Paylocity Holding (PCTY) 4 Feb 202020 Q2 Earnings call transcript

Company Profile

Participants

Ryan Glenn	VP of FP&A and IR
Steve Beauchamp	CEO
Toby Williams	CFO
Scott Berg	Needham and Company
Pat Walraven	JMP Securities
Brad Reback	Stifel
Mark Marcon	Baird
Samad Samana	Jefferies
Brian Peterson	Raymond James
Nandan Amladi	Guggenheim Partners
Matt Pfau	William Blair and Company
Siti Panigrahi	Mizuho
Daniel Jester	Citi
Drew Kootman	Cantor Fitzgerald
Robert Simmons	RBC Capital Markets
Arvind Ramnani	KeyBanc Capital Markets

Call transcript

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Operator

Good afternoon and welcome to Paylocity’s Earnings Results Call for the Second Quarter of Fiscal Year 2020 which ended on December 31, 2019.

I'm 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 website 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. forward-looking to actual factors, those results by or subject which and results are these cause could to other statements numerous risks important uncertainties implied These statements. differ from solely statements. Also, these subject risks those to uncertainties and projected the results information can actual materially and to cause on that differ statements are present in based are from the forward-looking

We Commission therein to information, filings with statements. disclosures. Exchange please and and contained factors refer forward-looking our not duty for additional any risk For Securities the any undertake to do other the update

Also, to business press of under the during is at the Securities a course our how that website Investor on the of We and representative release which filed reconciliation today’s these measure call, internally Exchange and we in schedule there detailing with paylocity.com certain will financial non-GAAP refer we located more is non-GAAP tab results Relations and currently measures are the Commission. believe our measures. available

that we comparable GAAP Please without directly any is information this because the unavailable reconciliation financial measure needed at the are which non-GAAP effort. is reconcile note time complete to financial a measure unable unreasonable to to forward-looking

conference Conference will be February XX. me attending these will schedule, let our with the be New one-on-one JMP Raymond attend James March Technology of at time the attending software on RBC to any I events. the and to regard Toby and X In March in if Please us you'd Conference in schedule in York know like conference on Orlando upcoming on Francisco will San Steve XX. I Institutional Investors

to that, let over Steve. me With the turn call

Steve Beauchamp

quarter earnings all to us for joining you, on call. our and fiscal second Thank you Ryan, of XXXX thanks

and XX.X%. $X guidance fiscal growth three able revenue market headwind had million quarter in throughout We pleased revenue total of consistent another of July. growth led revenue cuts to by by XXXX and interest the our to second strong target very raise recurring we're quarter be rate and other sales strong the since despite Our continued

and to the the to off sales sales some in invest start through team marketing under time. to employees half growth coming of continue Similar best strength as their and and continue well we quite drive XX initiatives in to We last fiscal year clients momentum is in our core with first unit as from see upper our of year, healthy to the market. end

quarter. continue to in Channel while again referrals more million Adjusted for development investments once gross research business leverage than initiatives and focused second was of marketing or on fiscal and XXXX the and sales to and second drive for margin in G&A drive XX% in we incremental and represented margin new quarter remain $XX.X costs the growth. EBITDA XX.X% we

our the with product Our dividends continues being in our to differentiator pay development investment in marketplace versus sustained suite competition. a product

receive continue community. We to feedback strong on

Our employee-focused productivity. engagement employee social communication and platform designed connection, for clients to increase

our clients initiatives. average enrollment on continue as drive have helpful than company of our half clients users advantage groups using and have wide employees taken such community to in events. and a in of communicating collaboration found variety benefit order topics Monthly to in and to of open their More cultural increase increase feature also community

employees last reactions to been utilization quarter. XXX,XXX just community a with posts very of by than this clients, we've addition, pleased In XX,XXX over the our more and content with in

existing prospects the and also appeals gain software pay on-demand workforce Our continue toolkit, adoption to modern with in evident and that providing commitment traction which like community to clients. innovative to is our

platform. help drive The at across clients roll and use toolkits our solutions, employee engagement understand and adopt common cases the

strategies. our instructional practices utilization, launch guidance product to configure and on with and clients best videos and provide plan, product toolkits adoption need Our rollout they expert products, including everything

by confirmed received XXXX Grid we've feedback, been named the Winter product be as the Paylocity GX’s first party payroll named in third an enterprise leader for Report, continues and to being XX leader once time. positive categories, overall segment for The in research from including has again prospects a clients in

a work busy busy The thank of agencies. fiscal payrolls, the their state operations annual hard want our year. WXs, dedication for is year employees time local to clients filing and time of of quarter with of all year as employees work during closely XXXXs processing this form very our for tax very second and end I and on they to federal,

like I review to the would guidance. and quarter's updated in the Toby to to now provide call results pass detail

