Asure Software Inc (ASUR) 2018 Q4 法說會逐字稿

Good afternoon and welcome to Asure Software's Fourth Quarter and Fiscal Year 2018 Earnings Conference Call.

Joining us today for today's call are: Asure's CEO, Pat Goepel; CFO, Kelyn Brannon; and Vice President of HR, Cheryl Trbula.

(Operator Instructions) As a reminder, this conference call is being recorded.

With that, I would like to turn the call over to Cheryl for introductory remarks.

Cheryl, please proceed.

Thank you, operator, and good afternoon, everyone.

Before we start, I'd like to mention that some of the statements made by management during today's call might include projections, estimates and other forward-looking information.

This will include any discussion of the company's business outlook or guidance.

These particular forward-looking statements and all of the statements that may be made on this call that are not historical are subject to a number of risks and uncertainties that could affect their outcome.

You're urged to consider the risk factors relating to the company's business contained in our reports on file with the Securities and Exchange Commission.

These risk factors are important and they could cause actual results to differ materially from expected results.

Finally, I would like to remind everyone that this call will be recorded, and it will be made available for replay via a link available in the Investor Relations section of our website at www.asuresoftware.com.

With that, I would now like to turn the call over to Pat Goepel, CEO.

Pat?

Thank you, Cheryl, and I'd like to welcome everyone.

I recently went to a concert and I waited about an hour for a band, and I was very irritated, but the band probably played and played well.

What happened today, and we again apologize, was we had our newswire -- Global Newswire had a glitch in the system.

So -- and we had to wait for this call for the earnings to be made public and it's per the SEC rules.

So we want to follow the rules.

We appreciate your patience.

Let's get right to it, we will -- first of all, we want to thank everyone for being on the call.

It's Asure Software's fourth quarter and full year earnings call.

We appreciate your interest whether you're an employee, client, investor, analyst or a valued interested party.

First of all, quarter -- fourth quarter marked a strong close to 2018 and I'll recap some of the financial highlights.

We drove several records for the year: record revenue, record gross profit, record cloud revenue, record non-GAAP EBITDA and record bookings.

Importantly, reoccurring revenue, and we've been on this journey for a couple of years now, has represented 81% of our revenue mix compared to just 73%, 2 years ago and what that does is allow us strong visibility into the future.

In addition, our contract duration is elongating with over 25% of our new deals having terms over 2 years and that's up from just 1% in 2016.

I'm really, really pleased with our focus in driving long-term visibility that's resulted in that dramatic improvement.

Looking at the full year, revenue increased 63% to $89 million, reoccurring revenue as a percentage of total revenue in '18 was 85%, which is a nice uptick from 74% just 2 years ago.

The growing mix of high-margin cloud revenue is also very exciting.

2018 cloud revenue grew 75% year-over-year and represented approximately 80% of the revenue mix for the year, up from just 60% two years ago.

Bookings also grew over 45% year-over-year and the total backlog now is over $50 million.

We're pleased what we accomplished in 2018, and we feel that we're well poised to continue to grow opportunities in 2019.

Moving on to some client wins.

During the fourth quarter, we secured Human Capital Management wins and NetPayroll, Hilltop National Bank, Centro and Prolong Pharmaceuticals.

In work space, we had some wins including Assurance, New York Parks & Recreation, Mazda Motors and SAP America.

Within the workspace area, we're excited about our generation 2 sensors.

These next-generation sensors monitor environmental factors such as CO2, lighting, heating, air conditioning and more.

And it clearly separates us in building intelligence in the marketplace.

We've also had a meaningful refresh in all our hardware business, driving enhancements to create what we truly believe are industry-leading devices that will pervade all our offerings, including facial recognition, time clocks, kiosks and panels in addition to our Hardware-as-a-Service offering.

And these enhancement within our hardware will drive meaningful analytics that will enhance the value of our leading cloud-based solutions.

2018 was also an extremely busy year for Asure.

We closed 7-plus acquisitions to enhance the scale of our platform, improve our product portfolio with the addition of new technologies and added new clients and new hubs to our large and growing footprint across the United States.

