WageWorks' (WAGE) CEO Joe Jackson on Q1 2014 Results - Earnings Call Transcript

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 |  About: WageWorks, Inc. (WAGE)
by: SA Transcripts

WageWorks, Inc. (NYSE:WAGE)

Q1 2014 Earnings Conference Call

May 8, 2014 5:00 p.m. ET

Executives

Staci Mortenson – Investor Relations, ICR

Joe Jackson – CEO

Rich Green – CFO

Analysts

Bob Napoli – William Blair & Co.

Tobey Sommer – SunTrust Robinson Humphrey

Jeremy Frazer – JMP Securities

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2014 WageWorks Incorporated Earnings Conference Call.

My name is Patrick and I'll be your moderator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to Staci Mortenson from ICR. Please proceed.

Staci Mortenson

Thank you. Good afternoon and thank you for joining us today to review WageWorks' first quarter 2014 financial results.

With me on the call today are Joe Jackson, Chief Executive Officer, and Rich Green, Chief Financial Officer. After prepared remarks, we will open up the call to a question-and-answer session.

During this call we may make statements related to our business that will be considered forward-looking statements under Federal Securities Laws, including projections of future operating results for our second quarter of 2014 and our fiscal year ending December 31, 2014. Our selling efforts and the anticipated benefits from those efforts, anticipated benefits from the modifications to the use-it-or-lost-it rule relating to healthcare flexible funding accounts, expected benefits from our channel partnerships and from our portfolio purchases, the demand for consumer-directed benefits, market trends for the industries in which we compete, anticipated benefits of exchange opportunities, our expectations and beliefs concerning how these trends will affect our operating results, and our strategic and operational plans, objectives and goals.

These statements are based on management’s current expectations and assumptions that are subject to risks and uncertainties. Actual results may differ materially from those set forth in such statements. Important factors such as risks related to regulations affecting our industry, our ability to successfully identify, acquire, integrate additional portfolio purchases, acquisition targets or channel partners, capitalize on exchange opportunities and risks related to employer and employee adoption of tax-advantaged benefit plans, could cause actual results to differ materially from those in the forward-looking statements.

These factors are addressed in the earnings press release that we issued today under the section captioned Forward-Looking Statements and elsewhere in our quarterly 4eport on Form 10-Q for the quarter ended March 31, 2014.

Given these uncertainties, you should not place undue reliance on these forward-looking statements. These statements reflect WageWorks views only as of today and should not be relied upon as representing WageWorks' views as of any subsequent date. WageWorks expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements made herein.

You should review WageWorks' SEC filings carefully and with the understanding that actual future results will be materially different from what WageWorks expects -- may be materially different from what WageWorks expects.

Additionally, non-GAAP financial measures will be discussed on this conference call. A reconciliation to the most directly comparable GAAP financial measures is available on our first quarter 2014 earnings press release which can also be found at www.wageworks.com in the Investor Relations section. Also please note that our webcast and today’s call will be available on our website in the Investor Relations section.

With that, I'd like to turn the call over to WageWorks’ Chief Executive Officer, Joe Jackson. Joe?

Joe Jackson

Thank you, Staci. And I'd like to start by thanking all of you for joining us today.

Q1 was a strong start to 2014. Our results are directly attributable to our record 2013 selling season, strong client renewal period, successful integration and performance of our portfolio purchases, and our relationships with channel partners and private exchanges. In addition, we continue to benefit from our newly-introduced marketing initiatives aimed at educating employers and participants on our products and services. We are very well-positioned in the marketplace and I'm confident that we will continue to execute on our business and growth strategies throughout the remainder of the year and beyond.

Now let's turn to our results.

We reported total revenue for the quarter of $62.6 million, an increase of 12% over the prior-year period. Our first quarter organic growth rate was approximately 8.6%. As a reminder, we expect our organic growth rates to accelerate in the back half of the year when the majority of the Ceridian account as well as several sizable midyear start clients will be onboarded. Non-GAAP adjusted EBITDA was also very strong at $18.1 million, an increase of 29% over the previous year period.

