Paycom Software Inc (PAYC) 2014 Q1 法說會逐字稿

Good afternoon, and welcome to the Paycom first-quarter FY14 results teleconference.

(Operator Instructions)

Please also note, today's event is being recorded. I would now like to turn the conference call over to Mr. Craig Boelte, Chief Financial Officer of Paycom. Mr. Boelte, you may begin.

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, since the statements are based on our current expectations and are subject to risks and uncertainties. These risks and uncertainties are discussed in our final prospectus filed with the SEC on April 15, 2014. You should refer to, and consider these factors when relying on such forward-looking information. We do not undertake and expressly disclaim any obligation to update or alter these 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 schedule showing GAAP versus non-GAAP results is currently available in our press release that we issued after the close of the market today, which is located on our website at www.paycom.com. that we issued after the close of the market today which is located on our website at, www.paycom.com.

I will turn the call over to Mr. Chad Richison, Paycom's President and Chief Executive Officer. Chad?

Thanks, Craig. I would like to welcome everyone to our first quarterly conference call as a public company, following our initial public offering, which priced on April 14.

Here at Paycom, we are very confident in our future, and it is personally satisfying to see the software-as-a service technology company that I founded in 1998, expand from payroll solutions in the cloud to an end-to-end human capital management suite. Today we are the only human capital management Company with a single database end-to-end product in the market.

We capture employee data from the applicant, all the way to retirement and everything in between, providing functionality and talent acquisition, time and labor, comprehensive payroll, talent management, and human resources. All the functionality is included in one application, which eliminates the need for integration with other systems, making it easy to use and more efficient to manage. Because the data is in one place, it is accurate, trusted, and highly impactful.

While others claim to manage the entire employment life cycle, they are often dependent upon on partners, and rarely provide the full-service payroll function that is mission-critical to facilitate the employment life cycle. At Paycom, we truly have a single end-to-end offering.

Now before we dive into the results, I would like to thank our employees. Many of this group are also investors in our Company. I would also to thank our clients, our investors, and our advisors, who were essential to getting us here. I would also like to welcome the many new investors we met during our road show. We look forward to continued conversation with you over these years.

I will begin today's call with highlights from the first quarter, and since this is our first quarter as a public company, I will spend a little more time than usual introducing you to Paycom. I will then turn the call over to Craig to walk through our financial results in greater detail, and provide you with our second-quarter and full-year outlook. I will then outline some of our key initiatives for 2014, before turning it over to the operator for your questions.

So let's dig into the first quarter. We continued our solid momentum in the first quarter with a 34% increase in total revenue to $37 million, approximately 99% of which was recurring revenue. Annualized new recurring revenue, which is an estimate of the annualized amount of the first full month of new client revenue, increased to a record of nearly $12.6 million in the first quarter, up from roughly $9.6 million for the same quarter last year.

This was a very busy quarter as well for our technology team. In addition to growing our technical headcount by 61% since the end of 2013, the bulk of which are programmers and developers, we launched several new applications and enhancements, including a new survey tool; and enhanced employee self-service features, including mobile.

We also launched a new data analytics tool called Paycom Report Center, which we are also very excited about. Paycom Survey is the newly-launched product that touches every user in an organization from top down, or from C suite to the employee. In a matter of minutes, an HR administrator can create an employee survey with just a few clicks, push out the survey to get a pulse of the workforce. This solution is built from a single database, and can be used in conjunction with our deep analytics and reporting tools to gain valuable insight into manager performance, employee on-boarding and departure trends.

During the first quarter, we completed our employee self-service redesign, which includes responsive coding that dynamically adapts to any screen resolution that the employee may be using. This is truly a consumerized user interface that effectively right-sizes the content to fit the device or screen that employees use on a daily basis, whether on a tablet, a smartphone, a laptop, or a high-definition monitor. This is just another example of how we build technology with the end user as our starting point. This redesign makes engaging with data and analytics even more user-friendly than it already was, and provides a crisp, clean view of our solutions. We are receiving overwhelmingly positive feedback from employees and managers who use our platform as their daily communication portal.

Included in the redesign, we also added a new employee self-service feature called employee directory, which allows real-time access of all employee information as defined by HR policies. Employees love this, because there is one less browser and one less database to log into. It puts all relevant, accurate, and secure information at their fingertips.

We launched most of our redesign in the first quarter, and already we are seeing a change in behavior and usage. Employee login frequency is up 170% year over year, and employees are now engaging with our products three to five times more than they used to.

