Paylocity Holding (PCTY) 9 May 212021 Q3 Earnings call transcript

Company Profile

Participants

Ryan Glenn	VP of FP&A and Investor Relations
Steve Beauchamp	CEO
Toby Williams	CFO
Scott Berg	Needham
Brian Peterson	Raymond James
Brad Reback	Stifel
Terry Tillman	Truist
Mark Marcon	Baird
Bryan Bergin	Cowen
Samad Samana	Jefferies
Matt Pfau	William Blair
Robert Simmons	RBC
Alex Zukin	Wolfe Research
Matt Diamond	Mizuho
Jeff Van Rhee	Craig-Hallum
Arvind Ramnani	Piper Sandler

Call transcript

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Paylocity's Q3 FY 2021 Earnings Conference Call [Operator Instructions]. I would now like to hand the conference over to Ryan Glenn, Vice President of FP&A and Investor Relations. Please go ahead.

Ryan Glenn

Good afternoon, and welcome to Paylocity's earnings results call for the third quarter of fiscal year 2021, which ended on March 31, 2021. 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. the market in close. discussing issued press be the after we'll results our announced release Today, website Relations A be next our available replay for the webcast of the XX this days tab. call will under Investor on

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

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

Steve Beauchamp

fiscal our quarter Thank us you, you to 'XX for joining all Ryan, on of earnings third call. thanks and

last we have employee X% strong a annual still million, or our season of QX third of in result to a than headwinds. Our in are included by of total selling fiscal clients quarter billing in increase same to quarter revenue and with an approximately Despite did COVID-related of and we had COVID-related fiscal. lower million, in grew revenue continued $X.X levels solid quarter continued $X due pleased a a X.X% million XX.X%, headwinds, as the more of year those results despite 'XX $XXX.X last revenue W-X headwind XXXX. which total to the other Recurring business the of of at versus started

larger product of gain team market execution be to clients. pandemic, traction to suite our continue at upper pleased sales our throughout the the with including as the target comprehensive end of with We our modern, continues

April April first-time as to of selling with business over last COVID-XX, impact as both to starts the up sales April gain new continue momentum Our conditions anniversary improve. and continues substantially team we appointments

We gradually marketing environment restrictions in U.S. sales our and across and as are vaccine generation the lead state and rollout the the return and about digital of support continues normalized investment potential continuing to our digital ease effectiveness to more a go-to-market remain efficiency to optimistic motion. committed to

referrals, of strong channel Adjusted again primarily that in of broker events, levels. benefit quarter channel the XX% Additionally, or exceeded use gatherings virtual led $XX.X new the helped by more represented brokers than us advisors margin, from connection business activities, financial and and million. increased was virtual QX, million, by once $X.X third for midpoint referral EBITDA our which guidance XX% of maintain

G&A development ability and normalized with costs, return future and be sales macro while to and marketing continue 'XX position in product sales 'XX growth and to with to driving investments focused more are in operational and environment. fiscal remain incremental our us initiatives we and We for we to our on a efficient momentum pleased and research once in

the drive of Our tenures. experience research that commitment An Modern that score. scores the satisfaction Paylocity a attrition platform workplace confirmed by higher or We a to be the MWI, productivity. R&D, with practices Workforce proprietary versus and machine and to best we product can algorithm learning and month, independent performed MWI the differentiator investment key team uses science in same MWI experienced client an in recommendations a utilization marketplace. be index the Last retention, scores and including than by more longer higher more of customized tracks increase peer MWI improve Deloitte to a industry. development, progress deliver will company's sustained continues in in for the with that lower leverage introduced to employee employee analyzes data Index, XX,XXX to levels improved goal our employee MWI companies then and employees, a data study engagement sentiment, score benchmarked and of companies that their as clients deliver engaging delivering improving algorithms overall created levels

better for will efficient remain we driving Toby on and quarter's the As these believe engagement across servicing individuals begin through and talent to return results businesses, as priority like and focusing office the suite. in product and areas detail I more to review processes guidance. our to now expanded employee for accelerates, would key to our a clients the provide war call updated to we pass committed the to be

Toby Williams

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

profit gross with adjusted continued was for interest from and QX, COVID-XX Our XX.X% rate-related both headwinds. pressure

fiscal development. revenue XX% QX. to in what total were as 'XX. $XX.X year. XX.X% investment remain non-GAAP We it R&D G&A making sales were a of remain make investments 'XX we non-GAAP basis, expense last continue our incremental leveraging XX.X% annual on QX expenses revenue research basis, focused we on were we overall in R&D, a of our significant costs important of a combine fiscal basis, in in in is fiscal marketing non-GAAP both expenses on investments G&A combined in to what and and On focused On consistently QX investments And And we revenue XX.X% QX On to in go-to-market basis. capitalize. versus and and of an million or understand

progressing which progress revolving repaid our $XXX facility credit team, also million we scale XX% end guidance invested corporate in which the quarter. adjusted we in We client-held for or million made to with another committed funds at EBITDA included $X.X toward funds once QX. to of to the for G&A our $X.X of our XX% and drawdown by was revenue operational XX% of our Our midpoint. adjusted target million revenue the and while client $XX.X return interest on daily regard exceeded remain and with quarter, opportunities to $XX.X we're in quarter, EBITDA macroeconomic profit balance fully the quarter gross In regard a In demonstrate and that QX. million equivalents operating with QX, was cash our income normalized income happy cash, the billion identifying was million, balance We're was net to and strong for was Covering ended and $XXX.X income, costs, results, pleased we million. of sheet, and environment. performance $XXX.X the during our the million, to of cash average quarter $XX.X sales our we've GAAP the to

