Paycom Software Inc (PAYC) 2015 Q4 法說會逐字稿

Good afternoon, and welcome to the Paycom fourth-quarter year-end 2015 earnings conference call.

(Operator Instructions)

Please note this event is being recorded. I would now like to turn the conference over to Craig Boelte, Chief Financial Officer. Please go ahead.

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 of 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-K for the year ended December 31, 2014, and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2015. You should refer to these and consider these factors when relying on such forward-looking information. Any forward-looking statements speak only as of the date on which it is made and we do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements whether as a result of new information, future events, or otherwise, except as required by applicable law.

Also during the course of today's call, we will refer to certain non-GAAP financial measures. 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, and thank you to everyone joining us on today's call. I'm very pleased to welcome everyone today for our fourth-quarter and full-year 2015 earnings call. We had an excellent fourth quarter which capped an outstanding year. 2015 was our first full year as a public company and Paycom enjoyed continued success with our full-year revenue growth accelerating over 2014. Before I begin the discussion of our results, I want to take a moment to express how proud I am of our team. Our success is a direct result of their hard work and efforts. Additionally, I would like to thank our clients for allowing us to serve them. We are committed to providing the very best payroll and human capital management services to our clients, and we are honored every day that they have selected Paycom to help them meet the needs of their business. We'll look forward to continued success.

Now I'll turn to our results for the fourth quarter and full year of 2015. As we announced in our press release earlier today, Paycom enjoyed continued momentum in the fourth quarter of 2015. Our revenue for the fourth quarter of 2015 was $65.1 million representing growth of 48% compared to the comparable prior-year period. As a reminder, the fourth quarter was our best quarter in 2014 and therefore was our toughest comparable for the year. So I'm particularly proud of this performance. Revenue for the full year of 2015 was $224.7 million, which represents growth of 49% over 2014. Our retention rate was at least 91% for the fifth year in a row. This milestone underscores our high level of client satisfaction.

Craig will go through our financials in detail later on the call. But I wanted to take a moment to highlight our adjusted EBITDA, which was 21% of total revenue for the full year of 2015, up from 18% for the full-year 2014. Paycom's been able to post impressive growth for several years while also achieving significant profitability. This result is a testament to our efficient business model as well as our focus on disciplined growth. It also indicates that we are bringing on profitable revenue as we grow. We believe that we are one of the few public technology companies that has achieved multiple consecutive years of high growth while also demonstrating consistent and increasing profitability.

As another indication of our continued growth, we recently announced our next slate of new office openings. As you may have read in our recent press release, in January we opened six new sales offices bringing the total number of sales teams to 42 nationwide. Our new sales offices are located in Chicago, Cleveland, Pasadena, Sacramento, San Antonio, and Stamford, Connecticut. This will be our second office in Chicago while the remaining five offices will represent new territories for Paycom. We believe that large metropolitan areas like Chicago have the potential to host several sales teams. We are excited about our prospects in these new regions and our ongoing sales office expansion.

As a reminder, we open new offices with proven sales managers from an existing territory and then backfill those managers with high-performing sales representatives who have demonstrated strong leadership skills. It typically takes a new sales team 24 months to reach maturity, so while we expect these new offices will make minimal contributions this year, we believe they are poised to drive growth in 2017, 2018, and beyond. I met recently with the sales managers that will be leading these new teams. I am pleased to report that they are all extremely energized to take on their new roles and to capitalize on the opportunity of introducing the Paycom solution to these markets.

Our team was on a roll in 2015 receiving several awards. Paycom received national recognition as a best place to work among large sized US companies by winning a 2016 Glassdoor Employee's Choice Award. For the past two years, Paycom ranked within the top 20 of Glassdoor's Best Places To Work for a list making this the third straight year Paycom has earned a workplace accolade from the popular career website. Additionally, for the third consecutive year, Paycom was named one of Oklahoma's top workplaces. After being ranked as second best place to work on the Oklahoman's top workplaces list. The top workplaces list are based solely on the results of employee feedback, and we feel the award is a validation of the effort we put into making Paycom a great place to build a career.

