Good day, ladies and gentlemen, and thank you for your patience. You joined Paylocity’s Earnings Results Call for the Second Quarter Fiscal 2017. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instruction] As a reminder, this conference may be recorded. I would now like to turn the call over to your host CFO of Paylocity, Mr. Peter McGrail. Sir you may begin.

Thank you, good afternoon and welcome to Paylocity's earnings results call for the second quarter of fiscal 2017, which ended on December 31, 2016. I'm Peter McGrail, CFO, and joining me on the call today is Steve Beauchamp, CEO of Paylocity. Today we will be discussing the results announced in our press release issued after the market close. A webcast replay of this call will be available for the next 45 days on our website under the Investor Relations tab. Before beginning, we must caution you that today's remarks in this discussion, including statements made during the question-and-answer session, contain forward-looking statements. These statements are subject to numerous important factors, risks, and uncertainties, which could cause actual results to differ from the results implied by these or other forward-looking statements. Also, these statements are based solely on the present information, and are subject to risks and uncertainties that can cause actual results to differ materially from those projected in the forward-looking statements. For additional information, please refer to our filings with the Securities and Exchange Commission for the risk factors contained therein, and other disclosures. We do not take undertake any duty to update any forward-looking statements. Also, during the course of today's call we will refer to certain non-GAAP financial measures. We believe that non-GAAP measures are more representative of how we internally measure the business and there is a reconciliation schedule detailing these results currently available in our press release which is located on our website at Paylocity.com under the Investor Relations tab and filed with the Securities and Exchange Commission. The non-revenue financial measures we will discuss today are non-GAAP unless we state the measure as GAAP. Please note that we are unable to reconcile any forward-looking non-GAAP financial measure to their directly comparable GAAP financial measure because the information which is needed to complete a reconciliation is unavailable at this time without unreasonable effort. With that, let me turn the call over to Steve.

Thank you, Peter, and thanks to all of you for joining us on our second quarter fiscal 2017 earnings call. The second fiscal quarter exceeded our guidance in terms of revenue, adjusted EBITDA and non-GAAP net income. Total revenue grew by 24.4% to $68.7 million, with recurring revenue growing 26.2%, versus the same period last fiscal year. Adjusted EBITDA for the second quarter was $9.9 million, exceeding the midpoint of our guidance by $4.4 million. We generated $17.8 million of adjusted EBITDA for the first six months of the year, up 17% from $10.5 million for the same period last fiscal year. We had a number of announcements during the quarter that I would like to take a moment to highlight. We were very pleased to be recognized as number as number 14 on Glassdoor’s annual Employer of Choice award in the large employer category. This is the second time we’ve been recognized as an Employer of Choice in Glassdoor’s annual rankings and the first time in the large employer category. Paylocity was also recognized as one of the 2015 Best & Brightest Companies to Work For in the Nation by the National Association for Business Resources. We were once again ranked on the list of 500 fastest growing technology companies in North America. This is the fourth year in a row that we’ve been included on a fast 500 list. Lastly, during the quarter, we announced the addition of Ellen Carnahan to our Board of Directors. Ellen has experience serving on several private and public company boards and has had very successful career investing in technology companies. The second fiscal quarter is a very busy time of year for our sales organization, many medium sized businesses target January as a convenient time to change their payroll and HCM platform.…

Thanks Steve. Let me walk through the results in more detail. As we’ve noted in our last few calls the wide adoption of our ACA Enhanced product which began in earnest during this quarter last year, has created challenging comparisons for us through the remainder of this fiscal year. With that in mind, total revenue for the quarter was $68.7 million, which represents a 24.4% increase from the year-ago quarter. As a reminder we grew 61% in the second quarter of last fiscal year. Total revenue for the first six months of fiscal 2017 was $133.7 million, a 33.3% increase from the same period last year. Our total recurring revenue of $66.1 million, was up 26.2% from the year ago quarter and represented 96% of our total revenue. Total recurring revenue for the first six months of fiscal 2017 was $128.7 million up 35.2% increase from the same period last year. recurring fees were up 26.3% in the quarter and 35.3% for the first six months of the fist year and interest revenue increased 18.9% in the quarter and 26.7% for the first six months of the fiscal year, primarily as a result of our client growth and balance increases. In line with expectations we set in our last call, implementation services and other revenue up $2.6 million was down 9.2% from the year-ago quarter. As noted previously, a number of clients full forward their stocks into October and November from January to take advantage of our ACA offering last year. As a reminder implementation services and other revenue grew 51% in the year-ago quarter. We are also pleased to report that are annual revenue retention rate which is always calculated on a trailing 12-month basis remained above 92%. Adjusted gross profit in the quarter was $41.2 million, representing a…

Thank you sir. [Operator Instructions] Our first question comes from the line of Justin Furby of William Blair & Company. Your question please.