Importantly, these acquisitions open up many cross-sell opportunities for us.

We also have bolstered the executive team with the addition of Rhonda Parouty as our Chief Operating Officer.

Rhonda's focused on managing the metrics of the business, harmonizing our resources across the country and our pricing and revenue initiatives.

We anticipate that she'll have a big impact on our operational efficiencies company-wide.

And then finally to kick off 2019, we successfully amended our credit agreement with Wells Fargo and Goldman Sachs to allow for more flexibility in respect to our leverage ratio covenants.

This amendment improves our financial flexibility as we continue to grow forward.

In January 2019, we also acquired Payroll Maxx, headquartered in Omaha, Nebraska.

Payroll Maxx is a full-service provider, servicing clients in all 50 states and processed over $1 billion in annual gross wages last year for mid to small employers as a reseller of Asure's industry-leading HRS platform.

We can quickly and effectively integrate them into our business to realize both revenue and EBITDA improvements.

Looking ahead, we'll continue to look at acquisitions opportunistically, but I don't expect the pace of acquisitions to be similar to that of 2018.

Our primary focus is to absorb the resellers, clean up the cost structure and optimize our infrastructure, while continuing to cross-sell products.

A key priority for us is to leverage our cross-sell initiatives across the business lines and we will maintain a high level of retention in client success with that strategy.

Now let me turn the call over to Kelyn Brannon for a more detailed discussion of our financials.

Kelyn?

Thank you, Pat, and good afternoon, everyone.

As Pat noted, we made progress on many fronts during the year.

As a reminder, as usual, all non-revenue financial figures I will discuss today are non-GAAP, unless I state them as a GAAP measure.

As always, you'll find a reconciliation from GAAP to non-GAAP results in today's press release.

Fiscal 2018 revenue increased 63% to $89 million from $54.4 million in fiscal 2017.

Our revenue for the fourth quarter of 2018 increased 60% to $24.4 million from $15.3 million in Q4 of last year.

Cloud revenue grew 75% year-over-year.

In Q4, hardware revenue grew 153% over Q4 of the prior year and 83% sequentially.

As Pat has noted, we are pleased with the large and growing pipeline of hardware opportunities that we're seeing developed in this area.

Maintenance support revenue was $1.6 million in Q4 of 2018, up 34% from $1.2 million in Q4 of 2017.

Professional services revenue was $2.1 million, up from $1.2 million in the year-ago quarter, but down from the $2.3 million in the prior quarter.

As a reminder, services revenues ebbs and flows, based on a variety of factors.

And as I've discussed before, we use services as an enabling function that is auxiliary to our cloud offering, which drives the real growth and value to our shareholders.

Lastly, you'll note that we've inserted a new revenue line, called Other Revenue, on the income statement.

This is related to income we receive when investing funds held for clients.

While this is currently a nominal amount, we have implemented some new initiatives to drive additional growth in this area in 2019 and 2020.

We continue to focus on driving the business towards a [visible,] recurring revenue-focused cloud company.

Our recurring revenue for the fourth quarter of 2018, as a percentage of total revenue, was 81% and improvement from 73% in Q4 of 2016.

For fiscal 2018, our recurring revenue, as a percentage of total revenue, was 85%.

This is a step up from 82% in 2017 and 74% in 2016.

Not only are we seeing success transitioning towards a reoccurring revenue model, but we're also benefiting from longer contract terms.

In 2018, 27% of new contracts had terms that were greater than 25 months.

This is up significantly from 16% in 2017 and just 1% in 2016.

We are pleased with our efforts at securing longer-term, more visible recurring revenue.

Next, I'll discuss our profitability metrics.

Q4 2018 non-GAAP gross profit increased 34% to $15.4 million, equating to a non-GAAP gross margin of 63.2%.

This compares to $11.5 million or a gross margin of 75% in Q4 of 2017.

Gross margin was impacted by a reclassification of occupied cost of goods.

Normalizing for this reclassification, which impacted Q2 and Q3 of 2018 but booked completely in Q4 of 2018, the non-GAAP normalized gross margins would've been 65% to 66% for the past few quarters.