Our total headcount at the close of 2015 was 1,461, up from 1,021 employees at the end of 2014. I've spoken on prior calls about how our single database platform allows us to enhance our solution and develop new functionality very rapidly and cost effectively. We believe this is a competitive advantage, and we are excited to continue delivering innovation for our clients in 2016 and beyond. 2015 was a very productive year for Paycom from a product perspective. In February, we introduced our learning management system, Paycom Learning. This application formalizes the Company's training processes and seamlessly updates through other pertinent applications allowing companies to develop their talent quickly and most effectively.

In June, we launched GL Concierge which offers organizations more control and transparency into their general ledger. GL Concierge is one of the few software applications in the human capital management space to operate based on payroll and gives financial professionals intuitive reporting, enriched audit trails, customizable file layouts, and real-time alerts all from Paycom's single database technology. Following the release of our Affordable Care Act dashboard in 2014, we introduced our comprehensive Affordable Care Act compliance offering Enhanced ACA in September of 2015. This application provides clients with a continued access to an ACA dashboard and also filing of the required IRS forms plus additional real-time compliance related data reports and alerts. In addition to these three new offerings, we also rolled out numerous updates and enhancements to our platforms.

We are committed to ongoing improvement of our system and providing enhancements to our clients so that they can benefit from the result of our R&D efforts. The strength of our platform has allowed us to become what we believe to be one of the fastest-growing profitable public companies in our industry, and we will continue to invest in our R&D group so that we are able to maintain this position.

This is a good time to share some examples of notable client wins during the fourth quarter. First, we signed a rehabilitation center with nearly 8,000 employees. This client came to us from a large legacy provider. We estimate they are saving over $700,000 annually from a combination of eliminating separate systems and the manual processes and unproductive labor that their previous system required.

Next, we brought onboard a casino organization with approximately 2,300 employees. This company had been managing its payroll in-house and also using several-point solutions from a variety of vendors that resulted in delays and frustrations from manual paper-based processes. I'm pleased to report that this client loves the functionality, automation, and ease-of-use offered by the Paycom solution.

Finally, we signed a retail services company that provides solutions to large grocery chains. This client has approximately 2,000 employees and also had been using a large legacy provider. This organization operates across 48 states, so compliance was a key concern as well as a need for automating its benefit process and having a central database where all crucial HR information could be stored. Each of these three clients enabled multiple Paycom applications continuing the trend of new clients taking greater and greater portions of our solutions suite.

To conclude, 2015 was a year of substantial progress for Paycom. We executed against our goals adding sales teams, expanding our offering, and continuing to capture market share in the outsourced payroll and HCM industry. We look forward to continued success in 2016.

I will now turn the call over to Craig for an update on our financials and our guidance.

Thanks, Chad. Before I review our fourth-quarter results and also our outlook for the first quarter in FY16, I would like to remind everyone that my comments related to certain financial measures will be on a non-GAAP basis. Adjusted EBITDA and non-GAAP net income are non-GAAP financial measures that exclude stock-based compensation and other nonrecurring charges including transaction expenses related to our initial public offering and our follow-on public offering. A reconciliation of our GAAP to non-GAAP results is included in our press release.

Our fourth quarter was robust with total revenues of $65.1 million representing year-over-year growth of 48% from the comparable prior-year period. For the full-year 2015, total revenue was $224.7 million representing growth of 49% over 2014. Within total revenues, recurring revenue was $63.6 million for the fourth quarter of 2015 representing 98% of total revenues for the quarter and growing 47% from the comparable prior-year period. For the full-year 2015, total recurring revenue was $220 million representing growth of 48% over the comparable prior-year period. ANRR was $40.6 million for the fourth quarter of 2015 compared to $20.6 million in the same period last year representing growth of 97%. Because of the demand for our ACA solution, we had a substantial number of clients implement our solution in the fourth quarter that we believe would normally have launched our solution in January of this year.

