Good day, ladies and gentlemen, and welcome to Paylocity's Second Quarter of Fiscal Year 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will host a question-and-answer session, and our instructions will be given at that time. [Operator Instructions] As a reminder, this conference call may be recorded for replay purposes. It is now my pleasure to hand the conference over to Mr. Ryan Glenn, Vice President of FP&A and Investor relations. Sir, you may begin.

Good afternoon, and welcome to Paylocity's earnings results call for the second quarter of fiscal year 2019, which ended on, December 31st, 2018. I am Ryan Glenn, Vice President of FP&A and Investor Relations. And joining me on the call today is Steve Beauchamp, CEO of Paylocity; and Toby Williams, CFO of Paylocity. Today, we will be discussing the results announced in our press release issued after the market closed. A webcast replay of this call will be available for the next 45 days on our Web site under the Investor Relations tab. Before beginning, we must caution you that today's remarks 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 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 Web site at paylocity.com under the Investor Relations tab, and filed with the Securities and Exchange Commission. 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 reconciliation is unavailable at this time without unreasonable effort. In regards to our upcoming conference schedule, Steve and I will be attending the JMP Technology Conference, in San Francisco, on February 25. Toby and I will be attending the Raymond James Institutional Investors Conference, in Orlando, on March 5th, and Toby will be attending the William Blair Technology one-on-one conference, in Boston, on March 13th. Please let me know if you'd like to schedule time with us at any of these events. With that, let me turn the call over to Steve.

Thank you, Ryan. And thanks to all of you for joining us on our second quarter fiscal 2019 earnings call. The consistent performance we've seen over the last several quarters extended into Q2 of fiscal 2019, with total revenue of $107.2 million, an increase of 26.1% versus non-GAAP pro forma results for the same period last year. Recurring revenue also grew by 26.1%, driven by new client additions and an increase in average revenue per client as we continue to see positive momentum with our newest product offerings. Broker referrals, once again, represented more than 25% of new business for the second quarter, as we continue to invest in the channel. Adjusted EBITDA for the second quarter was $26.1 million, which exceeded the midpoint of our guidance by $2.1 million. We remain focused on incremental investments in research and development and sales and marketing initiatives in the back-half of fiscal 2019, while also continuing to drive operational leverage in the business as we work towards our long-term adjusted EBITDA margin target of 30% to 35% of revenue. From a product standpoint, last month we released our TPA solutions product, and we've received strong client feedback so far. Our technology-focused offering includes a number of TPA products, such as health savings accounts, health reimbursement accounts, and flexible spending accounts, providing users with a single unified access point for payroll, HR, and benefit administration. Our offering includes mobile and web access, allowing users to see transaction details and account balances while also having the ability to submit claims, all from our integrated employee portal. The addition of TPA solutions to our product portfolio increases our total per employee per year opportunity, from $320 to $360 when a client buys all of our available modules. This is up 80% from the $200 per…

Thanks, Steve. Before going into our financial results, please note that the following discussion on Q2 fiscal '19 revenue growth will be in comparison to non-GAAP pro forma results for Q2 fiscal '18. Consistent with last quarter, in the press release we issued after the market close today, we provided a table that illustrates as-reported and non-GAAP pro forma revenue results on a quarterly basis for fiscal '18. Total revenue for Q2 was $107.2 million, which is a 26.1% increase from the same period in the prior year. We continue to be pleased within the consistency we're seeing in our business, with Q2 marking our eighth straight quarter of total revenue growth in the mid 20s. Q2 total recurring revenue was also up 26.1% from the same period last year, with recurring fees up 23.4% and interest income on client funds up 150.4%, primarily as a result of balance increases, increased average interest rates, and because we continue to invest a portion of client funds in high quality available-for-sale securities during the quarter. Our adjusted recurring gross profit was 75.3%, and adjusted total gross profit was 69.8% for Q2 as we continue to focus on consistent revenue growth while also driving scale in our business model. We continue to make significant investments in research and development, and to understand our overall investment in R&D it is important to combine both what we expense and what we capitalize. On a combined non-GAAP basis, total R&D investments were 14.7% of revenue in Q2, and on a dollar basis, our year-over-year investment in total R&D increased by 34.5%. On a non-GAAP basis, sales and marketing expenses were 22.9% of revenue in Q2 as we remained focused on incremental investments in this area of our business in fiscal '19. On a non-GAAP basis, G&A…

Thank you, sir. [Operator Instructions] Our first question will come from the line of Justin Furby with William Blair and Company. Your line is now open.

