PCTY - Earnings call transcript Q3 2019 | Paylocity Holding Corporation

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Operator

Good day, ladies and gentlemen, and welcome to Paylocity's Third Quarter 2019 Fiscal Year Results. At this time, all participants are in a listen-only mode. Later, there will be a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Ryan Glenn, Vice President of FP&A and Investor Relations. begin. may you Sir,

Ryan Glenn

FP&A A welcome CEO of earnings ended fiscal I'm today President XX, and me and the the Paylocity on on this call release will results announced third XXXX. the will call of Vice Toby Glenn, CFO quarter year Steve issued the Ryan Investor to for afternoon, XX and Relations, after discussing the results Williams, of joining Investor of website Beauchamp, Paylocity's days is for March be and Paylocity. of tab. webcast Good market available XXXX, which be on closed. our call under Today, press replay Relations we next in the our

statements or forward-looking statements uncertainties the statements. are by that from implied and uncertainties, to beginning, the differ contain these actual forward-looking the information on subject can risks session, are the materially statements solely cause which made results during based projected results factors, other Before caution are could to remarks, forward-looking must we risks in those present to these and These question-and-answer differ subject from results numerous you statements. to important statements. that actual and Also, cause including today's

Securities to representative undertake Las measure SHRM financial course available during filings us to available because directly on measures Toby our to with will be Investor Steve refer reconcile measures. Consumer, website without paylocity.com duty the the schedule please is at meetings information, release, be unavailable Also in factors to Services unreasonable will Chicago, in their that how the attending not call, business, detailing like refer to & on call press the disclosures. for Conference Conference will to non-GAAP the let conference the and be the Stock on William is to more additional upcoming statements. Growth Conference risk schedule, For reconciliation Global Exchange today's and that turn information to update is X Conference me Technology Baird and which Toby June at and Los forward-looking complete the if Steve. the to a located let May measure that, will there Exchange GAAP Commission. with Jefferies I any on late financial Angeles. We June for in regards this of these note results these comparable attending June time New Blair other a non-GAAP measure we and unable we the effort. do needed York. certain tab we I under We X Please the with attending forward-looking events. our financial our any be In are Commission With and Securities contained reconciliation Software time in are schedule me and currently the X over of any in in know and any you'd Please at filed Vegas. Toby internally non-GAAP believe will of our Relations at which is therein

Steve Beauchamp

third clients. by funds extended by XX.X% $XXX.X of held forma an Recurring driven revenue versus million, seen over and new you into we've pro last penetration increase the last improved joining performance income non-GAAP all with call. revenue Ryan, XX.X% for total HCM period for product interest additions, us client increase on XXXX grew same quarters for in and XXXX, of year. our to an you, fiscal Thank QX thanks earnings consistent of of on fiscal The the quarter several results

sales providers switch client fiscal starts quarter business clients. largest by We new for Broker quarter. prefer our our our at the calendar the execution third again referrals in were new new implementation The remained pleased a than represents new of onboarding the of quarter teams and representing the with more many of of volume quarter in XX% start third the to consistent, as year. companies once

and remain create also a existing our The focused channels with We continue in for our our smaller in as our to sales new us add time provided to broker investments of lead on efficient team. channel, which segment. investing well busy partners. make We spring target has additions in our generation deeper new market the platform with end in is source, resulting to relationships as partners the both hiring an client core

the with midpoint We are million. pleased $X.X and Paylocity's of our with experience. the well business-to-business place next great of us by EBITDA broader strong talented employment advance to reps has guidance a board sales in as in previous many force industry sales the brand exceeded work Adjusted year. which experience our growing progress we've on marketplace payroll made to million, allowed in the as with HCM individuals third quarter $XX.X as was for fiscal

XX% development in operational marketing continue the business adjusted XX% in long-term incremental to work research to leverage EBITDA on focus of initiatives and also in revenue. towards drive and We our continuing fiscal sales margin target and to investments XXXX, as while of we

is annual is the W-Xs interactions. Calendar year, and coordination and the fiscal highest-margin recurring tax reminder, filings. operational busy quarter very quarter the our to to the client handle increased fees planning of a collected time As a year-end requiring form of for significant volume due third

investment teams experience or topics service and also grow PEAK, retention we a dedicated call payroll free a consistently the in Education These that cross-functional of of contains on resource more launch time, continued earnings XX,XXX portfolio. November, a our client product We for supplemental XX%. Knowledge, than this information and variety above maintain continue to self-service our On professionals. of focus training initiatives, us innovation, announced adoption that we resource, us revenue service-related materials Since allowed which with seen unique and trending and to we've Paylocity allowed for product make together process our strong high-touch have HCM including investments, logins. our maintain has clients in as to