We X yield we an are fourth $X.X points in the will estimating billion assume the in approximately basis approximately average daily XX balance be average to of quarter. QX, and

I'd some environment. additional operating provide current on Before to reviewing the context like guidance,

this we As primarily our Steve pleased year-to-date the to continue client and team the mentioned, regards past on to level last related of In revenue to platform. to we on fiscal growth a this recurring be quarter. of sales sustained continued quarter of COVID-XX, performance double-digit impact with employees see impact lower our the ongoing

month, in we while with or see did of of quarter, in improvement April. the the any levels March, improvement not we in see January client the Within back half during in the February, a month notable particularly further increase did workforce

for related to have to-date, incorporates to year. 'XX, remainder per QX fiscal impacts of guidance full improvements and COVID-XX. regard but the to incorporates known provide the Finally, during employees our I'd guidance further In we no like our fiscal the seen estimated increases and client, financial some which

pleased in the 'XX For total $XXX.X And million. over or ready we the we to growth quarter current expected to and in million. are be $XXX.X investing are for for Operator, context is now expected particularly ensure revenue expected operating a range $XX.X adjusted for in total the or year XX% in EBITDA to fourth are the of with the return 'XX, quarter well-positioned full we million the fiscal And more to $XXX.X of to range range to $XXX.X environment. growth XX% questions. is is $XX.X to fiscal to macroeconomic be approximately be in over of environment, to XX% normalized expected the QX to the total be our results, Thank is a to of approximately fiscal In EBITDA we business $XXX.X 'XX, fourth fiscal revenue conclusion, the million million adjusted remain 'XX. revenue. in And million to million, of you. million $XXX.X committed of range

Operator

first Scott question you. Needham. comes Berg of from Thank Instructions] [Operator Our

open. Your line is

Scott Berg

the the six-month Steven, thanks saw a the to I company commented Hey, Or the that half on the about on which guess, how congrats customer on think think second-quarter period. a the here call, comment that on meaningful pace couple Steve, the XX.X% Ryan, questions I of in customer way able Toby, you but call, your line on back up metric additions for sustain that that quarter, for I I here. here. were hear roughly good with additions? a one Were 'XX other year-over-year? you in kind had and additions the taking of we or there should didn't of was was to how adds? rate, you change

Steve Beauchamp

Scott. Yeah,

of kind midpoint seen the on just color fact January a we the fiscal The made being that, - because didn't through really some More out continued. year, the think it knowing season. we was give not year this I change. that of it's call we or that we'd selling it to this wanted quarter had

And so half first that really I we've unit the ran had in continued quarter. think, growth the momentum and year, through strong, the of

Scott Berg

comments better customers there? assume well right rates, really your two means that one is the end Steve, the service with point driving be to then, platform of target win a that you the but Can might the And on strength sales it. about that of there slightly I is segment. Got upper sales your or was now? customer or of something about your improved factor resonating

Steve Beauchamp

Sure.

some COVID that like that remotely. we've that's we've still the addition marketplace In evaluating Video, HCM cases, there the we looking in and in think fact added clients the some modules Community, backdrop enough working the so of Premium many I in innovations platforms the are platform it. of made still where that at with they're the resonating really have the So also products product, of investments added, we've and employees the many resources larger of like but both to feel out terms with

that robust resonating. is of a earlier so it's really more of I think our the but in upper probably the bit little combination And the is more investments are important fact I think product on that - recovery, terms a end than the market

Scott Berg

and I'll the happen Any And seasonally in spend one QX, then for R&D that you. the doesn't from a sneak typically didn't necessarily it. dynamic? is on R&D you down expense in capitalized Got in the more for That for reason Toby. Toby, quick quarter. any quarter your actually sequentially

Toby Williams

against that from to I mean, I timing year, you're mean No. perspective, year-over-year pretty from we've some at what still the think may to seeing QX consistently drive throughout future tee things effort think still XX%-plus is focused said And think marketing see, quarter-to-quarter, timing this in I I you look is. I next I that's getting Scott. fiscal growth. a we'll this think on will we're and I that the think and drive sales perspective and and think up And incremental quarter, back be I both differences despite a as in on go-to-market future and sales investments as and putting continue to investments last growth where to R&D and also in driving and R&D the be the from growth. back true focused half for we everything in marketing year,

Scott Berg

Great. is again. I all That have. Congrats

Operator

you. Thank

question James. next Brian Our comes Raymond of from Peterson

open. is line Your

Brian Peterson

Hey Good you, guys. question. to the gentlemen. for Thanks from taking hear

the fourth to know the guidance Scott's for Toby, see follow-up will just some quarter. there investments. growth So it's the nice that XX% mentioned, to question, I maybe you be

that would profile, is plus think we're the about thinking us XX% that 'XX cadence give there and of to framework you about year how of any about beyond? think margins we growth fiscal as As terms in like

Toby Williams

Yes.