Great, thanks guys. Steve, can you give an update on the SMB sales build-out, I guess, coming out of your key selling season. Did you see enough early proof points to tell you that this is a market where you really want to step on the gas? And I guess, can you speak competitively what you're seeing there versus mid-market, I think there's at least a perception that ADP is a tougher compete in that sort of sub-50 run market, and I just wanted to get your thoughts there. And then I've got a quick follow-up. Thanks.

Sure. I mean, I think our thesis at the start of the year was really driven off the fact that we were seeing more success in the under-50 market with our existing sales force. And we're also seeing more demand for the broader HCM suite. I think as we continue to make some investments in that space that thesis has held true. I think we still think it's an interesting space. We still don't think it's going to be much of an impact for this year, and probably not a huge impact for next year. But as you fast-forward two or three years from now, we definitely think the fact that customers are buying more HCM products. We've got a pretty easy to use suite for them to be able to use, they're already buying more in that under-50 market, it's still a very interesting space for us.

Okay, got it. And then I guess just on the other side of it, the larger end of your market towards the 500-plus space. I think a year ago or so, you called out some areas of opportunity to improve there. Can you give an update on sort of that market? And if there's been a derivative impact as you've further down market and carved up the sales team a little bit, does that help in the enterprise or in the upper mid-market? Thanks.

Yes, sure. I wouldn't call it any material change in terms of the upper end of the marketplace. I think we feel like we've got a pretty competitive product set. Of course, we're continually enhancing our product and adding releases based off of the feedback that we get from our customers. So we think we continue to improve in that market. I think I'd go back to where our -- where we were for selling season. We had a really good selling season. We're able to raise the year pretty significantly. After this quarter, you've got to be able to perform in all market segments to be able to do that, and so up-market definitely did well just as much as our core market.

Great, thanks very much.

Thank you. And our next question will come from line of Scott Berg with Needham & Company. Your line is now open.

Hey, guys. This is Josh for Scott. Having already completed your $35 million recent buyback, what are your thoughts on capital allocation going forward with your free cash flow? Are you more focused on buybacks, acquisitions or other things?

Yes, this is Toby. So we closed the quarter with about $105 million in cash on balance sheet, and I think we continue to look for ways to drive growth. And I think we'll take a look, certainly on an annual basis, at how we should think about capital allocation. And as you mentioned, we look to do the buyback as a means of managing dilution. I think we'll continue to look at things on an annual basis, but believe we have all eyes on growth at this point, and we'll continue to view it that way. We'll look at the uses of cash that we can put against growth.

Okay, great. And then just one more for me, December quarter is your busiest selling season, how should we think about the productivity of reps in the December quarter versus your expectations? And then how are you thinking about sales hiring in 2019?

Sure. So I'll take the second part first. From a sales hiring perspective, we're really in the planning stages looking at what we think headcount needs to look like for next year. I think we've talked about the fact before, we really come out of the end of February looking to hire in spring and then all the way into summer, and we kind of set our targets and our headcount productivity through that time period. So, I think we're in the thick of it right now, so no update on that front. And then I think from a selling season perspective, I point back to the fact that we've got a $5.5 million raise to the year from just a quarter ago. We feel good about where we landed in selling season. We went in fully staffed from a headcount perspective. And so, we'll give you more color as we wrap up the third quarter of the year, but sitting here today and being able to raise, we feel good about it.

Great. Thanks guys.

Thank you. And our next question will come from the line of Brian Peterson with Raymond James. Your line is now open.

Hi guys, thanks for taking the question, and congrats on the quarter. So, just thinking about the product portfolio, now we're all the way up to $360 for the full suite, how do you balance investments, really trying to drive adoption into the installed base versus still looking to invest and trying to acquire new logos?

Sure. So we definitely are seeing clients buy more at the point of purchase as new clients come on-board, and that would still be our number one focus is really landing as many clients as possible and making sure they're buying as much at that point of purchase. Over time, as we've mentioned over the last couple of years, we've gradually increased our effort to be able to get more penetration into our client base. It's not necessarily the top priority for us, but it's become more material over time. I think that remains still a really good opportunity for us as we look forward. If you think about growing product up to $360 per employee per year, we know what our new clients are buying at, and we've got a team of people that we've gradually expanded over time that are going back into the client base, and we'll continue to look at capturing that opportunity over time.

