Paycom Software Inc (PAYC) — Q3 2019 Earnings Call Transcript

Thank you and welcome to Paycom's third quarter 2019 earnings conference call. Certain statements made during the conference call that are not historical facts, including those related to our future plans, objectives, and expected performance, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent our outlook only as of the date of this conference call. While we believe any forward-looking statements made in this presentation are reasonable, actual results could differ materially because the statements are based on our current expectations and subject to risks and uncertainties. These risks and uncertainties are discussed in our filings with the SEC, including our most recent Annual Report on Form 10-K and our most recent Quarterly Report on Form 10-Q. You should refer to and consider these factors when relying on such forward-looking information. Any forward-looking statements made speak only as of the date on which it is made, and we do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. Also, during the course of today's call, we will refer to certain non-GAAP financial measures, including adjusted EBITDA, non-GAAP net income, adjusted gross profit, adjusted gross margin, and certain adjusted expenses. We use these non-GAAP financial measures to review and assess our performance and for planning purposes. A reconciliation schedule showing GAAP versus non-GAAP results is included in the press release that we issued after the close of the market today and is available on our website at investors.paycom.com. I will now turn the call over to Chad Richison, Paycom's President and Chief Executive Officer.

Thanks, James, and thank you to everyone joining our call today. I'll start by reviewing another strong quarter of robust profitable growth and provide you some comments on employee usage, Direct Data Exchange and Ask Here. I'll finish by discussing the scale of the human capital management, or HCM industry and the strength of our position within it. Then Craig will review our financials and outlook before taking your questions. Third quarter results were strong driven by robust new business adds and our durable high-margin recurring revenue business. Q3 revenue was approximately $175 million, representing growth of 31% over the prior year period. Adjusted EBITDA of $66.6 million in Q3, represented a year-over-year margin expansion of roughly 1 percentage point to 38%. With these strong results and our expectations for continued strength in Q4, we are raising full-year revenue growth guidance to approximately 30% year-over-year at the midpoint of the range, which Craig will discuss in more detail in his remarks. We have a lot of great things happening here at Paycom. We've been leading the charge in the HCM industry with our focus on employee usage that we believe is fundamental to the future of our industry and we are starting to see this theme echoed in the marketplace. With Paycom, our clients benefit from higher employee engagement, increased productivity, and job satisfaction. We continue to find new ways to encourage businesses and their employees to embrace the digital transformation in the workplace just as they already have in their daily lives. Easy-to-use solutions including mobile apps continue to be important drivers of employee engagement. Earlier this year, we introduced all of our clients to the Direct Data Exchange, or DDX, and we recently demonstrated this disruptive tool as part of the new tech showcase at HR Tech. The ability to track and measure all data changes made by employees and all duplicative data entries made by client representatives allows us to quantify the cost savings that our clients might realize if they were operating at or near 100% DDX score, just like Paycom and many of our clients are already achieving today. Prospective clients are taking notice of the DDX and we are receiving leads from it, including prospective clients well above our stated target range, who upon implementation are achieving great results with the DDX. To put the potential cost savings in perspective, while clients are achieving an average DDX score approaching 90%, if all of our clients were operating at 100% DDX score, we estimate they could save an aggregate of nearly $0.5 billion annually. Until the launch of DDX, no one in our industry, let alone HR professionals, knew what appropriate employee usage looked like or how to measure it. Now we can take it a step further and attribute a measurable estimate of ROI to incentivize further employee usage. We are very pleased with the DDX adoption levels we are seeing, but there is still a lot of cost savings yet to be captured by our clients as they migrate up the DDX usage scale. Last quarter, we launched Ask Here to our clients, a tool that gives employees a direct line of communication to ask work-related questions to company representatives and receive timely answers, all through the convenience of Paycom's self-service technology. While it is still early, already half of our clients have enabled the new feature and the initial feedback has been very positive. I'm very excited about the benefits companies and their employees are starting to experience and look forward to continuing to iterate and develop this new tool. These innovations further enhance the employee-employer experience and strengthen the clients' employee usage initiative, which are contributing to our rapid sales growth and market share gains within a large and expanding HCM addressable market. To conclude, I'm particularly pleased with this very strong third quarter with every metric pointing in a positive direction and continued strong demand and new sales growth. With 98% recurring revenue, we're set up well for 2020. I'm confident that our product strategy, our people, and our high-performance culture position us well for the long-term. We're delivering tremendous value to our clients and their employees as we lead them through the digital transformation of the HCM industry. With that, I'll turn the call over to Craig for a review of our financials and updates to guidance.