I So point to. backdrop the focused XX% we that's over getting that think we've time. still talked would still I think is guess, the right picture XX% range that big framework being on I into about to

I better of is investment maybe be the to but substantially. investment of we continue spend to so we've manage been consistency year and I and on that drive things drive this comes through to strategy And and R&D pandemic, sales we've have would thought down we've costs continue marketing as think of I from a year that some from then to performed to philosophy the think perspective like the in being gone to like growth. think margin T&E the continue course at the in And lot think than a I able things to - in able through future the the the outset.

think will that's still consistent coming that thinking be this we think next year. I through I go into So as we're about how And year.

remain focus think will constant. I investment that

Steve Beauchamp

return add would I you appointments on. about leads at sales one we're starting the things what as thing of now kind pre-COVID think of to number seeing we're market force, when of coming look bringing excited the in the the I number in is clients levels in, see we're first-time right to we're

And T&E so things. there definitely to travel that and so year, take want many other some we and opportunity. advantage with And of and were invest last constraints

definitely And that so on into focused we're getting mid-XXs.

that well number definitely certainly same rate want and us our do we our one than as to over back over of, getting we forecasting invest focus. for You time, quarter, as past kind can And XX-plus balancing sales And responsibly. see we the we this the R&D, marketing. percentage. that while in of objective to next time, that's and higher We're that at have a can think EBITDA year at long-term

Brian Peterson

of And over competitive from? you I'm the the potentially just of Steve, of dynamics sources a the guys. maybe if curious where seeing, may early business to any it's lot this changes kind may question, pipeline Thanks, and how too ask the evolve, time. indicators but that you're think early into about come

Steve Beauchamp

Yes.

is first happy pretty thing So we would I have force. with say the been sales

sold did absolutely have last year. little it past over than year. productivity business But right, more has we a affected this bit, We

usual get certainly much And start of of that couple in closer out at we're of exciting over activity see and particular, usual end more perspective. one we're target us. amount traction competitors from market, and but levels, from appointments months market. people we're mix we're the customers the pre-COVID the the so to little upper the No starting big - made of to seeing the we amount level, bookings, a that the last that the all in would We see to a kind change call that's getting the to our bit

Brian Peterson

you. Thank

Operator

you. Thank

Our comes Brad next from question Stifel. Reback of

open. is line Your

Brad Reback

very plus base get Thanks think their to back that look at the about, in picking the a pace April, you hiring were? installed where through or Great. was couple on a to Guys, of as employment do takes if play year much. it to it talked quarters to levels, of pre-COVID they up you and you where returning you

Steve Beauchamp

economic try think forecast been the we've hesitant recovery. I to to

you in prepared and that And what that fiscal of now. color vaccination the we We'll assume that's in in anything into the set rates mentioned approach through we give the I try as give we'll that think Toby terms It further of then for guidance guidance. remarks, to incorporated saw toward so to number and Obviously, next in April, right of news are. assumptions of - took basically played us cases and there. on out as year what we But positive those is better take. we our terms difficult there's

what to this seen so in point, to that is recovery, probably it's very at still think I starts it's determined a whether or not, gradual mind. accelerate we've far, been be our

Brad Reback

much. very Thanks Great.

Operator

you. Thank

question Our of next Truist. from comes Terry Tillman

open. Your line is

Terry Tillman

thanks question. XX%. April terms Hey, taking Yes. in of I Steve, the Steven, color, up for guess thanks appointments, the for my

I know market? growth upper lot than a that of going target to around habit along. ask what does appointments year-over-year? just pre-pandemic, more for like? that. adding growth like assume. the I'm capacity, to a coming little appointment prior what sales I month you bit maybe more But to year are assuming mean XX% was get But We're sound that - your every like the I because is a But end of it's cetera. et a was of You're you're good in growth And better here. color going months, the there from how every month couple

Steve Beauchamp

up XX%. being So specific don't on called think I all, we first a it number of out

we to we're specifically. numbers would call the that to actually So not relative be going out but what saw, low

it really more was board. than So definitely seeing the we're across it that. up And

lower market, the of down kind So businesses COVID. during obviously were we're of it our seeing which end at much those very target impacted

more that So are that more It's open. come we're back. the seeing a little bit states happening in

there. surprises has Midsize also no So come started back. to

I upper lower to starting end throughout we're to the the COVID, the the now of really mid see and back. the probably market end and been think of come market start steadiest, has kind of