And finally, we launched Paycom's multi-client code development. This feature is particularly useful for our larger clients and enterprises that have employees spread across separate business entities and tax identification numbers. If an employee transfers from one entity to another, companies traditionally had to transfer their records and tax codes. With Paycom's single database architecture, information now moves seamlessly when transferring employees, which maintains the integrity of the tax and compliance reporting chain. I am very pleased our clients are pulling our technology development teams deeper into the product suite, and strengthening our competitive position in the market.

Due to increased demand, we expanded our geographic footprint ahead of our expectations, opening five new sales offices in Baltimore, Indianapolis, Philadelphia, Portland, and Silicon Valley. We now have 31 sales teams in 30 offices around the country, with coverage in 25 of the 50 largest MSAs in the United States. As we have seen with our newly opened offices, we expect to see meaningful contributions from these locations as the year progresses. As a reminder, we typically seed our new offices with experienced sales managers, which makes the ramp-up to revenue more efficient. And as I will get into later, we are seeing that the strong demand for our technology is making it even easier to sell, as well as expand in the new geographies.

Craig will speak to our financial performance in more detail later on the call, but needless to say, I believe we are off to a very good start as a public company, and I am excited about our growth opportunity. Since this is our first call as a public company, I want to take a few extra minutes to provide additional background on Paycom, and describe our technology, our opportunity, and our growth drivers.

I founded Paycom in 1998, with the vision of transforming the payroll and human resources industry with an automated software-as-a-service solution, that included not only the functionality, but the added benefit of real-time reporting and analytics. Paycom is the only SaaS HCM provider offering a single database platform for the entire employment life cycle. It is a key differentiator that sets us apart from other players in this space. We are disrupting a large and growing HCM market.

At our core, we are a technology company, with deep roots in SaaS architecture. Our comprehensive solution was developed on a massive single database architecture in the cloud, to solve the data integrity dilemma faced by many businesses. With Paycom, an individual's information exists only one time and in one location. And because our solution is built to manage the entire employment life cycle, which includes comprehensive payroll and tax reporting, there isn't a need to integrate with another database. Because our applications span the entire employment life cycle, our clients can streamline the full range of employment processes, from recruiting and hiring, through termination or retirement, and everything in between.

While our single instance multi-tenant SaaS solution is fully scalable across all clients of all sizes, we derive 86% of our revenue from businesses which have between 50 to 2,000 employees. Without Paycom, these businesses are forced to integrate and patch together multiple products and databases to complete the entire employment life cycle, leaving them with data integrity issues and decreased usage.

While we believe we have the most comprehensive solution in the market, we are continuously innovating and expanding our SaaS solution to meet the evolving demands of our clients. Our internal and proprietary development process is 100% focused on the end user, from the front-line employee to the reporting and analytical requirements of the C suite. Based on client feedback, sales team input, and proactive innovation analysis, our R&D group assesses best-of-breed functionality, and then performs a rigorous development process and quality specifications. Once approved, our developer teams can turn the high-quality new applications around very efficiently. Our SaaS solution and single database uses standardized development processes which allows us to ramp up valuable technology talent very quickly as well.

While we are a technology company first, we have been very successful at turning our sales organization into a key competitive strength. Our go-to-market approach is built on two core principles. Number one, ensuring we are targeting companies that have a high probability of becoming long-term customers with high upsell potential. Number two, ensuring we have the right sales reps and the right sales leaders selling the Paycom way. We have developed our sales processes internally, and we use our proprietary CRM to manage sales activity and deal flow. We have deliberately developed a sales recruiting, sales training, and sales production process that is not dependent upon any third party.

We traditionally promote from within, and have a very low turnover amongst those reps who have achieved what we call executive rep status. We also have a dedicated team of client specialists that provide personalized one-to-one client support. They work hand-in-hand with our sales professionals to ensure seamless implementation, as the client switches over to, and deepens use of, our solution. These efforts, combined with our industry-leading SaaS solution helps us maintain a high annual revenue retention rate, which over the past few years has been consistently 91%.

So in summary, this is a very exciting time for Paycom. It is just the beginning, really, and we are bringing enterprise class solutions to the small and medium business market in a profitable and efficient way. We have multiple vectors to drive sustainable growth, and we will remain focused on developing new products and features that our clients want. We will continue to increase our penetration within our existing markets, add new clients and enter new geographies. There is a tremendous whitespace opportunity ahead of us, and we will continue to strategically meet the market demand with our disciplined approach.