Great. And just wanted to get your thoughts, obviously, there's been some high profile M&A in the space. Anything that you think might influence your competitive position over the next several years? Thanks guys.

Sure. Yes, I mean obviously ULTI making the announcement that they're going private. They're certainly a competitor of ours, but not one that we see that frequently. There's some overlap at the top end of our segment and maybe the bottom end of our segment, and obviously with them going private they're still going to be a competitor in the marketplace. So, I don't think that that has any implication in terms of our ability to continue to grow our business or any implication even when we run into them head-to-head, which is just not that big of a percentage of time.

Understood. Thanks, Steve.

Thank you. And our next question will come from the line of Brad Reback with Stifel. Your line is now open.

Hey, how are you? Steve, so there was recently an article in the Wall Street Journal talking about small businesses broadly pulling back on spending. Given that you probably have a much deeper clientele than maybe from who they spoke to, are you seeing any of those signs in your client base? Thanks.

Sure. Well, I mean, you think about the fact that all of our clients have payroll and then some series of our HCM modules; it's really a must-have product. So they've got to make sure that their employees are being paid. You could argue that maybe some of the products that they might maybe able to look at as items that they could consider not doing, but the reality is they get so much efficiency and the return on that investment really makes a lot of sense that we don't necessarily see spend differences a lot, whether the economy is growing a little bit or it's not growing as much. So, what I would tell you is it would be difficult for us to see that and what they're purchasing. And then secondly, as we look at the number of employees per our customers, whether that's growing, it's been pretty consistent over time. No call out there.

Great. Thanks very much.

Thank you. And our next question will come from the line with Samad Samana with Jefferies. Your line is now open.

Hi, thank you. This is Anupam [ph] on here for Samad. Thanks for taking our questions, and congrats on the quarter. Couple of questions here, first, we saw Paycom come out yesterday and the -- saw significantly improved, I guess, churn on their platform from -- from some of the usage programs that they put in place. So, I -- first generally, like how has your churn been trending? And could you maybe talk about some of the specific programs or opportunities that you see in it -- maybe bringing it down a little bit? Thanks.

Sure. I think as we continue to get broader adoption of our HCM suite, we are absolutely seeing significant increases in employee and manager usage of our platform. And that's growing much faster than our client growth. And so, if you think of spaces like talent management, where we've had a lot of success penetrating these products, you're getting a lot more employee interaction in those applications. And some of those interactions move from transactional interactions, where you're looking at pay or punching or approving, to really opportunities to be able to interact across the organization. And I think that's a big part of what's driving higher utilization rates, both in our mobile platform and our online portal.

Okay. And you said you just launched your TPA solutions. I was wondering how -- could you just give us some insight how you're monetizing this, and how should we think about the impact that this would have going forward?

Sure. The launch of our TPA solutions increased the maximum amount of product that a customer could buy from us, from the $320 per employee per year to $360 per employee per year. And so, if you know anything about that business, there's a cyclical nature to it, so where people are often doing a lot of their purchases in the fall and for kind of a January 1st enrollment. What I would say is be called out early on, we didn't think that product was going to have a big impact this year, because it wasn't going to be ready until January. So we're going to build volume throughout this year and hopefully be in a good position to be able to hit that market from a sales perspective next fall. We absolutely do have live customers on the platform in January. So we're happy to get feedback from them. The feedback from those customers has been very positive. The real point here is the ease-of-use of being able to get everything on my mobile phone or my portal and I can get my balances, I can submit claims, it just makes it much more transparent to the user and that's been received very positively.

Okay, thank you, that's it from me.

Thank you.

And our next question will come from the line of Terry Tillman with SunTrust. Your line is now open.

Hi, there, this is Courtney [ph] on for Terry, thanks for taking our questions. Something you talked about recently is getting more modules and the initial sale to a new customer, how has that been playing out and what did you see this quarter?