We had some exciting developments during the first quarter. We closed several meaningful enterprise customers and saw some positive cross-sell activity. As an example, Lowe's who has been FSA client for close to a decade, will now also become a direct bill and COBRA client starting this July. We also signed a contract with Kaiser Permanente to administer their nationwide FSA and commuter programs starting in January 2015.

We have also seen a significant expansion in our new sales pipeline compared to first quarter of last year. The sales team is focused on both new and cross-sell opportunities, taking advantage of the heightened market awareness around consumer-directed benefits. We are looking forward to a robust sales year and hope to provide you with additional client announcements as we progress through the year.

Another important driver of growth are our channel partnerships and portfolio purchases. We have an active pipeline of strong acquisition candidates and we remain committed to one to three portfolio purchases a year as a key piece of our growth strategy.

Also, we are very excited about today's announcement regarding our new agreement with Liaison to be the national administration partner for FSAs, HRAs and HSAs for their Bright Choices Exchange and other private exchanges powered by Liaison Corporation. This further strengthens our position with private exchanges and broadens our overall market opportunity. Starting July 1 of this year, our consumer-directed benefits will be offered to employees via Liaison's private exchanges throughout the United States.

Turning to our healthcare business, the carryover provision for FSAs has generated a positive impact on employee participation in those employers who have already adopted the amended rule. We continue to work with all of our employer clients to ensure they include this carryover option in their FSA plans. We're seeing strong interest and expect there to be a more meaningful impact on our revenue from this amended rule in 2015.

In addition, our marketing team is currently very active with programs targeted at midyear enrollments. While the majority of our clients have yearend open enrollments, a small percentage have their plan-year start around midyear. Midyear enrollments are open now and will provide us with another opportunity to increase participation rates.

The transition of Ceridian accounts to the WageWorks platform continues and is tracking to our expectations for the full year. We will have the vast majority of those accounts onboarded by midyear and expect them to have a greater revenue impact in Q3 than in Q2. In addition, the Ceridian sales force is actively participating in our 2014 sales season, selling WageWorks products and services. We continue to expect the annual organic revenue impact at the full run rate to be $9-1/2 million to $11-1/2 million.

We're also seeing some exciting new opportunities in our commuter business. On March 26, the Metropolitan Transportation Commission approved a regulation that mandates businesses with more than 50 full-time employees within the nine counties surrounding San Francisco to implement a transit benefit for their employees by September 30, 2014, with a pretax benefit plan being a prominent option. We already have marketing campaigns in place to educate employers and potential participants on the new program and are encouraged to see very strong indicators that similar ordinances are being pursued in other major metropolitan areas such as New York.

Our first quarter results demonstrate the strength of our position within an expanding market. We're capitalizing on the opportunities that are arising like carryover provision and the San Francisco Bay Area commuter ordinance. We are also pleased to see that once again the contribution limits for HSAs have been increased, which will make this benefit even more valuable for working Americans.

I'll close by saying that our team continues to execute against the strategy we have laid out. Our growth engine is at full throttle as our footprint continues to expand. Our disciplined approach to managing our business continues to drive scale, as demonstrated by our improving EBITDA margins which have increased 400 basis points year over year.

Finally, our addressable market continues to grow as consumer-directed benefits become more popular, with the FSA carryover provision, private exchanges, to our future is very bright, and I continue to believe that we're just getting started.

With that, I'll now turn the call over to Rich to go through the numbers. Rich?

Rich Green

All right. Thanks, Joe. I'll start by providing details on our strong financial performance during the first quarter of 2014, then I'll discuss our financial guidance for the second quarter and full year 2014.

Total revenue for the first quarter was $62.6 million, an increase of 12% over the same period last year, exceeding our guidance. Healthcare revenue was $40 million for the quarter, an increase of 12% compared to the first quarter of 2013. Commuter revenue was $16 million for the first quarter, an increase of 9% over the same period last year. And other revenue was $6.6 million, an increase of 16% compared to the same period last year.