Toby Williams

and million, increase revenue was Total recurring Steve. up year. an for XX.X% same period with of revenues last XX.X% Thanks, other $XXX.X QX the from

our Steve consistency QX and of of team growth our other seeing with we're and had offsetting revenues noted both the strong three in interest the specifically quarter recurring pleased As some in performance in sales of July. cuts we're headwind another since the QX, rate

prior XX the operational Our in as start continue sales our QX, our for from strong focus increased same to basis model, adjusted force period adding points gross scale the the handle also volume by to on XXXX. client a was while driving of from resources profit an we in year increase fiscal in XX.X% business resulting

both overall combine important significant we what We continue to development we investment and in to and in and make is to research R&D what our expense investments capitalize. understand it

on investments in XXXX. of non-GAAP expenses a R&D marketing of On the sales first in of in basis, sales dollar were strength increased fiscal a reflecting of revenue XX.X%. the revenue year-over-year R&D total total QX half and On were XX.X% basis, our and a QX, non-GAAP the basis in by combined investment performance XX.X%

a versus basis. consistently fiscal an revenue improvement remain we last XX and QX and XX.X% were year On leveraging in focused of basis of costs QX expenses G&A on point XX.X% on basis in our non-GAAP G&A annual

or to to margin the higher guidance our expenses million we million, and with range margin Adjusted associated in $XX.X see $XX We sales the driving EBITDA for quarter deliver strong while compared XX.X% continue our are the did as second million quarter performance. of was $XX to pleased interest environment lower leverage. the headwind and sales to from from on rate in focus

was cash profit income regard gross was with the the generated and million for cash $XX same ended the cash, $XX.X million $X.X quarter results, GAAP $XXX.X and to In income net we million in of for operating was million, $XX invested quarter, we balance last operating million. $X.X in as sheet, year. equivalents to corporate and activities from cash QX compared our the million Covering period

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

in quarter the revenue. is And to million or to a of And is expected $XXX.X to $XX.X million fiscal million million be and total adjusted expected $XX.X year be to million of of XXXX in to XXXX adjusted to in quarter expected the is $XXX.X of over revenue $XXX.X total the $XXX.X For revenue the approximately total fiscal $XXX.X or to of range range total for XXXX, full the million EBITDA third $XXX.X EBITDA XXXX growth approximately range fiscal over revenue. third in to be XX% expected million is be fiscal range growth XX% million.

are margin our we scaling focus other recurring to including continue with and conclusion in our term ability well towards consistent and continuously growth our making as on revenue both business particularly demonstrate our In results, gross revenue in progress QX and long to as G&A financial pleased we our targets.

Thank now you. Operator we're questions. for ready

Operator

with And [Operator Instructions] from Scott first Needham. Berg question comes you. our Thank

Your line open. is

Scott Berg

off a and were let's changes your for any upon guess just kind said today. is the I of my quarter said Hi, it for across – to you of Steve, move you best strong that you just sale let's the Toby. thanks I demand sales ever, some teams and quarter in yeah sales down modules or Congrats start taking on expand customers like productivity sounds fruition, see your questions. guess good of your the your successes Steve are in in asking do environment trends it force market terms maybe the

Steve Beauchamp

prepared you lot feature community Yeah for great several of the the for six the in think sales we terms is really across modules utilization. are to year force the know definitely those ads both and in know the and so additions in enhancements of a think we months made the first thing last the the in market a of product other us highlight strength the board. remarks And I that the the I is mentioned say reception I as including you new in overall over differentiation would seeing years I

continued units in below mark. So strength the XX employee

you done it's put number well Our all we've offering we've when together and core well had really our market target at a done of that best mid-market years. so in and of start end the definitely has top the

Scott Berg

How should around in an delta year conservative Great, prior interest then EBITDA think margin you flat that your a about though Toby guidance. couple your changes. you or for you kept the of spending adjusted guidance or raised helpful. being the maybe from areas are on rate on absolute basis And EBITDA that we revenue

Steve Beauchamp

Yes it's little main through has And think we're both performance sale since I an are had July adjusted also happy Scott standpoint revenue expense bit Steve - I had we're headwind from and just sales obviously definitely is the it talking cuts a about EBITDA the main from those the impact rate but probably a you perspective which of with. seeing then so from an the we've which from think the a you which both that two standpoint I points. really results know of was know think we're

Toby Williams

from standpoint overall pretty I sort able perspective and of I think keep overall adjusted you mean from you EBITDA the know to be to feels revenue And good. the know raise guide

Scott Berg

the I'll Yeah. into moment jump It's queue. I have all the at Thanks back

Steve Beauchamp

Thanks.

