Earnings Call: Q2 2017

Aug 1, 2017

Good day, everyone, and welcome to the Paycom Software Incorporated Second Quarter 2017 Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. And please do note that today's event is being recorded. I would now like to turn the conference over to Craig Bolte, CFO. Please go ahead, sir. Thank you, and good afternoon. Before we get started, I would like to note that certain statements made during this conference call that are not historical facts, including those regarding 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 we have made are reasonable, actual results could differ materially because the statements are based on our current expectations and are subject to risks and uncertainties. These risks and uncertainties are discussed in our filings with the Securities and Exchange Commission, including our annual report on Form 10 ks for the year ended December 31, 2016. You should refer to and consider these factors when relying on such forward looking information. Any forward looking statements speak only as of the date on which it was 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. A reconciliation showing GAAP versus non GAAP results is included in the press release that we issued after the close of the market today, which 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, Craig. Welcome to everyone joining us on the call today. I'll start with some comments on the quarter and our view into the industry, and then Craig will speak to our financials and guidance. Then we'll take some questions. Our second quarter results reflect ongoing momentum. Revenue for the Q2 of 2017 was $98,200,000 representing growth of 33% over the comparable prior year period. This performance is particularly impressive when you consider that we grew 51% in the comparable prior year quarter. We are proud of our first half results as we continue to post very healthy growth even in the face of challenging prior year comps. As the guidance provided in our press release implies, we anticipate we will continue to deliver robust growth throughout the year, even as we will be lapping our 1st full year of ACA related revenue. HR leaders and executive management within every industry across the country are becoming increasingly aware of how to utilize technology driven human capital management or HCM solutions to solve problems and gain efficiencies in their business. At the same time, workers are becoming more reliant upon technology and increasingly expect their employers to keep pace by offering powerful yet easy to use software for their HR needs. Executives are continuing to turn to advanced HCM functionality to gain a we believe that Paycom is well positioned to benefit from these trends. We believe our single database solution that allows employees to input and manage their own data is the best option for companies looking to streamline processes and realize the benefits of having their HCM functionality reside within a single database. We recently conducted a survey of HR professionals in conjunction with hr.com that provides insight into how companies are utilizing executives agreed that self-service percent of HR executives agreed that self-service technology is the most efficient way to provide employees with HR information. For companies with over 500 employees, this figure was 94%. Additionally, ease of use and single log on capability were amongst the most important aspects of HCM technology. Even with this growing focus on HCM technology, our survey found that in nearly half of the organizations with self-service capabilities, HR departments still manually enter on average 38% of their employees' data indicating significant room for improvement. These survey results echo what we hear from our prospective clients. We believe that we are still in the early stages of a multiyear secular trend of companies turning to HR technology to help them succeed and that Paycom is in a favorable position to benefit from this shift and achieve sustainable growth for many years to come. To support this growth, we've continued to execute on our strategy to expand our sales organization. In June, we opened our Richmond office and in July, we announced our new office in Long Island. These offices along with our Milwaukee office, which launched in April increased our total number of sales teams to 45. All of our newer offices are developing in line with our plans and we are pleased with their progress. This more staggered cadence of office openings in 2017 is allowing us to focus more on developing our talent and minimize the disruption that occurs when we open new offices. At Paycom, growth is a key goal. With our market share still in the low single digits, we believe there remains a significant opportunity to win substantial new business and we are hyper focused on achieving this goal. While we remain committed to growth, we are also mindful of continuing to improve our profitability along the way. Our current full year adjusted EBITDA guidance of $122,500,000 to $124,500,000 or 29% at the midpoint exhibits continued improvement over the guidance we provided last quarter and also at the beginning of the year. This performance underscores our ability to both leverage our top line growth and also improve our own internal processes to drive efficiencies. Our profitable cash generative business model also allows us to return capital to