Yes, I would say we've had really consistent success over the last several years as we've added modules that take rate continues to increase after a launch and remember our philosophy is we get it out to market, we react to the customer feedback, we make it better, we improve it, and I think those investments in R&D and those improvements really yield higher penetration rates on those new sales. So if you go back to a couple of years ago we launched recruiting, we launched expense. I highlighted last quarter recruiting was on a really nice trajectory, expense was kind of where we expected. I think that continues. We're seeing better success with our newer modules from last year like compensation and surveys. And so that's definitely part of the model is we'll drive higher levels of penetration on new sales, and then back to the client basis we continue to launch these new products.

Thank you. Second question is this is another quarter of mid 20% recurring revenue growth, can you talk about how you see the sustainability of mid-20% growth going forward?

Sure. At the start of this fiscal year, we came out with a new long-term model, because we had achieved all of the key metrics that we had outlined at the time that we went public. I think in the long-term model we talked about 20% to 25% revenue growth being kind of our long-term target. And so seeing that level of consistency for the last eight quarters being at the top end of that range in terms of our long-term range we feel pretty good about, we're focused on 20% plus growth. Growth is our number one priority as Toby said. Even when we talk about use of capital it's how can we continue to grow. It's a big market, we think we're in the early stages of this opportunity. We have a very low penetration rate in terms of our total TAM, and so we think that as long as we stay focused on growth and we execute that the opportunity is in front of us.

Great, thank you very much.

Thank you. And our next question will come from the line of Mark Marcon with Robert W. Baird. Your line is now open.

Good afternoon, and let me add my congrats. With regards to the G2 scores, which are impressive, wondering how that's impacting your ability to sell -- it's obviously be a positive, but I'm just wondering if you can talk about qualitatively what are you seeing in terms of sales cycles acceptance of Paylocity, et cetera from a reputation perspective?

Yes, as you know being focused on mid-market, some of the enterprise oriented studies, we wouldn't necessarily be part of it, and our customer segments don't necessarily buy those research reports. So we really love the idea of being able to look at reviews from our customers. And the transparency of those reviews, I think, is really valuable, and the customers put a lot of validity in them, because they know it's not us paying to participate in a research report or anything like that. And so it's very much like a Glassdoor review from an employee perspective. So it's really resonated well in the marketplace as we've been able to talk to our customers and I think it gives the proof point that the investments in R&D is paying dividends in terms of products and then we back it up with great service. And I think if you take the time to read a lot of those G2 reviews you'll see the combination of service and product come out in those comments.

I did. And they were good. I was wondering, how do you think it ends up impacting retention, which has been very consistent, and you're going a little bit down-market so that has a negative impact, but then the economy is a little bit better, so -- as you're thinking longer term, do you think we can get some more improvement on the retention side?

We've been really consistent at greater than 92% retention, Mark, we're not giving you the exact rounding and the decimals on that. I think it's stayed very much in the same range. And I think being above 92% we think is really fantastic. If emerging market were to really take off which would obviously be years from now, really just because of the nature of our investment, it's possible that that has some impact, but that would be a great problem. That's because we've got so many small businesses that it's starting to impact. So I don't worry about that too much. I think for the near-term we feel good about our retention rates and we feel like we are in a position to be able to maintain that level of consistent performance.

Great. And then two quick ones, can you just provide a little bit of meat on the bones with regards to the revenue guidance just in terms of the split between the interest on client funds versus recurring versus implementation and other particularly, given the transition?

Yes, I would look at our history over the last couple of quarters and then realized that interest revenue has been accelerating just based off the rate increases, and so, we obviously do not bake any future rate increases in. We've been able to work with a lot of our partners to get most of that into what you are seeing for this past quarter. So, on a go-forward basis, it's going to be less of an impact in terms of what the interest revenue would look like when you compare it year-over-year.

Got it. And then, longer term just the margin you reiterated the 30% to 35%, can you talk a little bit about the cadence as you balance growth versus profitability?

Sure. I think it's important for us to continue to prioritize growth with 17,000 clients in a market, with over 600,000 clients we think there is a huge opportunity in front of us, and we've been able to get good ROI on our investments, whether they're in sales and marketing or whether they are in R&D, and we will stay focused on that. I think we've also got a history of being able to gradually march forward EBITDA, and so we were able to do -- reach our long-term target from IPO in about four years, a little more than four years. And so, we've got a target of 30T to 35%. We think we will march towards that in a fairly gradual fashion. If we see great opportunities to invest, we will do it, and we won't hesitate to do that, but we are committed to getting to that range.