Now let's turn to cost and margins. We'll review our numbers on a GAAP basis, and where applicable, on a non-GAAP basis. The non-GAAP numbers for the first quarter excludes stock-based compensation expense, the amortization of acquired intangibles, contingent consideration expense, and the related tax impact of these items. A GAAP to non-GAAP reconciliation can be found in the tables of our press release which is available on our website.

Gross profit for the first quarter was $39.8 million and represented a gross margin of 64% and in line with the 63% gross margin in the first quarter of 2013. Operating expenses totaled $28.9 million in the first quarter, compared to $28 million in the same period last year. In the first quarter of 2014, we had approximately $4.4 million in amortization and change and contingent consideration, versus $4.5 million in the first quarter of 2014.

Despite Q1 being a high expense period as we continued our staffing levels high in our service organization to support the higher call volume and claims, we are pleased that we are leveraged -- we're able to leverage and realize savings in our business as we continue to scale.

As a result, our income from operations on a GAAP basis for the first quarter was $10.9 million, representing an operating margin of 17.4%, an increase compared with the GAAP operating income of $7.5 million or an operating margin of 13.4% in the same period last year. Our non-GAAP income from operations was $15.2 million for the first quarter, representing a non-GAAP operating margin of 24.3%. For the same period last year, non-GAAP income from operations was $11.2 million, representing a non-GAAP operating margin of 20%.

Our non-GAAP [sic - see press release "GAAP"] net income was $6.4 million or $0.18 per share based upon 36.3 million diluted shares in the first quarter of 2014. And this compares to non-GAAP [sic - see press release "GAAP"] net income of $4.6 million or $0.14 per share based upon 33.8 million diluted shares in the first quarter of 2013.

On a non-GAAP basis, our net income was $9 million for the first quarter of 2014, which assumes a tax rate of 40%, compared to a non-GAAP net income of $6.9 million for the first quarter of 2013 which also assumes a tax rate of 40%. Non-GAAP net income per diluted share was $0.25 for the first quarter of 2014 and $0.20 for the first quarter of 2013 based upon 36.3 million and 33.8 million shares outstanding, respectively.

Non-GAAP adjusted EBITDA for the first quarter was $18.1 million, and exceeded our guidance. This compares to $14 million in the first quarter of 2013, an increase of 29% over the previous-year period, and more importantly, represents an increase in our adjusted EBITDA margin of 400 basis points year over year.

Now let me turn our thoughts to the second quarter and full year 2014. Starting with our second quarter, we expect total revenue to be in the range of $58.3 million to $58.9 million; GAAP net income per diluted share of $0.12 to $0.13; and non-GAAP net income per diluted share up $0.21 to $0.23.

Our GAAP EPS range now includes additional stock-based compensation expense that was not contemplated in our prior guidance. This is due to a new first quarter option and RSU grants. Our expectation of the non-GAAP net income per diluted share for the second quarter excludes stock-based compensation expense, the amortization of acquired intangibles, contingent consideration expense, and the related tax impact of these items. GAAP and non-GAAP net income per diluted share assume a tax rate of approximately 40%, and weighted average shares outstanding were approximately 36.5 million. Non-GAAP adjusted EBITDA for the second quarter of 2014 is expected to be in the range of $16.5 million to $17.1 million.

For the full year of 2014, we continue to expect total revenue to be in the range of $238.5 million to $241.5 million. Our 2014 organic growth rate is expected to be between 9-1/2% and 10-1/2% and organic growth rate will accelerate in the back half of the year as the majority of the Ceridian account and a number of sizable midyear start clients are onboarded.

GAAP net income per diluted share is expected to be in the range of $0.42 to $0.50. And again, our GAAP EPS range now includes the additional stock-based compensation expense that was not contemplated in our prior guidance, and again this is due to our new first quarter option and RSU grants.