Before I review our third quarter results for 2019 as well as discuss our outlook for the fourth quarter and full year 2019, I would like to remind everyone that my comments related to certain financial measures will be on a non-GAAP basis. As Chad mentioned, we were pleased with our third quarter results with total revenues of $175 million, representing growth of 31.3% over the prior year period. Our revenue growth continues to be primarily driven by new business wins. Within total revenues, recurring revenue was $171.4 million for the third quarter of 2019, representing 98% of total revenues for the quarter and growing 31% from the comparable prior year period. Total adjusted gross profit for the third quarter was $149.4 million, representing an adjusted gross margin of 85.3%. For the full year 2019, we anticipate that our adjusted gross margin will be between 85% and 86%. Total adjusted administrative expenses were $94.4 million for the quarter, as compared to $70.7 million in the third quarter of 2018. Adjusted sales and marketing expense for the third quarter of 2019 was $46.7 million, as compared to $35.2 million in the third quarter of 2018. Adjusted R&D expense was $18 million in the third quarter of 2019, or 10.3% of total revenues. Total adjusted R&D costs, including the capitalized portion, were $24.8 million in the third quarter of 2019 compared to $16.1 million in the prior year period. Adjusted EBITDA was $66.6 million, or 38% of total revenues in the third quarter of 2019, compared to $49.2 million in the third quarter of 2018. Our GAAP net income for the third quarter was $39.2 million, or $0.67 per diluted share based on approximately 58.4 million shares versus $28.8 million, or $0.49 per diluted share based on approximately 58.5 million shares in the prior year period. Our effective income tax rate was 22.5% for the third quarter and 18.1% for the nine months ended September 30, 2019. For the fourth quarter, we expect our effective income tax rate to be roughly 27% to 28%. For the full year, we expect our effective income tax rate to be roughly 20% to 21%. For the fourth quarter, we anticipate non-cash stock-based compensation expense to be approximately $6 million to $7 million. Non-GAAP net income for the third quarter of 2019 was $41.1 million or $0.70 per diluted share based on approximately 58.4 million shares versus $30.6 million or $0.52 per diluted share in the prior year period. We anticipate fully diluted shares outstanding will be approximately 58 million shares in the fourth quarter of 2019. Turning to the balance sheet, we ended the quarter with cash and cash equivalents of $108.1 million and total debt of $33.1 million. As a reminder, this debt represents a financing of expansion-related construction at our corporate headquarters. The average daily balance of funds held on behalf of clients was approximately $1.1 billion in the third quarter of 2019. During the quarter, we purchased 107.5 acres of land adjacent to our corporate headquarters in Oklahoma City for $19.2 million. While we currently do not have any plans to build on it, it was an opportunity for us to establish additional space around our existing headquarters if future business needs require it. Now let me turn to guidance. For the fourth quarter of 2019, we expect total revenues in the range of $188.5 million to $190.5 million, representing a growth rate over the comparable prior year period of approximately 26% at the midpoint of the range. We expect adjusted EBITDA for the third quarter in the range of $72 million to $74 million, representing an adjusted EBITDA margin of approximately 38.5% at the midpoint of the range. For fiscal 2019, we are increasing our revenue guidance to a range of $733 million to $735 million or approximately 30% year-over-year growth at the midpoint of the range. We are also increasing our full year 2019 adjusted EBITDA guidance to a range of $311 million to $313 million, representing an adjusted EBITDA margin of approximately 42.5% at the midpoint of the range. With that, we will open the line for questions.

Thank you for taking my questions and congratulations on another strong quarter. I have two questions. Chad, you mentioned earlier that DDX is helping you move slightly higher up in the market. Could you elaborate on that? Is it within the 2000 to 5000 employee range you talked about last year for the sales force, or is it even higher? Also, what kind of momentum are you observing there? Craig, I've noticed that your EBITDA margins are higher compared to last year. Can you discuss the factors contributing to that? Additionally, could you share some insights on the TV advertisement you ran last year that was successful enough to repeat this year? Thank you.

