Pat Goepel: Yes, so you’re talking about this year ’23?
Eric Martinuzzi: Yes.
Pat Goepel: Yes, I’m going from memory. I can figure out my notes here, but it was roughly, I believe, $5 million in the first quarter and $7 million in the second quarter and then about $5 million in this quarter. So, that’s a total of $17 million. So, I’m testing my memory.
Pat Goepel: And a lot of the one-time revenue or professional services revenue in Q1 and Q2 a vast majority of it was ERTC.
Eric Martinuzzi: Okay. So, was there any recurring revenue in Q1 and Q2? I know there was in Q4, but didn’t you —
John Pence: I think there might have been a couple hundred grand in Q1. But, yes, it was — we had a contract that we changed early in Q1 of this year that was going to look like a recurring contract, and then it morphed as we modified it.
Eric Martinuzzi: Got you.
Pat Goepel: So, the real — the big quarter that we had, that the ERTC was in the fourth quarter, reoccurring to the tune of about $2 million. As we changed that contract, there might have been a couple hundred thousand that bled into Q1, but the vast majority of ERTC is in the professional services line.
Eric Martinuzzi: Okay. And, John, you said $5 million for Q3, but I had $3.7 million from your prepared remarks. Is that — did I have that —
John Pence: That’s the increase year-over-year, I believe. So, I think we did $1.4 in Q3 of last year. So, the $3.7 is just an increment.
Eric Martinuzzi: Okay. Got you.
John Pence: 5.5, absolutely.
Eric Martinuzzi: Okay. And then, last question. The sales headcount, I know you’re targeting 120 by year-end. Where are we now?
Pat Goepel: About 110 or 112. Let’s say we have commitments to 112, I think, as of today. So, that’s where we’re at.
Eric Martinuzzi: Got it. Thanks for taking my questions.
Pat Goepel: Thanks. I appreciate it.
Operator: The next question is from the line of Vincent Colicchio with Barrington Research. Please proceed with your questions.
Vincent Colicchio: Yes, Pat, I’m curious, did direct sales productivity meet your expectations in the quarter?
Pat Goepel: I would say slightly behind, but all-in-all, it was a good quarter. Obviously, when the IRS paused ERTC on September 14, it caused a little bit of pivoting and just understanding and sales cycle disruption. By the same token, we were already well on our way to pivoting and working through the Secure 2.0. So, maybe we lost a couple of weeks in that area, but all-in-all, we were very pleased with the quarter. We’ve been very pleased with the sales staff and the organization we think that we have the right leaders and the right people in play, showing the — pretty excited about the pipeline going into the Q4. So, maybe uplift that we had some change management, but all-in-all, I was very pleased.
Vincent Colicchio: And any changes in the competitive environment, particularly interested in pricing?
Pat Goepel: No, I would tell you, first of all, I think we’re focused on ARR and repetitive revenue. Getting a customer is tough. We have good companies that we compete with, and we get after it. I’m very pleased in how we position and how we get clients. I think we’re winning our share, which is important. And we’re getting to clients with value propositions that are probably more valuable than our competitors, and broader in some respects, especially around compliance and legislation, so I feel really good about where we are in general. It’s a tough sales environment. People, depending where — if you’re bullish, or not, are you seeing a recession and all that kind of stuff, but we block out the noise and we have a value proposition that we feel is very, very robust, and we’re getting our share of business. And I get excited and energized talking to our salespeople because they’re successful, and they’re going to stay that way.
Vincent Colicchio: Thanks, Pat.
Pat Goepel: Thanks, Vince.
Operator: Our next question is from the line of Greg Gibas with Northland Securities. Please receive your questions.
Greg Gibas: Hey, Pat and John. Thanks for taking the questions. I wanted to follow up on assumptions with occurring versus other revenue in 2024 guidance, and maybe what could ERTC contribute next year if not excluded? Like how much did you take out from guidance reflecting that uncertainty?
John Pence: So, I think the majority of that guidance for ’24 is recurring. We’ve not forecasted an inordinate amount of non-recurring. How much ERTC could it be? That’s kind of speculative. We were running a pretty nice clip, as you can tell, historically. I don’t know what was going to keep at that clip going into ’24. So, I think if you were going to ask me that question maybe two or three months ago, I probably would have said maybe $10 million or so for the year. I don’t know what that looks like now, just based on all the uncertainty. Again, that’s why we didn’t put it in the guidance. But to answer your first question, the current guide, the 125, the 129, assumes almost all of that being recurring.
Pat Goepel: Yes, and Greg, just if you look through even our past numbers, less ERTC, we’re somewhere around 1.5 million professional services or so, if that. So, and that’s a quarter. So, let’s say if you want to include that or straight line it as a number that’s 4 million to 6 million maybe of professional services. Mentally, I was coming into this year over the summer saying, I had to replace 8 million to 10 million of ERTC. the program is going to change a bit. I think it’s going to be more stringent, which is actually good, and we support that. Because I think there’ll be a flight to quality around vendors, et cetera. But that’s what I had kind of thinking that we would replace. So, if that’s kind of mentally where our head’s at, and then what is to come?
We hopefully have taken a conservative stance, and as we get revenue, great. But by the same token, we’ve got to run our business in a way that we can optimize and get the best value proposition to our clients, and this is what we’re going to do.