Therefore, we estimate approximately 25% or $10 million of our fourth-quarter ANRR was pulled forward into the fourth quarter with the majority of these transactions occurring during December. Without this contribution, we estimate ANRR would have been approximately $30.6 million and would have represented nearly 48% growth over the comparable prior-year period. Total adjusted gross profit for the fourth quarter was $55 million representing an adjusted gross margin of 84.4%. This compares to 82.8% in the fourth quarter of 2014. For 2016, we anticipate that adjusted gross margin will be within a range of 82% to 84%.

Turning to operating expenses, as a reminder, we pay commissions to our sales representatives based solely on new sales at the time of the client's first monthly billing cycle. This is a one-time commission that we recoup over the life of the client relationship. When we experience strong sales performance in a quarter as we did in the fourth quarter of 2015, there is the potential for us to see increased expenses in that quarter depending on the timing of the client's onboard process. Driven by our strong sales performance in the fourth quarter, adjusted sales and marketing expense was $30.5 million.

For the fourth quarter, total adjusted administrative expenses were $47.4 million. This compares to $30.7 million in the fourth quarter of 2014. Adjusted R&D expense for the full-year 2015 increased 98% from the comparable prior-year period. As Chad detailed, we will continue to invest in our solution to maintain our competitive advantage.

Adjusted EBITDA was $10.5 million or 16.1% of total revenue in the fourth quarter of 2015 compared to $7.8 million or 17.6% of total revenue in the fourth quarter of 2014. Adjusted EBITDA was impacted primarily from the commission expense due to the strong sales performance I mentioned earlier. Adjusted EBITDA for the full-year 2015 was $48.1 million or 21.4% of total revenue compared to 17.9% in 2014, an increase of 350 basis points. This improvement was driven by scale and ongoing efficiency enhancements across the organization.

Non-GAAP net income for the fourth quarter of 2015 was $6 million or $0.10 per diluted share based on approximately 58 million shares versus $3.1 million or $0.06 per diluted share based on approximately 54 million shares a year ago. For the full-year 2015, non-GAAP net income was $23.4 million. For the full year of 2015, earnings per share were $0.40 based on approximately 58 million diluted shares. The effective tax rate for the fourth quarter and the full year of 2015 was positively impacted by the extension of the R&D tax credit in late 2015.

Turning to the balance sheet, we ended the quarter with cash and cash equivalents of $50.7 million and debt of $25.9 million. As a reminder, this debt represents the financing of our Corporate Headquarters. Cash from operations was $9 million for the fourth quarter and $43 million for the full year of 2015 reflecting our strong revenue performance and the profitability of our business model.

With that, let me turn to guidance for the first quarter and for FY16. For the first quarter of 2016, we expect total revenues in the range of $82 million to $84 million representing a growth rate over the comparable prior-year period of approximately 50% at the midpoint of the range.

We expect adjusted EBITDA for the first quarter in the range of $21 million to $23 million representing an adjusted EBITDA margin of approximately 27% at the midpoint of the range. For FY16, we expect revenue in the range of $309 million to $311 million or approximately 38% year-over-year growth at the midpoint of the range. We expect adjusted EBITDA for FY16 in the range of $63 million to $65 million representing an adjusted EBITDA margin of approximately 21% at the midpoint of the range. For 2016, we anticipate an effective tax rate of approximately 38% primarily due to the extension of the R&D tax credit and also the Section 199 deduction.

With that, we will open the line up for questions. Operator?

(Operator Instructions)

Michael Nemeroff, Credit Suisse.

Hello. Can you hear me?

Yes.

Nice quarter. Unfortunately, your stock is one of the many that aren't probably fully reflecting the really strong prospects of the next couple of years. But hopefully that will work itself out over time.

Just a question. Based on the number of new offices that you are opening -- because you are not significantly increasing the number of new offices in 2016, it's just six over five. I'm just trying to figure out what kind of productivity increases that you're building into your forecast to keep the growth rate pretty high over the next couple of years in 2017 when the new offices in 2016 start to really affect the numbers.

Yes. Thanks, Mike. We have continued to increase the amount that any one executive sales rep can sell, as well as sales team. I don't know that we've hit a ceiling yet on how much a team can sell. I've talked about this in the past, how we continue to increase from $3 million to $6 million; and we continue on for any one city.