Thanks and congrats on a nice quarter. And thanks for the smart guidance for the back of the year. Steve I wanted to ask first on in terms of how the quarter progressed. I guess if you go back to your conference call in early November a few days later we elect Trump and I guess I’m just wondering if you saw any change in terms business environment or sales cycles as you move through the quarter and into January? And I have a quick follow-up. Thanks.

Sure. I think we saw a continued activity from our first fiscal quarter in terms of broker referral percentages trending back towards those historical levels. That something you wouldn’t have anticipated at the start of the fiscal year in terms of getting there just quickly. Not surprising that we get back to those historical ranges just happen a little faster. So that continued through the second quarter. And then as we looked at the data over the first six months we also saw that in-house the amount of business we get from in-house which has never been that material to us but did get up to the high teens in terms of percentage of new business. Kind of return back into the mid to lower teens where we have been historically. So those would be kind of the two trends that we saw continue in the second quarter.

Got it. And then I guess just any change though in terms of sales cycles or people putting deals and ADP this week. Scared some folks area talking about. Did you guys see that at all in the margin last couple months?

Yes I think hard for us to tell exactly whether customers have a level of inertia around the election cycle. We certainly saw less activity both in terms of mostly brokers, but a little bit in in-house. Don’t know whether that was affected by the election or not. So really difficult for us to give you an assessment of that.

Okay that’s fair. And then I guess just quickly on core business if you set ACA and product and I guess I’m just thinking about the core and medium term growth in that business. Just based on what you see today do you think it’s 25% plus type business. And when you think out fiscal 2018 as you get to easier comps, again net of ACA excluding that business, when you think about fiscal 2018, do you think the core could actually accelerate just a comps ease and you continue to add products like the recruiting and expense management? Thanks.

So certainly this year has been a little bit more of a challenging comp versus last year. Last year was very much an anomaly with the activity around ACA. So not only do we get these sale back into the client base last year, but we also got a different type of cycle and cadence in terms of new business. And what I mean by that is we got a lot more business in the first half of last year. The first six months of the year a typical year we get more business in the second half of the year. The point is there is a lot of puts and takes to try to be able to reconcile this year versus last year. And so difficult for us to give any type of long-term guidance at this point in time still a very transactional business we feel good about the project initiatives that we’ve got, the sales initiatives that we’ve got and the retention that we have going forward. But I'd be a little hesitant to comment with any type of metrics looking into fiscal 2018.

Okay, that’s fair. Thank you.

Thank you. Our next question comes from the Scott Berg of Needham. Your line is open.

Hi Steve and Peter congrats on a good quarter. I have two questions from me. First of all Steve could you comment on your direct salesforce and efforts with them or even to the broker channel upselling all the new modules that you been able to bring out over the last year. I know you talked about it over the last 12 months that you been selling into the install base back in the install base really for the first time changing a little of your mode from new customer acquisition to up sell it. Try to understand what your capacity is for that over the next may be 12 to 18 months.

Sure. I think we're still focused on the land part of the land and expanse strategy. Albeit as you mentioned last year ACA provides us an opportunity to stat expanding products back into the client base first starting with ACA and then additional modules that we either had available then or we since launched like expense and recurring. I think we’re still early in that effort. We certainly see the expand opportunity as a very good one going forward. However, it’s something that we see gradually happen over time. We got good feedback on our recruitment module most of those recruiting customers I mentioned were new customers, but we did have some current customers as well adopt our recruiting module. So we are seeing some success but I would still think about this mostly as focused on land with a gradual expansion strategy over time.