Our sustained as switch suite clients dividends investment our remains Paylocity. strength reason the in the continues product of to to number pay one R&D

In XX% the that since increased driving driven and by increase in of which our and engagement XXXX, addition clients to are features product IPO an continue PEPY suite, develop has employees. in our their expansion we to utilization our

tasks increase recruiting quarter, our have module Just survey platform a on mobile XXX,XXX resulting efficiency that elements and we app continually and over ratings create performance Venture's Cloud great basis. of reviews and includes their checks clients, a Companies in culture. interactions proud in feedback, real-time impressions millions which communication as weekly of usage as on our our employee viewing sending self-service in The social engage clients to platform this very in Highest our Battery general Activity Broader clients entries, to receiving received punches, to of employees our a and I'm and requesting time using module. X time-off. critical highlight are to with how based on than XXXX management ways XXX,XXX and create variety all million Glassdoor. our are to through Rated well on to list, have our is responses onboarding module, nearly own on platform also our the transparency, Like jobs past improve automate from using recognition labor improve our more positive gather been using interactions applications, named we and posted employees employee and our with both a continues culture. increase

to busiest Toby year. thank our call Before results all our of to the their like I work pass our during I hard the dedication would in and quarter employees detail, review on for of to

Toby Williams

Steve. Thanks,

results into Consistent million, please reported QX today, note market quarter, the on last which that basis provided $XXX.X for as be to XXXX forma results increase discussion following non-GAAP release Before comparison table fiscal QX issued non-GAAP revenue financial was last the a pro our revenue is growth same revenue the XXXX. results, QX going pro XXXX. fiscal year. quarterly Total we a we for from in after the period in that and with for fiscal press XX.X% will of on forma closed illustrates a

pleased the rates year QX to and result consistency last because client revenue total marking we're with as XX.X% period was interest revenue recurring continued ninth XX.X% client interest seeing increases, total in funds. same income to mid-XXs. on quarter recurring business, and fees primarily with our straight funds by we up portion average of up increased of be a the invest of our continue balance from growth QX XXX.X% We in up a the

on focus gross total for scale gross business also continue in XX.X% XX.X% profit to while consistent we was adjusted Our QX adjusted revenue recurring our model. profit driving as was growth and

in year-over-year it XX.X% increased investments to research significant a of focused On expense in development, on understand revenue in R&D, QX, XXXX, expenses. On our R&D on in were in consistently as basis, On of to and basis, were both what we fiscal is a fiscal make basis, XX.X% business our important we and investment versus costs incremental non-GAAP sales QX total non-GAAP focused to a combine and remain remain R&D non-GAAP overall marketing QX capitalize. what and we area were on combined investments of G&A XX.X% continue revenue by revenue investment We in XX.X% in in total of we leveraging dollar our basis, XX.X%. a and expenses revenue QX our G&A investments of XXXX. and this in of

for Our at results. $X.X adjusted or Briefly exceeded revenue our the of midpoint. EBITDA which $XX.X GAAP by our covering the was quarter, million XX.X% guidance million

last With was generated cash cash an the as and income including expand million. to from operating we we was million activities we From annual net same will cash For to basis, and with flow million the gross cash, $XX.X on respect the in of quarter in cash perspective, income sheet, margins compared period $XX.X for cash operating $XXX to a remain profit million, free equivalents ended continue $XX the was $XX.X QX year. We that confident invested million. quarter, corporate flow XXXX. $XX.X in fiscal balance million

to guidance like financial for our for updated provide fiscal I'd and Finally, QX XXXX. guidance

fourth an fiscal on the our revenue we including And forma towards and million our year $XX.X from our over to and XXXX is our from guidance in million for business $XXX million adjusted XX% the we've over million the the to continuously fiscal last EBITDA million we revenue $X total expected pro approximately $XXX.X guidance. progress Thank XX% be This the of total range results, growth of of represents represents with to increase quarter pleased total to financial long-term range in for forma the million to quarter questions. to $XXX.X provided scale million, fourth revenue $XXX.X February be earnings $XX million mid-XXs QX over XX, the are call targets. expected $X.X the ready non-GAAP now And revenue fiscal be revenue in of adjusted you. is is ability initial expected In adjusted Operator, expected making our million. growth approximately XXXX an or revenue million. XXXX $XX.X quarters, XXXX, in total of in increase $XXX.X range conclusion, be guidance to which our of to nine generated revenue EBITDA demonstrate to of to fiscal million. $XXX.X we're For is fiscal of the pro million or we're of growth XXXX the $XXX range EBITDA August. $XX.X And fiscal an increase million of non-GAAP provided last

Operator

comes William Furby Our Justin with Instructions] question Blair. from [Operator first

Your line is open.