So we're definitely increasing the productivity. And how we're doing that is by selling more deals, selling larger deals and then, of course, selling more modules into each client.

And then also, Chad, on the ANRR, I know it's not a perfect proxy for bookings in the quarter. And if you look at what you did in the second half of 2015, it's just truly remarkable, over 100% in Q3 and over 90% in Q4. Just trying to level set because we're going to build the models, and investors are going to have some expectations for 2016.

Where would you like the expectation to be for the ANRR growth, given the phenomenal growth in that number and that figure in the back half of 2015 in 2016?

Well as we've discussed in the past, we do not give guidance as to the ANRR number. We are providing revenue guidance. ANRR, as you know, does turn into revenue. So we do expect ANRR to be strong moving forward. I'd probably stop with that.

Okay. And then just lastly, you know the implied EBITDA guidance for Q1, the strongest it's ever been. I'm just curious which line items will we see the most leverage in Q1?

Well, we're heading into Q1 off of a strong year. And as everyone's aware, our revenue is recurring. 98% of our revenue is recurring. So we bring that into the year with us and into first quarter, so we're expecting a first quarter.

Craig, you can talk more to the leverage on that.

Yes, in first quarter we'll see a slight amount more of a seasonality than we have in the past because of the 1094 in 1095 filings. And then also the way our sales and marketing year starts over on February 1, we see that ramp up throughout the year, those commission expenses.

And so we do commission salespeople more based on how much they sell, and our year starts over beginning February 1. So naturally, commission rates are going to be lower in the back half of the first quarter.

Got it. Thanks. Congratulations on a great quarter and a fantastic year.

Thanks, Mark.

John DiFucci, Jefferies.

Thank you.

Chad, I know you don't forecast ANRR. You do, but you don't provide guidance for it. But you did say or Craig said that there was some ANRR that was pulled forward. And that was part of the reason why it was so strong this quarter and it was strong, really strong the quarter before.

Craig, can you remind us -- or Chad -- I didn't catch as to why that pull forward happened this quarter. And I guess what could be implied is that next quarter we would see a significant moderation in the growth rate of ANRR because of that. Should that be our conclusion with that -- without giving us guidance on ANRR?

Yes, obviously we're still in the middle of the quarter. And ANRR is a calculated commission amount based on starts, which is why it's really not something that we guide on because it's based on when a deal starts.

Back to your original question on the reason why we saw the pull forward, ACA is obviously is something that -- it's real and it's here this year. And so in order for us to perform the task for a client that's needed for them to be compliant with ACA, they had to onboard with us in 2015. It's been our business that we bring clients on. And we will actually provide them year-end services provided that they are with us for the month of December.

And so that required deals that would have most likely started in January, as indicated by what would be normal for us in past years. Those deals started early, and they started at the end of December. And as we went through and we estimated that amount, we came up with approximately 25% of the ANRR that we had are deals that pulled into fourth quarter, as it relates to ANRR.

Okay. Well, I guess we'll just wait till next quarter to get a little more on ANRR.

Yes, I mean John, we're going to have the pull forward. We definitely had the pull forward. Those are deals that would have normally started in January.

In our business, it isn't necessarily common for companies to onboard in December. It doesn't mean it doesn't happen. And there are reasons why a company would look to onboard in December based on their confidence in their current year-end process that they're going to undertake.

ACA added another level to that, obviously. And so this is revenue we were going to experience anyway. But it just so happened we did have that pull forward into December.

Okay. Great, Chad.

And if I might, a follow-up because I know these are the questions we are going to get tomorrow. And you'll get them too along the way.

So really strong business, right, ANRR, last couple of quarters. I mean, strong before that but even stronger now. It had a little pull forward here, but that's okay. Even without that, it was a really strong quarter. And ANRR, as you pointed out and we know, turns into revenue in the future. And that's evidenced by your guidance, especially for the first quarter. But what it implies is that the guidance for the year, which again, is significantly above where the Street is. But it implies a growth rate throughout the year will, in revenue, will actually decline or decelerate, how's that, in the back half.