Operator

Thank you.

Terry SunTrust. Our next from question comes Tillman with

open. line Your is

UnidentifiedCorporate Participant

Terry. Hey, our It’s actually taking how are on for guys. for Nick questions. you Thanks

investment was PEPY moving I products? think Thanks. first on how focusing near increases in around term the the should are we so we current guess which So you about R&D one forward more extract further area R&D

Steve Beauchamp

Yeah.

opportunities we So I have think to both.

seeing definitely of released over us helps the our years number modules we're clients. getting a that we're increased certainly we've PEPY several last that from across realized of that a and So penetration

continue it getting team able products then able add time think that modules time revenue and we're every be of bigger there, new going And bigger it's so gets a a same to monetize. selling business part inside but to we've to single we lastly, to the will lift an be little huge year. of really that bit got At back to not over clients do current our those sales we're a

the when for capitalize a so for both definitely plan same that is and drive new to at forward you years type and solidly range think been is go XX%. really a I investment to expense of basis. in that and number a look continue of the we product XX% We've for continue to our range term long would on and of feature R&D modules part that us set ability new innovation from believe And to we

UnidentifiedCorporate Participant

Got it.

And base customer conference helpful. mentioned or would attach insights. you That's up you insights Thanks. And of a Okay. follow I are any you be in X% on I updates prepared because remarks, have community customers guess and for but the user on touched are you so any guess then helpful. just update the data Hannity on using at there across get rates

Steve Beauchamp

Yeah.

definitely it's benefit purchase so able insights we from separate those So overall are utilization we to comes and our module client data be in for any to and been different purchase increased not driving which analytics new a have that. seeing customers with

driving can platform. utilization and fall. how rollout higher community – And translates that added is employees doing probably that to the rolled of customers newest that then that use completed the both engagement got and exactly in a analytics are dashboard we we’ve and levels saving the client's to we've the see what time the We've

looked we new It cases drives reasonable ahead really and We've of I have with customers with really XX% the try feature. that employee when interesting engagement, would said I pace XX% even where community. module or to get And of of in on pretty like I period use been past a think within to really of on expected introduced our I lot we a unlocks time or the of customers. that our happy a we're some that think uptake for module

UnidentifiedCorporate Participant

it. Got

Okay. Thank you.

Operator

you. Thank

Pat comes JMP with question from Walraven next Our Securities.

open. Your is line

Pat Walraven

Oh, great. congratulations you Thank you and to guys.

Steve Beauchamp

Thanks.

Pat Walraven

some just talk a your big I’m little about lot going a to little are that to can want drill I have this bit how in down you but really and a bit. business deck slides get helpful

So you Steve… right got customers XX,XXX roughly,

Steve Beauchamp

Yeah.

Pat Walraven

your in XXX,XXX there's …and market. target

Steve Beauchamp

That’s correct.

Pat Walraven

up off But I this so many market are mean of for – end what you really can how you something share sort right. you’ve XXX,XXX of can – taken up how Is grabs. with? those eventually where

Steve Beauchamp

Sure.

XX of things core market I So employees. this a think XXX,XXX couple to are X,XXX of

fiscal increasingly last to I as we're that’s of which the year said trying viewpoint continue we per year than As the our grow above to at was you And XX% more last year we from coming XX,XXX. had XX%. end units business at a is little saw so think over

And – four and at so the of you business. every three can years between doubling up end that idea metric the

of still there’s and And that clients just share. XX% XX,XXX XX,XXX market you think if so clients being

look so stay model but that's And a within beyond focused that kind look there's know to long our think last off based metrics you as timeframe toward of we we're going and that and at at that executing on term of target. of kind we great that something that's and a you reasonable that kind we're year's near-term room

milestone. getting a business the Let's and think of to big is billion $X and beyond next our doubling

Pat Walraven

on just a sort of but radar , don't you on Is a recently into you. right. came my here I competitor. And and the that follow-up across slide do All that Thank great is competitive on a a landscape sort Paycor, have of run also you one Awesome. see then that

Steve Beauchamp

Yeah as see. we that you being I we held of Paycor , the privately think largest one companies know characterize would

of you lot than would companies a I and very narrow you geography the in know a are operate larger know smaller Paycor much So that. privately think companies be definitely held

this kind saying or we know anything point specifically. see enough that call not tough you at us them that's would competitor a but Paycor time to we they’re so local of that And often regional necessarily about still fairly put and not in

Pat Walraven

congratulations very you much and Thank Perfect. Okay.