All right. Well first, Raimo, I think you squeezed in about four questions, but I will handle it. The DDX, what I've said was we are beginning to get leads from having the DDX and that's true. In fact, one particular client that we had was double our stated range and they've already made 2 million changes in the last four months. They have a DDX score of about 99%. It is differentiating us out there in the marketplace for those businesses that do want their employees to have that direct relationship with the database for both input and data retrieval. I'll let Craig talk a little bit about the adjusted EBITDA.

Yes. In terms of our guidance for this quarter, Raimo, we're currently guiding – basically, we're at the midpoint this year and this quarter at where we finished last year. So nice of you to notice that. Some of the give-and-takes we're continuing to spend on R&D and on sales and marketing and then we're starting to see the efficiencies in the G&A line, as if you remember last year towards the end of the year we bought that building online. So, I'm seeing some efficiency there. And then your question on the TV ad, yes we are seeing some TV ads this fourth quarter, but any of that has already been baked into current guidance.

And they were successful as we had last year, which is why we are continuing them into the little bit in third quarter and fourth quarter this year.

Perfect. Well done. Okay. Thank you. Congrats.

You bet.

Yes. Thank you very much. I'll add my congrats. Chad, I'm curious what percentage of the new logos that you're signing recently are signing up for 100% mandated employee usage?

Yeah. I mean, we continue to have that growing as far as we're getting the pledge. I'd have to look through exactly what that number is, but I can't say that it's 100% of them. What I will say though is 100% of all of our clients that are onboarding, we are seeing increased DDX scores from the beginning. So they're out-of-the-gate number of DDX for those companies that have converted in the third quarter are higher than the out-of-the-gate DDX scores from those that had converted in the previous quarter. So we are continuing to see growth in the DDX initial scores month-over-month which does continue to push our aggregate number of DDX up.

Okay. Great. And then Craig, is it possible to quantify any incremental drag you'd expect in 2020 from the interest rate reductions in the overall interest rate environment?

Yeah. I mean, we call out that our average daily fund balance was $1.1 billion. So a 25 basis point decline will obviously layer in, but the full 25 will be somewhere in the $2.5 million to $3 million.

Yeah. And last year, we did benefit from some interest rate raises. This year, we've had some interest rate headwinds as they've started to reverse. We continue to put up the numbers in the face of those headwinds. In the last 21 years, I mean, we received yields as high as 5.9% on overnight sweep accounts and as low as 0%. We have a very small percent of the TAM, and we have the most differentiated product in the marketplace, and we feel comfortable about being able to weather whatever happens with the interest rates. It is important to note, we sell more in new business in a week than any quarter-point drop in interest rates. And so, our annualized sales on average on any given week is greater than any quarter percentages rate drop. So there is headwinds, obviously, but we've been pushing through it as you've seen in this quarter.

Thank you very much.

You bet.

Great. Thank you so much. And I'll echo my congrats as well on nice results. Chad, it's the time of year where we see interesting product developments being rolled out across the HCM space more broadly from a competitive viewpoint whether it's on-demand pay or layers of intelligence that are augmenting various HCM processes. I just wonder, are customers asking for things that competitors have been showcasing? And in the past few quarters, you've hinted at additional products as well. Any teasers on future product direction or places where you'd go or places maybe where you definitely wouldn't go that you'd be able to give us a sense of how you're thinking about things from an R&D perspective?

Yeah. So, I mean our R&D buckets have been substantially the same as far as what our spend is. You are going to have a certain portion on compliance, the things we have to do to keep our software updated in accordance with both labor laws as well as tax laws. You're going to have another piece of that that continues – a third of that is going to be – to continue to expand. They're not proportionate. I'm just saying there are three categories. At any given time you can be in one – more in one category than the other, but a second category. So, first category is what I just mentioned, more on the compliance side. The second category is continuing to develop deeper within our current product set making them better. And so we continue to update that. The third category of the three would be innovation. And that's us developing items things like the DDX, like Ask Here that are typically replacing nothing within our industry or some other third-party concept. And so, we do continue to work on that. Staying true to ourselves, we don't disclose those products that we're working on until they're out. But you will continue to see as you have in the past further innovation from us, as well as continuing to go deep within our product set to drive more value for the client.

I appreciate your insights and would like to follow up from a go-to-market perspective. As we approach a new year and I understand you are likely still in the midst of your planning cycle, I want to discuss your unique go-to-market model. A couple of quarters ago, we mentioned moving upmarket, which wasn't a departure from your previous strategy. As a great sales leader once suggested, if you are trying to achieve the same success this year as last, it’s important to innovate. Do you have any initial insights on the learnings and adjustments you’ve made to the model over the past couple of years and what we might expect moving forward?