I guess I just want to make sure that -- like, what does that mean? This is their first; you're giving guidance for the year at the beginning of the year. So I just wonder if there is some conservatism in there? Or is there something in that guidance of a deceleration of growth into the back half that there is something we're not thinking about? Is there something we should be thinking about of how the business may develop over the year?

No. I mean we traditionally had a strong first quarter due to annual tax form filings that, again, continue to recur. And so we're going to have a little bit more of that this year with the Forms 1094 and 1095 with ACA, which we'll file first quarter of every year for clients that have that service. We're going to receive a little bit of uplift on that.

Okay. Great. Thanks a lot, Chad. Nice job.

You bet. Thank you.

Raimo Lenschow, Barclays.

Hello. Thanks for taking my question and congratulations.

Can I stay on John's point a little bit, Chad? Remember the quarters before when we talked about ACA, you kept mentioning that that's kind of a small revenue item for you. And at the end of the day, people are often staying with their provider because the ADP will give you an ACA module. The $10 million that you point out now, is that ACA revenue? Or is that a customer going on the payroll, and ACA will be a small module of that? I just wanted to clarify that.

That is correct, the latter. Those are customers that started early with everything, including ACA. I mean, with everything they're going to start with, including ACA. So those are clients that onboarded early with ACA.

I do not believe that clients choose us for ACA alone. These are deals I think we would have gotten anyway, regardless of ACA. I mean, as an HR leader of a mid-sized company, you're not going to make the decision, or you should not make the decision, to make a change to a payroll service that's going to also be doing time and labor; talent acquisition; HR; and talent management. You're not going to make that decision based on one piece of the functionality.

And so it is something that clients have to have. ACA, I believe, you should use somebody who's an expert in complexity, which we are. And I believe that clients need to find someone to do that. But I'm unfamiliar with a competitor of ours that doesn't have an ACA offering.

And whether ours is better or what have you, there just has to be a strong business case or value proposition for someone to change their culture; move all their data; and learn new systems. And it's not something we've seen happen based on one module piece.

So this is pull forward of deals that would have normally started in January because there wasn't a great reason for them to start in December. But due to ACA, we now had a better reason for them to start in December; and we onboarded them.

Perfect. Very clear. Thanks, Chad.

And on the sales office opening, you mentioned six already in January. As we think about a year, is that the number for the year? Historically, you had very front end loaded for the year and then maybe had like a couple like in February, March. Is six the number, or is that just the January number?

Six is the number that we have opened this year. It's the best year we've ever had in opening up offices as far as six. We opened them up much more efficiently this year than we have in years past.

We had more people to choose from on our bench and what have you. And so we're comfortable absorbing the six that we've opened. And then as the year moves on, I mean, we'll review at that time.

Okay. Perfect.

One last question. How do you think about the whole balance between growth and EBITDA and the EBITDA levels? If I look this year, you achieved adjusted EBITDA around 21%. I think guidance midpoint is around 21%.

Is that for you healthy probability is much better than the competition? And so with the rest of the money are reinvest? Or how do you think about leverage as you run the Company?

Well, I believe it's important. We've been doing this for 18 years now. I mean, I believe it's important to, at some point, be able to have some leverage in the model.

We are a high-growth Company, and we focus on that. But we're also out there selling profitable business. And so in the perfect world, we would expect to continue to grow at a high level while also having some leverage in the model on a go-forward basis.

Okay. Lovely. Thank you. All done.

Thank you.

Mark Murphy, JPMorgan.

Yes, thank you very much for taking my question. And I will add my congratulations on the strong results.

Chad, you had mentioned closing a rehabilitation center. And I believe you said it has 8000 employees. So I wanted to ask you first of all, did I hear that correctly? What issues were they encountering in particular with their legacy provider?

And then also, I'm curious where does that customer rank now within your customer base in terms of size? And what I'm trying to get at is whether you think that's a one-off or if you see other prospects of that size in the pipeline.

Yes, so size doesn't necessarily dictate complexity in the system. I mean, sometimes it can. 8000, I mean, it's not going to rank small for us. We've kind of reported these numbers in the past. So that is definitely at the larger end of clients that we've onboarded.