Great, thank you.

Thank you. And our next question will come from the line of Pat Walraven with JMP Securities. Your line is now open.

Oh, great, thank you and congratulations. So, Steve -- and I total get that your focused on your mission of marching forward, but do you think that the sector is going to see more consolidation, if so, what's driving that?

I think the sector is getting a lot of attention, because there is a number of companies who are having success. I also think that the fact that clients are really trying to become as automated as possible, they are really trying to make sure that the managers and the employees have the ability to serve themselves and become more efficiency. And then when you add the fact that creates a whole bunch of interesting data that you can share with the customers, I think there is this secular trend where there the HCM components have just become so much more important to businesses. And I think the example I gave you is we talked about the fact that you're seeing in 30, and 40 employee companies that are asking for things like recruiting and performance management, and expense management, and my perspective as they're hiring that next generation of employee they absolutely expect to have modern, real-time, easy-to-use tools in the workplace. And I think that helps the sector as a whole, and I think we're kind of in the early innings of that shift.

Great. And can I just ask a quick follow-up, which is how is learning done?

So, we have some learning components in our application. We mostly focus those on compliance courses, which is most applicable to our segment. So think about stuff sexual harassment training, which is mandated in certain states in certain sizes. So we've had that available for our customers for a while. We talked about potentially building a learning module. We've not launched a learning module yet. Our program typically involves early adopters, client feedback, usage, I would say we are very much in that stage right now, and when we are ready to be able to launch that, you know, obviously we will make that announcement and we will add that to TPI opportunity, but that's probably next up on our list of product initiative tip market.

All right, great, thank you.

Thank you. Our next question will come from the line of Shankar Subramanian with Bank of America Merrill Lynch. Your line is now open.

Hi, thanks for taking my question, and congrats on the results. A lot of the questions have been asked, so I will just ask some more high-level question. When you think about the ACA market now and comparing few years back, has your cost of acquisition for new customers start to get better or worse? And I'm asking that because in a market where cloud transition has been going on for the past six years and there is a lot of talk about maturing market in the next couple of years, do you see potential that cost of acquisition gets a little worse as we go along. And if that's the case, how do you -- what programs do you have in place like get the efficiency built into acquiring the customers?

Yes, I think you've got to look at the last five years in the context of the first couple of years after coming public and then we have those ACA couple of years where there is certainly more activity in the marketplace. And so, our cost of acquisition today would certainly be higher than those ACA years, but it would look a lot more like it did when we first went public. And I would say absolutely we are always looking for efficiency in terms of how we're driving our sales and marketing programs. We've talked in the past about different initiatives that we tweaked and made some investments in. I think at the end of the day this is a very profitable business, and we feel comfortable being able to take advantage of the huge TAM in front of us, and be smart about our investments in both sales and marketing and R&D, and get the right level of ROI. So I think something that we look at closely, we monitor, we tweak, we try to get improvements all the time, but we don't see any big shift in what we have to do to be able to win in the market.

Got it. Just one follow-up to that, do you see any early signs of how pricing pressure in the market, in the sense that if -- seeing more people competing for the same kind of customers do you see pricing becoming a problem?

Sure. No, I would tell you it's always been a competitive market. I've been here for more than 10 years, and it's been competitive from the time that I have got here, it's still very competitive. I don't think price is ever the biggest, most-deciding factor, I think it really comes to combination of product and technology that people are really looking at, the overall spend on average, this isn't big enough for price to be the biggest mover, so I would say there has been really no difference from a pricing perspective in the market.

Okay. Thank you, guys.

Thank you. And our next question will come from the line of Nandan Amladi with Guggenheim Partners. Your line is now open.

Thank you. Good afternoon. Thanks for taking my question. So, Steve, you talked about how your -- your targets gone up as a result of the new TPA features, but on the broker side, how is this helping or how much is it helping bring your brokers into the fold?

Sure. Yes, I would say once again we are pretty early in that TPA initiative. We just launched the product in January. So, our first clients went on the product in January. And so, we really didn't hit that kind of early fall selling season. And we knew that when we made the acquisition, we knew it was going to take us some time to build their unified experience for the employees. So I think what I would tell is, it's working as planned. We've had good reception from the brokers. We had a lot of feedbacks from the brokers that they are off and looking for a reliable partner that had that balance between a real strong technology as well as the service component. And I think so far so good. I think TPA from our perspective starts to become a little bit more meaningful as we go into next fiscal year, and that would be the same thing in terms of resonating with the brokers. We think it's a great opportunity going forward.