Justin Furby

just to Steve, you. with Thanks quarter. guys wanted and start great

have normal. guys incredibly this feels, I'd better even had say, bit results You than consistent quarter but a

a look from like outperformance jump think added that quarter. wondering year there's drove $XX ago. added And the $XX out what fees, is in sequentially, anything a terms pretty I million which if of the if call just you you you've recurring in particular I'm at this million big something you'd

Steve Beauchamp

there's big I callouts. think Yes. don't any really

is good business, level consistent This a it of into and I to back a recurring this And I quarter. a little to bit go consistency. had that's think gotten think built a definitely we've quarter. revenue execution sales the does team

in As new all an part it's our onboard customers selling you to be to of important know, those able January. season

our from perspective, And would core implementations think I say I definitely And a job. market, so great did a strong. our marketplace team

at success the see the marketplace. continue We end of to low

our continued that's core did So with the that of emerging in to January small sales and force see market number as then well. well reps

results. with sales some drove operations think and retention I the strong performance So performance consistent in on

Justin Furby

I most businesses And just in Ulti remind and as well, you can your revenue back approach competitors a Ceridian I take time. into us, as think the guess to as of Okay. their and guys step you as continue mid-market $X.X scale runs a billion

for guys? Just you're sort players give your us the legacy seeing a Paycor or space down Paycom, of often of sense how versus those in kind

Steve Beauchamp

so customers our employee while, mean very target And markets then think I have about under-XX up that segment. Yes. segment. around And down And obviously, as with customers emerging above to in that that great fits our employees. go once employers will average, XXX to in X,XXX employees. our On are market goes our find a well. we small

really, we the go And after. in XXX,XXX that So that's over that market there's space. businesses

have the and are a in like from both who still perspective, there's opportunity. penetration think XXX,XXX see can ADP really, players a that U.S. huge you serve. something I so they And businesses big the Paychex, And

so to it's Paycom it's percentage a is Ulti like like folks still The get players, in narrow you local people market that those. we people the hundreds order Obviously, country smaller companies a are there's run or then Paycor. regional fairly that that into. that's that run been percentages, the a we I and think those and more of But focused long little So across into. group that smaller a you the really today. and of the a of would time bit in And payroll primary wouldn't be next case the a for be geography, think that operate up

Justin Furby

Thanks guys. much Okay. Great Got quarter. very it.

Operator

you. Thank

Our next Scott question Berg comes Needham. with from

is open. line Your

Scott Berg

guess Congrats on I start well. to to the quarter hiring Steve, wanted your sales great wanted follow efforts. I as up, on

the should forward? segment your we pleased segment Sounded maybe in But like in early those of you're with about how additions your emerging the think year. progress versus them core going

Steve Beauchamp

Yes.

driven year all, really core success of is next what tell the success and of going be over our I our fiscal years in first is our would couple think you I next to segment.

is emerging our with where success relatively and markets think saw core selling I an segment bit area client It's have success, definitely seen small. little smaller still we a size. we

the year to So increased start last growth unit saw you happen.

fact that I core product. positions really the But buying think are really love clients that we be more by it's segment. our We us going smaller think driven So to well.

some units X/XX clients as think about the I even in annual momentum, think what revenue won't you'll see market maybe if it be actually start basis, revenue you emerging see pick to size, to bit. because is gains going you less up a much maybe a those but than are as will an the it, little that on little

And of that the in quarter. we saw definitely some so

success, are core see because so market emerging in our over hiring built progress of date. our segment so And versus – right, time. to you're you'll most happening And And far happy as of market. with hiring that then gain gradually would that, with we we will emerging very

