Earnings call transcript Q4 2023

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Operator

Hello, and thank you for standing by. Welcome to Paylocity Holding Corporation Fourth Quarter 2023 Fiscal Year Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to your speaker, Mr. Ryan Glenn. begin. may you Sir,

Ryan Glenn

Officer; available welcome and Earnings ended Fiscal And Beauchamp Chief XX, and call on the are today on Call Fourth XXXX. Steve Financial Glenn, Ryan Quarter Year Toby I'm joining to afternoon, me Results the Williams, Paylocity's and for June and Good 'XX, which release XX of we market closed. the on Today, Paylocity. the this of under Relations after will be discussing the next results tab. webcast issued replay for announced our website Co-CEOs will in days call be our the press Investor A

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

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

unable effort. reconcile measure note Securities complete unreasonable a Relations with any we located that is forward-looking there results Investor release, which to unavailable this directly filed the needed is representative information, and press of more schedule website are refer on during we GAAP internally measures. today's to the to is the available our measure at comparable that reconciliation call, business, currently course their the measures non-GAAP We our at detailing under will financial how financial Also, of and certain because is believe in which non-GAAP financial a Exchange paylocity.com reconciliation and without non-GAAP measure Commission. these we time Please to the are tab

In in attending Conference at Vegas our know in September upcoming schedule, Toby With of Tech and like conference that, these Executive to me attending with will X, Summit Valley you'd if will on Deer August Please Tech New time Global I regard mid-October. and let XX be Tech be the York in Citi schedule to on Conference the Stifel in to any the over turn let Las Steve. HR us events. call the me

Steven Beauchamp

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

in proposition most industry drive of continues software value in XX.X% in marketplace the to the growth providing the modern total resonate differentiated QX. help Our revenue of and

XX.X% key $X the reached company For over or fiscal just billion with financial under we growth at $X.X 'XX, total for billion threshold 'XX. a fiscal the revenue finishing and milestone crossing

again were the average X%. an per results both with by We ended at new of client. year, employees XX,XXX driven XX,XXX solid clients revenue increase 'XX compared Our to adding and clients fiscal of once and last end increasing fiscal

industry. in and mid-teens, in the development grew larger we're historical and product as most up trends seeing the in with the market on employees realize total by the of driven part the platform While growth platform investment sustained benefits by modern our consistent success, the clients

our increase over client on Revenue result employees increased a 'XX. and retention fiscal in also remained rates over compared across An XX%. clients. larger with client 'XX strong fiscal revenue platform, of rising $XX,XXX $XX,XXX at was product as in base XX% success greater Average just recurring than attach per the to of

success focused We base. entire clients across back most selling have as our of continue attach client and to products existing time our resonate modern product more sale at the increased on the workforce into realized

on by to of Scheduling is the continue investment and Advanced Management sustained product several Pay. premium in feature capabilities set Market needs enhancements, built suite, shifts certifications swap our or by based new scheduling us scheduling Learning role, via Advanced function ability directly evidenced features, adding allows recent existing as job and mobile and including expand announcement advanced to as such well Scheduling, as skill product upon device. development claim, Our employees to offerings with the our manage our match

users clients safety safety Management to compliance. Similarly, new and training our and courses a new community, bundle enhancements help new share create of Learning including ensure allows module on-the-job to via training XX easily to

most of workforce pay positions make track, accurately solutions, evaluate job and the market explore, comply job compensation and to clients and in better data with Market easily pay compare across allows recent different posting and help states. decisions, Lastly, specific multiple modern suite manage to families equity addition Pay requirements roles our our to

these continued X target achieving $XXX, the new our offerings, Collectively, along X across has investment product ago. years suite product with to PEPY our increased set we

achieve to to and $XXX the goal and As our years develop confident a new market-leading we are to target now ability products. PEPY coming in are raising result, continue this deliver as in we our

to an XX to product categories in HCM product leader with in Paylocity Summer GX's overall development continues the Grid recently in be market Our XXXX recognized commitment being Reports. named

in market won Awards; the and was SMB Technology Additionally, XXXX, NEAT Human Business SIAA leader Technology and Report the Best software CODiE achieved Solution Technology TrustRadius ranking Paylocity segments. HCM large the Next-Gen for for top-rated as NelsonHall's XXXX HR recognized both and mid in platform management Capital the XXXX;

without sales culture, commitment possible our and execution and operational strong be and industry-leading software not employees. Our would of the dedication exceptional

Toby employees the quarter like fantastic thank pass all further As we our the would to call strong on color fiscal to a fiscal and close very now like to provide out a 'XX. year. I I'd 'XX, for to of