Given our increasing mix of HCM revenue, along with increased hardware and HaaS mix, we expect non-GAAP gross margin to be in the range of 64% to 66% in the near future.

Q4 2018, non-GAAP EBITDA was $5.9 million, an increase of 78% from $3.3 million in Q4 of last year.

Non-GAAP EBITDA as a percent of revenue was 24% versus 21.5% in Q4 of 2017.

For the fiscal year of 2018, non-GAAP EBITDA totaled $19.9 million, an increase of 79% from $11.1 million in fiscal 2017.

Non-GAAP EBITDA was influenced by higher level of onetime expenses in 2018, primarily the result of 7-plus acquisitions completed during the year.

As we look into 2019, we will continue to see improvements on non-GAAP EBITDA as these one-time expenses diminish and we fully integrate these assets.

In Q4, non-GAAP net income totaled $2.2 million or $0.15 per share.

Looking ahead to the first quarter, our non-GAAP effective tax rate guidance is still at 0%, and we feel this more appropriately measures are expectations for actual performance.

Shifting gears to our balance sheet.

Cash and investments were $15.4 million at year-end.

This is a decline of $3.8 million from the prior quarter.

Cash usage in Q4 primarily reflects investments in workspace and time and labor management inventory, and to a lesser extent, some seller note payments related to several acquisitions that we closed previously.

At December 31, 2018, we had $115.2 million in gross debt.

Total deferred revenue on the balance sheet as of December 31, 2018, including both short- and long-term combined was $12.7 million.

Short-term unbilled deferred revenue representing business that is contracted over the next 12 months but unbilled and off balance sheet ended the fourth quarter at $17.7 million.

Long term or multiyear unbilled deferred revenue beyond the 12-month period was $22 million.

At December 31, 2018, short-term backlog, which we define as a sum of deferred revenue and unbilled deferred revenue within a 12-month horizon, was $29.4 million.

Total backlog, which includes both short and long term, currently exceeds $50 million.

We are pleased with the level of visibility enabled by our focus on recurring cloud revenue.

DSO in Q4 was 66 days, down from 90 days in the year-ago quarter.

Headcount declined sequentially by 9 employees in Q4, bringing our total headcount to 544 as we were able to realize synergies across our organization.

We expect to realize additional synergies as we head into 2019.

Before I turn the call back to Pat, I want to update you on our back-end upgrade activity.

Our NetSuite implementation is on track, and we plan to have the majority of the new ERP capabilities up and running by midyear.

Additionally, our client support will be fully hosted on the AWS cloud platform by mid-2019.

Now I'll turn the call over to Pat.

Pat?

Thanks, Kelyn.

Now I'll discuss guidance and our plans for 2019.

Recall, we updated our guidance in Q1 of 2019, as such we are reiterating our guidance of 2019 of $104 million to $107 million of revenue with non-GAAP EBITDA margin of 22% to 24%, which equates to an EBITDA of $23 million to $25 million.

Looking ahead to the first quarter of 2019, we expect to generate positive cash flow from operations and we also expect to be cash flow positive for the full year.

Please note, that as we've outlined to you, the guidance does not include any contribution from future acquisitions.

We'll revise our guidance after such acquisitions close.

While we have an active pipeline of acquisition targets, we will be opportunistic on this front.

As I mentioned earlier, I don't expect the pace of acquisitions to be similar to that of 2018.

Our primary focus is to absorb these resellers and realize additional efficiencies as we clean up our cost structure.

We enter 2019 with some very solid momentum and are keenly focused on accelerating the velocity of our cross-selling opportunities and scaling out of our business.

We also have plans to hire additional sales reps this year to enable deeper penetration of both our current and new clients.

We tripled the overall business in the last 2 years, while we kept our sales rep headcount growth at less than 20% year-over-year.

At the same time, our productivity per sales rep has been up 23% and 24% over the last 2 years.

We simply didn't have enough feet on the street to drive organic growth.

As we enter 2019, we anticipate hiring about 20 new sales reps through the year.

We'll get them onboarded, trained and productive to reaccelerate our organic growth.