Great. Then my follow-up quickly. On the earnings possibility in the quarter you had a pretty significant be it $0.06 to $0.07 there. Can you talk about expenses in the quarter? Is there any shift in the second half or the overall expenses is kind of inline with expectation trying to reconcile was the [indiscernible] outperformance.

Yes I guess we would say in a macro level that’s it’s always our intention not only to grow but also to manage our expenses and to grow either. I think that carry through this quarter I think you actually saw carry though to our guide year end where we said at the mid point of the range we’d increased 200 basis points. We’re committed to EBITDA expansion as a much as we’re committed to growing. It’s a big part of who we are and how we think we got to run the business.

I think to point out to that is if you go back a couple years ago we were at about five percentage adjusted EBITDA and we’re guiding now to over 14% adjusted EBITDA two years later. So it's hard to get really specific around quarter because we have some things that certainly move around. But when you look at the year we feel really good about the leverage we’re driving in the model.

Great. That’s all I had. Thanks for taking my questions.

Thank you. The next question comes from the Nandan Amladi of Deutsche Bank. Your line is open.

Hi good afternoon thanks for taking my questions. So Peter in the quarter what actually drove the earnings out performance and we look ahead into the March quarter which is seasonally your strongest quarter with all of the electronic filing and so on in terms of margins. How much room do you think you’re leaving yourself because guidance is fairly conservative I think.

In the quarter I think we got something out of everything that is sort of how we play the game and how we think about it. We look at our business that way and we try to drive through our people and our through our production we try to drive leverage everywhere we can. Looking out I don’t know the electronic filing makes that – I think the mantra that we have in the second quarter is the mantra we carried throughout the quarters. We try to do that every quarter. So I don’t know if electronic filing and non-electronic is a specific element that drives leverage. I don't think so. So you should think about the way we guided. We absolutely try to drive EBITDA and the way we guide it to the year end is we’re looking for 200 basis point improvement. And that’s sort of who we are if it's a culture.

Thank you.

Thank you. Your next question comes from Brad Reback of Stifel. Your line is open.

Great thanks a lot. Steve the least ADP ending of life for the mid market product middle of this calendar year, have you seen any acceleration in those types of sales cycles and if not do you think there might be?

Yes. So I think that ADP has certainly been out on a journey to refresh their technology and that's been happening over a long number of years. And they're certainly in kind of a migration path in the mid market. As we look at kind of the data with – we see ADP the same amount, we've got the same type of win rates we've had historically versus them. And we don't necessarily see that just come from one segment, so we get them on the upper end of small business, we see them in mid-market, we see the newer version of work force now, we see the older versions of work force now. So I don't necessarily have any data that would point to the fact that we have much more success first as one product category versus the other at this point.

Great thanks very much.

Thank you. Our next question comes from Mark Marcon of Baird. Your line is open.

Good afternoon. And thanks for taking my question. With regards to the new plant wins that you're having during the quarter and the way the pipeline is shaping up here in the fiscal third quarter, are you seeing any sort of marked difference between smaller companies relative to larger companies just in terms of ability to move ahead or – where it seems a little bit more fruitful?

If you think about the target market that we're in which is really kind of 20 to a thousand [ph], and our average customer being may be in that 120-employee range it grows a little bit each year but not by a lot we stay focused on that target market segment. I'm not sure with in that target market we really see a whole lot of behavior change. Certainly the larger the customer maybe a little bit longer is the sales cycle and then obviously maybe a little longer the implementation process. But that actually happens relatively quickly. And so I wouldn't say that we see any type of behavior changes this past quarter in our target market where we're seeing different behavior at the upper end versus the lower end of the market. It’s just a little faster on the low end as usual and it takes just a little bit longer. But when you look at an aggregate it's still a pretty transactional, it goes fairly quick.

Great. And then with regards to the recruiting module 150 clients, any characterization there in terms of the ones that came on whether they were smaller or larger, how broadly applicable does it seem at this point relative to your overall install client base?