Yes. So you are right. You have to continuously change your go-to-market strategy as the product continues to change too. I mean if we are going to market the same way today as what we went three years ago when we have a different product today than what we had three years ago that would be a problem for us. We're only getting stronger as an organization. I mean, we have a very small percent of a large TAM. We're creating a larger competitive moat. This year is shaping up to be our best year as an organization. Last year was hard to follow as probably our best year up until then. But here we sit about ready to stamp out another 30% growth with the rule of 70 again. And so, I feel like we're doing really well and we're set up very well for as we head into next year.

Well congrats on all the success. Thanks guys.

Thank you.

Thanks very much. Chad can you give us an update on the inside sales initiative, how that's progressing?

Yes. So we started that. I believe I announced it last quarter. We’ve started a little bit before where I think we had five reps, we had moved in outside sales manager to build that group. We now do have two inside sales teams. No change in strategy there just in size. They do continue to catch those deals businesses that are calling in below 50, as well as catch those deals that might be out of territory areas where we do not have an office, where they can pick up some low-touch opportunities there. So nothing's really changed there except they are staffed.

Great. And then just one quick follow-up, R&D spend has increased as a percent of revenue at a very nice pace as you continue to obviously put money back into the product. Any sense longer term where we should expect that to stabilize as a percent of revenue?

Yes. I mean we continue to increase our R&D spend. I mean from quarter-to-quarter I think sometimes it goes up a little bit in percent of revenue, and there have been quarters where it's fluctuated the opposite way when you're looking at quarter over prior year quarter. But we do continue to invest in our R&D strategies. And so, it's all relative to our growth as well. We're still very focused on continuing to be a very strong growth company and that would require us to continue to invest in the product.

Great. Thanks very much.

Good afternoon. Let me extend my congratulations. It's not just the DDX itself, but the usage it measures that continues to increase. Can you discuss how this is affecting the sales team and their ability to convert leads? How well is this resonating? Additionally, what do you expect regarding retention as we progress through the year, considering you have some strong proof points?

Sure. Well some prospects have that initiative. They have an initiative to have their employees with a direct relationship with the database as we're in 2019 and beyond. They see that as a huge benefit to the organization. Other clients might see it as a benefit to the organization, but they're not yet ready to actually take it on. With those clients, it is a different type of sales process where we have to acclimate them to the idea. It's something that they haven't been used to in the past. So we continue to do that. I would just say some sales, it's much easier for us. With those clients, since we are bringing something to market that's different than what they're used to we have to sell a different way. But we haven't seen any elongated sales process times and/or conversion times from it — it's just different. As far as conversion, I always think that the more value you bring to clients and the more usage that you're able to establish, the longer clients look to stay with you. As far as retention, we do update that once a year. We aren't updating that now. As we move through the end of the year, the numbers start to change as you go through October, November, and December. We'll be updating that at the first of the year.

Great. And can I just ask a quick follow-up with regards to just as you're planning for next year, Chad, what's the organizational readiness for expansion in terms of new offices? You're obviously doing a great job in the markets you're in, but just wondering about broadening coverage.

Yes. We are opening up offices as part of our strategy. We did open up New Orleans as well as expanded an inside sales team so far this year. I will point out that of the more than $20 billion of TAM that we have, we've already got half of it covered in the markets that we have open. Our focus is on productivity of sales reps as well as careful expansion and execution. As you can see from the results, the strategy is working.

Absolutely correct.

Yeah, hi. Thanks for taking my questions. Chad just a thought maybe I'd ask you just a question. Any update that you're aware of in terms of the competitive landscape? Are you seeing any changes in terms of the win rates that you're aware of or maybe where the replacements are coming from? And then the follow-up question I had for Craig was just on the cash flow in the quarter. It came in quite a bit higher than where I had modeled that. Just wondering if maybe you're able to spend everything that you wanted to spend in the quarter? Thanks.

Yes. So I'll take the first question. I would tell you, it's the usual suspects for us as it has been for a long time. Our win rates aren't getting any — well, our win rates aren't going down. So I can just say that from there.

Yes. In terms of the cash flow, it's kind of where we expect it. I mean you're going to have some variation quarter-to-quarter as it relates to, let's say, tax payments and things like that. But yes, I feel like we're probably spending at the right levels.