stockholders. During the Q2, we repurchased approximately 460,000 shares as part of our $50,000,000 share repurchase plan, including 235,000 shares in the open market purchases. As a reminder, this is our 2nd $50,000,000 repurchase plan in the past 13 months as we completed our first $50,000,000 share repurchase plan in December. Before I turn the call over to Craig for an update on our financials and guidance, I want to highlight our recent sponsorship of the Jim Thorpe Award, which is presented annually at the top defensive back in college football and will be named the Paycom Jim Thorpe Award going forward. For those not familiar with Jim Thorpe, he was born and raised here in Oklahoma and was named the greatest athlete of the 20th century by ABC Sports. He played professional baseball, basketball and football and also won Olympic gold in the Decathlon and Pentathlon. Jim Thorpe exhibited many of the qualities we value highly at Paycom, such as grit, versatility, perseverance and teamwork, and we are proud to have the Paycom name associated with such a prestigious award. Now, I'll let Craig comment on our financial performance for the quarter. Craig? Thanks, Chad. Before I review our 2nd quarter results and also our outlook for the Q3 and full year 2017, I would like to remind everyone that my comments related to certain financial measures will be on a non GAAP basis. We use adjusted EBITDA and non GAAP net income as supplemental measures to review and assess our performance and for planning purposes. Adjusted EBITDA is a non GAAP financial measure that excludes non cash stock based compensation expense. Non GAAP net income is a non GAAP financial measure that also reflects the adjustment for non cash stock based compensation expense, which is further adjusted for the effect of income taxes. Reconciliation of the GAAP to non GAAP measures discussed today are included in the earnings press release issued earlier this afternoon. As Chad mentioned, we experienced a strong second quarter with total revenues of $98,200,000 representing year over year growth of 33% from the comparable prior year period. Our revenue was primarily driven by strong new business wins and we are pleased with our performance in light of the tough comps from 2016. Within total revenues, recurring revenue was $96,400,000 for the Q2 of 2017, representing 98% of total revenues for the quarter and growing 33% from the comparable prior year period. Total adjusted gross profit for the 2nd quarter was 81 point $6,000,000 representing an adjusted gross margin of 83%. For the full year 2017, we continue to anticipate that our adjusted gross margin will be within a range of 82% to 84%. Total adjusted administrative expenses were $58,600,000 for the quarter as compared to $43,000,000 in the Q2 of 2016. Adjusted sales and marketing expense for the Q2 of 2017 was $32,500,000 Adjusted R and D expense was $7,500,000 in the Q2 of 2017. We made substantial progress in building out our R and D organization over the past several quarters. We will continue to invest in R and D. We anticipate adjusted R and D expense in the Q3 of 2017 will increase by approximately 100 basis points as a percentage of revenue as compared to the Q3 of 20 16. Adjusted EBITDA was $27,800,000 or 28 percent of total revenues in the Q2 of 2017 compared to $22,600,000 or 31 percent of total revenues in the Q2 of 2016. Our GAAP net income for the 2nd quarter was $14,200,000 or $0.24 per diluted share based on approximately 59,000,000 shares versus 10,400,000 dollars or $0.18 per diluted share based on approximately 59,000,000 shares a year ago. Our effective income tax rate for the 2nd quarter year to date 2017 was 16.1%. Non GAAP net income for the Q2 of 2017 was 15 $200,000 or $0.26 per diluted share based on approximately 59,000,000 shares versus $12,400,000 or dollars or $0.21 per diluted share a year ago. Absent vesting events of performance shares, we expect stock based comp to be approximately 7,000,000 in both the 3rd and 4th quarters of 2017. In the second quarter, we repurchased a total of approximately $30,200,000 of stock under our $50,000,000 share repurchase program, including $15,000,000 for share net downs as a result of stock awards vesting and $15,200,000 in open market purchases. We look forward to continuing to return cash to our stockholders opportunistically via these open market purchases. For modeling purposes, we anticipate fully diluted shares outstanding will be approximately $59,000,000 in the 3rd quarter. Additionally, we expect our full year effective income tax rate to be approximately 22% to 24%. Turning to the balance sheet. We ended the quarter with cash and cash equivalents of $68,100,000 and total debt of 34.6 $1,000,000 As a reminder, this debt represents a financing of construction at our corporate headquarters. Construction of our 4th building continues to go well and according to schedule. Cash from operations was $15,100,000 for the 2nd quarter, reflecting our strong revenue performance and the profitability of our business model. The average daily balance of funds held on behalf of clients was approximately $802,000,000 in the Q2 of 17, which increased approximately 27% compared to the prior year period. Now let me turn to guidance for the Q3 and full year fiscal 2017. For the Q3 of 2017, we expect total revenues in the range of $99,000,000 to $101,000,000 representing a growth rate over the