Terry Tillman

Yes. said notes, looked you my I at substantially. just

that I XX%. made Somehow,

to the out right their plethora question, had Are the of second So end the upper I a I But changes maybe of market, for there. of for call any And then follow-up you and now what's target Toby. had a your a good part there? Toby add-on your is, seeing at buy modules? follow-up then propensity

Steve Beauchamp

Yes.

the years, schedules, I at changes, of value really is most And So transparency. value giving people last proposition, of the market modern platform being over for map That HCM few a our lot us think gone flexible filled resonating the is manage, a what's upper look and proposition maybe clients road tools resonating. modules. if in to the end demand the home, you through our that's bunch whole we the higher working product workforce the of a idea complete at really from of

offering a capabilities. we've got much complete So more modern more much and

point to back terms target market. the see that throughout we're sales. starting to in But I the and calling both ultimately least worth really improved in us our think of at I has so has close again, across of then And the we've generate upper into translated the those that ability things really it think come market to to - And out. gradually translate emphasize, COVID entire got I leads was end it that

Terry Tillman

guess, XQ Toby, impact, you or from was the better Steve know but employment to from I in you headwind great. that's employment did $X.X standpoint, in the maybe there? you lower talk like but levels, expect an And what Yes, XQ? quantify it sounds April the and I you. mentioned million I $X actually actually quantify did million about this, guess, Thank

Toby Williams

the to so I - the that. I call didn't think, But employees think the million to on we're mean And mean, in that was for I say $X as that. quantifying QX. platform out W-Xs quantification out think QX, is I terms what I of I'd Yes. guess was the think million at call of I for we the looking in reference I $X.X

consistent see we Steve's was think improvement, we mostly - in the I March. started guide, but point include we the that April. and we comment QX what did to And didn't for guidance half we've But to We carried of is see from as the improvement forward. that's since how been with well. that what in improvement did incremental I any through And issuing back beginning. did that's we think

Terry Tillman

Thanks.

Operator

Thank you.

from comes of question Marcon next Our Mark Baird.

is open. line Your

Mark Marcon

question. afternoon Hey. thanks my Good and taking for

can Just regards stories obviously, And little could there? Can you and a what bit and the shortages? order seeing talk about rates. demand sorts to the perspective you if the a from little bit alleviate there workers. a curious worker and about else companies to separately, talk more your all modules in Wondering shortages of some a big uptick seeing Community talent what of modules you're with do worker and Premium there's then attach if acquisition Video, you're you and usage for help about

Steve Beauchamp

Yes.

think I point, throughout utilization the have we definitely on increased COVID, Community. seen, first in So

a social the all module social communicate to and in and available people our connect how really their ways very communicate lives, of it's ability gives is that's in that that and mirror experience. Now customers for might

to so grow. has continued And that

surprise been at people start communicating new Video, this of is probably which definitely since last year. today. with customers would what are the of have have expected. We That's pleased Premium a And available via launch calendar than video lot no better initial done we the to

throughout a and throughout around trend the employees. the learning that's well communicating fashion I of been modules idea question, is employees to truly about innovate are consistent with that much continue think we it, your other of with I that - in modern management, has two these all more been a was think experience part surveys, connecting COVID Mark, And digital of done really pleased second really and really your for a COVID. And we've being

Mark Marcon

are seeing that you are the up the that of onboard? attach acquisition, Anything shortages What new talent terms further board. clients? talent Helping can creeping to in for you rates help do clients basically your address across

Steve Beauchamp

via probably I level seen on like business of definitely normalized a we've of text, which challenging will to at, gives that talented out figure that connect the good not penetration especially our economy response added rates. early a that our text-based markets. so higher recover, think downsizing you trying is. We and you're on starts I as to it people much That's something as of rate. demand is in module really a more our We as their find quite recruiting in help Well, be Sure. where recruiting people to really in you are continue pandemic, launched kind growth you're return the innovate, example become right, features customers, can because think with candidates looking able back and to the have to application, to to we'll

Mark Marcon

And are talking terms rates? top Who the end, tippy then the So heard, their end, coincides. range? of your talking winning you you midpoint talking from of wondering at about all the how big who obviously, we all end? about incumbents we've the you're are they've because increases are I'm in from - the And upper just from? upper retention you Great. know, on talking been the the that that when are way the kind of Or upper to

Steve Beauchamp

Sure.

sales do about really we cap customer. So force. basically fit a It's to not our product the

bring employees. customers X,XXX many X,XXX for and But to up in we'd employees. above we years, cases are so on focused many And

number the we it's say customers I platform. the with half, it's would X,XXXs have customers And of a employees, And upper really XXX on thousand of employees have several so we and so plus. with

market upper we maybe seen had we beyond in felt a at bit and we've out momentum that so particular the call than ago, probably XX probably and was worth quarter. more And the seen the was months of even that because our end target strength little a like

Mark Marcon

from? taking who And Great. are you away

Steve Beauchamp

big there. differences real No

to continue some the bureau service We providers. see of

won't don't We enterprise but players see we infrequent. fairly in-house still in the while, to enterprise a you the our product that level some At the of run a in folks you offerings. into, where alongside into pretty the process, typically run of end of I in the space far day, continue it's Once offers get difference we think suite some if of see us.

