog has been growing. And, you know, the second half story, this partner we talked about with accounting, you This quarter, you know, we'll see bigger deals in the second half of the year. You know, where we are on, you know, first of all, our cross-sell attach rates, our attach rates are going up. I gave you the example around, you know, kind of broker record as well as HRC and, you know, 401k attach rates. So some of those in the sales team's momentum, We feel pretty strong about that. So it's a combination of the sales team ramping in a big way, the backlog hitting the beach in the second half of the year. Some of our partners, John outlined some of the embedded strategy we feel pretty good about. you know, or just a reminder that none of that includes acquisitions, which we just got a facility for. So I think you'll see some pretty good movement and, you know, we feel good about what we're doing. Great.

That's very helpful. And if I could follow up, as it relates to the hiring of additional staff and the other investments in infrastructure that you mentioned to support these enterprise deals, how much, I guess, of that of these increased costs are reflected in Q1 versus anything that is maybe to come or isn't fully reflected in financials yet?

Yeah, so I think, again, we mentioned this last call. We probably have an inflection point in the first quarter of costs. We're going to try to run a business with roughly the same headcount we entered the year with. And that's the biggest driver of our cost structure, right? It's our employees and those employee dollars. So I think, you know, we had a little bit of a spike in the first quarter. We think it'll kind of get normalized back down to that kind of headcount range for the balance of the year. And so that gives us, again, relatively flat to down cost structure for the back half of the year with increasing revenues. So that's the impetus for the flow through. So if the revenues come, we think the cost structure will produce those kind of EBITDA margins in the back half.

And if you think about, you know, kind of, we telegraph some of these deals that are relatively new to us, you know, whether they're acquisitions around broker record or recruiting, or they're, you know, some of the tax deals that we talked about, you don't bring some of the customers that we're talking about going live, you know, with new people. So what you want to do is a higher ahead of the revenue. We've done that over the second half of the year in the first quarter. Now that we have those people in place, now we have the opportunity to position and grow with scale. And as the revenue continues to grow, we can grow without adding headcount because those areas of growth, areas of the business that we didn't have headcount in place, we now have. So I think you'll see a lot of expansion in the model. This is what we've telegraphed all along. You know, our long-term plan, or mid-term plan, 180 to 200 million with 30% plus margins on how we define it as adjusted EBITDA. You know, we're right on track to doing that. This would be a good proof point by the end of the year. Got it. Very helpful. Thank you.

Thank you. Our next question is from Vincent Colicchio with Barrington Research.

Yeah, Pat, can you provide more color on the Canada tax product? For example, is there an early pipeline? What does competition look like as well?

Yeah, actually, it's interesting, Vince. I appreciate the question. Already, first of all, some customers that we had come in from Strata and Venture, they had Canadian tax. So if you think of Strata in the case, those are enterprise customers. You know, they had a North America footprint. We could provide historically the US taxes. Now we can invite Canada. And then the venture PEO group, you know, they had a Canada PEO and, you know, we have turned on that capability for them as well and their clients. And then some of our clients, you know, have a lot of them are very close to cross-border. Pretty good opportunity there. And what I love about it, too, is we have kind of a look and feel. The design with the team around Canada, it's a very modern look and feel. It's one that will continue to grow out throughout the organization. So pretty strong pipeline. We've already had some inquiries on it from just we haven't ventured into Canada yet compared compared to where we were and already people are asking us and then, you know, we already have a ready-made client base that is turning this on. So, really pleased with development organization and the capability here.

And then lastly, any updates on the competitive environment?

No, I think, you know, what I would say is, you know, I think from what I saw, and have been seeing, I think our new engagements were really strong in the first quarter. Our pipeline, our close rate was really good. Sales cycles maybe five to seven days elongated, which in each segment has different kind of avenues. The enterprise space we watch closely just based on our tax deals and where we're at there. Interest level is very, very high. You know, I do monitor it just based on some of the, you know, volatility of situation. But from, you know, kind of our bread and butter marketplace, there's no change in the competitive environment. Thanks, Pat. Thank you, Vince.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Pat Goodbull for closing comments.

Yeah, well, we got another quarter in the books. Really, you know, appreciate you guys listening in on the journey. You know, we do think it's a journey that has a lot of upside and a lot of, you know, the heights of which we haven't reached yet, but we will. And it's kind of a fun story for me to be involved with as we continue to make progress. And we really appreciate your interest along the way and your investment along the way. So until next time, I know Patrick mentioned we have some pretty good investor outreach here over the next quarter and look forward to talking to you soon.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.