As far as what exactly they were experiencing, I don't know of all the very specific issues that they were experiencing. But it's not uncommon, as we go through and work our value proposition and then deliver on ROI, it's not uncommon for us to look at both soft-cost and hard-cost savings. And there are a number of techniques that we go through to do that. I don't necessarily want to telegraph that on today's call. But we're able to come up with a number as we have collaborative meetings with the client.

Thank you.

And then I wanted to also follow up on some of the other questions about this concept of the ANRR pull forward. And really, I have a very simple question. Do you think that that could recur in Q1 or even in Q2? Or is that a one-time event due to unusual year-end characteristics tied to this ACA phenomenon?

Well, I will answer that this way. If you're not currently on our system and having been on our system since the first of December, we will not be providing ACA services and filings for those companies for 2016.

And so the other piece to your question I guess is, yes, we will onboard clients this year who are looking to get compliant with ACA as it relates for 2016 to be filed in 2017. And we will onboard those clients throughout the year. But as I explained earlier, they're taking the payroll, the time and attendance in other areas. And so ACA is a piece of that and not the driving force behind why someone makes the decision.

Okay.

Craig, I wanted to ask you as well, in terms of the Q1 revenue guidance, I think you mentioned or you were speaking to this in terms of the EBITDA guidance. But the sequential increment is nearly $20 million at the high end of the range. And it seems unusually strong. I think you alluded to part of this in terms of some of the 1099s or 1095s, the processing of year-end payroll links, tax forms, and all that.

Is there a way you could dig a little bit deeper into that? Because I think we're going to try to be gauging for our model what the underlying dynamic is there, and just perhaps how much of that is seasonal versus what will recur.

Well, it should all recur. It will just recur in the first quarter of subsequent years. I mean these aren't one-off charges. These are recurring annual charges.

Yes, understood, but we're trying to understand from a modeling perspective that you have business that recurs once per year annually, and you have business that recurs all four quarters throughout the year. So I think we're just trying to understand what portion of that is related to those forms. And therefore what kind of a sequential drop off to model in Q2.

And I'm just trying to understand if it's any different than what we've seen in prior years because, again, the revenue guidance is just so unusually strong for Q1.

Mark, as you're looking at the out quarters, we've given the full-year guidance as well as the first quarter. So the balance of that would be spread over the remaining three quarters. And as you've seen in the past, the third quarter is stronger than the second; and then the fourth steps up as well.

So we would expect, from a modeling perspective, to be very similar to what you've seen in the past. And then that additional step-up in the first quarter would be primarily related to those forms filings. And then, as Chad mentioned, that will be a recurring revenue item that we'll file every year.

Okay, thank you very much.

Thanks, Mark.

Brendan Barnicle, Pacific Crest Securities.

Thanks so much.

Craig, in your prepared comments, you called out the large sales and marketing expense relating to the upside in commissions. If you hadn't had this big benefit to ANRR, the one-time thing related to ACA, do you have any sense of what that sales and marketing expense might have come in at?

We really haven't looked at that specifically. But I mean, obviously, it would have made an impact on the adjusted EBITDA for the year.

Just to add on that, we did mention there was $10 million in pull forward into December. So the commission rate associated with $10 million, you could probably expect there would be some of that.

Got it. And then, Chad, we've seen strong results across a number of your competitors you have already reported it as well. So we've seen this general upswell. Part of it, you've talked about some of the ACA component of it. Are there other factors, other than that, that are driving so many folks to look at re-engaging around their payroll and other parts of their HR platform?

Yes, I mean, again, I'll go back to ACA is a component of our overall value proposition in the product we sell. And again, I'm unfamiliar with any client that would go to us just for ACA alone. And so what we've developed throughout the years, and what we continue to sell as an overall product, us being better at selling product, having more mature sales staff, them being able to sell more. I really do believe that's what's been driving our growth.

ACA has been a timely conversation. I mean, anytime you get an opportunity to talk to a client about additional complexity coming down the pipe, that's a positive for us. And whether it's reciprocity law, lived in/worked in, states changing labor laws, overtime laws or what have you, that gives us an opportunity, and so ACA has done that. It's provided us an opportunity.