comparable prior year period of approximately 29% at the midpoint of the range. We expect adjusted EBITDA for the 3rd quarter in the range of $21,000,000 to $23,000,000 representing an adjusted EBITDA margin of approximately 22% at the midpoint of the range. For fiscal 2017, we are raising our revenue guidance to a range of $429,500,000 to $431,500,000 or approximately 31% year over year growth at the midpoint of the range. We are also increasing our full year 2017 adjusted EBITDA guidance to a range of $122,500,000 to $124,500,000 representing an adjusted EBITDA margin of approximately 29% at the midpoint of the range. With that, we will open the line for questions. Operator? Thank you. We will now begin the question and answer session. And the first questioner today is going to be Michael Nemeroff with Credit Suisse. Please go ahead. Guys, this is Alex Hu on for Michael. Thank you for taking our questions and congrats on the strong quarter. My first question is, given the new cadence on office openings with 3 announced year to date and more to come, can you comment on how the new staggered timeline has impacted your business thus far compared to prior years, whether it's better sales productivity you're seeing on existing offices, employee retention, higher quality sales hires, etcetera? Yes. And so, well, thanks for the question. And so our goal in opening the offices in a more staggered taking a more staggered approach was to reduce the disruption that happens to those teams that we disrupt anytime we open up an office. Just as a reminder, we always open up an office with current sales reps who are ready and prepared or excuse me, current sales managers who are ready and prepared to open an office and then we backfill them with sales reps who are ready to be in management from another office and then we backfill that sales rep with a sales rep, a new sales rep who has come on board. And so in the past that's been disruptive. And so by spreading out this disruption over a period of time versus taking it all and oftentimes the same week, I believe we opened up last year's offices all within the same 10 day period of time. We felt like by staggering them out, we have we're still able to accomplish our goal in the outer years because these offices, it does take 24 months for them to reach maturity. So we feel good about that and also it's caused less disruption. We believe that's been reflected in the numbers we've been able to onboard this quarter and in our future guidance. Okay, great. And then just from a sales capacity perspective, I understand that it takes about 24 months before an office is mature, but many offices do continue to ramp well past that. Just curious, can you quantify or share the performance of some of your top offices currently? How much specifically how much new recurring revenue do they pull in typically for let's say the top 5 performing offices on average just so that we could get a flavor on what could transpire for your newer offices? Sure. And so I gave out the sales capacity number of $260,000,000 I believe I gave that out about this time last year. I'm not going to update that today. That number was given out when we had 40 it would have been 42 offices, 42 sales teams. And so you could have somewhat for your averaging, you could have somewhat divided those 42 into the 260 to get again what we believe our capacity was. But we're continuing to eat away at that. I'm not ready to change that number yet. Something I can share with you anecdotally is that in the past 30 days, we've achieved our highest sales week that we've had here at Paycom as far as new revenue that was recently sold. And so it's not something I'm going to share every quarter, but I do think it's reflective of the decisions that we've been making to increase our sales productivity and I'm very proud of the group and what they've been able to accomplish in achieving this in a month that traditionally for our industry is not one of our strongest new business signings month because it's in the summer. But again, we had our highest week from a book sales perspective and we're very proud of that accomplishment. So I think our group has done a great job in taking this strategy and running with it. And I think what we're well, I know what we're seeing is the benefits of that through these results. Great. Thanks for the color. And just one last question for Craig. Looking at your R and D guide for Q3, it suggests to us that you're continuing to invest heavily on the product side. Just curious, can you comment on some of the near term initiatives you're working on, specifically what are those investment building towards? Yes, we don't and this is Chad again. We haven't I mean true to form, we haven't ever discussed items that we're working on until they've actually been released. One other thing I will mention is, we were the top trending app on the iOS Apple Store for our employee self-service app that we put out again in earlier the month of July. And so obviously the increased R and D made an impact on that app. We do continue to work on our other products. As you guys are aware, we have a very broad product set. And the more clients you have D spend is directed toward that. And we are increasing our our R and D spend is directed toward that. And we are increasing our R and D, but we've also been able to increase our margins as well. I mean, we've increased our R