Operator

Thank you.

comes from question with Brad next Stifel. Reback Our

Your line open is

Brad Reback

thanks much Steve. Great very

customer that think forward of fundamentally engagement going that Thanks. forward. you with your amount base product of If does type the seeing the solutions you the you're given put community change can into

Steve Beauchamp

Sure.

our So that them really value one we're save add we in office. for it one is ways really customers entire to different of think time ways three and trying is about back really digitize to the trying the HR and we're

of interactions lot does of and platform. that transactions on so lot utilization it create our lot And drives a a and a of

and we and So we of that off monthly users users increasing see look weekly at daily and monthly the weekly transaction users a users based we transactions. based users and that see increasing and

to are trying is Secondly, engaging do that more of we're automation find cases just transactions. use

clients a impressions other maybe what you we So deliver basis our from workforce that management data take have engagement recognition oriented bit survey certainly about frequency than both engage interesting which but have community and that data that products and and be think we and and do opportunities interesting think might to likely on the combine ago. go up years opens that little or product you our we four employee that different of of journal product, level and and thought surround of which performance a forward we products think a about with would they and of insights that transactional that about the three creates these then capability, reward whole we back engagement to all that

Operator

Thank you.

Baird. Marcon Our question with comes from next Mark

open. Your line is

Mark Marcon

Steve, new the of Wondering GX Does from scores the Ryan. strong are implications You're and capitalize well that. clearly Toby that market. afternoon, opportunity? doing just represent wondering the up so that what in perspective what from the to are particularly plans a really Good

Steve Beauchamp

Yeah.

really we're revenue that I that really, consistently think proof I client us. we're customers And and retention advocate our I over on the scores reflects been for delivering focus really ultimately experience think a strong GX a been think positive mobilizing We've it proud point. has of overall our XX% delivering. as

new that winning actually I we've some not to is time would market. enterprise having that brand probably at the think success speaks the I potential, I'm the it in unlocking that look sure so first

the the proof and know and I it's goes to XXX has really force been X,XXX you X,XXX it's I plus really a that across segments think come in think mention important that another to us strength all sometimes start sales little a beyond a just and to has strong point. it XXX

Mark Marcon

great. to That's the regards guidance… then with Toby And

Steve Beauchamp

Yeah.

Mark Marcon

that …how and effective thinking contrasts were to yield balance flow growth year? and last compares about relative you and how

Steve Beauchamp

Yeah.

we And be perspective seen from rate as since both seen I we’ve So I – have flow said within there three flow obviously that's revenue as the from cuts a July through and there mean through and I headwind EBITDA certainly – in that impacts QX, be think is through. continued continued in QX, flows there – QX. and will will adjusted QX

from even mean, though we through around up into And I see so, I through balances average continue to that come in and X.X% see X.X% flow QX are you'll to that directionally QX. you'll QX that impact have think

Mark Marcon

contract with cost about as we regards cash the And the the how flow, to that then on should unfold? deferred think Okay, year great. free

Steve Beauchamp

what proof was execution talking think about. some is there – point that the what of you're I So force of see sales Steve the you

QX see you and of So this you of that's of mean, and QX have seen the the see impact we to start one QX year strength to start years, – if and areas where that. in look at versus QX I prior performance

Mark Marcon

Yeah, clearly.

Steve Beauchamp

it's references I so sales first – in it QX. think performance half and strength in of the the far the

Mark Marcon

it's been Terrific Yeah, Thank follow great. I’ll you. offline. up

Steve Beauchamp

Yeah.

Operator

you. Thank

Our Samad Samana comes Jefferies. with next question from

open. is line Your

Samad Samana

Hi. Thanks questions. for taking my

acquisition marketing more change sales Toby I commissions wanted than first were clarity expected. we sales it stronger on just like-for-like kind driven in by for deals? sized held because maybe So the cost and side to of that's side on just the just similar if customer Any

Steve Beauchamp

seeing back marketing it investments I it course so sales or the year performance talked also course you're and other sales marketing But sales what the expense investment so quarter. the so call the just in and of I I the year think the incremental in in incremental in step take and think part the you're of of is cost think seeing a incremental some last we've the over from the No. mean about there. you're seeing sales I significant

Toby Williams

that think think really time, directly Yeah. that initiatives we our year last percentage performance. performance, spend organization related at to we and relatively this most from the The just things producers. sales some in marketing We're we're marketing, levels And add would about item I if channels is sales you that compare sales driven to are the to by organization is our staffing the incremental largely that line of but doing small. of coming excited say

Samad Samana

Steve. you And maybe Okay. for one Great.