Yes. So I would say that the clients that are maybe hiring a little bit more are certainly what we're seeing in terms of maybe that initial adoption. And so if I'm a 50-employee count and I may be you have higher turnover or I'm hiring 20, 30, 40 employees, it's still attractive. And then on the upper end if I'm closer to our 1000-employee target market and again I'm doing a lot of hiring I think that's where with a little bit more demand for recruiting. But at the same time one of the value propositions that we offer is you can also handle the internal recruiting needs. So if I've got a job and I've got somebody who gets promoted I need to fill that, and I want to communicate that internally and manage the application process internally I can do that. So there's certainly value even if I'm not necessarily a fast growing or hiring a lot of people. So I think we've seen it across a wide variety of industries and various sizes for at least the first 150 that have signed up.

For that first 150 are you replacing first gen solutions, first gen ATS or…

Yes.

Do some of them not have anything at all?

Yes so I don't have the exact data on the 150 but we have looked at that as we kind of entered the market in terms of how our existing clients behave. And we do have a lot of customers that are still operating some sort of manual type process. There are times we might replace an alternative system but if I were to hazard a guess you would see a significant number of those customers being somewhat manual at this point in time.

Great, thank you.

Your next question comes from the line of Pat Walravens of JMP Securities. Your question please.

Great thank you. I guess my first question Steve would be as we look at the deceleration in the business is it just because of ACA and the test comp or is there something else that's going on too?

Well so I think if you look at the businesses broker channel being a key driver last year spiking up creating some additional activity in volume, we certainly got more customers from in-house last year. So as we look at the data over the first six months of the year, that's a pretty significant drop in brokers. We talk about high thirty's back in the kind of the high twenty's where we've been historically and then in-house dropping down a little bit as well. That seems to be the biggest driver in terms of the lower growth rate versus last year. Obviously last year being a very tough comp. But that's what we would highlight.

Okay. And then if I could just follow-up a little bit on that because I get the question all the time. I mean have you – has your segment of the market gotten any more competitive?

Well I would tell you that we still see the biggest players in the market the most as you would imagine so the traditional service providers the ADP, and paychecks, and so on are the players that we see. We still see local and regional players kind of next. They vary by geography. And then certainly some of the newer players like Paycom obviously we would seem at times we're both growing so that grows over time but we're still at the traditional service providers that we see the most.

Okay Thank you.

Thank you. Your next question comes from Ross MacMillan of RBC Capital Markets. Your line is open.

Thank you and congrats from me as well on being able to maintain the year. Steve one for you and one for Peter. Steve ADP made some comments suggesting that since the election as they've signed new customers that would be under the employee employer mandate each 50 employees up that they maybe hadn't seen the same rate of attach of the enhanced reporting and obviously subsequently filing services in other words there seem to be some companies saying we're just band-aided if we don't have it this year, with the that ACA goes away. Are you seeing anything similar or are you still finding that most of you signing that would fall under the employer mandate or kicking [ph] the enhanced reporting, et cetera?

Yes I think if you go back to the market segment that we focused on most of our customers’ primary objective is just focus on running their business. And even when ACA was first being passed we had to do a lot of education to those users. And at that point they became focused on compliance. I actually had calls with our service organizations throughout January to see what types of questions we were getting and by far and away the biggest question we were getting from customers is how do I get compliance this year and how do I get my 10 95s five done. We're not necessarily seeing a lot of questions about what's happening in the future. I think they'll react when that happens. And then on a new client you'd see a similar behavior they need to issue the 10 95s, we have a great ACA product that we offer them. And so we're seeing pretty good attach rates still because it is the law and they have to be able to issue these. And they certainly don't want to do it manually.

That's helpful. And Peter if we do get to a point where we had to – we got a full repeal if you will on the ACA reporting and filing revenue went away. Is there any way you could characterize the EBITDA margin on that business? Is it at company average, below or above company average any way to think about that?

Well certainly we've said that HCM products carry more recurring margin to us than regular payroll. So this ACA would be one of those products. But I think in terms of ACA as you can see we're bringing on a lot of new products at the same time. So if we saw that coming, we would certainly try to be in to our clients and attempting to sell them other products. They've got the budget set aside for aCA and the opportunity probably would exist for us to displace some of that. Of course ACA was a legal mandate other products are not legal mandate. What you would see is actively trying to replace that revenue and margin as we move forward if replace, repeal, repair or whatever it is takes place.

Very helpful. Thanks so much.

Thank you. Your next question comes from Terry Tillman of Raymond James. Your question please.