and D anywhere from 80% to 100% each quarter over prior year quarter. And we've also been able to expand the margin and that's because the R and D expenses are turning into revenue generating products that the clients are able to use. And so we're not going to be turning around here being market high on R and D expense as it relates to a percent of our overall revenue. That's due to also strong revenue growth, but we are going to continue to focus our efforts in our R and D department as well. And our next questioner today is going to be John DiFucci with Jefferies. Please go ahead. Thank you. I have a question for Craig first and then a follow-up for Chad. Craig, the results congrats, strong results both top bottom lines here, but cash flow was below what we were modeling. And it looks like there's a couple of things happening here, but the one that stands out is a $20,000,000 use of cash in the accrued expenses line, accrued and expenses and other liabilities. So can you please explain a little bit what's happening there and should we expect this to reverse or was this quarter the reverse of a previous benefit? And I guess is that related to the big incentive compensation contribution of cash in the quarter? And you talked a little bit about in your prepared remarks that was a 14,000,000 dollars Yes. In terms of the cash flow and kind of what was going on in the quarter, some of that's timing quarter to quarter. We also had some tax payments that were made this quarter. We kind of do we have a catch up second quarter based on the Q1's results. So we had some additional tax payments as well in the quarter. And we'll see some benefits kind of moving forward. You saw our tax rate for the 2nd quarter decline some as well because of the deduction related to some of that stock comp. Okay. Okay, thanks. And then, Chad, great to hear the largest ever new sales week in this past month. I mean that is great to hear. But and I'm just trying to think big picture and that helps. But when I look at this market and we realize a lot of your competitive wins are against what I'll call the incumbent HRO vendors, But it seems that part of those deals could also be, I guess, greenfield, so to speak. In other words, customers maybe are doing just payroll with the likes of ADP and then they come to Paycom, they realize, well, you know what, it's easy to consume this other stuff too. And I don't know if you guys break that out or if you think that way, but can you even roughly quantify how much of a new deal on average might be incremental functionality for the customer? Because we're just trying to get our arms around the addressable market. What is the real opportunity here? Yes, I mean, well, yes, so I'll try to answer that. Our value proposition we believe is an expanded value proposition past the competition. So we would hope that any client that comes on to our offering having less the competitor would experience greater usage and have a more robust product. So we would expect that would be the case, the people that we onboard use more product. But also I believe we're starting to see the way that there's somewhat becoming a change in the way that companies use HCM technology. I mean, I've said it before, companies for employees for 2,000 employee companies are using more technology when they buy their coffee than what they do when they're interacting with their HR department and people that work for different sized companies know that, but that's shifting. The HR departments are becoming more strategic. They're leveraging technology. They're leveraging what's in the hand of the employees. And so I still believe we're in the early innings of that shift happening, but I think we're well positioned for that. As far as how many of our deals are greenfield versus not, I've mentioned in the past, greater than half of our business comes from legacy providers and everything else is a dogfight. So whether we're competing against a traditional provider or a SaaS type provider, every deal is competitive. And we also do convert those companies that are doing it themselves. But even those situations are competitive. So we're in a very competitive industry and I think that drives innovation that ultimately benefits all clients out there or people looking to buy this type of technology. Great. We'll keep that attitude that it's a dogfight. Appreciate it. Thank you. And the next questioner today is going to be Mark Murphy with JPMorgan. Please go ahead. Hey, guys. This is actually Albert Shee on for Mark. Great job on the quarter, Chad quarter. Can you talk about some of the trends that you might be seeing at the upper end? And are there any changes that you've detected in the competitive environment? I know we ask that every quarter, but it's worth asking. Thank you. Yes. No, thanks, Albert. I mean, I appreciate your point now that historically, we have provided a few examples, actually not historically, I think for the 1st year or so after being a public company, we did not provide client wins and then started layering them in. And we provided those specific ones. We highlighted some that we had one above our range and we primarily did this to provide proof points that our solution can scale and handle the needs of larger clients. We believe we've established that at this point. To kind of answer the next question, we did have clients both above our stated range and below our stated