Non-GAAP net income per diluted share is expected to be in the range of $0.81 to $0.89, and our expectation of non-GAAP net income per diluted share for the full year excludes stock-based compensation expense, the amortization of acquired intangibles, contingent consideration expense, and the related tax impact to these items. GAAP and non-GAAP net income per diluted share assume a tax rate of 40% and a weighted average shares outstanding are now expected to be $37 million. Non-GAAP adjusted EBITDA for the full year of 2014 is now expected to be in the range of $65.8 million to $68.8 million.

Now as a reminder, our current outlook does not include the impact of any portfolio purchase and we will continue executing on the strategy of making one to three of these a year. We see promising opportunities for continued industry expansion and consolidation. Our pipeline is strong, and we have a proven history of successfully integrating acquired companies.

So in summary, we are pleased with our first quarter performance and believe are well-positioned to successful execute on our strategy and growth objectives during the rest of 2014 and into the future.

So with that, operator, I think we're ready to begin the Q&A session. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions]

And our first question comes from the line of Bob Napoli with William Blair. Please proceed, sir. Your line is open.

Bob Napoli – William Blair & Co.

Thank you. Good afternoon. First question, on Liaison, can -- the -- it doesn't sound like, it doesn't say exclusive, and I know Liaison is growing very fast, and you talked about the, I guess, the Bright Choice Exchange. Maybe tell me a little bit more about Liaison. I know it's owned by Towers Watson, they acquired it, and I know it's a fast-growing business. But what else can -- can you give us any feel for the number of consumers you expect? Things like that. Thanks.

Joe Jackson

Yeah. No, I can kind of give you [an outlook]. They, like Towers, they're a great partner. We've known them for quite a while. And you're right, they've been very successful and we're very pleased to have a relationship with them.

Basically what it means, Bob, is, starting July 1, any new employers that come on to the Liaison or the Bright Choices Exchange, the consumer-directed benefit offering will be handled by WageWorks. They have a number of clients that are already existing in their private exchange, and it's safe to say that the plan is, as the anniversary of those plan years come up, which most of them I would assume would be primarily in January, although they tend to deal with more small to medium-sized businesses, so I think the start times or starts could be included in a number of months throughout the year. But as the anniversary or the renewal of those programs come up, the plan is that they'll be moved to -- the consumer-directed benefit portion will be moved to the WageWorks platform.

Bob Napoli – William Blair & Co.

Great. Okay. There was a Towers presentation that said they, as of January 1st, they had like 80,000 accounts or employees on their exchanges. Is that --

Joe Jackson

I think it was 82.

Bob Napoli – William Blair & Co.

Okay, great. Thanks.

And then, can you give any -- the Ceridian, did you get any revenue, or how much of the revenue from Ceridian did you get in the first quarter? What do you expect in the second quarter? And again there you said most of it. Do you expect there'd a full run rate and more impact in the third? How much -- how was that transaction going and how much revenue have you received so far?

Joe Jackson

Okay. I think it's going very well. We had a big wave of clients, as you know, that came over in January, and that contributed primarily to the first quarter revenue, obviously. We had a few start in March, we had a few start in April. We had a nice wave that started in May, and then we'll have some in June, July, and through the rest of the year as well, a little bit, some in October as well.

But the best way I could describe it to you would be, as I stated before in our last call, we will have the vast majority of the revenue onboard by midyear. So when you look at revenue composition, obviously what we have in first quarter will go to second quarter. But I think what you'll see is a bigger impact of Ceridian revenue in the third quarter, that's after midyear, than we'll see in the second quarter. So the second quarter revenue will be a little bit more than first quarter. Third quarter will be markedly more than Q2.

Bob Napoli – William Blair & Co.

Okay. And then just last question, I'll turn it over, the use-it-or-lose-it, have you seen -- can you give any feel for the increase in the penetration rate? And I know it happened quickly at the end of last year, but as you study your portfolio, do you have any examples that you think are reasonable from some of those companies, and what has happened with the penetration rate?