Thank you.

Hi, good afternoon. Thanks for taking my question. So on the gross margins, how much of your gross margin improvement is driven by this push for automation versus just natural scale in the business as you get larger?

I mean obviously we're seeing the employee usage strategy that is having an impact on our gross margins. We're able to see that our specialists are able to handle a larger volume just because our clients are using the system and their employees are using the system kind to the fullest. So it is having an impact on our gross margins.

Okay. And then on the move upmarket, would you characterize any change in sales cycles as you move upmarket, Chad?

No. I wouldn't. I want to say we haven't moved any further upmarket. Our range is still the range. We've always continued to get clients at the upper end of our range in the past. We just have had success with people contacting us with the strategy a little bit more so than what we had in the past. So we kind of called that out. As far as sales cycles and as well as conversion cycles those have stayed the same.

Okay. Thank you.

Hi, good afternoon. Thanks for taking my question. Chad, I guess kind of maybe following up on the upmarket success. I'm curious, do you see a different trend in the modules that customers at the upper end of your customer base are adopting or is there something in particular that brings them over or that you're seeing greater pickup that's driving that success?

Yes. I don't know that I could call out greater adoption upmarket. We've always had strong adoption of our products. Our clients take a greater than half of the products that we have at the time of conversion and that hasn't changed upmarket either. Are you still there, Samad?

Yes, great. No, I did not have a follow-up question. Thanks for that. I appreciate it.

Thanks for taking the question. Good results. Just on the employee engagement and DDX, I just wanted to see if you are continuing to see more success of this offering? Do you think you may change your revenue model to charge more of a usage-based or percentage of cost savings that you're offering clients or do you think you may not go that route?

Well, no, I mean I don't. I actually think the more you use our system the better it is for Paycom too. I will tell you that most software companies historically are not necessarily advertising how much of the system you're using. We're actually measuring it. We're leading with it. We want you to use the full system. And so I don't see us charging clients more for using the system. They've already bought the modules. And so once you've made that investment, you may as well — I've always said it costs you the same whether you get the full value out of the system or not. In order to get the full value out of the system, that's about usage and being able to measure that for our clients so that they receive that value and that return on investment I think is making the difference.

Great. And then with the current product set and offering, where do you think is sort of the greatest opportunity for further automation?

Employee productivity.

Hi Chad and Craig, thanks for taking my questions. First off, Chad, I was interested to see that Paycom had a presence at HR Tech with a boost for the first time in quite a while. Just curious what really went into that decision-making process and if you could talk about any of the benefits that you've seen since then from either increased brand awareness or from a lead-generation perspective.

Yes, I think this was our third year in a row to attend HR Tech. But you're right, we had been absent from it prior to that. I mean going through trade shows and what have you and definitely HR Tech is something that we had started doing about three years ago. We did continue it this year. It gives us an opportunity to highlight new products that we've developed. I think we implemented the HR Break Room last year where we had it I think somewhat in the middle of the floor. We do continue to make those investments in trade shows as well, and HR Tech is a good one for us to go to.

Got it. And then just a follow-up. On the Ask Here communication platform, I think you mentioned that about half of your customers had enabled it since you had launched it or announced it. What sort of usage trends are you starting to see even though it's early days there? And do you think this is something that follows a similar path to what you're seeing with Direct Data Exchange?

Yes, I would say they're a little different. I mean DDX is kind of the scorecard to the strategy that a business might implement, and Ask Here is actually something that should continue to grow. I mean you're somewhat limited by your imagination on questions. You set up the categories of questions; it can be whatever you want. You set up who are the company representative experts on those questions, whether it's benefits administration question, where it's a how do I get a key question or whatever IT questions resources, whatever they're all right there. And so what it allows the company to do is set up those categories. And then for employees, oftentimes, they don't know who to ask. With Ask Here you don't need to know who to ask. You just ask your question of Ask Here and it knows who the appropriate person is to respond to that question. It just greater drives employee adoption, and it builds that conduit once again between the employer and the employee for stronger communication. They are a little different, Ask Here versus DDX, but both are strong differentiators.

Hi, thanks for taking my question. Just to kind of build off the last one, when you're introducing some of the new functionalities to the platform like DDX, like Ask Here, can you just kind of philosophically talk to us about whether you want to charge for that, whether you want to give it away for free? How do you think about when you're introducing new features and how do you think to your clients to ultimately benefit the most from it?