range. And obviously, this is also reflected in the numbers. But at some point, when we keep calling out the name or the industry that accompanies in and the size, a 5,200 employee trucking company that we took from a legacy provider, At some point, it's not that difficult for people to somewhat triangulate or for lack of a better word reverse engineer the company that we're talking about and definitely for the person that just had them. And so I feel like we're kind of giving out more information than what's really valuable. And so moving forward, we don't really feel a need to share that other than to say that this quarter, when you look at a client makeup or the makeup of our profile, client profile, the profile of the clients that we onboarded in this quarter, we're in line with the clients that we've onboarded in any other quarter. That completely makes sense. I appreciate that. And just one more follow-up is, I kind of wanted to ask about the acceleration of revenue growth in the quarter, especially off some tough comps. And I think we saw some of that in services, but revenue or recurring revenue also accelerated. And you also mentioned that there's some decisions that you've made to increase sales productivity. Could you kind of walk us through a little bit about what those are and maybe what drove the strength in the quarter? Thanks. Yes. I don't want to get too specific on the we do get very specific when we start talking about sales metrics and our sales strategy and how we drive productivity internally. I don't necessarily want to telegraph all that, but I will say this, we on purpose focused on reducing disruption as we open up offices. And I think our cadence in the last 3 years has been opening up all the offices in the Q1. And so when you take a strategy of causing less disruption and it works, you are going to produce. And so that's really what's happening for us is we're producing. To continue to be the top of growth company that we are. And we're proud of that. And we've it's something we really needed to do to continue to be the type of growth company that we are. And so very happy with what's going on there with the sales group. Awesome. Thank you. Thank you. And the next questioner today is going to be Mark Marcon with Robert W. Baird. Please go ahead. Congratulations on a terrific quarter. Wondering if you can talk a little bit about some of your internal efforts just in terms of what you're seeing from a recruiting training perspective, what are you seeing in terms of customer satisfaction metrics? How do you think that client retention trends over the next 2 to 3 years relative to historical levels? Well, we update our client retention every year. We just updated it, was it in February? February. Okay. In the February earnings call, it has remained unchanged, I believe, for the last 4 or 5 years that we've done it at 91%. And so there is that from that standpoint. As far as retention of our own staff, I have to say it's probably been in line. I don't even on the sales side, I mean, we made significant efforts over there to continue to improve productivity. We've done that. I can't say we've made a great impact on attrition of the newer reps. And we haven't experienced more attrition from the senior reps, from the executive rep status. As far as the training and development, I mean, we're a training and development staff. I think we get beat up for hiring people with recent college graduates. And of course, over the course of 20 years, those are they're no longer recent college graduates when they're out there running the different levels. And so, I don't know, I mean, we just continue to develop and train. We continue to identify areas of improvement for us, whether it be through client training, client onboarding or even our own employees in onboarding and we remain very focused on that. Great. I just meant with regards to the success that you've had, I was wondering if it's changing in all the profile or the types of people that are looking to join Paycom and whether or not that's having some impact? And then lastly, can you talk a little bit about just the capacity to implement new clients as you continue to grow rapidly? Anything that's occurring from that perspective that next few quarters great, but things may lengthen or do we think we can stick on the same metrics? Well, I mean, first I'll take the first one. I mean, I do believe it's easier for us find people now than what it was 3 or 4 years ago and I think that's just due to the profile and the momentum we have and that type of thing. And so but again, the type of person that we look for and the training that we put them through, although that's all continued to expand, it falls within our current strategy. As far as onboarding clients, I mean, that's something we do. There is no such thing as an easy client transition. They all have their complexities to it, but it's something we wake up and do every day. So we do a lot of them. And so just like anything you do a lot of, you get better and better at it and we continue to improve our boarding process and really the key there is driving usage. At the end of the day, clients it's easier to get clients to buy products than to use them. And you definitely want clients to experience their overall value lot of initiatives that we have that we're working on today is to get clients to use the technology that's available to them