Joe Jackson

Yeah. Like I said on the last call, we had about 1,200 employers that signed up for the carryover provision in 2013 going into the 2014 year. When we got through with all the open enrollments and we went back and looked at those 1,200, we saw an increase in FSA penetration kind of in the mid to high teens. I've talked to probably four or five of my industry competitors/colleagues over the past couple of months, and where they were able to measure the impact of people taking advantage of the carryover provision, they were seeing similar increases as well.

What I said in the prepared remarks with regard to midyear starts is that'll be another kind of test for us. So over the last couple of months we've been working very hard to ensure that as many of our midyear starts, kind of mostly in the June, July timeframe, take advantage of the carryover provision, and we've seen very good uptick there. So as we go through open enrollment not and up until the midyear starts, we'll then get through open enrollment, we'll have another kind of benchmark to kind of -- to see how the penetration is going. So I'll probably be able to report on our midyear results on our next call. But that will be kind of the next kind of pressure point that we can look at to see what the increase in participation is.

Bob Napoli – William Blair & Co.

When we say, Joe, mid to say high teens, just for example, if there was 25% penetration rate at a company, then it was more like 29% or something that, you know, mid to high tees off of a percentage of 25, or is that -- just trying to be clear on what exactly that means.

Joe Jackson

Yeah, that's right.

Rich Green

Yeah, that's right.

Joe Jackson

Yeah. You didn't add 12% to 25% to make it 37%, Bob --

Bob Napoli – William Blair & Co.

Okay.

Joe Jackson

Yeah.

Bob Napoli – William Blair & Co.

Thank you.

Joe Jackson

Not yet at least.

Bob Napoli – William Blair & Co.

Yes, hopefully. Thank you.

Joe Jackson

Thanks, Bob.

Operator

Your next question comes from the line of David Grossman with Stifel. Please proceed, sir. Your line is open.

Unverified Participant

Thanks. This is Ervin Lue [ph] --

Joe Jackson

Hey, Dave. Oh, hey.

Unverified Participant

So just one question about the Liaison signing this morning. Does 82,000 participant number refer to the number of total employee participants or the total number of participants, the employees and their dependents?

Joe Jackson

Again my understanding, from what -- I've looked at kind of the same document you have. My understanding is it would be 82,000 employee participants, so, employees that are participating in that exchange, representing a number of employers.

Unverified Participant

Understood. So, does not include their dependents, right?

Joe Jackson

I don't believe so. By the way, that's not a fact. I'm kind of surmising as you are. If it ends up being the case, then I'll try and let you know. But I'm just kind of going by the chart that you saw.

Unverified Participant

Okay, got it. Thanks.

And then secondly, as you look at your own like $3.2 million employee participant number, is it possible to break -- provide a breakdown by healthcare accounts and commuter accounts?

Joe Jackson

We haven't disclosed that at this point. I think we've given some rough percentages of our healthcare business is approximately 60-some percent of our business.

Rich Green

That's right.

Joe Jackson

And then we haven't really broken it. And then commuter is probably 20%, 25%, 30%, somewhere in that area. So that's what we've described.

Unverified Participant

Okay, got it. Thanks. That's all I had.

Joe Jackson

Sure. Thank you, Ervin.

Operator

Your next question comes from the line of Tobey Sommer with SunTrust. Please proceed, your line is open.

Tobey Sommer – SunTrust Robinson Humphrey

Thank you very much. In your experience with the firms, the customers who were able to respond to the change to use-it-or-lose-it last year, those 1,200, is that a fair representative sample of your book of business or did it skew some direction by customer size or some other thing that might not make it a representative subset?

Joe Jackson

Well, first of all, it does. It skews primarily more to the smaller employers. So of the 1,200 that took advantage of it in 2013 going into 2014, the vast majority of those would be small businesses. We had a couple of enterprise clients take advantage of it as well, but it would, in answer to your question, would be skewed more to the SMB side.