Our focus in '19 is to absorb the recent acquisitions, show margin improvement, experience better cash generation, invest in product improvements and execute on our cross-selling opportunities, while also completing our ERP system overhaul and adding AWS to improve our infrastructure.

Asure will, in turn, benefit from additional scale as we execute both in the near and the long term.

In closing, our current product suite and depth of offerings has never been more robust.

We continue to aim for both top line growth and bottom line leverage.

And with that, we're open for your questions and really appreciate your interest.

Operator?

(Operator Instructions) Our first question comes from Scott Berg with Needham.

This is Josh Reilly on for Scott.

At our conference in January, you discussed the potential per employee per year could be up to $500 over time, or if you take on the full product suite.

Can you discuss some of the drivers to get that number up over the next few years?

And what else needs to be done internally to make that happen?

No.

Thanks, Scott (sic) [Josh].

Yes, in fact, recently we had, I think, a 100-employee company sell for $57,000 annually, which is about $570.

Now what that included was what I'll call the full-meal deal.

It's payroll, it's HR.

It's recruiting.

It's COBRA administration, FSA.

It's even space management.

So really what is needed, and that's what's so exciting about the cross-sell opportunity, is if you have time and attendance, payroll, HR benefits, you really start to walk up to those $500 figures.

Now we don't sell that on every deal.

We still have to make progress, but as we train the sales force and continue with the integration opportunities, we have that kind of potential.

Okay, great.

And then another question from me.

Now that you've been selling the hardware-as-a-solution for a quarter or so here, what's the initial reaction from customers?

Do they prefer to buy it on a subscription basis?

Or do they prefer the one-time sale?

You know, Josh, right now, they love that they have the flexibility to do both.

And we believe that the Hardware-as-a-Service model, it takes the focus less off on the price per device.

And where we really want to focus is on the profitable cloud revenue and the analytics around it.

So when we give people a solution package, it's less about the cost of the hardware, it's more about the driver, which is value in the analytics and the software that they can use -- use our software and get the outcomes that they're looking for.

The other thing, Josh, is sometimes a purchasing of hardware is capital intensive or capital budget.

What clients like is the flexibility to have it as an operating budget as well and to not have such a cash drain, but they could have it, pay for it over time and pay for it when they get the benefit of what we're trying to do.

And in the case of whether it's real estate management, where we can drive their cost of ownership in half in some cases, that's pretty exciting for them to not have to have a huge cash outlay.

So we're seeing success in that area.

We've spent some money on inventory and we've got the -- a hardware refresh for those reasons and we're pretty excited about some of the possibilities going forward.

With Hardware-as-a-Service from a modeling perspective, I'll remind you that that's repetitive in nature, which will drive us -- growth for future years and future quarters.

And our next question comes from David Hynes with Canaccord.

Sorry for the background noise.

Pat, obviously, your headline numbers were really strong.

I wanted to ask about revenue composition.

Subscription cloud revenue declined sequentially and hardware was particularly strong in the quarter.

Can you touch on what happened with cloud?

Or what drove the sequential decline?

And then on the hardware side, was that somewhat of a function of kind of catch-up from -- we've talked about elongated decision cycles with the acquisition.

In the past, was there some catch-up in the quarter?

How should we think about that going forward?

David, thanks for the question, this is Kelyn.

So really what impacted Q4 is that we had made the acquisition of OccupEye back in April of 2018 and there was some misclassifications in Q2 and Q3 between professional services and hardware and cloud.

So cloud was a little overstated in Q2 and Q3.

We did a catch-up entry in Q4 to get it aligned in the proper revenue category.

So if you were to normalize that and apply it retroactively to Q2 and Q3, cloud revenue would have been up sequentially about 2%.

Okay.

Got it.

That's helpful.

And David -- David, just going forward to the second part of your question from elongating sales cycles, we did benefit a little bit from elongated sales cycles in the third quarter.

But -- and our pipeline, which is up 4x, is continuing strong.

We've gotten the nod on some pretty good deals.

And we believe that, that'll continue to bear fruit in 2019 now those are -- with the HaaS model and with the cloud model, those are repetitive by nature so that blended over time.

But we feel that we're working through what we had as far as the acquisition integration kind of build-up, we're working through that in 2018 and '19 for the first half of the year.