Scott Berg

about period? of scaling down year you when the a a But customer success more guess consideration the feel have how even market think challenges two Are technologies even what in ago the And help units maybe you lot doesn't us in maybe ago. And to today our maintain in that years that did obviously busy you scaling new is you're level implementation adding can take units you you really Great. smaller implementation to a there you're emerging necessarily into had than from perspective understand bring I any this segment. like or efforts? or follow-up teams, you've

Steve Beauchamp

question. Yes. No, that's a great

did often bringing we have don't customers. units, market success process as for established recast about more implementation great they those that think anticipated really our segment, thing processes. having on The I more we

more that out-of-the-box instead the matter platform. in they're best days of, And kind a we up into built customers configurations, apt-to-use, So definitely get we've smaller of practices can several weeks. of those a of matter

bringing way, very them than of we so been able on something going customers because And kind realistically it think that build efficiently months. We're we're configurations, And best system. these faster that done into practices, last We relatively that's part that to about from. over benefited before. well. prebuilt We're that has ever the XX launched we've doing the

Operator

you. Thank

Brian question from next Our Peterson comes Raymond James. with

open. is line Your

Kevin Ruth

Brian. Hi here for Kevin on guys,

launching about to would spoken the end between modules you see that balance but going as don't range speak areas? of map any that You've within you within have new deeper And the to PEPY your some visibility $XXX before looking kind road could how versus there? goal. the just grow there suggests into Can existing you characterize headroom be product

Steve Beauchamp

I forward. enabled enable and our what's Sure. will going product that years, really is many think Well, our success think I for our strategy success

So need them. feedback learn from time, continually customers' modules new to add we and have what to need we both. we available We at same need the to do enhance our to and

about on I give will calendar management. one today, And have the in program road what building product. and good early to many learning have exact our doing. off customers so adopter can year you feedback trajectory customers tell module we that us. telling that's do cases, We necessarily of out of be are we're the are don't focused you on of our our an we we're what that we're talked learning and based about map this will We reacting because be feeling management

on up employee so per And would $XXX year. working list. on things you tell beyond go that's actively that And the next probably per I to we're

Kevin Ruth

cash priorities the going on a think a going position give authorization what high-level. update few ago. Can completed Got see I you. us you your you we quarters you've And How as repurchase generation for think at prior forward? then maybe an just about forward? should cash

Toby Williams

Yes.

we we've ability cash. think on mean the look the think $XXX our I as about quarter tend it uses generate about growth. terms think use about to before, talked at in million I we continue to is cash balance to ended and of we cash with to sheet, I help what of

top I cash for mean that's mind about over we the think of options time. think usage I So planning and us for our as cash

Kevin Ruth

helpful. That's Thanks. very

Operator

Thank you.

Humphrey. from question next with Robinson comes Our SunTrust Terry Tillman

open. Your is line

Terry Tillman

down, I'll how echo into played is to the quarter and know out. terms gentlemen. out play on of more Hey, it update too early partners job and TPA, the the quarter. confidence congrats. attach just in I to difference early the with first adopters this your it working your of the going just Maybe of you've related Nice of your that's quarter guess and rate it's I level making one next some on we But brokers on into folks maybe thoughts it. an some move as trying of and a and product. year Steve,

Steve Beauchamp

Sure.

So to and build I go top from technology app, that it that think if acquired was back learn into the we on platform mobile employee a transactions. product our our into really pharmacy be able their strategy employee and really business an of all TPA you at and that original paycheck, at in knowledge bought to a look self-service the right to to then offering build we request their before our of that the and time, account so need the bill same at walk into time-off, they could but balance their check look pay some over

adopter we in that that you tell early would phase. I do So product have

balance. phone I So to in company, terms product my on on have our available we're looking own good rolled strategy. at making right now my progress and we own of it But the it out

useful. even as that next think that we our a strategy of months And very, adopter to things going some And to very really road strengthen over resonate. brokers what that's can the have really launch think to starting introduce that just portfolio. strong to is. map to XX XX that's figure starting out we we add I so We're And we it's early

in next So, having it, impact bit and little so from look acquisition with two emerging impact. as years an before year or or as start before, of to now I both so year. having versus this but lag indicated at TPA call you see really far our good that the revenue three certainly a growth, investments to our We

Terry Tillman

seen step you're and And years, of all products those you and the of children love proud add-on the what most, of what has just if and just or here, couple just all thought HCM these then and in product look meaning suite products state if is business kind follow-up I impressed But be broader of the could the question of the add-on the you modules. the that your at products Okay. you from back would've know kind more of, the take review, last and a all better? what all you is, your and the success you you