Toby Williams

Steve. Thanks,

build products the continue introduction in we the As providing Steve proposition with software of modern to new our feature differentiated highlighted, upon the enhancements. premium and of industry value most

to professional an proposition increasingly market. comparable for in over ensure and positions services still talent our already pay evidenced to value remains capabilities in of XXX analyze and competitive While as with its resonating tight compensation these clients, one to of labor help attract early, the employees, retain market clearly new payer is market leveraging high-quality the by

expanded In QX I'm force heading and new in investing for this fiscal market, from continue our the 'XX fully our reflected go-to-market in into reps reps We've to entire staffed fiscal fiscal execution that to sales by across dynamic momentum fiscal XXX XX% was and to in forward plan we're 'XX, year. fiscal into 'XX fiscal carry 'XX. and solid we initiatives XXX target 'XX, sales in this pleased sales

more our new QX continued pleased and We fiscal and also continue 'XX. business XX% initiatives, channel with consistency referral to in than our full of in deliver invest remain to our we the channel, in which

in in digital addition reps generation 'XX, In and to committed our we our fiscal an sales support XX% to go-to-market continuing lead digital to marketing for motion. increase remain investments

XX.X% of current As EBITDA cash into financial of a strong result and flow our including of margin margin XX.X% fiscal which our free of well puts adjusted financial targets. us 'XX, in performance, our range the

We to leverage demonstrating beginning are performance of in in in 'XX. a model. our of ability certain very grow fiscal the and with to reflection is This our our fiscal scalability while I'm pleased continue targets and our increasing 'XX, business strong financial

of an growth detail, margin of adjusted additional revenue provide to Ryan XX% free with margin continue target to total an target revenue. target While increased revenue EBITDA pleased XX% cash we're XX% to increased flow XX%-plus XX% and will of to of

to of Paylocity in Built be Work for The as In's among strong and externally work this were culture Best to we to recognized nation. the the named year best companies continued fiscal Places to and brightest

and row, financial for best a 'XX, Echoing also Ryan for in without and year we their would the would clients. our to second our the would comments, thank for call for employees possible 'XX employers been not all of Additionally, over women. list a the Forbes placement for guidance. provide on have X,XXX review dedication like fiscal companies commitment Steve's than to now results diversity in to I which earned more and like fantastic to detail to pass I the best fiscal

Ryan Glenn

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

As Toby quarter XX.X% Adjusted EBITDA and $XXX.X top was fourth top another our margin of $X.X guidance of above the and team to end come solid were in or had exceeded noted, for our $X.X guidance the quarter, end range. pleased our million. million sales million we the by

million was 'XX, XX.X% resulting leverage XXX $XXX.X of adjusted basis points or EBITDA fiscal margin, For in fiscal 'XX. versus

progress of XXX% in our free Additionally, up and cash ability we a beyond. flow on of flow remain 'XX. made free cash from dollar nearly in to increase We margin an significant fiscal continue fiscal basis and basis fiscal expanding margin XXX 'XX XX.X%, confident on 'XX points with

important is and capitalize. and research on fourth combined total our make we investment total 'XX. And compared R&D, We were investments our non-GAAP dollar year understand the to development. to what it investments in basis, On R&D a XX.X% year-over-year And continue basis, a revenue. in in what overall to by combine XX.X% were to investment R&D expense 'XX significant quarter. when On fiscal a increased we basis, total both in revenue in of full fiscal XX.X% of investments R&D

the provide We product valuable differentiation us drive in future investments with believe ability continue our and growth. R&D to to

fourth QX, leveraging annual operating $XX.X of results, revenue year. million; expenses covering net for revenue on and the XX.X% XX.X% quarter costs basis, focused to million. On in 'XX, consistently non-GAAP was year Full G&A the On profit our million; XX% expenses G&A a period fiscal and was a last fiscal and versus as basis, we compared marketing were of basis. Briefly XX% remain revenue on our sales income were and non-GAAP G&A was 'XX. $XX.X of XX.X% in GAAP income fourth were same in $XXX.X the quarter an costs in gross

year, was billion For and income the funds was $XXX.X income, health million income QX $X.X client net was our In was regard $XXX.X balance of to $X.X for million. in full Operating fiscal billion and average gross interest daily and funds client $XXX 'XX. million. profit