Okay. And quick follow-up, on the R&D front, I think you said in the script, R&D investment was up 34% year-on-year, this obviously tracks ahead of your other OpEx lines. What are you focused on right now, and how much focus is there on the adoption of mobile apps?

Sure. I think our overall view on R&D is to stay in a very similar range, over time we think it's really important to be able to continue to invest in products, I think we've got a great track record of launching products and then seeing that average revenue for customer increase over time as well. So we are getting good ROI on those investments. We definitely are seeing mobile adoption grow significantly faster than we are in the online portal from an employee perspective and manager perspective. And I think it goes to the point that people are using so much more of the HCM products, which naturally drive more of that adoption. It's certainly a trend that I think is driving the industry as a whole, and it's one that we are realizing as well.

Thank you.

Thank you. Our next question will come from the line of Ross MacMillan with RBC Capital Markets. Your line is now open.

Well, thank you so much. Steve, one for you, just we track open regs on your career site, and that number really has gone up a lot this month more than we've seen historically, and I just wondered -- I know it's a seasonal, strong time for hiring now, but anything to call out there in terms of either magnitude or timing?

No. I think I'd talked about earlier on sales hiring. We start ramping that up really kind of towards the end of February. So we've obviously opened up a lot of regs when it comes to looking at ramping for sales, and it takes us from spring all the way into summer before we get to those headcounts. So I think cyclically, you generally see our open regs be a little bit larger as we kind of enter -- finish this winter timeframe and enter that spring timeframe. And also I would tell you that year-end is a pretty busy time for us. So, a lot of our operational teams in January -- December and January, I should say, are kind of heads down dealing with all the year-end client-related issues. So, in those cases, they're coming out of this in February and looking to kind of fill some positions that they had available to them. So that doesn't surprise me at all. Does that make sense?

Yes. And just maybe another point on that is, in the emerging group down market, is that -- are you staffing that up more meaningfully going into next fiscal year, and any sense for order of magnitude?

Yes. We haven't given order of magnitude, frankly because it's still in flight in terms of us deciding it. We are happy with what we've seen in terms of the reception from the customers, and the product bundles that we put together. We've obviously had some hirers working in the marketplace. We are happy with some of the referral channel relationships that we are building, but we are very early in that emerging market investment. I would say it's safe to say we will continue to hire in that space. We haven't finalized the exact number. So I'm going to try to give you color as we go into next fiscal year. I think what I say is it's probably not that meaningful as you look at our cost structure this year, and it could be a little bit helpful as we look at revenue next year, but it's going to take multiple years before that really I think becomes a growth driver for us.

Great. And maybe just one last one, I just -- it's a broader question, but given the strength of the employment backhoe we've had, maybe for Toby, does that actually impact retention in the sense that there is more headcount growth per customer, and is it meaningful to the retention metric? Thanks.

I mean, I think -- I guess the way I would think about that is when we see stronger economic cycle, higher employment levels to the extent that translates to some increase in terms of the number of employees at one of our clients, I think we view that as a tailwind for sure, and I think that's a tailwind for the existing customer base. And so, if you think about the revenue in the base, I mean yes, it's a tailwind there, but I think we view it as it's a directional tailwind, it's relatively small in terms of the actual contribution from a revenue perspective. And I think the same thing is true when you see the cycle -- you know, if and when you see the cycle turn it becomes a headwind, but it's not all that big.

Yes. Ross, in other way, I would say that is, we talk about this being very low small single-digit growth in employees on a percentage basis, and if that growth was zero, our revenue would still be greater than 92%.

That's helpful. Thanks, guys, congrats.

Thank you. And I'm showing no further questions. I would now hand the conference back over to Steve Beauchamp, Chief Executive Officer, for any closing comments or remarks.

Well, thank you very much for all of you for your interest in Paylocity, and I just want to take this moment to thank our nearly 3,000 employees for all their efforts over a very busy year-end season. Everyone have a great day.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude our program, and you may all disconnect. Everybody, have a wonderful day.