Hi Good afternoon guys. Can you all hear me okay?

We can Terry.

Well I'm excited to say I have some ACA and competition free question for you. Just two of them I thought.

All right.

Well two and half. So the first question Steve just relates to last quarter you talked about those kind as you evolved your sales your direct sales resources, you obviously historically you’ve had a lot of success with folks that know payroll, got payroll. Are you going to expand your horizons to bring in folks to maybe you’re more kind of enterprise class sales reps can maybe some modernizing HCM type initiatives. Maybe you could give us an update on how that understood [ph] is going? And an update also on the size of your salesforce and where you are in terms of a report card on the growth in your salesforce?

Sure. So I’ll just start the last one first. So from a size perspective, we are really after we get through year end here we get into February, March is where we typically start doing most of our hiring in terms of the salesforce. So I think we're starting that process in earnest and hard on kind of recruiting for next year. Obviously we have not set kind of our target number yet for next year. And then if you think about the strategy that we talked about last year which was just expanding the hiring pool by still hiring business-to-business experience folks, but maybe not with the same industry experience, I think the reason that I wanted to call that out on the on the last call is that may effect a little bit of how our sales and marketing expense has, the cadence of that drove the year for hiring some subset of our total hires a little bit earlier in the year. I don't think it's a big shift for us, it's really more of a tweak to the strategy and it will take us really through next fiscal year to see how those folks do.

Okay. And I guess Peter in terms of you've had a couple of quarters where you have exceeded estimates for the current quarter so that like say you maintain the guidance again for the year. Is there anything to say that are either conservatism for full year bookings or is this reflective of maybe kind of the flow of business is not so front-end loaded like we saw last year because of ACA. Thank you.

Yes. So I would think I just repeat some of the things that Steve has said about the business. Broker and in-house have returned to more historical levels faster than we what had originally anticipated. And certainly we built that into how we think about the business through year end. And frankly we're happy that we're able to able to affirm guidance this quarter for the year-end, given those circumstances.

Okay, thank you.

Thank you. Your next question comes from Jim McDonald of First Analysis. Your question please.

Yes good quarter guys. Following-up on Terry's question, any update on the competition for salespeople out there in the market?

We’re a little early still in the hiring process at this point in time. So as you probably know already we have a lot of recruiting resources internally, we handle most of that ourselves, we're actively talking to people in the market certainly a lot of good conversations at this point in time. But we won't really start getting our first hires on the ground here until we wrap up year end at the end of February. And then we expect to have kind of hiring process all the way through to the start of our next fiscal year. So good early conversations going on right now but just too early to give you kind of a sense of where we are in terms of our hiring goals.

And I had sort of two quick ones any impact of the slightly higher interest should we start saying something there and also how many 1095s that you put out in January versus that was up from last year?

Yes your question 1095s were up from last year, I think we've historically said last year we talked about doing more than a million 1095s and that we would imagine that that would grow in line with client growth and that’s kind of – that’s the right expectations to have in terms of looking at the number of 1095s we delivered. Certainly more than last year and over that million number again.

Yes, so certainly on interest rates certainly but the trend is going in the right direction. We of course like others would benefit from rising interest rates to give you a sense of how much on. What our average balances look like in the second quarter around approximately 800 million on average, so a good number. And if interest rates continue to go up certainly we'll have a more meaningful impact to our numbers as we go forward.

Just quickly two tenths of a percent [ph], what kind of number makes sense to you?

I think you can do the math pretty simply in your mind. Those are the impacts. The thing you have to think about it is banks – as interest rates go up banks don't react overnight and say oh I’m going to give you that 25 basis point. There's some process they go through that eventually they raise rate. So this will be somewhat gradual, will take some time and it certainly relies on, it also has the impact of banks on where they think rates are ultimately going to go will impact how quickly they raise rates as well. So it is definitely going the right direction, we will be a beneficiary of it, we just need to keep all our ears to the road to see to see how quickly and when it when they do increase.

Okay, great. Thanks.

Thank you. Your next question comes from the line of Jeff Van Rhee of Craig-Hallum. Your line open.