today. Great. Thank you. Congrats. Thank you. And the next questioner today is going to be David Hynes with Canaccord. Please go ahead. Yes, hi, thanks. It's actually Mark Belcar is on for David today. Just one more on the competitive landscape. Obviously, sales No, it's been substantially the same. No, it's been substantially the same. Okay. And then just quickly on maybe on the numbers, Cash flow, it was brought up earlier, it was also a little lower than what we had. And you called out the facilities build out. So I was just wondering on CapEx, what can we expect in the back half of the year relative either to as a percent of revenue or relative to the first half? How should we think about that? Our CapEx for really the 1st and second quarter of this year have been very consistent based on a dollar basis. We're continuing to complete the construction of the 4th building. We would expect those levels to be fairly similar on a dollar basis. And then as we get closer to the completion of the billing, you would see CapEx increase a little. So and then as I mentioned earlier, we base those tax payments on the Q1 is based on prior year. And then when you have a strong Q1 like we did this Q1, you get you have some catch up on that. So in terms of the cash flow that was part of that and I mentioned that on the earlier question. Right. Got it. Okay. Thank you, guys. Thank you. And the next questioner today is going to be Corey Greendale with First Analysis. Please go ahead. Hey, good afternoon. Thanks for taking my questions. So Chad, not to get too hung up on the point that you had a record week in July. That's great. Congratulations. Is there anything you would point to suggest like in terms of process or something that's actually going to be repeatable and you would be disappointed if you don't have another record set in August or September? Or do you think it's more kind of great week, but let's no reason to expect that's going to happen again and let's see what happens? I mean, I can imagine a situation where as we continue on as a company, we're not having additional record weeks. I just think that this was somewhat timely and the fact that it was in a summer month, I thought was something I wanted to point out. And again, it really comes down to us being less disruptive within our model and continuing to increase productivity. I mean, it's something I've been talking about that was going to be our focus when I talked about the $260,000,000 new business sales capacity metric that we put out there. I said we're going to be very focused on bridging the gap in this, so that we can expand it, but we need to have the achievement. That was our focus. That's been our focus. I think we're seeing signs of that coming to fruition, but we're not done. I mean, we're continuing to focus on that, heads down. And again continue to get our value proposition out there with as many potential clients as we can. Great. And then just on the regulatory environment, has the out of DC kind of the stop and start on ACA? Has any of that filtered through to your discussions with customers affects conversations at all? Or is it sort of who cares? We're looking at our HCM system for a different reason and we'll see what happens? Well, if you're a prospect, you have to have an AC, you have to go to a company that has an ACA option. If you're a client, you already have the ACA option. It's the law today. We talked about in the past. It's a nominal fee for our clients. It just is when you take into consideration everything. There is the year end forms filing, but it's an ongoing fee that they pay. I believe it's somewhat nominal. We've talked about the overall percentage, approximate percentage of our revenue that it impacts. And so, no, I don't have a clue what's going on with ACA. I mean, every time it comes up, I think something is going to happen and it hasn't. I don't think anything's going to happen overnight. I think we're going to have plenty of warning as it relates to if there is a wind down. I think there will be a wind down. I don't think it just automatically stops right away, but I don't know. We're going to wait and see what happens. Once we get the regs, our clients can rest assured that we're going to do the work that needs to be done to make sure they stay in compliance and with whatever that might be. Great. And then one last quick question. Can you remind me or if you haven't disclosed, can you tell us, if you look at your revenue growth, like roughly the split, how much of the growth is coming from number of new customers and how much from a higher ARPU per customer? No, we don't break that out, but I've said it in the past and I wouldn't mind repeating it now. I mean, the overwhelming majority of our revenue growth comes from new client adds. Now, those new client adds might be adding additional products to that as they come into the fold. But I mean that's where the overwhelming majority of all of our revenue growth comes from. Yes. Sorry, I meant growth from the fact that I I'm guessing new clients today are paying more than new clients last year just because your suite is larger now? I can't confirm that that would be a I would have to no, I mean, I can't confirm that. I think that our suite's been pretty built out last year as well. Now, we'll tell you that the longer you've had a product, I mean, the more popular it becomes with usage. And so, I think someone