Yeah. I mean, I see that as a kind of a — it's hard for me to answer that question without giving out too much competitive strategy on exactly how we decide which products we're going to develop and which we're going to charge for. I can tell you this though. There are certain products that it's so important that you get 100% usage on. You really don't want to go through the time of trying to sell it over the next year or two to clients. DDX was definitely one of those types of products that could we have sold it? Maybe on the margin, but I would rather have 100% people using it. That's the same with Ask Here; they create so much value. I would just leave it at that. We do continue to develop other products that would be for a fee products. But these two, I really felt like it's important for us to get 100% usage out of it. We're getting close on the DDX as far as I mean we've had at least every client click through it from that perspective. On Ask Here, we actually have 50% of the clients using it right now. I see that adoption rate only increasing as we head throughout the fourth quarter and into next year.

Great, thanks. And then on the balance sheet, ending with over $100 million on the balance sheet, can you talk about how do you view deploying that cash? Is there a time in which you'll become more structured with letting investors know about whether you're going to be using that cash for buybacks etc.? Thanks.

Yeah. I mean, we are approaching over — we're over $100 million now on the balance sheet. Our first priority is to invest in growth in the R&D side. As you're aware, we still have $120 million available under our current or existing buyback plan. That is one of the ways that we return capital to shareholders. We were very opportunistic in 2018 towards the end and have continued to build back our cash position throughout this year.

Hi, thanks for taking my question. Just one for me. On DDX and Ask Here button, are you seeing any differences on people picking it up quicker, maybe they're larger clients or smaller clients? Just anything you can point to of how quickly people are adopting it in different areas.

Yeah. So all products start off right when you put it out then you get to train the sales organization and what have you and it takes a little while before the sales organization is necessarily selling it that way from the beginning. I can tell you on both of those products if clients are coming in today, they're on those products. But we've got a lot of clients that we've had in the past that we didn't sell on those products from the beginning. We’ve done a good job as I mentioned with the DDX last quarter and as I've mentioned on this call with Ask Here. We've done a good job of circling back to those clients and making sure they're capturing the value of these products that are just included to further drive ROI.

Thank you.

Chad, I just wanted to drill into the Q4 pipeline, which is easily a strong quarter in terms of new customer adds. So are you seeing any more traction in terms of pipeline in your switch for like 500 to 2,000 range? Or are you seeing more on the upper end side 2,000 to 5000? Any comments in terms of demand environment?

I mean, no real change there. I mean, I used to talk about the top end of our range and I was talking about above 2,000. Now when I talk about the top end of our range, I'm talking about above 5,000. So I mean that's had some change a little bit. We've got a strong guide going into Q4. In fact, our guide this year heading into Q4 is larger as a percentage than it was last year heading into Q4. We feel really strong about what we have in the pipe for Q4. We're seeing strong demand across the market would be the answer to that question.

That’s great. Thank you.

Nice results guys. What has been the response or pushback to the recent price increase you put through?

Yes. So, I mean, we did a pricing adjustment. If you guys remember, we did that. It had very little to no impact on the first quarter. It'll have about a 1% impact for the full year. I mentioned that I believe in the second quarter, I said at that time, we consider pricing adjustments to be competitive in nature. So, it's not something that I'm going to talk about moving forward in how we choose to price our product.

Can you discuss whether any clients have had a negative reaction to the recent price increase, or are they largely accepting it, which represents a small percentage?

Yes. I feel really good about our pricing strategy. As I've said before, we were able to have a price adjustment to a select group of clients. It had a very small impact on the first quarter. On the quarters subsequent to that, we expect about a 1% total impact on our organization for this year. Moving forward pricing, I do consider to be competitive and it's not something I want to talk about on these calls.

Got it. All right. Thanks.

Thank you.

All right. Well, I want to thank everybody for joining us on the call today. Over the next couple of months, we'll be on the road meeting with investors at the following conferences. Craig and James will be hosting Investor Meetings at the Stifel Growth Conference in Chicago on November 7 and at the RBC Tech Conference in New York on November 19. I'll be presenting at the Credit Suisse Tech Conference on December 3 in Arizona as well as at the Barclays Tech and Media Conference in San Francisco on December 11. We appreciate your continued interest in Paycom and we look forward to meeting with many of you soon on the road. Thank you, operator. You may disconnect.