Great, thank you. Couple for me guys just first on the brokers just to clarify I think you said it's not faster than expected do you believe it will stay in the high 20s? And then also I think you are pushing some initiatives I think broker portal and a few other things to try to make that a little sticker. Just a little update, I guess, on both of those.

Sure, yeah, we have had good reception in the broker market to some of the enhancements that we have made to the protocol portal. We will continue to invest in the broker portal as we move forward and we have also worked with brokers to collect some of their ideas that we kind of have in-flight now. So we’re pretty excited about some of the things that we can do with the broker portal concept, really allows them to be able to engage with us and then therefore get access to valuable data from their clients. So we will continue to do that. I think we’ve always said if you go to prior to ACA, I think we have always being above 25% great. We will be very happy. We can maintain that as we continue to grow and scale the business that’s certainly our goal. At this point in time as we return back to kind of the pre ACA levels, we see very similar type of behavior in the market that we saw before. So no reason to think that we can’t do it, but I obviously you know we need to execute in that channel. And it does get a little bit more challenging as you grow. So that’s certainly our goal.

Yeah, okay, that’s great. And then just two last for me. In terms of the new wins, just the initial attach rate of modules now versus say a comparable period a year ago, just if you could call out anything that’s change there and then also in that same frame of mind, the module up sell, cross sells, anything notable this quarter that exceeded or missed expectations?

Yeah, I get that question a lot, and it’s really been a fairly gradual process for us. I think I said this in the past. At this point, you really selling payroll and HR and almost every single deal it’s very hard sell payroll only happens, but not very frequently. You know time and labor, we continue to see kind of gradual increases in that category. We also see increases in benefits, some nice increases in the talent category. So that might be – may be increasing slightly faster than the other two, also little less mature. So that kind of makes sense. And then the newer products are early at this point in time, but good feedback really happy with the early results, even expense management as I have talked about launching today we have customer on that today, we always get beta customers on the product to get their feedback before we launch it. So we’ve got active users using that right now. So we really feel good about the product strategy that we have been able to execute to go from $200 per employee per year less than three years ago now to $285. We’re on track to get to that $300 per employee per year, which was our goal at the time of the IPO.

Okay, fair enough. Thanks so much.

Thanks. Your next question comes from Trevor Upton from Pacific Crest Securities. Your line is open.

Great, thanks a lot for taking my questions. Most of them have been answered, but now maybe a couple modeling ones. Peter, we talked about the increased margins for the first half of the year, but in the quarter I think recurring gross margin were maybe down a bit, and G&A was maybe up a bit. Is there anything to puts and takes anything to takeaway from that?

Yeah, the quarter has cost us an anomaly because we are comparing against the 61% quarter, which if you have a quarter like that on the sales side, all your mark is going to benefit from that, there is no doubt about it. So when you compare it, it can look like things had gone backwards, but that’s why we looked out at over six months period. And they had gone forward and that’s when we look to the end of the year. We’re anticipating 200 basis points of EBITDA improvement.

Right, that’s helpful. And then the pull forward implementations last year, how should we think about implementation growth sequentially coming quarter?

So, if you think about implementation revenue, it’s really implementation revenue and other. And I think we have called out on the number of quarters that that other category doesn’t grow exactly at the same rate. We have also called out that some of our HCM products that were getting higher penetration on, don’t necessarily carry the same percentage of implementation revenue. So, you know, we also mention that it was going to be negative in the quarter because of the tough comparison, so no surprises there from an implementation revenue perspective. We would see that grow kind of in line with sales, but not directly, you can’t necessarily just look at that to kind of understand sales.

Okay, so probably back to the more kind of traditional sequential growth, but temporal a little bit because HCM has lower implementation than others not growing is that fair?

And the other pieces can fluctuate in the quarters and generally the other pieces I think Steve mentioned actually have trended down, like people buying hardware clocks, it’s used to be much bigger than it is today because people go to electronic versions of things and much more automated.

Okay, that’s helpful. That’s all I have. Thank you.

Thank you. Our next question comes from John Byun of UBS. Your line is open.

Hi, thank you. I wanted to ask about the Web Expense product, is there a way to think about potential tax rate versus let’s say recruiting is there much more of an something that could be – I have much broader appeal and then also in terms of relative pricing of Web Expense versus recruiting?