So we feel good about our pipeline.

Got it.

Makes sense.

Maybe a follow-up, can you update us on kind of what you're seeing in terms of cross-sell execution and initiatives going forward?

Obviously, the plans to hire 20 reps in '19 is exciting.

I assume that there will be focus there, but maybe you could help me think about that?

And then, you now have a new COO in the seat.

Maybe talk about kind of what directives are from an operations perspective?

Yes.

First, I'll take the operations perspective.

Rhonda is focused on really -- we have a model where we're centralizing some of the back-office functions around banking, ACH.

One of the things that we talked about -- and even investing the cash is far as tax float.

Operationally, how do we drive that?

And then how do we drive, obviously, AWS and really centralize that part of the model.

So -- and then what Rhonda is doing is now that we have these businesses across United States, kind of implementing best-in-class metrics around whether it's pricing, whether it's clients served, whether it's how many people have the knowledge base, for phone calls what's the response time, et cetera.

And coming from HP and coming from an entrepreneurial background, that's what she's focused, is harmonizing on a kind of an Asure Software level of service across the country and then across the globe.

As far as cross-sell initiatives, we had our sales kickoff, and then we have our national client conference or global client conference here in June.

And really the focus is on the whole package, but what I would say, in space management, it's really around the analytics, around integrating the hardware, software and the sensors.

We feel that there is tremendous value there.

And then in human capital management, how do we cross-sell time, HR, payroll, et cetera, across the suite?

And the folks are getting trained up on that.

Of the 20 sales reps, approximately 12 or 60% will go to the base and really focus on a lot of those cross-sell initiatives.

And then as far as progress, we had some good starts in the first quarter of some cross-sell initiatives that were done in '18.

And we continue to build on that throughout the year with the client conference being a big stake in the ground where we're exposing our clients to not only the thought leadership within Asure, but all the products and services on display for them.

Our next question comes from Derrick Wood with Cowen and Company.

Pat, I wanted to get a sense to kind of what factors are going to drive reaccelerated organic growth?

Clearly, hiring sales reps is going to be a big driver.

So can you give us a sense how that progresses through the year?

Where you are in Q1 so far?

And then when you think about -- there's a lot of moving parts in the model that shift to subscription at workspace and more of a land-and-expand motion.

So when do you see these factors normalizing out in the model and kind of progressing to improve the organic growth?

Yes.

First of all, in space -- and you know if you think about it, if I step back on organic growth, we were a $36 million company two years ago.

We finished this year about $89 million.

I haven't done the math on that, but that's probably 250%.

We've grown our salesforce only 20% during that time or less than 20% per year.

So we have sold well, because our productivity has been in the 20s with the sales rep productivity, which I think is a great stat.

We just simply didn't have enough salespeople.

Now when I look at the acquisition in space, specifically, our cloud revenue is up 10% or so.

So we're starting to get organic growth.

I think it will accelerate, given the hardware initiatives and the next-generation initiatives as well as the focus on analytics.

So it's about having amount of reps as well as the product cycles, which are coming into place.

Now that will be offset somewhat, but because of the repetitive nature of the Hardware-as-a-Service.

In HCM, really the focus now has been on hiring those reps.

We have 55 or so today.

So we're about 1/4 of the way through.

We'll continue to add those sales reps.

And then from a product cycle, we're coming out with new HR products, benefit products, integration.

So we feel, by the second half of the year, we add the appropriate sales reps, we have the product lines that are starting to hit the beach, a refreshed hardware portfolio.

Now we're in a position to continue to grow.

But again, with 80%-plus repetitive revenue, that happens over time.

And -- so that's been our focus.

And simply put, we're very happy with the scale.

Now the focus will be kind of get efficient and then start to grow organically and then continue the acquisition strategy but continue it at a more measure pace.

Okay, great color.

And Kelyn, can you give us some color around on what you're thinking on cash flow or it sounds like positive cash flow is the target for this year.

What are the levers that are going to improve that from 2018?

Well, I think -- and this is not in any kind of stacked rank.