We do expect there that there has been some uplift. I mean, we're not going to ignore the fact that ACA is a revenue-generating item for us, just like direct deposit and some of the other items that we charge for. And so we expect the ACA to be a good product for us as far as on a moving forward basis. We don't expect ACA revenue in 2016 to be any higher than low-single digits of our overall revenue.

Again, it's timely for us to be able to have these discussions with people. It does help us get someone that might have on boarded a month from now to onboard now, especially if you're sitting in 2015 because there's still a lot of complexity to it and a lot of it's knowledge-based -- what does someone really know about it.

I do expect in 2016 and 2017 and in subsequent years for the buzz surrounding ACA to dissipate somewhat as it relates to the filing piece of it. Because people are going to understand it, and we've seen this happen over and over again, as the leaders in Washington make changes to complexity in either tax codes and other areas. And we benefit from that because part of what we do is educate ourselves in order to become experts in complexity.

Chad, we've spent a lot of time talking about the ACA. But you've got two other products that got released last year with GL Concierge, as well as your LMS solutions. Give us any sense of what percent of revenue those ended up representing?

No, we're not going to break out the addition of those or any of our other products. I just wanted to point that out on the ACA.

But Paycom Learning is doing very well. It is the first year for that product, as well as GL Concierge. We take a methodical approach to us developing products based on need and how we're going to sell it, as well as client usage. So everything we develop is on purpose. And we expect those products to continue to be strong for us as well.

And then lastly, Chad, you've obviously seen the market's been very worried about macro weakness in the economy, the prospect of recession. Anything that you're seeing with all the different businesses that you work to suggest any real slowing that's going on?

Obviously, anything that hurts the overall economy, I think, can have an impact on all businesses. And things that impact our clients can have an impact on us. Now, we've provided the numbers; we've provided the guidance. So as far as do we feel like it's going to have a specific negative impact on us, we feel like we'll weather through what it is.

And I do believe the ACM industry is different. We're not just a technology Company. We are providing a very valuable service, and no one should be doing the payroll by themselves. No one.

We never converted a payroll of someone doing it in-house that was correct, ever. And I've been doing this a long time. I don't believe that's going away.

We've solved the problem with technology. But the fact is the service itself is extremely valuable. And I don't see companies going backwards and starting to do their own taxes and everything else based on maybe they lost a few employees or what have you. And that said, we haven't necessarily seen any impact, major impact, on our business at this point.

Great. Thanks for taking my questions.

Thank you.

Brad Reback, Stifel.

Great, thanks very much.

Maybe just building on Brendan's question at the end there on the economy a little more. Chad, if you think back to 2009, can you give us a sense of what, if any, impact or changes in employment levels you saw in the install base?

I mean, 2009, we were a high grower in 2009. Sometimes these types of pullbacks in the economy create opportunities for us. Because we are looking to go in and create additional efficiencies.

And for companies that are looking to streamline processes in times like this in order to become a more efficient organization, we're a better solution. And so oftentimes, pullbacks like this allow us to go in and be much more competitive. Because people are looking at it, right? When things are good, people aren't necessarily looking to streamline efficiencies maybe the way they should. When you have pullback, people are forced to do that. We're a better option.

In answer to your question, I mean, it was a good year for us in 2008/2009. You more had the mortgage companies you had to really look for at that time. And we made some changes in our business at that time to make sure we are handling guaranteed funds properly and other items that have survived throughout the years.

Again, I'm not an expert on the economy. We've been doing this for 18 years. This is going to be a year for us. Next year is going to be a year. And we're going to continue on. We're in our own lane here, and we're going to continue to do our business.

Great. Thanks very much.

Thank you.

Jim Macdonald, First Analysis.

Good quarter.

Just going off the last question, you say you're in your own lane. But can you give us an update on competition? Are you seeing anything different out there?

Not from -- let me say this. Competition is ever changing as far as what competitors provide, and that's been the case from the beginning. I mean, we've had a very strong competitive market. There are a few of us that do it, I think, from a full-service perspective. I'm unfamiliar of anybody of any size since we came into the picture in 1998.