$X.X approximately fiscal annual $X.X 'XX, QX We average the billion balance of XXX points. of basis average are to with an be will in daily approximately estimating billion yield

estimating year are balance billion $X.X we points. average average an 'XX, approximately the $X.X basis XXX be On with daily fiscal basis, yield billion a to in will full of

point includes increase, but include Our XX not other in interest any rates week's last to basis currently does changes fiscal 'XX. guidance

key cash our financial adjusted an our current XXX of EBITDA of targets free updating increased financial Before Toby XX.X% revenue, from in improvement revenue we're of XX.X% targets. guidance, to of I our XX.X% a increased certain XXXX, basis points. from August our And point provide has revenue, setting X,XXX basis Since to over mentioned, of as improvement. our flow margin of has revenue of XX.X%

in beginning As a which revising against business we financial model, we fiscal and the to our result of of 'XX. targets, scalability performance key our strong make expect are financial certain progress

our we regards revenue, target, continue In be remains achieve this confident to in and our XX%-plus to to total growth goal goal. ability of our

from to adjusted Our total XX% target margin increased XX% gross XX%. XX% to has to

is general and X% from of administrative to to revenue target Our reduced XX% revenue. spend XX% to XX% of

XX% free cash our Our XX% adjusted to EBITDA XX% to flow margin XX% earnings XX% increased has release target from refer to details. from And our to to to to additional increased XX%. is XX%. Please press XX% for target

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

And million, For total quarter is million basis fiscal approximately expected And to expected to fiscal range range fiscal total approximately which approximately or 'XX. billion million be first for leverage expected adjusted or Total in adjusted And represents over fiscal XXX over points year $XX.X leverage over $X.XXX of of range be range expected the be $XX.X is to the over revenue million, first to $XXX of is in to in represents million of to of billion 'XX. 'XX, to quarter fiscal fiscal XX% XXX basis is points of XX% be to the the of EBITDA in $XXX.X approximately growth EBITDA of $X.XXX growth QX revenue. 'XX. revenue the 'XX which million $XXX.X 'XX, $XXX

experienced historically business roughly X broader This workforce be flat workforce by X to typically all a continue we environment, contrary points broader macro environment, levels As levels. it from material to driven benefiting to relates respects. in what in revenue is with of GDP expansion recurring growth to normalized have the and

flow in X-point this workforce levels assumes threshold QX continued high in to and motion crossing free with leverage. fiscal of to flat guidance equivalent we fiscal headwind 'XX $X X- go-to-market the continues adjusted and our of enter a and an in driving ability revenue and road and cash map, 'XX recurring investments EBITDA to representing growth. scaling simultaneously our After to level Our confidence fiscal drive thereby billion with revenue product in and growth our strong of while business continue continued 'XX trend

questions. for ready now are we Operator,

Operator

[Operator Instructions].

Our first with Stifel. Brad Reback comes line of from question the

Brad Reback

about Steve, higher year a as subscription think the sales in the any if not is the you're the shouldn't absolute on being than success entering having driving we think do in well we fact, force increase and XX% headcount reason side? the of better into XX% that little as base, ARPU the able to bottom

Steven Beauchamp

our look a guidance, think it changed philosophy I you from perspective. at if hasn't

we the pretty got significantly. front of a We've a the lot us at to and total in goal of year got always for board being of we product which that the all good is front really We've up XX% a suite on end we're the heads feel about. year. of able running, the enhanced and there's and at have start revenue guide of us, So growth, execution revenue to

so about pretty good the feel And momentum. we

wouldn't a recurring Certainly, XX% our the below guidance on being contemplate basis. us

think way to to I it. And think But reasonable a even feel initial better that's we do our of our think about I the than history hit in to confident goals. So being able guidance. have we a ability

Operator

of the comes Barclays. Raimo question from next line with Our Lenschow

Sheldon McMeans

for This Raimo. Sheldon is on

the year more the the your about kind any capabilities per 'XX? installed thinking more your particularly $XXX As of talking and opportunity per and the there base lean normalized a you installed base about to new in Is with grows motion environment? how portfolio as adding revisiting enter are growth we opportunity into employee upsell product target,

Steven Beauchamp

to back in base the back really client XXXX. started selling We Sure.

we've been back XXXX. years. much started inside rate that increasing sales we So team And been that at our sales rest the faster a for of really number we've since in a doing than of force,

team well really success. this year. that So past with We're fiscal happy their did really

and growth. into increasing certainly going of overall more year. so headcount, will our on team, that it next have average be are fiscal still represents material revenue XX% But portion a We it the small impact a

We are sales products inside team our client new enhance still base. the sell then more product to giving and to focused customers continuing our on portfolio, therefore, primarily to landing for back

than to yes, about it's So growing think way That to gradually sales will faster our bigger, it is it. get and right the outside continue team.