Mark Marcon

for it - about just year? back? possible next think additions things maybe creeping some travel that coming the lower entertainment we're with then sales is should improvement year next we and expect should we of expansion to maybe In other like And margin than really Great. back, level normal? have going a year, we next Or expenses words, and margin that

Steve Beauchamp

Yes.

think a question. that's I good

at really excited We in marketing kind and way would. numbers we I'm sales that working seeing in then. increasing certainly we're like the normally a and in grow. since of that a would and R&D about had continuing momentum those done invest about excited have pause early we're COVID. been We've to not First, And places we the grown in see can market. you maybe

office weren't mode. weren't time, time We we people get be of travel, want same period It they are where hybrid way. happen. culture moving the had haven't will at We long-term. environment, to to a lot we're together. everybody absolutely a the together, getting together. And in we the a back don't But be of going more absolutely think in people investment envision people being is our driving comping going We to getting around,

the because of But ability our of our type long-term model, won't of and probably investment next becomes think that that. long-term right year hinder us. still opportunity get is that's to large perspective, it year a from the a in to margin front we very So because really it tougher

Mark Marcon

Great. Thank you very much.

Operator

Thank you.

Our next Cowen. question from of comes Bergin Bryan

is line Your open.

Bryan Bergin

follow understand just this I'm trying improvement headwinds the pre-pandemic April. employment-related up to wanted that to saw base. through I on on afternoon. you magnitude Good guys. Hi, client of the the

a So digits? is that kind Or still move to the recurring XQ? headwind does in assumed it of single double-digit to into be

Steve Beauchamp

single into elements. I'm driven the calling it get platform. we the specifically. out It's on into not moved There's to different want digits. definitely It's sure mostly by employees

probably kind it. I then, and those moving being slowly way of think out about less That's the into getting obviously, digits double to quarter. gradually of think right it so as about and better next

into You been saw can period. kind was obviously, far, mid-XXs we're what guide, but the April. for back of guide, it's recovery. of of anniversary-ing so through anything We We're our right? assumptions anticipation but of a kind see guide. But we slow in our of steady terms kind in that the COVID Obviously, it, that didn't include else kind

Bryan Bergin

give new adding you in Okay. That's you're environment, sense how And helpful. sales then you And sales say headcount on professionals? where doing can stands? a would us this

Steve Beauchamp

Yes.

as early hiring. year I fiscal that mentioned in think to up. And the now. doing This our kick definitely in right pause we back team last environment, is and So felt we're just I COVID we season a in we really like earlier, started bit was that well hiring of terms had the a sales of

really so But we that fiscal we're headcount. call of hiring right where really of spring would you into We of good. making. so do So in next I with is next color terms number our that we're say, a at. feel we lot can progress pretty so about give the on good go where the year far the more We'll

Bryan Bergin

you. Thank

Operator

Thank you.

Jefferies. question next comes Our from Samad of Samana

is Your line open.

Samad Samana

Thanks question. afternoon. taking for Good Hi. my

it the looking And were March quite along bit an there of tuck-in a when get know just where that, maybe think process couple quarter, ahead last in integration So with what was the acquisitions, maybe actually kind just of I product we I but for. it update side, margin, seasonally of gross on we about up the company's back-end bumps the on is? could

there gross So to those we are gains completed? see starting as margin are integrations

Steve Beauchamp

gross as buy overall, think, of historically I we lift have gotten the customers in margin. a modules, HCM more So

you've dev modules. something that got support on you, and the the And of so Premium from kind to because is right? Video, turn in have be lot the a video you like And once parts we going different It's side, that the less with if to easy of new the taking embedded work's product of use, that. the on lot of really of perspective a naturally work think you application, we for so that's could advantage goal of a start of

drivers the of that's gross And so going penetration as of module increases, be to certainly margin. one primary

the learning good throughout had surveys expansion pretty we mentioned We management of COVID. also and

some and So element even gross some would there certainly that, as any cost think and from might we nearly take facilities much that see And we of, do didn't line, and we of growth - then But sales is another the in or as good there's there normal not travel you element on a are on anything perspective, marketing. example. margin additional in so in expense maybe an consider environment. headcount I

newer from of I a coming bit of that it, it's of module most these is there's penetration little but cost-benefit the from modules. - think So

Samad Samana

think then starting of PEPY, about we uplift should modules, I uplift? or Great. are conversion pricing, as how of the PEPY the Or you kind kind more and add-on rack, of to add of think historical right maybe as sticking see price between kind effectiveness the the about trend And there? like these realized of you better in of terms

Steve Beauchamp

bit confident able of there. a thing with that I that think pretty a being customers good what we can our success we're little that. historically and get had to we've XX% it when time, we do of found then we've is And grow from into pretty module, release

I And we will continues And little the some much pricing and increase that. we're perspective it take when how so, modules of good in feel to all getting at from realized PEPY, than of overall, others longer, that pretty right? doing about a terms and accelerate products faster a bit look some

you've at Now same platform. employees the the COVID, got time, on less during

from I some utilization you've those encouraged. from the clients mitigating But our and we're very module platform, penetration on a of think that So got circumstances modules seeing we're there.