Now let me stop there, and turn the call over to Craig to walk through our financial results.

Thanks, Chad.

I would also like to reiterate how pleased we are with the Company's performance in the first quarter. I will review our first quarter financial results, as well as our guidance for the second quarter and full year 2014 in detail in a moment. Before doing so, I want to quickly review a few key elements of our financial model, as this is our first quarter as a public company. One of the attractive characteristics of our business is that approximately 99% of our revenues are recurring revenues, based on fees clients pay us for our talent acquisition, time and labor management, payroll, talent management and HR management applications.

The services related to recurring revenues are rendered during each client's payroll period, with the agreed-upon fee being charged and collected, as part of our processing of the client's payroll. Collectability is reasonably assured, as the fees are collected through an automated clearinghouse, or a direct wire transfer as part of the client's payroll cycle.

Because of the recurring nature of our SaaS-based business and high retention rate, we have excellent visibility. We charge implementation fees for the deployment of our solution, and generate other revenue as part of our time and attendant services. Implementation revenues are recorded as deferred revenues, and recognized over the life of the client, which is estimated to be 10 years. Because this is a cloud-based SaaS model, we enjoy high gross margins of roughly 80%, with cost of sales largely consisting of hosting and support costs for our applications, along with employee-related expenses for client support, delivery, and bank charges.

We operate our own data centers, and have been consistently benefiting from scale advantages to drive leverage. We [can] pay commissions to our sales reps, based solely on new sales at the time of their first monthly billing cycle. This is a one-time commission paid, which we recoup over the life of the client relationship. While the impact of rapid growth puts near-term pressure from the sales and marketing expense line, this is more than offset over the long term, given the predictable recurring nature of our client relationships.

With this background in mind, let's review our results for the first quarter. As a reminder, as I review our fiscal first-quarter results and our outlook for the second quarter and 2014, my comments related to certain financial measures, including adjusted EBITDA and net income, are on a non-GAAP basis, which excludes stock-based compensation and other nonrecurring charges including transaction expenses related to the initial public offering.

Total revenue in the first quarter of 2014 grew to a record $37 million, an increase of 34.1%, compared to the same period last year. Within total revenue, recurring revenue was $36.5 million, representing 98.6% of our revenue, and growing 34% year over year. Implementation and other revenue of $0.5 million was up 42.4% over the prior-year period. As a reminder, the first quarter is a seasonally strong quarter due to annual tax form filings.

Annualized new recurring revenue or ANRR, a key performance indicator for us, was $12.6 million, up from $9.6 million in the same period last year. The strong growth that we saw in total revenue and annualized new recurring revenue was driven by accelerated growth of new clients, an increasing average revenue per client, as we continue to move upstream to larger clients.

Our solid results are being bolstered by success of our sales force, in adding new clients in our mature offices, which are offices that have been open for at least 24 months; adding new clients in our more recently opened sales offices; and selling additional applications to existing clients. Total gross profit for the first quarter was $30.1 million, representing a gross margin of 81.3%. This compares to gross margin of 82.4% in the prior-year period. The year-over-year decline in gross margin was largely a timing issue related to investments in headcount to support our growth.

Turning to operating expenses, total administrative expenses of $26.9 million increased 56.6% year over year as we continue to invest ahead of our growth opportunity by adding new sales offices, adding to our R&D talent, and incremental costs of being a public company. As Chad highlighted in his remarks, we increased our technical staff by 61% since the end of 2013. Adjusted EBITDA was $6.6 million or 17.7% of revenue, compared to $8.2 million or 29.6% of revenue in the first quarter of 2013. The decrease in adjusted EBITDA was primarily due to increased investment to support our growth, including sales commissions, new office openings, and increased headcount.

We are pleased that we opened five new offices in the first quarter, more than we have in any prior year, and setting us up well for continued growth in 2014 and beyond. Non-GAAP net income was $1.6 million or $0.03 per diluted share based on 48.4 million shares, versus $2.4 million or $0.05 per diluted share based on 47.9 million shares in the year-ago period.

Turning to the balance sheet, we ended the quarter with cash equivalents of $13.1 million and debt of $86.3 million. In April, we successfully completed our IPO, raising $64.3 million. In concurrence with the IPO, we repaid $65 million of debt, leaving our only outstanding debt relating to our Oklahoma City headquarters and data center facility.