But I think, what you're going to see is, as we bring up our infrastructure, we move to AWS, you're going to start to see more the synergies or more -- the one-times are going to diminish over 2019, as we move through these projects, which is a savings of cash and get those up.

We do have a plan to start investing our client funds.

And if we, on average, have $85 million to $100 million in client funds, and we're getting a 2.25% to 2.5% kind of interest rate although I've not modeled a lot of that into the -- into our forecast, because it will be gradually laid out like, I want to say, we're in 11 banks.

We have 60 accounts, and so it's taking time to kind of consolidate that and move that out.

But I would say that, it's really the harmonization the cost reductions in our HCM business as well as getting these 2 infrastructure projects up and to stop spending cash on it.

Our next question comes from Eric Martinuzzi with Lake Street.

First question is on the Q1.

Seasonally, you guys would see a step up just in the revenue line from Q4 to Q1, basically, sort of year-end related or start of year related.

You had the acquisition of Payroll Maxx in January, and I'm wondering if that is -- is that trend -- first of all, does it hold true?

And second of all, might it be more accentuated because of the acquisition?

We see -- I would think, Eric, that -- I would expect a couple of million step-up from Q4.

And we -- for a guide into Q1, I don't want to go too deep into the quarters, but that's how I would see it.

So I do think there is a seasonal step-up as well.

But also realizing, to add to that, Q1 seasonally has our highest churn.

That churn gets disguised, right, by the one-time effect of W-2s and ACA.

Okay.

And then also a model-related -- the second question is model rated as well.

The -- given the seasonality of the revenue as well as the, I guess, the other moving part of the efficiency that you're driving the business.

Should we be anticipating, you've given us an EBITDA for the year and this, say, 22% to 24%, is that -- does that stair-step kind of sequentially throughout the year on the margin?

If we guide a little bit towards, call it, 5.5% first quarter or so, we're not a million miles away from a hockey stick or anything.

It's more kind of a more flattish to slight uptick over the year.

(Operator Instructions) Our next question comes from Jeremy Hamblin with Dougherty & Company.

I wanted to ask a couple of questions here on the expense side of the equation.

So you saw a fairly significant jump in SG&A Q4.

And in addition, we saw a pretty significant jump in stock comp, more than double what you've seen in any of the quarters in the rest of '18.

Can you just discuss the kind of dynamics behind those 2 items?

And why we saw such an increase, given that there wasn't such a significant increase on the revenue side?

So on the stock comp expense, you know that we had issued additional kind of shares.

We were pretty low penetration within options and RSUs in the company.

So as I had indicated at some of my analyst meetings that we should expect to see stock comp grow.

Especially, as you think about the new talent that we're bringing into the company.

It's an important part of our recruiting tool.

So therefore, you're going to continue to see stock comp go up.

As for SG&A, a lot of that has to do with -- we're driving harmonization from the acquisitions that we -- that before, some times you have to spend a little bit more to actually drive the savings 3 to 6, 9 months out from there.

And I'm just trying to think if there was anything really unusual in that -- oh, I think in the SG&A also, we had accelerators on stock comp.

And so therefore, stock comp came in above.

I think commission.

Excuse me, commissions came in higher than what we were forecasting and -- which is always a good thing.

Okay.

So on the stock-based comp, should we be thinking that this, let's say, $800,000 level, that kind of is going to be the normalized quarterly run rate here in '19?

You know what, I would say, in the near term that's probably a good assessment.

And then if I see something changing, I'll certainly let you know.

Okay.

And then remind me again, so what is the change then in headcount associated with that?

The change in headcount, we actually were down a little bit in the quarter.

I think really from a recruiting vehicle and a commitment, our stock comp has trailed many of the best-in-class companies.

We are recruiting and upgrading talent and leveling up in a number of different areas.

And so with that, part of our offering is stock comp and restricted stock.

So we've had that philosophy at the board level as well as the management level.

And so really, it's attracting best-in-class talent around a $100 million company that has big aspirations.

It's nothing more than that.

Got you.

And then I wanted to -- you mentioned that -- where the gross debt and cash balances stood post the deal in January.

Could you just -- I didn't catch it.