in have such seeing As you changing had factor quarters. larger prices change curious dynamics, it certainly of think not just asked the but behavior, about. great I'm if competitors one get any about your competitive number some discounting behavior behavior pricing in any or you're is that we something in

Steve Beauchamp

Yeah. Yeah.

our price a the So think market not At seen day, highly any have competitive product we to the you're perspective. of those and end abnormal haven't it's really than one unlock them and to the and is price pricing I and but the seen of is changes that we from of to probably those behavior offering we service really can important more we're customers factor the don't kind number any really used it's a a definitely right, market strength value that the giving competitive provide dynamics. we're

Samad Samana

taking questions. you my Appreciate Great. guys. Thanks,

Steve Beauchamp

Thanks. Yes.

Operator

comes Our Raymond next James. Peterson with from Brian question

is Your line open.

Brian Peterson

to sizes for initial deal or just are comments. sales it growth follow you Brian. is this be Can as just on upsell Steve it. on Brown simply seeing on new metrics Is Alex momentum just customer might on well? that want up larger what the also or momentum elaborate Thanks, you in I

Steve Beauchamp

Yeah, this year, you you about strength. is revenue where know so last so new talking business look new angle seeing really is we're recurring compensated, sales is if organization the how revenue And I even that at think and and we so a and mid has that strength continued would strength our end lot I units we've into year of seen in upper better our of marketplace. say XX in saw under

we down market. were even I to and mid-market year a upper if been year at in good versus last had it's sales better year you so, know continued And characterize that year, this a perspective end strength with from last

Brian Peterson

being the to Got about I percentage it. more ask come on calls know for just wanted I corporate in to higher being client a just wanted And invested, to funds this calls of about Thanks. used up the but it's is ask investments cost that? tied Toby quarter, prior prior the I the percentage cash so commentary of some is so higher of

Toby Williams

each nothing know cash of piece from cash of Yes we have more have we're and sort funds reflects do the we’re and that for or but that just from portfolio that investing similar investing of a know you – so corporate that responsible we standpoint both, clients corporate you investing we of just placement a out well as portion less balance portion also we're were a piece than I on think the – a of sheet. of cash and

So…

Operator

you. Thank

question Nandan comes Amladi Our Partners. with next from Guggenheim

line open. Your is

Nandan Amladi

improving any much you. backdrop service taking that, Thank well. over quarters the are The afternoon. wondering question how actions relative as I'm some have competitive like overall displacements A point? having despite for sort competitive Thanks rates healthy here. pricing this a bureaus a your seeing you question. from my traditional to retention of what reported Good things also couple of vantage of and function is of economic last

Steve Beauchamp

Yeah.

way. being active think say run continues like, is employees paid we that that So our would so what has see of they any in we and rate that a haven't and growth are economy a how to for the to environment And look kind slow many I client seen that looks that many employees way been I base how change manifest the while have.

necessarily So because changed. a I that's for factor it us don't hasn't think

the economy bunch And It a that's you we formation. of business see more new not don't sell increasing new part so whole businesses of do. secondly what key sometimes with a we

this itself first the of last declines impacts you in been really So acceleration biggest the performance fiscal own of then fiscal helpful year. two see quarters us. and revenue been or of in that really recurring economy last the our year think versus to rate these two of that quarters interest I just hurtful terms has course don't driving in The

Nandan Amladi

about operational I is a follow up some features. automated quick for perhaps adopt the how make is process more the there How much on side, tools customers And you to talked you about adoption that on begin how that newer onboarding your for Right. know to and opportunity to side. efficient? of

Steve Beauchamp

Yeah.

a We've for the for our us. that process a market of completely portion and now are of our a product had great digitized So platform. using in onboarding number we've years customers got been onboarding’s the significant

a content some imagine of the would. from have So and prior then there include first you'll welcoming job or and can like to go and like you could able work feel to not information, go whatever up normally you'll the paperwork online, state three forms of starting in that show hours you're and fill two know necessarily you some out company the to through federal be all you required content to couple you

have adopted And lower at great have we've our would so of one seen expected. we that's end been It's product those a market get that the even more would products really of - us. for than

So we feel good about it.