So, Tobey, from my perspective, I had the same question you did. I go, okay, well, I got our sample size, but then I went out and started talking to other competitors, other folks out there. Now maybe they have the same sort of skewing that they're looking at, but I saw pretty consistent kind of mid to high-teens increases in penetration from those folks as well.

On the midyear starts we're going to look, again that's going to skew more towards the SMB side than it is the enterprise-level side. But again we'll be able to kind of get a sense there. But it seems to me to be pretty consistent throughout the industry that where that's been able to -- where somebody has been able to take advantage of the carryover provision, they've had that kind of double-digit increase in participation, which is I think great for such a short period of time.

Tobey Sommer – SunTrust Robinson Humphrey

Right, thank you. That's helpful.

Can you describe your -- a little bit more color on your relationship with Kaiser as you look into next year? Just trying to get a sense for how meaningful that can be.

Joe Jackson

Yeah. It's a very sizable account for us. They're a great company. But basically it's the, you know, they're nationwide with their employees and their locations. And basically we've -- we are fortunate enough to win the administration of their FSA and commuter business throughout the country. So it'll be every Kaiser location throughout the country. They've had success in taking up accounts today, but we're really excited about being able to get our marketing programs, to educate and make folks aware, and hopefully drive significant increases in the participation rates there as well.

Tobey Sommer – SunTrust Robinson Humphrey

Thank you. My last question has to do with portfolio purchases. I'm wondering if you could describe what the opportunities look like there and whether or not the change to use-it-or-lose-it has adjusted people's potential sales [ph], forward expectations, such that it can get in the way of consummating a deal here in the near term. Thanks.

Joe Jackson

Yeah, and I can understand why you bring that up. And we've kind of looked at that as well. But I am yet to have one organization or one individual tell me that that was the case. What I have stated, and continue to state, is I think we will do portfolio purchases this year. I get confidence from that based upon our pipeline, based upon the folks that we're talking to. And we'll work diligently to do that. But, you know, I would anticipate we would do between one and three this year.

Tobey Sommer – SunTrust Robinson Humphrey

Thank you very much.

Joe Jackson

Sure. Thanks, Tobey.

Operator

Your next question comes from the line of Jeremy Frazer with JMP Securities. Please proceed, your line is open.

Jeremy Frazer – JMP Securities

Thanks for taking my call. Just got a couple, a lot of people have asked some questions on Liaison. But just wondering, earlier in the year when you talked about abilities to get some other exchanges, is this in mind having the relationship with Towers Watson or are you more talking about relationships outside kind of the Towers Watson tie-in?

Joe Jackson

Yes. Well, you should assume that we're talking to many organizations, and there are many out there, either that have established private exchanges, thinking about establishing private exchanges, or even approaching us with a private exchange platform that needs consumer-directed benefit offerings. So we're talking to a number of folks.

Obviously we're thrilled with the Towers relationship. We did know and had talked to the Liaison folks prior to that acquisition. And when that acquisition was made, that didn't necessarily accelerate conversations, but we've been talking with them over the last few months, and again thrilled with the opportunity to work -- to begin supporting their exchange shortly.

Jeremy Frazer – JMP Securities

And just to be clear, do you guys still anticipate being able to sign up additional exchange relationships still this year?

Joe Jackson

Yes.

Jeremy Frazer – JMP Securities

And then I just wanted to touch a little bit more on the channel partner opportunities. Could you give maybe a little more color on that?

Joe Jackson

Well, as with portfolio purchases, we kind of maintain and nurture and foster a pipeline of potential channel partners that are out there. We've seen great results from the existing ones that we have. In fact, one of our sizable midyear starts is a direct kind of referral through the Aflac channel partnership. We've already seen some success for a couple of other midyear starts plus a couple in January through the Ceridian relationship. And there's a whole number of other organizations out there that I think would be great channel partners, and we continue to talk to folks, and I think you'll continue to see us execute channel partnership arrangements over the next few years as well.

Jeremy Frazer – JMP Securities

Okay. Thanks for taking my call.

Joe Jackson

Thank you.