Steve Beauchamp

Sure.

conversation I they employees clients how of moving their think as conversation to an an are efficiency how looking industry, talent. engage our platform having a we're higher-level with use simply attract at really kind differently, really our to customers do from where they do

feedback opens up starting opportunity forward. these great really to really of me product tell place new really our And you get launching management of I and problems be as on you back data it a your if newer to the we're having perform real-time through check in the get only not are of to experiences then can able year to the the gathering offerings learning your platform can to like So to a really are some start see and data feeling trying coaching people what sessions some like burden by to about gathering you happen. on-boarding with get exciting culture customer going that but really are make and whole data we reducing that's you about a and the half how work. something employees and solve, And around efficient make pulse we make what we and our administrative start how people thinking start interacting we learning use your very and sessions to or drive for hires. are surveys help around clients employees really a And you the start generally,

Terry Tillman

you. Thank

Operator

Thank you.

question with next Analysis. Our Corey First Greendale from comes

Your line open. is

Corey Greendale

investing technology the like to those you hoping kind talking the you partners? quarter. talking Steve, investments about managers the Nice I what you're portal, introductory elaborate might investments? talked or of on you Like your partner in but type Are investing Or about which is you're afternoon. not can good enhancements about in you was that. in channel, in? on work comments, surprising, broker of just on Hey, elaborate

Steve Beauchamp

Yes, sure.

So I say would both.

So continued investment that in our the brokers platform use. technology

available So what's find of valuable come when them into think insights to analytics will partner adding portal? terms in they different we they that We're their about our mutual customers.

something that to we that's So continue do.

continue will dedicated we partnering to our are that Secondly, to those to add resources with brokers.

coordinating resources programs. marketing And of those some might here, be programs

side The key the be other with of brokers. kind people that working are that could of in our field

So on little to in mostly that definitely with to and we more that think force bit more support channel, terms that's do have opportunity and historically for by brokers technology even something there's do, sales of an people. a we providing our leaned both

Corey Greendale

sense. makes That

of competitors been sounds really of seeing for you. with to terms competitively in of your it you Are any this anything has brokers? partner fruitful trying that terms channel, In actively more

Steve Beauchamp

I it's people that probably would say marketplace. in that seen usually we've the

and You people PEO like it's in Paychex see context decent pretty don't businesses, their insurance-oriented ADP or who direct. of whether the necessarily have

sometimes not them a but lot. see You

might and I ourselves couple it's players more growth say so wouldn't local of the and But you broker that And channel. regional the the in dynamics have probably like of the changed. see a

Corey Greendale

you. Thank

Operator

Thank you.

with Samana Samad Jefferies. question comes next from Our

open. is line Your

Unidentified Analyst

taking from is you and are guess go-to-market customer like gone talk Thanks. first compared changes follow-up? how a incenting I some have could made And you've of business? learned segments? market compared are you around [ph] questions Samad. This the similarly, question. or do And Anubhav you maybe deeper you mix of differing you've rest market about And as set to the for do on my you I rest for your to Hi. for what of this the and you're drive would your more could about the generally Thank to making Mehra the channel of like sub-XX is channel that you market, you the ads the how – market into my market. like think

Steve Beauchamp

Sure.

Okay.

we our XX really in resonated think these low as our than with that probably explored months that at ago we customers the solutions our looking you I them. more And really if marketplace, with looked past, and just realized in increased we clients what selling end they were started segment. look core force success the HCM under-XX sales employee of it, more for solution seeing had for

so that And that still back dedicated early with sales core the based started We're off after we're be resource success we of force, to some market. this would that add go the to process. that having in

to driver. we're progress teams. core a that think revenue It's I resources a happy also not have the under-XX at But that. of marketplace. focused have with in – we lot the of continues same don't success those They're big probably not on time, our sales force

at continued. that recruiting, looking things low on-boarding, for end has our like The more marketplace. of of very HCM market clients segment trend the in the that products, So are popular

with that continue, the go up market force end we and we'll out trend so both that focused the of think is always who may structure our will time. as reps in And core a it and low going to also channel year-after-year think by well the built in sales up have be folks. but on at over reps to take like we're I do with the and because that's necessary. working while And things and same to relationships we've to the going CPAs creating things the channels that dozen and And emerging layer as field-based sales would think years, have market for to of probably these continue We we'll build centrally that combination we little located. We've now it's a been the you've a broker got banks.