Samad Samana

apologize I think for going there? I'm that two. adding earlier about see in in But we especially any CAC, I are in aware that, just mentioned to we customer advance your of with as know to more the we're changes one down retention, I any somewhat squeezing starting units, normally as some acquisition changes a fight should increasing and of? be more costs trends think incumbents at in. for Great. to

Toby Williams

don't pretty - a think I don't we've retention Samad, think perspective. been I from consistent Well, -

relatively the of pandemic. rates think throughout And consistent mean I course seen so client I we've the retention

on a through the earlier think in in and with would just to I to investment the to would lighter next I I being we QX Steve future. marketing, that that sales the consistency as have QX. at we of back to remain as of terms go all back a able into prepared think the in investing focused remarks, - we couple and bit And that's look made call comments Obviously, in and investments then point focused last in think year. have is think continued of we I at in marketing. pace growth year year. and get and - Steve's mean, times, are this little drive the difference effort referenced at being still sales and on on fiscal I continue the true this timing because That's of pauses the year, I look I But mean,

Samad Samana

questions. Thank Great. taking for you, guys, my

Toby Williams

Sure.

Operator

you. Thank

Our Blair. comes next question Pfau from of William Matt

is line open. Your

Matt Pfau

question. Hey, my guys. Thanks for taking

Wondering any Just one if competitive for in changes rates. you've the your on seen me environment. competitive win

there win your I talking competitors was think about out rates. of better one them seeing

out you seeing the just what in market. So wondering there guys are

Steve Beauchamp

Yes.

you what time, fairly have think I over I rates been of I would tell lot change a necessarily win our consistent there. not is think

what think I more call out is seeing we're activity. the

appointments, flow, the So deal encouraging. activity. more that's part more first-time probably more that's And more

the and able win feel think our out that rates deliver had consistency that we about the versus I wouldn't been and to good there. we've change wins call competitors a we've

Matt Pfau

Thanks, guys. Great.

Operator

Thank you.

comes Our next Simmons Robert RBC. from of question

open. is line Your

Robert Simmons

the Good thanks for question. Hi. taking -

of $X.X and things. not that million. to million kind and forms And right, two year-over-year? was headwind want versus W-Xs $X is the thing? You ACA-related I does include That that trend, gave just check trials both to

Toby Williams

that all impact as the that million that's - was actual yes. $X $X.X to almost the related the dollars, quarter million in to it, of was and W-Xs So in

Robert Simmons

Okay.

there filing for So requirements? as form was ACA additional like annual impact the also well ACA

Toby Williams

So the bundle we the for service. ACA basis platform on impact clients, ongoing would of typically, as of have on an we the employees ongoing in been embedded most an because that kind the

spread throughout year. than it the gets charging one just So out rather time,

Robert Simmons

it. Got

like give off mentioned you would as then turned what's or are dropped but useful? and minimums, little they're little And color great. retention you - haven't still Okay, around they a be businesses sticking there? you the being employees you seeing to more that pretty down paying very zero anything and consistent, some that Like but can

Toby Williams

I'm has retention for on That's a down revenue sure. overall, strong we from right? been detailed that generally been question, clients to no making strong, month. above continue for focused We're some retention tell process and and for in continue. to But us we We being pretty retention you "Hey, to I to year the might XX%, manage whether going perspective. Yes, going do see payrolls at to a go that. It's a of back us, don't not next going employees quick assessment - an I'm the going minimum those amount." any and they're clients pay terms at are

never of revenue. number, on who very on we take not doing number any so And and are reengage loss But had of would anything buildup really clients small We a have a our them small small would it's amount time. to. as period we their platform actually business and those customers of for when if of came a

Robert Simmons

Got Thank it. you.

Operator

Thank you.

of comes next Our question Zukin Wolfe Alex Research. from

open. is line Your

Alex Zukin

it to Hey, Thanks just taking for I'll two. keep my the guys. try to question.

a back So bit, Steve. maybe just stepping little

almost like be are pipelines type anything of mode? coverage that and a budgets were there seeing of going a a of point the where little hesitant almost more an kind there's like were about to to new some of willingness pre-pandemic a people may coiled metrics move almost And are, execution seeing into think bit that you those situation? loosened, where have spring we you If environments the acceleration maybe you at demand the sales there's now reopened, - you now, back really where when your is Are so like are and - pipeline as pent-up is, in started your that we to pandemic, execution.