Operator

We have a follow-up question from the line of Bob Napoli. Please proceed.

Bob Napoli – William Blair & Co.

Thanks. Just on the commuter business that grew more strongly than expected, because I know you had a headwind on the reduction in part of the benefit, how did you -- how were you able to get that level of growth even with that headwind?

Joe Jackson

Well, I think the -- if you remember, we've talked about it before, any headwind that we would feel there, Bob, would probably be in kind of bulk past [ph] business, which is a small percentage of the overall commuter revenue. And the rest of the commuter business, I think whether it's $250 or $140, you're still going to take advantage of the benefit, and therefore we would see per participant fee. So that's continued to grow well.

I would say the headwind that we expected in the bulk business hasn't been as windy as we thought. It's actually been a little calmer. Now that's true the first quarter, we're monitoring it very closely in the second quarter, which is obviously one of the reasons you would have noticed we didn't take up our revenue guidance for the full year, we want to kind of get another quarter into it on a number of years, but the commuter area being one.

But no, it's still been strong. Maybe we'll start to see more of an impact on the bulk business in the second quarter. But again as of -- as I sit here today and as we're working through the second quarter, it's been less impactful than we would have thought.

Bob Napoli – William Blair & Co.

Great. And then just, Rich, a quick question. Your accounts receivable number jumped up in the quarter from $33 million to $51 million, which is an unusual number that jumped out at me. Is that -- what caused that?

Rich Green

Well, we have the -- we're a little bit unusual in the business that we deal for our funding on kind of a weekly basis. And when -- the timing of when the month actually is cut off, will skew that number. So in our particular case, I think the end of March was on a Monday and our big ACH billing date is on a Tuesday. So, long story short, Bob, it's just more of a function of just the timing of when the months cut off versus anything really going on in the AR.

Bob Napoli – William Blair & Co.

Right. Okay. Thank you.

Joe Jackson

Sure.

Operator

[Operator Instructions]

We have a follow-up question from the line of Tobey Sommer with SunTrust. Please proceed, sir, your line is open.

Tobey Sommer – SunTrust Robinson Humphrey

Thank you. I was wondering if you could just give us an update on your customer satisfaction stats and KPIs from that perspective, and then maybe also talk about the competitive environment when you're out there with some of the larger highlighted wins that you cited in your prepared remarks. Thanks.

Joe Jackson

Well, first of all, in the competitive landscape, we get asked that question a lot, and the answer there is we've really seen no material changes at all there. It's pretty much kind of remained as is for about the last few years.

On the customer sat side, and I know you've talked with Edgar and those folks and you know we do client satisfaction surveys, we do participant surveys kind of after calls and things like that, that have gone very well. Tobey, I don't have the stats in front of me. Maybe I can get to them in -- when we talk later, I might be able to shed some light on you.

But as I tell Edgar and everybody else all the time, client satisfaction to me is retention. So our retention rate last year improved over the year before. And it's well under the high 90s. And we feel -- you know, that to me is the ultimate test of how you're doing.

Tobey Sommer – SunTrust Robinson Humphrey

Okay. Thank you.

Joe Jackson

Sure.

Operator

Ladies and gentlemen, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Joe Jackson for closing remarks.

Joe Jackson

Great. Thank you, operator, and thank you all again for joining us.

A couple of quick things. This week marks the second anniversary of our IPO. And I'd like to thank our shareholders, I'd like to thank our clients for placing their confidence in us, and I want to ensure that increasing shareholder value and providing outstanding service is always top of mind here at WageWorks.

And finally, I'd like to thank our employees for all their hard work and commitment every day that drives our results. And the good news that I share with our folks all the time is, you know, we've had great results, the company continues to perform, the industry is in an outstanding place for administrators throughout the country, we're the leader, and as I tell everybody, that's all good news, and that's why I always mention to folks that we're just getting started. So, thank you to all of you for making this such a great place to work.

With that, thank you. And we'll talk to you next quarter.

Operator

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. Have a great day.

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