Terrell Tillman: Alright. Thank you.
Raul Villar: Thank you.
Adam Ante: Thanks Terrell.
Operator: Thank you. Our next question is from Bryan Bergin with TD Cowen. Please go ahead.
Unidentified Analyst: Hi. This is actually Jared on for Bryan tonight. In terms of the demand environment, we heard your commentary about it being solid, but would you say there has been any change relative to last quarter? And then how would you characterize the current demand environment relative to pre-pandemic?
Raul Villar: Yes. We haven’t seen any changes. It’s been really consistent – what I would tell you is that, we are seeing really strong top-of-the-funnel performance, strong impression, visitors to paycor.com, first-time appointments and win rates are consistent. So, we feel really good about where we are at the top of the funnel. And so the demand environment is strong and holding up.
Unidentified Analyst: Okay. Great. And then in terms of generative AI, can you discuss the level of client interest in your Gen AI functionality? And how we should think about the potential revenue opportunity there?
Adam Ante: Yes. I think that it’s still a little early to call the revenue opportunities on generative AI. I think there is a couple of areas that we are using it in the system like job description generator, for example, we were able to roll out pretty quickly. And we have seen a lot of interest, rapid usage, but it’s not something that we are necessarily thinking about charging explicitly for. I mean we are using those underlying GPT models and Azure, and we are seeing a lot of success. We can roll out really quickly. I think there is other areas, though like with our recent analytics capabilities that we are going to launch where we are seeing pretty strong request from a customer perspective, and there will be some opportunity to potentially charge an increased PEPM for that.
So, I think it’s going to be a blend. And I think it’s still a little early to call, but I think that, that should take shape maybe over the next couple of quarters, and we will have a little bit better view going into the back half of the year. Thanks Jared.
Unidentified Analyst: Thank you.
Operator: Thank you. Our next question is from Scott Berg with Needham & Company. Please go ahead.
Scott Berg: Hi everyone. Nice quarter. Thanks for taking my questions. Raul, I have kind of maybe – or maybe it’s a better question for Adam, but I have kind of an unusual question is, as I look at your income statement, your recurring revenue line item, the growth rate tends to bounce around more than other public vendors in the space and more that I have seen historically. Any reason why that is in a particular quarter over time? I didn’t know if there are some different dynamics going on in the business that would be helpful to understand. But the question I have received from investors more than a few times recently.
Adam Ante: Yes. Hi Scott, I mean I think over the last, say 4 years, we have really migrated to a PEPM model, the majority of our business on a PEPM model, and we have really driven more consistency in the ongoing growth rates and the recurring growth rates. And it’s really been about addition of new business for us. Also as we have rolled out new services, there may have been some lumpiness and whatnot and then ERC over the last couple of years coming in. But nothing like particular, and I can’t speak to everybody else’s business model per se, but we have been really consistent in our approach over the last 4 years building to the model that we have now, and we have been able to be fairly consistent with that.
Scott Berg: Got it. Helpful. And then from a follow-up question perspective, your effective PEPM charge kind of trended down from 15% a couple of quarters ago, almost 6% in the current quarter. How is the cross-sell cadence today maybe versus earlier last year? Is it similar than what you have seen from expansion opportunities or maybe its new customers buying the same amount. How should we think about that metric and how it’s trending over the last couple of months?
Adam Ante: Yes. The cross-sell contribution to the PEPM growth rate has been really consistent, actually. It tends in that sort of 2 points to 3 points of additional growth from cross-sell. And this year as we have gone from – really what I would say is a more normal rate is in that sort of 8% to 9% range. This quarter, we are in that 6% to – just over 6% growth range and really driven by the two dynamics of the embedded channel, growing a point and then also our enterprise channel grew or Enterprise segment grew a little bit faster. That’s customers over 1,000. And so both of those really accounted for the difference really between that 8 points to 9 points of growth and 6 points, 6.5 points of growth that we are seeing this quarter.
But the cross-sell motion has been really consistent. If anything, there is I think, continued opportunity, especially as we have added a lot of great products and expanded the suite over the last couple of years, there continues to be a lot of whitespace there.
Scott Berg: Understood. Thank you. Very helpful.
Adam Ante: Thanks Scott.
Operator: Thank you. Our next question is from the line of Brian Peterson with Raymond James. Please go ahead.
Brian Peterson: Thanks for taking my question and congrats on the strong quarter. So, I wanted to follow-up on the embedded opportunity. I just want to understand how quickly can those relationships ramp, both from a technology perspective and working with a potential partner? And then is there a go-to-market motion? I am just curious how to think about that and when we should start to see that ramp up?
Adam Ante: Yes. Those relationships take a while. I mean from the time you initiate the first conversation until you sign a new business or you are building over – or migrating a portfolio, I mean it can take well over a year. And that cycle is quite a bit longer, and you are navigating a more bespoke service with the partner itself, right? We want to create great technology and integrations that enable a better experience for their customers. And it’s all about setting that up. It’s about setting up the go-to-market capability where we support them, especially early on so that they can get up and running. And then once they board, whether that’s through their portfolio or just signing new business, then it has the chance and the ability to ramp rather quickly. But it’s a long upfront motion from sale to close.
Raul Villar: Yes. Brian, there are two different types of partners, right. There is partners with an existing portfolio. And they tend to take longer because they may already have a solution, and we have to integrate and ensure that we meet all the feature functionality and needs of the existing platform in the formats that they are accustomed to. Other software partners that don’t currently have an HCM solution or a limited HCM solution are easier to onboard and you start selling new. So, you have to – it’s more of a go-to-market motion every week versus converting a large base. So, there is two different opportunities. We started with the latter with two larger installed bases. And we are – our go-to-market motion has resources targeting both today.