With that, let me turn to guidance for the second quarter, and for FY14. With the second quarter, we expect total revenue in the range of $31 million to $32 million, representing a growth rate of 31.8% at the midpoint. We expect adjusted EBITDA in the range of $4 million to $5 million, representing an EBITDA margin of 14.3% at the midpoint. Excluded from our non-GAAP adjusted EBITDA outlook for Q2, are stock-based compensation of $0.1 million, transaction expenses of $0.3 million, and a one-time adjustment of $4.1 million related to the early payoff of our debt.

For FY14, we expect total revenue to be between $139 million to $142 million, or 30.6% year-over-year growth at the midpoint. We expect adjusted EBITDA in the range of $19 million to $22 million, representing an EBITDA margin of 14.6% at the midpoint. Excluded from our non-GAAP adjusted EBITDA outlook for FY14 are stock-based compensation of $0.4 million, transaction expenses of $1.1 million, and a one-time adjustment of $4.1 million related to the early payoff of our debt.

In summary, we are seeing very strong demand for our solutions, and we plan to continue to invest in the areas of R&D, and sales and marketing, to fuel our high recurring revenue growth, while at the same time delivering attractive profitability.

With that, I would like to turn it back to Chad

Thanks, Craig.

As you can see, we are very excited about the future of Paycom, and have high expectations. Before we open it up for questions, I want to lay out three key initiatives for driving continued profitable growth in 2014.

First, we will continue to invest in our industry-leading SaaS solution. Our internal technology capabilities and product development are second to none, and we will continue to go deeper into the product suite throughout the year. We look forward to consistently adding new functionality, like the recent survey tool and mobile employee self-service and reporting modules.

Second, we will continue to invest in our people, attracting new talent and getting them up to speed the Paycom way is critical to our long-term success. We have been very successful in this regard, and expect to continue to add to our deep bench of R&D and sales teams. Finally, our sales office growth strategy is working, and we are confident this is the right go-to-market model. We added five cities in the first quarter because the demand was there, and we were able to attract the talent we needed to act quickly. We will continue to opportunistically add new offices as the sales talent and market conditions demand.

Just to give you a little more perspective, we had planned on opening three new offices in the first quarter of this year, and one more in the remainder of the year. We exceeded our internal goals, and opened five new offices, because what we are finding is that the demand for our product is exceeding our expectations. At the same time, we are getting better at developing our sales talent, and they are ramping up to productivity faster. Our value proposition is resonating with businesses, as they experience the benefits of our single database solution.

As important as SaaS is, it is not a standalone solution. The product has to be differentiated. Paycom's key differentiator is that our SaaS solution uses a single database to provide all functionality included, eliminating the need to patch together multiple solutions, which allows a business to turn what was disparate data into actionable information. Because of that, we are winning our clients over, and they are changing the nature of their employee communications and processes.

We really appreciate your interest in the Paycom story, and this is just the beginning. Paycom is off to a great start as a public company. We are excited about our current growth prospects and the opportunity for our Company in the coming years. I believe we are well-positioned to sustain and build upon the positive business momentum we have well into the future.

With that, I would like to turn the call back to the operator, and open up the lines to take any questions.

(Operator Instructions)

And our first question comes from Raimo Lenschow from Barclays. Please go ahead with your question.

Hello. Thank you, and congratulations to your first quarter as a public company.

A couple of questions for me. First, can you talk a little bit about the mix this quarter between payroll and non-payroll? And talk, Chad, maybe talk a bit about the opportunity, like obviously at the moment the majority of the business is through the payroll. But as you kind of roll out new businesses like you mentioned this quarter with the surveying business, how does it work in terms of kind of monetizing that? And how do we -- you see that market versus the payroll market in terms of [investment] opportunity?

All right. Well, first Raimo, thanks for congratulating us, and we are looking forward to this. So to answer your question, payroll is the core of any business function as you look at it. So 100% of all the companies that we work with, they do have our payroll offering. Over the years, payroll has represented a smaller percent of the overall, it's starting to -- even though we have clients that do --100% of all of our clients to have the payroll offering, we have done a good job at developing out the entire employment lifecycle. So in answer to your question, I believe that payroll -- we will continue to see growth in the payroll side. But the other offerings, the popularity that we have had in the other offerings are going to continue to grow as well.