Steve Beauchamp

Well, to sit exactly it's where know right now. hard we

I environment, of So a challenging a we obviously, amount into you over big tell fact what both versus getting of called terms then activity out would is were customers you year. I in and had is We a pandemic, the that tell sales in that prior started. going it more throughout and the but was and of bookings bit would XX% market momentum, the little pandemic, it's significant is What the certainly big those opportunity. a we

have growth. states continue able industries we're existed to we focus was to So good where what those thought on and opportunities still and pretty

quite levels across markets the and I activity think, recently, as couple now, yet, like the at for And of we're both feel us We and pre-pandemic reopened, have not first-time see increased. different country, that appointments in uniformly the it, toward in we more the level we we're but meaning And bookings. probably reason are heading giving certainly last but that months the that's have maybe not optimism.

Alex Zukin

one not period, business getting next just of little I at the And at productivity. we're you're But look the a in it. in year. COVID Got guidance any Toby. a then look If comping I maybe for - boost giving bit for realize the I tailwinds if

able to sell. that You're some modules now incremental you're getting

of employment perspective, bit You're the think the a seeing heightened business sequential about or there growth? some as any From 'XX about that should seasonality different why we of Is recovery, little at and recovering fiscal trends. least a some shape around in previous years? see growth rates, anything trajectory elements the float be growth interest sequential couldn't versus we

Toby Williams

mean, there's that I mean, would a shape quarter-to-quarter there's year. I in a basis structurally to watch things don't course different you think I that the question. that a the the you the of anything give different on business lot throughout in

standpoint terms from of in to timing and going a or the for and going mean - perspective, to if business they - it things in days out how those and there's or tailwind see seen hearing and you're how the great optimism necessarily quantify back next might be - of do. thing early in the from foresee associated but structurally March year, us think March the of out they're half the I timing steady-state April. that are to that they're from the would so... to if play say nothing you or mentioned different those in mean, you an world you're a exactly awful we've course I'd a so things in play with of next think of what I lot fiscal them, I hard hard are continue. see the pretty It's I Certainly, only is to year

Alex Zukin

guys. good on you, quarter. Congrats a Thank Understood.

Toby Williams

Thanks.

Operator

you. Thank

from comes Mizuho. question next Siti Panigrahi Our of

is line Your open.

Matt Diamond

- behalf. I going guys. that noted people people as for return start about Learning is on has. interactions Hey, is that of that office, America different cycle? a would Video - customer little and a I Matt starting to pixels as Does the keeps are any than resume your the Management question the have I'm It ramifications the consider Premium Alex's actually majority platform was imagine of Thanks base sales of want and a Would resonate. any the is corporate Siti's on modernity Premium screen? priority-wise, ask This to differently. those, curious, question. Diamond, most bit to at for taking very and to thinking Systems, least more in-person the Video

Steve Beauchamp

knowledge been worker that of going is they be this, we've is in particularly, effective hybrid. economy, do the conversations they're can think we've the our out to trying some that people home. Most how you had I So with is that of where having as with new conversations everybody that sort mentioned, from figure to customers, a normal

to is flexibility it's I've maybe going economy to come days it trust, to right was five be the the look to be office week, what from to way week. and think just productivity is keep more scheduling a talented level going we've return Maybe office the - is. a to scenarios. in three I'm able means be to able that before, what got And the my so was around We've particularly been a now of the see days finding going people I be And as that difficult in what like work-from-home challenge. and and I is back can it's growing a to

that those an everybody the office if could are culture your office of in as back the And actually, even in where So important going day. some people time. become very environment period resonate are have for in to part think I of products every to they continue don't driving you

likely will we've based very conversations on we look had, what here like certainly to so like and And at Paylocity. going much trend feel that that's continue it's the

Matt Diamond

And for that the to virtual as do the dialed reopening dovetails and as - next been sales wouldn't in where approach alluded Understood. back, T&E question. Does - virtual plans pervades and sales potentially your half, something fade gradually my was has really the into a away it the - comes be it second more? point it nicely own that not earlier, approach that's long-standing more could and to

Steve Beauchamp

creative, is Yes. to What I very revenue. they're great follow they're want would where find is thing tell you salespeople the the about and to market entrepreneurial is they the

if comfortable And And to force conversations our certainly there that avoid so then that. where that. cases are do on-site comfortable, salespeople move and customer drive and that they to way, what the also they're customers I want if more a recognize ready mean by in-person that they'll much they do do is sales are virtually absolutely having today. The and can is that having very is, appointments

are that they and the the be customers all do from want clients virtually that either with we we way most doing getting with sure making sure can their back comfortable. our tools office, site to today, successful, so to need or it And selling salespeople make arm home as on they're we the customers

I new sure of bit reps a do going that and where a going think a of the both happen it way. before, normal to And it's ready a are like we're sales bit my either ways. to make hybrid going to to see answer you're

Matt Diamond

so much, guys. Thanks Excellent.

Operator

Thank you.

question of Rhee next from Jeff Craig-Hallum. comes Van Our

Your line is open.