pretty we're the channel the cycle in So on side. early

Unidentified Analyst

Okay. great. That was

you're a follow that of So up, jumped like the ASC is could how forward, investment give substantially, of forward? had if going level but obviously similar with lot year, R&D versus expect? on XXX, and And some what and idea we do – directional of if just sales expansion an like kind margin expansion your to that thinking to you of of you balance lines, us this idea us this level you margin margins looking do give making in could should of

Steve Beauchamp

Okay.

a the to issued we ago. benefits into in new put of of It we model. started years and place So four then, year long-term were achieve the model fact we XXX that able account this some the fiscal course, that taking

exact us And long-term so at to We're so to historically four long-term of XX%. clearly growth starting we the would forward. frame. out prioritize think put we've thought model about XX% don't took to we how that think kind have EBITDA, but going going XX% around it we and time see how It you time, about there into that first target adjusted gives an sense a about be a and get a it to years first

because got that in So And measured, item simply growth a thoughts to gradual in want would onetime line Toby, you more benefit lift the spends? from much give other then XXX. margin, that maybe, we so some of on

Toby Williams

think investment we for R&D Yes. have those and level pretty have been – sales there. consistent think the what I and would marketing – mean I is of say I I around

then of that's XX% to XX%, XX% around been the marketing for to in tighter �� tighter XX% those So XX%. in in the and has range we've sales to that both XX%, sort and probably been even the XX% even R&D, in range probably XX%

refreshed forward. consistency that to pretty you'll of see model, long-term out I consistent as – and I we've there, called So in and level around we a think the expect – that's that haven't I'd go been we think

Steve Beauchamp

we Right. And to to lastly, expect leverage G&A. continue

us primary overall and So the get into gross margin continued G&A that is drivers range. improvements in long-term probably to

Unidentified Analyst

you. Thank

Operator

you. Thank

question MacMillan Markets. with RBC Ross next Our from Capital comes

open. is line Your

Ross MacMillan

employee as and Steve – to time. relative with successful well. attach aside are towards higher average end, so But is Steve, number the One follow-up terms over size, algorithm much probably the growth in skew so for seeing congratulations you're core customer Toby. I'm my of what you Thanks leaving to per if just your at going modules obviously and just merging low of on XXX-plus customer market? that unit for curious module

Steve Beauchamp

Yes.

employee there, per than And on isn't per if offerings we're of our marketplace. con that year, price admittedly quite as be year the per the employee the the revenue and – A is basis. early down on what at a per our different slightly the maybe this, not is I and minus. plus pro higher revenue it's per core you a would employee – look a the there's average two year average market right? and some say adoption So there's plus module can at And then to you still average high. two, in And per core

we're you per seeing And initiative net that so to able two a on in in what things per similar early generate is markets. both out, average that employee we're when those revenue year

Ross MacMillan

helpful. super follow-up. And a That's just Toby, then,

I client client held growth rates were dynamic strong. was versus in funds And but very Your but funds in on income sequentially quarter. interest lower for understand quarter – underlying of the the this prior

how don't fund of – larger further if So impacting will, some, takes? know, Are base? laddering you could sort the look driver, is that's what and through slightly Or that a kind some I out other with puts impact you of if is there the number? you

Toby Williams

little did – couple I a more is, think get had obviously, – have before. – than a There's I see different probably about and And that think there. other everything lag might don't before mean talked we've I is as – up, you element then got drivers another gone there's rates immediately. the There's mean you put in One bit to we work both of I there, we is a buckets Yes. Ross. you've

– reinvests of been last probably year rates And is increase, we the over have with I as you actually could reinvest are those as that you where the that time, are be have dynamics is the advantage gone that. invested, rate But another in situation can then different think taking the rate before of dynamics so a higher while a two up there you rate. a through bucket as you've, you're or have And I increase element we passed it's get One to you. to different think, so. a that over if

Ross MacMillan

I see.

just capital higher – blocks that that rebates that higher lag like definition kind by the of, rate year-over-year So and within you're base? getting on the, there's are a around these fact of growing

Toby Williams

That's Yes. right.

Ross MacMillan

client stable a of that number's move into more fund at really going rate rate environment, the if to So we more grow growth?

Toby Williams

Yes.

right largely about I think yes. that's the way it, to think

moderates that Yes. I over think time.