So as far as the players, I think the players are substantially the same depending on where you're at. And the flavor of what they provide changes here and there, and so do we.

And just a couple clarifying questions on the ACA. You provide some of it on a perform basis. But do you provide any of it on a monthly basis? And if so, what is the split between the two?

We provide an ACA dashboard, which clients are able to use as a standalone product. We also have Enhanced ACA, which is an ongoing monthly service that we provide, which has additional service pieces embedded in it. And then at the end of each year, we also provide the form 1095 and then as well as 1094. And so those are the components that make up our ACA revenue or any revenue associated with ACA.

And can you give us a clue as to how much is for the form and how much is recurring?

We do not provide that breakout. But as I did state earlier, we do not expect all of ACA revenue combined to be more than the low-single digits of our revenue next year.

And just for interest, what percent of your clients use you for ACA if you can, approximately?

Most of the clients that are required to be compliant this year have implemented ACA with us. But I don't have an exact number as to those that are using another option for that.

Great. Congratulations, again.

All right. Thank you.

Mark Marcon, Baird.

I'd like to add my congratulations. In the 17 years that I've followed all the public payroll companies, this is one of the best quarters I've ever seen from anybody. So congratulations on the great year.

One of the questions that I've been getting is just with regards to your more mature offices. I know they're all growing, but particularly those in Oklahoma and Houston. What are you seeing there just in terms of the growth rates?

We don't disclose any one office, but those offices you've named specifically are doing very well. They are mature offices. They've been open for a while. They've had the same managers in them for a little while. And so any place where we've had a manager in there for some period of time is going to be a strong office for us.

But I mean no degradation in terms of the opportunities that you're seeing out of those offices just because of what's happening in the oil patch?

No, absolutely not. Again I think it helps to do with our size and the overall TAM that we still have left to capture. We're still 1.5% of our overall TAM. So that's still a lot of room for us out there, and I think that's really more a factor of we get to choose who we sell.

Sometimes, we pick up the phone and there is someone saying they want to convert. But oftentimes, we choose who we're going to sell, whether working with a referral source or going through our targeted prospecting methods or some other techniques that we use. We're going to continue to sell into those markets, and we haven't seen any type of a pullback.

Great.

And then with regards to the ACA revenue that you recognized here in December. You pulled forward $10 million. But it sounds like even for this quarter, you gave us the 2016 ACA kind of contribution. For this quarter, it was even less than that, right? As a percentage?

Well, what I would say just to kind of tweak that a little bit. We pulled forward $10 million in ANRR, not necessarily revenue, right. So $10 million in ANRR (audio break) businesses started early.

Yes.

Sorry, maybe I missed the question.

I was just saying that the ACA contribution for this last quarter was fairly de minimis; was it not?

I haven't gone through that number. We did a calculation based on next year. But from an overall year perspective, yes, it would have to be a much smaller number.

You gave us that number last quarter, Chad. That's the reason why I was asking is because it kind of sized things so that people could get a perspective in terms of what we haven't seen that yet.

Just switching over to the EBITDA guidance for the full year, given the revenue growth. The guidance basically implies no EBITDA margin expansion for 2016. If that's the case, would that basically be a function of we're going to continue to invest behind technology in R&D that will continue to grow in a fairly rapid rate? And then in addition to that, there's a possibility that we're going to continue the strong sales performance. And so we want to leave some room in terms of sales and marketing for increased commissions if that comes through.

Yes, I mean I would say, obviously, we're going to continue to invest in R&D as we have. But it seems like the largest impact we have on a successful quarter are sales commissions. And you start to see that as you have that throughout the year.

And just to remind people, your commissions basically are being paid on the ANRR during the time period when the ANRR is disclosed.

That is correct.

Great. Thank you very much and congrats.

All right. Thank you. Well, I think that's it. So thanks to everyone for joining us on the call. I'd like to extend thanks again to the team here at Paycom. We had a terrific year, and we're all looking forward to another successful year here in 2016.

So thanks for joining us. We'll see everybody later.

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