Operator

next Pfau comes Blair Matt Our open. is with William Your from line question

Matt Pfau

their sub-XX on any on from more progress - target - were market, questions. wanted more - in customer partner that also how as ask generate some additional sub-XX to the of to guys. leads with focused help build from competitive the the Thanks on taking have market? in. my that's to for seen out response And put or companies area Hey, employee you is effort then businesses market, you that you I

Steve Beauchamp

Sure.

brokers. which the new if on of XX%. channel you part first us think do XX% fairly from at our more I than under is Brokers frequently comes So strategy revenue business look our refer

for and not one market us it's seeing expanding opportunity we're into. we're that new is a So

relationships and operating get does a off great more while that that referral I client build to with so We are over be time. take do off are who another that creating that job believe to able relationship and you get a or and referral we think CPAs a

drive And we over unit gradually to doing success that you are see able the that think I that at in last year were we XX%. and

to our success more that really progress we're to it's we're new making. channel about some continue in We with happy channel So than approach market. really the expanding of new think able to sort approach brand XX under that be

Matt Pfau

on side, from you've then market as the their response some or competitive And the more of companies target had success any there?

Steve Beauchamp

the it's Yeah. XX I to competitors of deals XX market we us than seen, we down important see see mostly had just we the XX more But We've think new activity not to competed market. usual always kind more in an for a little accelerated point. drive bit I a but new. really the you Again maybe them in that us as always before we've we've it's XX unit that's ever might that growth so for more think there as nothing

Matt Pfau

Great. all lot. guys. had, That’s I a Thanks

Operator

Thank you.

Our next question comes from Siti Panigrahi from Mizuho.

open. is line Your

Siti Panigrahi

Thanks for taking my question.

are clients. in talked had the on strength and and XX,XXX Just of about a that segment things follow ADP improvement and platform? the the changes the about Paychex, up lithium they that in kind kind new new up they platform landscape about get almost as also they wondering about and new are of expecting as besides in more come XX% Arvind’s talked And a aggressive of or changes they you recently talked seeing question, I'm mentioned any any they our competitive with you guys well. in you've returns

Steve Beauchamp

Sure.

more have quarters I to just two competitors to of level that ones against our this a remarks so into is think back Paychex last of has success. larger are been few by of quarters run we've in the success really have been we years. same and the and we frequently ADP the that all And So continue in – we number comfort had we fact the with what best and and them the that space continue as the sales prepared go –

that we're differences good that a momentum sales really haven't we and about we landscape We rate have. any seen competitive driving the win from feel the

before XX,XXX we not I'm share those change size market as we've to even sure So retention got opportunity. the there. get big a a in from our back affects of lot room clients, small Go really XX% that of some of players

had. So feel about the we've really start good we

Siti Panigrahi

And then talked getting you modules when know you the of think some traction. about about growth, you

growth into within So base versus do the coming new cross-selling the the increasing see employee how you products logos? – your you installed and know, base new versus base from installed

Steve Beauchamp

Sure.

probably time of marketplace, all been think growth. biggest accelerate last momentum has continue that about to for you the the that. the of of first so logos in saw logos kind XX have a we to XX% So year, in that's new new to And of under years. about And number first right driver our always way

of than sales terms at the relatively small revenue. you it's still maybe force add of growing look our faster in when total amount on think sales it's business something we're new I but that

think that opportunity are that's a adopting these and them do our a on fact that do basis And part clients and great we're asking a was that's sign is products to your of for adding that forward growth We clients be our great the part question small of going able to to think rate. a employees, continue that. really I the last go

that's low a economy years. and consistent been over the growth single slow very, So last fairly percentages of very in number digit

Siti Panigrahi

allow that you know, Steve you on-demand And have you pretty you you about you pay are last pay any I'm talked on shared to on-demand talked early, and some feedback, question update when wondering going then if Okay. about – it?

Steve Beauchamp

we January number two Xst it. as we've of customers adopt customers customers made on-demand available those all it – a in have starting to had to pay of fall. We we had So and We in of definitely the market. out the our it rolled

to need they've a said stuck great for to we've On-Demand available think you earned able to know always unexpected them. paid with about an as option might employee I who it’s expenses get that get already and pay be

the at end the hesitant bit adopted of which that what number understand feel we haven't sometimes a seen have and the to customers But in are customers we they're a that. of little We've of. going place kind to have in want seen day controls

of XX,XXX that any And that our to rolled say plus employees. so customers offer I out it to slowly our would of on their today turn customers although could kind and

Siti Panigrahi

you. Thank Right.

Operator

Thank you.

with from Daniel comes question Citi. next Our Jester

Your line is open.