Jeff Van Rhee

Great. Thanks for question. my taking

me. one Just for

$X on have maybe in you just On or a think margins And a itself. quarter, give I of of you on $X side. just terms it? more on million around just upside, and spend, about second in point terms variance little there the maybe - finer a can take, little little revenue variance, a about I the the clarity quarter spend put so had million the the EBITDA of

Steve Beauchamp

Sure.

bit of end said, as March. of in recovery quarter, half certainly back the of fact the little variance at the more Toby comes we a from of the got that some So right the

and portion and So were it. we would of to be to a the hopeful of the contact. much some the travel we more doing be that's at that certainly meetings of year in-person And able have smaller then back start

So penetration kind point, get of to And some as we we some do these of higher to able driving expansion. quarter, my products are the expense perspective. on margin then lastly, we're from to budgeted able that better earlier think in an rates I were

gross in So you saw margin. that

So adjusted in than combination translated that a we a I factors to bigger had on think have it's EBITDA revenue. of beat

Jeff Van Rhee

Yes. Thank you.

Operator

Thank you.

comes Piper Our from next of question Ramnani Sandler. Arvind

Your open. line is

Arvind Ramnani

taking for good Congrats quarter. my a question. on Thanks

been perspective. kind what of on couple looking the understand Bamboo, investments asked to making and a kind environment. times. a the more of you've I making I'm of Paychex certainly, cloud a agile. more been is, then more of question it's whether had or some wanted really really their some has Just players, niche of solution kind from legacy the players, to more But different kind know a and of like of Paycor competitive ask ADP And coming about have like the

the feel ahead of do you're right over competition investments keep couple two So is kind of to these the either groups? of follow-up And the have making seen competition years? product increased you a of you next from perspective, of from kind the of kind roadmap

Steve Beauchamp

Sure.

environment. on it's a question, first pretty always think I So your been competitive

is I at two or going to typical look think that pretty it's customer providers. three a

evaluating more Our lot size can't handle probably that. than they market, a

biggest And the the the that's see time. those in always you So players all yes, case. deals

used earlier, win change not rate. with. the mentioned some really our a we're competing I And in we have newcomers, to of And as seen

pandemic been pretty we've So of throughout in competing. effective the terms

road second wanting in work the different tools work their entering really at of some trends versus home demands terms employers, their do tools Z believe on our really bigger having I like increased workforce and home, your we on, and well that the bode of point all Gen from think macro that map. product flexibility, people feel at

we good modern of the to about feel the with recent us really hybrid one page, process the most in modern modern in the And that the we've employer. same integration marketplace. video, of combined what being will model their a Modern how Community, our excited just Workforce engine And an in of built to That, a And communication, Index, of effective about we allow we actually have progress done pretty recommendation good engaged innovative. on which unique with are. a employees where of team acquisition, what work think And not that in that's in in proprietary platforms, those environment. the example they are measure their really scoring launched are even we've in really that's this with - data think platform Community, speak is with we proof terms is investment in our if we're something and recommendation so absolutely more still I all point most how science to new trends going continue their people made

Arvind Ramnani

shoot a at investments pandemic next with like pandemic know of Steve, you areas years? of product where the XXXX, And quickly up this I must you look have Community and over video. the need to And your of didn't certain the met of kind the and kind have we probably happened? were kind in point, up than that certainly Terrific. gone there anticipate when But more you if certainly, at usage clients. taken sort not you about - of but bigger map excited had the make road Are of couple

Steve Beauchamp

of good and challenges this I with and team call machine have, we've do, some it the it's up and the sure average would question. of XXX little one what Yes, done to algorithms not the they're than stuff a customers I especially oftentimes a our was customer employees. earlier, mean learning. data brought the science more around

time and and now the connecting and them. I've only got with I'm hard so schedule whole Wednesday I've entering and got Thursday having people are flexible environment, And younger I've other who on workforce, got and are Monday a employees and this Friday, employees in

leveraging the to and they are to being really that who's they we what got what lowest turnover, best who's about post, to we're got so from XX,XXX they they going then use clients and able And platform that the on so more so that community, know how know do, to our they than have know the the excited employees our out practices, data figure to surface know engage. clients actually how

for to of and with that best they're that science and helping idea clients those those this going of and proposition. to really so stay higher more are really And our we then If we going see investing in think that's their data productivity longer, do employees, employees well, a retention get clients powerful practices. value

Arvind Ramnani

makes much rest Thank very lot and year. of you good luck Yes, the the a sense. for of

Steve Beauchamp

Thank you.

Operator

call questions remarks. I'm closing CEO Paylocity, you. Thank time. no showing at Steve I'd to this of to back over further Beauchamp, for turn any the like

Steve Beauchamp

of a to during Yes. very Thank been time. to just want for who've our country challenging the a interest brief Paylocity working X,XXX Great. and definitely take you. you hard thank nearly thank moment your in employees I'd across all

evening. great I hope has everyone So a

Operator

conference. conclude Thank today's you. you. Thank Ladies this and gentlemen does

You day. may great all disconnect. Have a

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