Ross MacMillan

Congrats much. again. you Thank very

Operator

you. Thank

from R.W. comes next with Marcon question Our Mark Baird.

open. line Your is

Mark Marcon

as obviously the year data and what's how you With adding satisfaction and new renewal can typically apply? regards clients about ones, you you've do with the but the the then of would can beginning congratulations to clients. – My you're about well. season? you seeing you're your improved great been that What client existing – It's bit little regards you characterize to telling where what's study materially here do renewing you the also talk you further what learnings Like the what rates? a

Steve Beauchamp

Yes.

know, of busy whether adjustments of you it's year the customers, time make they as year. for really that it's have a to end runs bonus the or So Mark, at

to the is new the very able were very high on frequently. do times, which most which to very, immediate the make which well to are secondly, able clients through that's mentioned helpful things think that access of much more we who I And hard of very to sure we I thing worked year-end some so And in call And comprehensive. that for really management really knowledge we've our obvious gives call, launched is system, were become year-end questions. really the other come with going terms to customers this then that response we and e-mail

customers. us, want really So It I we improved year-end the a give love customers. capability we would we we call, that point think with the to with them. self-service just our important be customers opportunity adoption for having that and and And conversations is is high-touch. higher-level has e-mail more product still us on the get our I last utilization make to the But more these for get our platform, experience there's more connection

I to efficiency doing or that practices think about they best not do able how just things drive to but and either really other we're conversations this drive employees. might maybe some do So engagement their with

of were than more And platform. this any the we so because maybe of to in and utilization year-end because do year-end able efficiencies of our other that

So overall, year-end. through great retention

Mark Marcon

regards the I'm same rate ago? wondering attach level of that or if rates, the that time you the you can granular say, a terms more more would clients nature. to you're adoption – How of in and doing little pickup number sold terms get new of in just year but of things you module modules how like perhaps then characterize the period Great. onboarded relative a with obviously, recently, And to, of

Steve Beauchamp

Yes.

the I rate and think that way that's I price think of last that what year it somewhat consistent. typically growth at year I buying And look the employee is been that per have. good, per think come several consistent people been is that – adoption we look purchasing. If been customers over the has we've really point they're and reflective in new we've that per per modules we on, it's of nicely. had And really pretty at years, employee growing it's the we

in growing. us that. got stuff new the had end we've to has the also the that will do success market. two allowed pipeline low the keep some last think to of over years we've launched allow to We continue that We've with modules Our us

still of smaller lot attachment. getting more had units a our a So be products that modules we're size but they're may we've great up and buying slightly and

that think a Compensation any for success trajectory. management into and a – us. at Expense great the the we and little we've I nice but would are I the highlight bit nice in a a with range newer that last surveys two released real well been would modules module. rate, years. are Recruiting's on expect attached

Mark Marcon

they're side I – in where and we're emerging's contrasting to clients particularly but and to still that new relative to comparing And ended seeing? there, be you're there? new Great. any of And there what learning Are regards but then from? terms the with sort of characteristics and you used like coming consistencies Paychex emerging to just know seeing up – any it when in the of

Steve Beauchamp

want down be their to many as in Well, efficient who need of definitely to of as their possible different a employees think and kind Yes. automate user as market, want engage really processes a with I you fashion. and to wants

still that a I there not, are want or it number to people payrolls. of think believe on call So their

our market. a And really target employers. focused We're their experience that so users want software-centric really that's different with to not drive on probably

to simply so wants more user there a done. a to probably HCM attracted versus that just is who our of capabilities is little get And bit level somebody payroll

and HCM successful those market trend competitive being for we that, increasing, of And so really I think are looking that's that and definitely one that's of that is that's a modern, the different and much is a kind is where we're reasons platform more it resonate.

Mark Marcon

one. Great. And last then one

perspective, we with to you to drivers where margin target regards XXX. the doing factored Just the with this, – you than better in be comment ended is up and what a but obviously did and year just what are going expected long-term this from cadence we

did in What this of that does so – setting how we moderate should cadence just think terms you mean? about expectations? mention Just

Steve Beauchamp

Yes.

– And terms to continue now the able been two to quarters that. we've it, what want of growth's mean past deliver part XX%-plus for, been call number Here's model. would the you. to mid-XXs in of going We in obviously, years, long-term going that's we've number invest our we're to priority. tell of the to really I I do one growth, be our

may straight be one growth number line, a our do to is in expansion, opportunities. number into So we we'll if more a opportunities, clear, It us get in some long-term And investing a of margin there see that we'll still that years growth little allow But not bit a growth way will we range. priority. take be little a the with bit those might typically get over less.