Okay. And then like, on the investment side for the year, so obviously you over-achieved in Q1. How do we have to think about it? What triggers extra spending versus non-extra spending if I think about the rest of the year? And how do you do think about this new offering: offices, do you do them at the beginning of the year, and then the rest of the year is nothing -- you just let them go live and start performing? And then you do the next thing the next year or? Help us understand the process that goes on at Paycom there?

All right. And so, from the sales -- it looks like there was a couple of questions there. I am going to take the first one. But as far as the sales office openings, we have traditionally had a lot of success, starting these in the beginning of the year, just because they are able to ramp up by the end of the year, and you are able to get staffed.

We do onboard several clients, even though it is well-distributed throughout the year, we do onboard for several clients as well as in January. And so, we like to get those onboarded, and not really open up offices potentially at the first of a quarter.

What happened in this -- at the first of the year, we saw some large opportunities. I mean, we have had increased demand for our products in certain areas, and we actually had the staff that was in a good position, that we could actually promote into these new positions. And so, we captured that opportunity due to the demand that we had for our software.

So the way -- in a way, as I think about it, so two things -- the two things basically came together, which doesn't really -- what happened, like so you had the right people and the right city, and just the two of them came together. So it would be silly not to use it, is that the way to think about it? Yes?

Yes, that is correct, and we are always going to look at the opportunity that way. For us anyway, the larger that we become as a technology company, as well as a sales organization, over time you have more technology to sell. So you do have a lot more pull for your product, as well as you have a deeper bench of future leaders. And so, over time it becomes -- it's never easy, but it does become easier for us to open up additional offices.

Yes. Okay, perfect, thank you. And then one last question from me, like maybe it is more for Craig, or actually maybe for both of you. If I compare Paycom with other companies, I mean you are using option for employees a lot less than the others, a lot less. Can you talk a little bit about why that is, and how are you incentivizing your people?

Could you restate that question, Raimo? (Multiple Speakers).

Yes. So, I was trying to say, like if you look at Paycom, and you look at how extensively you use options -- while actually you are not using options to your employees extensively, if I look at the charge that you have, compared to other technology companies coming out of the Valley. Like can you talk a little bit about how you motivate the people? I mean, a lot of these other companies say, I need to give out options to keep the employees happy, et cetera? What is your thinking behind that and how are you doing it?

Okay, I will take that one, Chad.

All right, go ahead.

Raimo, what we have done, is we have probably 200 to 300 employees that are actual owners of the Company through the -- through our options plan. Prior to our reorganization on January 1, we were an LLC, and we were able to use incentive units to incite -- incent the employees. So our valuation of those was significantly less, and as part of the conversion on January 1, they are still owners in the Company, but our comp charge was significantly less. As we move forward, we will continue to put plans in place to incent our people and keep them involved.

Okay. Thank you.

Our next question comes from Sterling Auty from JPMorgan. Please go ahead with your question.

Yes. Thanks. Hello.

Hello, how are you doing, Sterling?

Good, good. Just two questions, one to start with, the 61% increase in the technical people, are all of those being accounted for inside of R&D? And I want to make sure that I heard correct, I want to understand kind of where your allocating that talent to today? And maybe the follow on to that is, have you hired what you want to hire in the technical area for 2014, or is there still more investment to come?

I will take the first part of that question, Sterling. Part of our R&D is capitalized as self-developed software. What you are seeing on the income statement isn't the full amount of the R&D spend.

So, then I will turn it over to Chad.

Right. And so, we increased our technical headcount by 61% this quarter, and these are programmers, developers, and what we call QA, as well as product development. All of our development, most all of our development, and definitely what this group coming in will be working on, it is all future development. It is not maintenance of the product. And so, we have a lot of plans to continue to bring our SaaS technology to the market, and we have some ambitious items that we like to go ahead and get completed, as well. And so, as the opportunity presents itself in the future, we will continue to grow our R&D staff.

Then my follow up question is, when you look at that 50 -- your core market where you have got 86% of your customers currently. Yet some of the larger players obviously aren't standing still. I think they are investing in SaaS-related solutions also. Where do you think you are, in terms of the head start that you have got on them, and the investment that you are making? Is this going to be enough to kind of sustain that lead?

Well, that's a good question. I cannot speak for the others. I think you do have companies that are around, that are actually trying to -- they are actually in the process of converting to SaaS. This is a very serious industry that we are in, and we are really in an industry where -- if you are 99.9% accurate, you get an F. And so, everything really has to be locked up. So we will continue to spend on the R&D side as we need to, and we have attracted a lot more research and development talent over the last year.