might be able to surmise that there could be some of that, but I don't really think that's what's driving revenue. Great. Thanks very much. All right. Thank you. And the next questioner today is going to be C. D. Panigrahi with Wells Fargo. Please go ahead. Hi. This is Ankit for C. D. Panigrahi. Could you talk about your general investment plan in R and D and if you're coming up with any new modules to drive PEPY higher? Yes. And so we don't we haven't ever disclosed any modules that we're working on or any that the new modules or any current modules that we're expanding usage cases for. And so, but I mean we are investing in R and D. I mean like I said, we've had 80% to 100% growth in R and D each quarter over prior year quarter depending upon what you look at. I doubt very seriously we will be talking too much time from now and people are still probably saying that our R and D is low compared to others. And so from an overall percentage of revenue, I really don't see us moving away from bottom of the pack anytime soon. But we do have initiatives that we want to continue in R and D group that does take resources to do that. Anytime you see us adding to R and D, that's headcount. I mean, we are hiring individuals and bringing them in there into Paycom and we expect them to perform and produce the type of software that we're able to turn into revenue. And so which then continues to keep the R and D as an expense of revenue somewhat in line with the trajectory we've shown in the past. And so I would expect that to be somewhat the same, but we're not going to be market high R and D as a percent of revenue compared to any of our closest SaaS peers primarily just because it would be a natural for us to make that type of investment. It's unnecessary for us where we're sitting today. Got it. Thank you. And the next questioner today is going to be Abhi Lamba with Mizuho Securities. Please go ahead. Hi, guys. Thanks. This is Parthav in for Abhi. Congrats on the results. Can you comment on attainment during the quarter and how it came in relative to plan? And then any directional color on quarters during the quarter would be very helpful. I'm sorry, comment on achievement during the quarter and how it came in relative to the plan? Attainment. Yes. As it relates to quota? Yes. Yes. I mean, we don't really ever talk about what percent of quota our staff is, but I think it was a good quarter for us. And we talked about quota achievement, we'd be talking about how somebody booked sales last quarter. It's last quarter's book sales that turns into this quarter's new business revenue, if you kind of keep that in mind. But I'm very happy with what's going on with the organization. I mean, the sales group does continue to increase their level of not only knowledge, but production and activity. And we're really happy with what's going on there as we sit today. Okay, got it. And then for your current sales office space, I guess, could you give us a sense of how many of those 45 are either mid ramped or fully ramped or any high level commentary on where you expect to end up by the end of the year? Yes. So let me see here 6, 11 plus 3. You're going to have 14 of them that are either almost to maturity or maybe have just having hit maturity, either brand new or mid ramp. So I'm probably going to say maybe 10 in that area you're talking about, 9 to 10 in that area you're talking about. They're still in the ramping, either brand new or ramping phase. Okay, got it. Perfect. Very helpful. Thank you. And the next questioner is going to be Brad Reback with Stifel. Please go ahead. Great. Thanks very much. Chuck building on the sales force question there, how is the hiring environment out there right now? I mean, I think it's been a good hiring environment. I mean, if you are looking for top talent, you're going to have to have a good strategy to get it. We go through several interviews to find the right people. And so but I mean, I would say it's been in line with the way it's been in the past. Again, I think our profile of being a public company is on the margins helped us attract certain people. And so and we get a lot of the especially from the sales side, a lot of our talent comes from referrals from our own salespeople. And they're pretty good proof sources of what's possible. And so we get some there as well. And so hopefully that answers your question. I wouldn't say it's getting any more difficult to find people. That's good. And one other unrelated question. Last week ADP talked about better retention as they sort of finish up the workforce now migration. Have you seen any of that in the field or does that really have no impact on you? No, I mean, I think, I mean, ADP is the 300 pound gorilla. I mean, I think we continue to gain the comment on that to comment on that. Got it. Understood. Thanks very much. All right. Thank you. This will conclude the question and answer session. I would now like to turn the conference back over to Chad Richison for his closing remarks. All right. Well, I want to thank everyone for joining us on the call today. I mean, we appreciate your time and interest in Paycom. We look forward to meeting with investors at the Canaccord Conference on August 9 in Boston and also on the road this quarter. Thanks to all. Ladies and gentlemen, the conference has now concluded. Thank you all for attending today's presentation and you may now disconnect your lines.