I didn't get it in my model here quick?

We actually did not disclose that.

We actually disclosed what the gross debt at 115.4, I think, it was, at 12/31.

And then if you refer back to the Payroll Maxx press release, we talk about with the amendment of the Wells Fargo, Goldman data arrangement, that we pulled an additional $8 million down on the delayed, the DDT.

And then also, there would be a seller's note component, but that would all be coming in the first quarter results.

Okay.

So roughly about $125 million on a gross basis?

Roughly.

Okay.

All right.

And then the last thing was, just your deferred revenues, which I think you tend to suggest looking at on an annual basis, that did track down on a year-over-year basis from like little over $13 million to just under $12 million and down sequentially as well.

Can you just provide a little color on that?

So one of the things, as you know, we've been going through 2018 and still in the first half of this year, of really cleaning up the accounting data that -- from these multiple acquisitions.

If you think about how many we've acquired, some 18 in the last 2 years and a quarter.

And so as we work through the deferred revenue schedules, we found where there was some revenue that was just kind of hung up, and so therefore, it wasn't a lot, but we were able to recognize that.

That related to prior years.

And our next question comes from Vincent Colicchio with Barrington Research.

Yes, Pat, I know last quarter your results came a little bit short at your cross-sell program.

I know it's not your major focus right now, but how did it perform versus expectations?

We finished the year really right on about expectations.

We were delayed a little bit, I would say, a quarter or 2 in the middle part of the year.

We're really, I think, in 2019, we're pretty excited about the pipeline, which is up.

We're also pretty excited about the products' scale and kind of where we fit within the product lifecycle.

So we have a complete hardware refresh, which would also drive some of the cloud revenue.

We're off to a pretty good start here in the first quarter.

So we feel we have people scaled up, ready to go, and we feel pretty good about the cross-sell initiative.

Our client conference, early sign-ups are really high, that's always a good momentum builder for us, in June this year.

And so I think the sales leadership team has been in place now for a couple of years and the combination of product, the acquisitions, the additional heads and the trained sales force will, I think, bode well for the future in 2019, for us.

And Kelyn, you had mentioned that the NetSuite was -- most of it was on track.

I'm wondering if there was any challenges with any particular areas that you didn't mention?

And then if you can give us an update on the business intelligence systems you're putting in place?

Okay, absolutely.

So no real surprises.

I think the one thing that got us a little delayed was around the consultants that we were utilizing to help us put it in.

We expect to have the bulk of it up by midyear.

And in fact, I'm hopeful that I might even be able to do the consolidation of the Q1 results in NetSuite.

We will see a little rollout of some additional functionality in Q3, but for the most part, we should be kind of stood up by midyear.

And just to note, Kelyn's sometimes too modest, but she's implemented Domo across our sales force and general ledger packages.

And we feel really good about the reporting that we're starting to get out of the system.

And I think that's been an enhancement that's helped the business analytics within the company, both getting ready for a call like this, but also really understanding the business and the multiple acquisitions we made.

I would say, the only others -- we use Domo for analytics.

You're asking about the other.

And we also selected Vena, which is our FP&A planning tool.

One last question, Kelyn.

You mentioned the gross margin level for the next 2 quarters.

Could you help us -- what should we target for the year?

Maybe a range?

Right now, to be on the conservative side, given the mix of the HCM revenue and the fact that we are in the middle of a play on harmonization and consolidating all the back office, I would use that 64% to 66%.

And that takes in too the impact also that HaaS might have on us.

I'm not showing any further questions at this time.

I would now like to turn the call back over to Pat Goepel for any closing remarks.

I really appreciate your time on the call.

We -- we're sorry we started a little bit late.

Given that we started a little bit late, really, really appreciate your time.

It was a glitch that unfortunately we could not control.

I think in closing, we had a really strong fourth quarter.

Some of the kind of pipeline is starting to come into fruition and over the next year, we think we're going to be off to a strong start.

And our focus is resolute and we look forward to see you on future calls.

Thanks for your time today.

Ladies and gentlemen, thank you for participating in today's conference.

This does conclude today's program, and you may all disconnect.

Everyone, have a wonderful day.