Daniel Jester

while down little is back flow cash my of last date Yeah for maybe to cash and wanted generation just same to free year ago sort to thanks go to year. compared taking the flattish free know I period a you question. question to

the of we be thinking is the other any go takes in puts to XXXX gets kind how but of as about deferred converted EBITDA talked about and throughout You contract cash. there terms costs to rest of

Steve Beauchamp

I about we flow we I of said basis think free cash basically last on Prior continued mean I over being to an XX.X XX.X to an where annual and flow think just free at being from free would perspective we cash on is was to from talked back leverage think drive we've maybe cash to were basis. able Yeah and year - looking we've a fiscal went continue focus on the that annual progress measurement flow drive

pretty to so called annual think And being that range I free cash basis. able think the continued an leverage I focused into We're we out on good we we've drive that. feel about flow on remain

within if quarter to you sort timing at some elements quarter look think it. that's how it I think we annual of but think an you I the still basis about on year see

Daniel Jester

just adopt can fast of And some specific maybe a they it. to of explicitly? be the on give any you you then or pay just given specific some examples customers mean why of some at That's reasons helpful. are on-demand maybe the I you they’ve that may more pushback of commented taking what – your you. you. not Thank Got look as

Steve Beauchamp

Sure.

terms it internal to that comes in controls some they of the place processes. of think I down in their have

that actually something to I need that them you about that advance workers. confident the that worked before for supervisor feel I and see was have think has need hourly demand approved I if that that make sure pay hours pay that definitely earned. it's to And it, So more you

A lot that of a it. they to biweekly about make day are of asking yes, that so payroll checks. that are were and signs the and have think what supervisor have and an single frequency advance understands They they that sure my verified business basis processes it. that they on processes do to off for day is on person don't if need need that depending clients there and do a that's their prior or on those weekly that every that, basis that's necessarily that They double where a to

feeling workers for right and have that And hourly that so workers processes this customer they that to demand think hourly the need there's comfortable require I a available. for make does

Daniel Jester

Thank you.

Operator

Thank you.

Cantor Our with Kootman next Drew from question comes Fitzgerald.

Your line is open.

Drew Kootman

taking thanks Hi question. my for

for I follow wanted one to on-demand me and Just pay. up also on

I the the people from using are hesitancy from know the So reaction that has some just customers but what it. curious been

Steve Beauchamp

Yeah.

Drew Kootman

any XX% could any revenue impact that to how penetration, might timeframe take and any And you long be? XX% or or think there on that that idea

Steve Beauchamp

Sure.

of before is think that about a introduce XX% year we I So XX% that we know product, or a when two get kind timeframe modular you three or new range. overall could be think you into

definitely of faster that. Some definitely gone that, gone than products faster than have number a products have

I for demand have – this run, bunch pay good associated going with we small you I that of fee you is don't impact any think whole would immediate you to that off structure think volume short a is it start. to on think be need a to material. know I there's know relatively it,

we've and offer take overall. a adoption – way feature rollout. bit used while as and but it's in little our customers I of have material it's going going to on have near to We to it great add that we nice that in to to term. differentiate believe it's be those by the slower drive us going a employee be for employees a to a all of an well, perspective be had the more it for think that and feedback It's to From marketplace, to wouldn't able the great

about runs some and you or like to on extra new and somebody into feel expense I do they like to so where think your scenario able I need gift depending know need season when you for giving, sort tires holiday paycheck know cash, a the be something you car need their some And you of that. falls, some un-forecasted

and employer it the go it is you app, bank takes account. immediately my examples me kind can their time they does they've request in and see themselves really can advance real on deposited different exactly gets hey to in of say, that where advancing what earned they pay, they're heard We've can the what out it of conversation the

we've I So the think has gotten employee delivered feedback. that experience great

a I at that bit little out think time we therefore balance for impact it's to just take of a we'll roll customers and perspective going have the – from this look revenue year. discrete to fiscal a of fairly minimal as

Drew Kootman

Perfect. Thank you.

Operator

Thank you.

RBC Our Markets. next Simmons with Robert from comes question Capital

open. is line Your

Robert Simmons

for Thanks taking our Hi. question.

on I'm on can talk the but new what and questions this versus others these for about offering On Demand topic approach sorry differentiated So up provide? how you question and following Pay your are

Steve Beauchamp

Sure.

mobile there to how so the at log they is So on employee They at the to their way pay, used of employees app we payroll pay on things. it been next that works your do have bunch their app of utilization has significant whole a mobile for you going from can which actually an much earned. perspective to look can look are

time see you $XXX. So I've earned far can it oh in real so

customer I to amount the that. a all account deductions and direct and out. next put to depending some deposit on then mean the it the taxes as is your to time is that's see manage will request can that from day request direct or it it same into you be gross – easy taking actually it there's as for and your you day either of into day net all And with use. can can whatever You available settings to

Robert Simmons

what else. actually what then model based fees revenue for on is the or is you, And it

Steve Beauchamp

Yeah.