Mark Marcon

Got it. Congratulations.

Operator

question comes [Operator Brad Reback Instructions] next with from Stifel. Our

open. is line Your

Brad Reback

Steve, down running market and up from have here, onboarded you're beginning those getting appreciable to customers are in you perspective? cost success differences as some any a seeing

Steve Beauchamp

and platform perspective and utilization to do it they more overtime. is more need do running to We time – say of It's faster. we don't go And we then up similar. because we fairly to drive necessarily cost the through or faster definitely and would much have Yes. I resources get it try the a process. really them multi-week in much days,

So cost think don't kind say there's call I different I similar, to structure. meaningfully would out. of, anything very

Brad Reback

very Thanks Great. much.

Operator

Thank you.

with Nandan from Our next comes Guggenheim question Amladi Partners.

is line open. Your

Nandan Amladi

question. for my Good afternoon. taking Thanks

across so? from down years, new break have So last headcount, existing the HCM, really, the done you characterize look the if I for backdrop Steve, adding growth providers if think years new of I'm versus really curious employees at you that trending employment past the and most well. just would or you customers over new mix has good two – customers how been and couple really just

Steve Beauchamp

in over would I the say last economy. growth slower years, three the of we've kind two or been

It customers very a so platform at the is adding think rate. though. I tailwind And the and consistent are It's way of helpful. not it. you're it's a characterize XX%, driver, that slow kind I slight But it's helpful just single relatively would is basis to it's our in employees low so incrementally of a really the growing kind when digits percentage core

Nandan Amladi

out and there play And with the Okay. iCIMS ZipRecruiter talked large about, that you recruiting so module Indeed your recruiting then the and module on and networks on? recruiting does that how like

Steve Beauchamp

Yes.

in So I think about the two different maybe ways. question

where ability access are. I think clients candidates they the giving to our we're

different platform integrating Indeed of we probably customers that customers – most. the we from candidate our our are – have a hiring the with candidates then Indeed. get example platforms. get would is the that that would can those of applications an from with bunch But So platforms to ability really where be whole integrate

we've that. so to ability got the do And

the think probably the powerful the into ease platform resonates thing of and of and suite our customers. the with really I our integration the the rest that most is

Nandan Amladi

you. Thank

Operator

Thank you.

Lynch. question comes Merrill Shankar Bank of America next with Our from Subramaniam

open. is line Your

Shankar Subramaniam

Congrats on the results.

is of to LTV value you you to same similar of So figure getting now? to of segment talk we But both? emerging I going long about how on long it about where the you're is in improvement – time. it that talk core a summarize or the would And that customer a kind in seems right out, in of versus them can of and CAC, per do is over – just same versus core want core. revenue going the compare the be it user over lifetime the so the if And kind an the market, – the it emerging a be the market like in to the period time? is And be see period to

Steve Beauchamp

Yes.

have So for been market time. we to about I is first that in a selling think the think thing long

driver monitor what be built to our gradually smaller is basis. number of the decide And So a of then core those force then our customers. grow. certain will lot able structure be that force for of of selling will cost a growth. on go-forward our looks want more a into acquisition it existing emerging cost core lean that drive smaller like to Emerging sales do customers to on we to We'll or to sales in do and be do marketplace able more we want a

these looks we and margin/implementation. either at can term, both the the business think expect overall, so understanding efficient drive a more, actually bit a different We the and that bit on think got And we've I little to from be long got to perspective, experience clients little very like, very your understand our in past. and what We know cost will go to over scale. it long-term this able gross in dynamics. we that a you've be results similar business we think more sales to to core business of those be thesis our similar

Shankar Subramaniam

Okay. Thank you guys.

Operator

call no Beauchamp showing at Thank remarks. to closing you. this for Steve And the further time, I'd turn over I'm back like question to currently

Steve Beauchamp

like opportunity for thank very work thank their have our I'd great of Everyone, a all employees year-end. a to you just another your night. busy hard all all to take Paylocity over for and interest of Well, Great. in

Operator

Ladies wonderful Thanks participation, and and conference. gentlemen, for your have a day. this concludes today's

Paylocity Holding (PCTY) 3 May 192019 Q3 Earnings call transcript