Got you. Thank you.

Our next question comes from Richard Davis from Canaccord. Please go ahead with your question.

Hello, thanks very much. You talked about it at a high level before, but who and what percentages are you replacing incumbent vendors? Who do see the most? And I am sure we will be asking you this over the quarters and years, as we go along to see how that evolves.

All right. Well, most of the time, the overwhelming majority of the time, we are replacing an incumbent provider. And most of the time they have one or two -- well, most of the time, at least one or two databases on the small end that we are replacing. As you move further up market, it could be three or more. Obviously, the largest legacy providers are the ones that we are going to run into the most, and we continue to have a lot of success competing against both them and others.

No names? (Laughter). Well, that's all right. I understand who they are. That's fine. I was just teasing you. And then, one other question that sometimes I get is, is having a single database one of the key differentiating? Is that the most important reason that I pick your guys in a competitive bake-off? Or I mean, obviously it depends on the customer, et cetera. But is that the plurality of the reasoning behind me, as a potential customer choosing you guys?

Yes, I think it is really what the single database provides on the backend. So it is really about the functionality and experience you can have with this single database. So that you are not -- you do not have the need to integrate or patch together multiple systems to actually use your data, which we actually turn into information.

Got it. Great. Thank you so much.

Thank you.

And our next question comes from Brad Reback from Stifel. Please go ahead with your question.

Hello, how are you?

Hello, Brad.

Craig, I think you mentioned during the prepared remarks that you have had success moving up market with some of your more recent customer additions. Could you maybe give us some sense, if you look at the average customer that you acquired here in the first quarter, versus what the average customer looked like a year ago or two years ago, from where they are starting, and how much up market you have been able to go? Thanks.

Our average customer count is trending the way it has been trending for years now, which it continues to trend up. And this is, Chad by the way. (Multiple Speakers).

Yes, Chad, I am sorry, not average customer count, but the size; the average customer size, what that customer looks like today, versus what the customer looked like two years ago? Are you getting bigger customers?

Yes, we are. Our actual employee size per customer continues to trend up. 50 to 2,000 employees is a broad range, and there is a lot of opportunity for us to capture in that range. And really that is the market segment that is highly dependent upon the information, and we have a very strong value proposition for them.

Okay. Thanks a lot.

Yes, thank you.

(Operator Instructions)

Our next question comes from Brendan Barnicle from Pacific Crest Securities. Please go ahead with your question.

Thanks so much. Chad, just following on a bit on Brad's comment. One of the things we heard from other companies this quarter was some difficulty in closing larger transactions. We saw some of them get delayed and pushed out a little bit. I am wondering if you saw any of that in yours? I am not sure that the ones we heard about were in the size range. It might have been quite a bit larger. But was wondering if you saw any changes in that -- the characteristics of closing some of your larger deals?

Thanks for the question. And no, Brendan, we have not seen any changes in that. As we reported, our ANRR for this first quarter was a record for us, and a lot of that has to do with our ability to close businesses right in our wheelhouse.

Terrific. And then, you continue to build out the sales force, and go city by city. And I was wondering how sales hiring was? That was another thing we have heard this quarter from many companies, is sort of some challenges in getting all the hiring they wanted done. I was wondering how that looked for you through the quarter?

Well, thanks for the question. This quarter, we actually exceeded our sales office opening expectations, with actually being able to open five. And a lot of that was due to the demand for our technology, but also our ability to find and source candidates to actually come and work for us. And so, we have not experienced any problem with finding talent.

And in terms of the sales talent, are you still sourcing that primarily from some of the -- some of your competitors who have -- are kind of larger and slower, or are there some new sources?

Right. And so, we do not traditionally hire from competitors. But that said, we are going to remain open to anyone that is talented in the sales process, and wants to actually come work for Paycom, and do things the Paycom way. We are always open to those individuals.

Great. Thanks so much.

Thank you. All right. Well, I want -- I'm sorry, go ahead. Yes, any other questions?

Sir, at this time, I am showing no additional questions. I would like to turn the conference back over for any closing remarks.

All right. Well, I want to thank everybody for participating in today's call, and for your interest in Paycom. We are very proud of the hard work and dedication of our employees, and we are excited about the huge opportunities ahead of us, and we look forward to speaking with everybody next quarter. So thank you.

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your telephone lines.