So small that to up has fee that a pay fees transactional they want selects to whether benefit the – a to want the that they or have and employee is that to client offer transactional their of client kind employees small pay the customer.

Robert Simmons

Thanks. Great. it. Got

Operator

you. Thank

Ramnani from with comes question KeyBanc. next Arvind Our

is open. Your line

Arvind Ramnani

all my my among Hey. core is prospective bit of to situations? in rate gets But well a taking particular those my talk for question certainly if seemed very market, first as logic win larger of also – you Win on one employer, of those – in your little your checks how you acquired be with users by about clients all on you can based the as how good. rates win Sir a kind Thanks types do positive. with is clients feedback rate Yeah. product and question. lines very

Toby Williams

Sure.

think couple the I the definitely of times seen we've entire had one that strength said a is of So market. I across things

space you you feel about a about plus good and rates to bit then we know X,XXX space. and upper would you the that XX, below end So XXX little customers in the are even that know tell those retention and XX so think there. really at again larger as we XXX would really I a XXX that to that sometimes our is

part clients’ of of a needs time. And as change product been strength the of the So the then year. that's the sale our secondly story big piece over for first

and part to as strong about we strength that definitely well a that we've start their good the and contribution had the year. our to plus So win of in market so XXX both core rate really as feel

Arvind Ramnani

there as any of or very well then, this be – positive. to but as weakness, there is some areas And or of on I that, I also I call you seem know and you by on? know, softness Are – sort growth all you on Great. costs of of be tone kind your any concern offset mean you're certainly highest have higher all like area sales know think, performance you of that's understand but focused rates underlying real

Toby Williams

No rate three I is this mean got us for – wind is challenge I think the face. year you've as in our cuts, interest

cuts strong the line the backs other a great to and behind so any EBITDA more guidance I the know know rate than start pretty adjusted expense then the that – think year you to start. handle item us you see we’re know also to you of able years with able strong couple then good you year kind range in for that You pressure the we've associated of maintain that we're our for and performance, on year last had sales EBITDA able those feel and and so to overlay that puts absorb wind we be sale our the be

of the back And say problems but like manage so are that's through half of I to kind that would really those always I'd to the what the have. we're year, trying

Arvind Ramnani

On On just talked And also [indiscernible] about compensation for one question question of have I'm rules on – I around the Demand me, months is last was offline back, topic want to the clarity feel a I clear Pay is implications. because a I lack this ask I Great. there and Demand we that and get IRS the should know on tax on until clarification few

Toby Williams

Sure.

impact getting your it's or the from time the On to think Demand I the My number advance people up working catch Pay be a XXXX Pay, that going there's On in whether in of legislation and are economy of that change perspective. there's legislation workers idea an you've of the any in the California in big around way seen

a of seen lot haven't clarity We as yet. of

there. doing really we're of people get ahead they've day in before providing that offering their advance is and scheduled regularly they them What pay earned we're pay

can if there And so are that based believe him gives closely we monitor off offering structure easily compliant changes definitely it we adapt. the a feel that we product we but our current and to

Arvind Ramnani

much luck of very Thank the rest Great. for good you and year. the

Operator

you. Thank

with Our next question comes from Craig-Hallum. [indiscernible] Jeff

Your line is open.

UnidentifiedCorporate Participant

EvoShare the maybe Compeat relationships how with have gate any the just road? just to down relative you and those one relationships, to guys. of out other here. and brief back implications touch, less expectations be come touch or if I to one more for similar on wanted Thanks One aggressive

Steve Beauchamp

EvoShare advisers and We offerings. call plus at brokers last traditionally that our the integrates revenue with talked channel. and our is on the partnership financial start which generating from Yeah. it advisors product and been really financial really financial of advisers tied And that that focused on provide really really we about helped we've XX% happy differentiation the really and

for have of and be that's we is Compeat kind software you a or our then us either customers partnership a where really mutual able bit create integrated jointly The might that vertical would for kind newer horizontal software to something much offering and software a that. little of offerings market market definitely more then

And that well. so really happy with we've as one been

Now none of material. those are really that

to we it’s and time we would beat could component that of the a of think about over and that these be the to revenue. more our continue how XX% of more create I that drive that channels idea concept plus

Operator

the Thank to Beauchamp further back you. call remarks. like I'm no to closing questions showing in I'd the Steve turn And for queue.

Steve Beauchamp

of Great. want a then Paylocity. all during take for once on Well. thank employees thank our the Have moment call again brief year the everybody I busiest just in course of and to the your night. of a interest great time to

Operator

Ladies and concludes Thank gentlemen, you this participating. today's conference for call.

Everyone disconnect. have great a day. may You now

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