Yes. So here is the way, we think about kind of our product expansion strategy, we kind of work with our customers to see what they need that we don’t have. We typically won’t embark on a build process unless we think over a period of time we can get kind of in that 10% to 20% penetration rate that doesn’t happen initially, it certainly doesn’t happen in the first year. But our philosophy is if we build if we believe we can drive 10% to 20% penetration rate kind of over a number of years. And then beyond that long-term obviously and so we certainly feel like recruiting has that opportunity, we also feel that expense has that opportunity. Now expense isn’t necessarily always used by every single employee in the company, because not every employee necessarily is kind of an expense filer. But most employees have this problem. They have some subset of employees that need to file expenses. And so we think that its got a broad kind of appeal but it will probably run like many of our products take us with why are we getting that 10% to 20% range and then we’ll make efforts to be able to push it beyond. But we think those as similar opportunities.

Thank you.

Thank you. Our next question comes from Kash Rangan of Bank of America. Your line is open.

Hi, Steve, a little disappointed you didn't talk about your 99% [indiscernible] approval rating on glass door the highest in software that we track.

I appreciate that, Kash.

Thank you.

We didn’t mention the award, we want a glass door, we are certainly glad them all the feedback we get from our employees.

And I personally did.

We tracked the CEO approval rating for the past two years, you come out on top 99% I don’t know how you do it but maybe I want to bear on – they will tell me my serious question is if you look at the – what looks to be about 10 percentage points to 13 percentage points so far the delta in growth rate excluding ACA. Is it fair to say that almost all of that is from the brokerage channel contribution or was it also some slowness in hiring direct salespeople? How should we think about how much of that is due to just hiring versus external timer constraints?

Yes, so we were certainly full stashed on our goal of hires going into this fiscal year. So I don’t think that was necessarily a factor I would point to two real factors. One is there is some tough compares over the last year because we sold 88 back to our client base and that will happen in the second quarter of last year. So we get three quarters of the year that are going to be tough compares that naturally has an impact on the delta in the growth rate. And then secondly, certainly seen brokers activity decline you’re talking almost 10 percentage points roughly in decline in broker activity that would be the biggest driver a little bit of in-house decline factors in there. But we were certainly fully stacked going into the year and that wasn’t necessarily a factor.

And your productivity, you’re happy, how sales productivity trending?

Yes, so what I would say is I think sales productivity was certainly impacted by the number of broker referrals. So we anticipated that broker referrals would gradually make the way back to the historical range. We didn’t anticipate that would happen in the first six months of the year. It has happen in the first six months of the year and so if you look at sales productivity they would then be impacted by that decline…

Got it. But its good to see that your aspirational plan is to continue to sustain what looks to be about 25% type top line growth. So its fair to assume that in the medium-term you’re shooting for that aspirational number once you get passed this ACA and broker channel a bump to your growth rate, is that fair?

Well, I say it this way, right. We're still focused on getting to our long-term model that we had talked about at the time of the IPO. So we view ourselves as a goal of continue to maintain 20% plus growth. We're going to be obviously forecasting in the high 20s this year. And at the same time, we want to get ourselves to 20% EBITDA and we're making good progress this year. So we're still focused on being a growth company and at the same time expanding that bottom line.

Wonderful. Congratulations.

Thanks, Kash.

Thank you. We have a follow-up question from Mark Marcon of Baird. Your line is open.

I’m just curious in terms of the guidance for revenue for the second half of this year, is the assumption that implementation and other would actually increase year-over-year or how should we think about that?

Yes, we call those decline in the second quarter, obviously didn’t call out a decline the rest of the year. So you would made the right assumption.

Yes, we would definitely assume that for the year, we would get growth in implementation services and other.

Great. Thank you.

Thank you. At the time, I’d like to turn the call back over to management for any closing remarks. Gentlemen?

Yes. I'd like to take a brief moment to thank all of our employees again for all the effort. This is a very busy quarter as I mentioned in my prepared remarks and we have had a very successful year-end managing all of our clients' needs with W2s and 1095s. So thank you very much.

Appreciate it and go patriots.

Thank you, ladies and gentlemen. That does conclude your program. Thank you for your participation and have a wonderful day. You may disconnect your lines at this time.