Sheldon McMeans

was you And at talent quick follow-up, R&D talent, I may. wondering, just peer a about broadly map. how I headcount It's investment. AI/ML the, And to more Great. if generative than about say, nice are would faster see AI feeling road organization? just engineering thinking I your

Steven Beauchamp

Yes.

So think the second I'll I take first. part

an investment, you definitely R&D. that dynamic from being at have capitalized from we to product feel expense where that pretty lots of a So ideas can XX% customers the headcount and of is product environment that R&D competitive add our when It's we've look what we we This around been workforce get space. pretty consistent and we we suite. a

going it do philosophy we things that portfolio. as There's have forward. enhance level So think think can we've what maintained look at I to of of revenue. And we our steady that we pretty investment a you a of is when R&D percentage lots

of data we On your a practice question, about X part ago. the years started really team first

around if our go capabilities so leave And our off customer. might back, predictive you based in who We've had we've got algorithms. a MWI platform

so had for we've while. in that team And been a that's a investing space

of in now I got community quickly get where we customers. capabilities, can think capabilities AI places our long to relatively to those to us a market think job with and generative the both we've And for that's continue in what add allowed we descriptions. list

Operator

TD of next Cowen. Bryan the Bergin line question Our from with comes

Bryan Bergin

cadence with wanted growth kind a question. fiscal off to of I kick 'XX

particularly growth a here us you to the of Q kind at? think in guided as we out anticipate where you So relative guide, Can recurring. what the cadence give first trough 'XX about recurring you to on the fiscal sense guide about growth to

Toby Williams

comments are the Ryan and at good XX% hardest from of getting across year. I I going feel where feel Yes. you I mean the we we to the that's last back look very Steve's comps think, I think -- business to relative mean I ago, overall, the about in, about few fiscal maybe think And pretty first think have start too. said, guiding like to first just we is the the that the jump provided obviously, for when a comps perspective. I'll momentum a the I year, I guide minutes obviously, toughest And the I we But year. recurring think that can half from a good that mark half perspective.

I'm get lot fiscal feel actual had a fiscal. product good momentum good certainly I for I take may think, -- momentum that more the seeing products we're the think you feel a new we've we about the the in days feel I from think it feel feel to able it's announced. we perspective. very see pretty from to that what the release the about year. product announced, about seen have we've back and guide the that you We a made about impact the perspective, part of pretty sales of for overall, that while start probably announcements to across adoption just the excited to pretty -- adoption I good But portfolio XX% good I we've things early being about when And from that and and in

Bryan Bergin

the That sense. makes And a long-term Okay. target. then follow-up on

discuss confidence? grades that the understanding bigger are about natural other obviously, on and levers here it's to expansion? and G&A that key to there free the have the can Just on of So gives margin leverage some but specifically, margin. you gross flow talk cash nice you scale, EBITDA see broader Within you of sources

Steven Beauchamp

Yes. Sure.

I you to that us ongoing hit I same one margin, second the think or scale. new them in is the think require the But of IPO we've service implementation being don't expanded one do reason we've from lift since the either is lot added consistently products of for gross that XXXX. perspective. a And I always think able an

from that You the incremental think margin X all gross perspective. about those now, we are had additions a

biggest see our probably a revenue in mix and get of So we newer added, gross some as we the natural the lift that's margin, shift, we've products driver.

Operator

comes of Securities. with Our the Truist line question from Terry Tillman next

Terrell Tillman

on employee the first mix growth, larger prepared of Was the when about XQ the talked of increasing? and any coming you the customer I remarks were in think anything the just XX% coming stats, is 'XX? midsize guess I FY you there of the is shift customers maybe some sales think bookings quantification I smaller foresee is in where all the part of large, notable size you quoting this based do capacity on And larger of larger about mix second mid-teens customers. from the a kind question, maybe customers the from in growth, or business from question

Steven Beauchamp

Sure.

of I years the if think is last shift your a have you part we ago. go mix did question several back

First, in in up success market. We of original against then we rate, expanded see to And an upmarket expanded started market. accelerated particular our at resources that. more kind we below target we our target put and

that each segments. being good of the fairly was and last couple the over across of in each I steady case think segment, really We mix rate have we feel XX% similar growth but probably years, that growth think about is headcount now. the we that about the the the of

Terrell Tillman

comment workforce dynamic? workforce just flat year XQ. about thing being about different is the about you're any Did think on And say was assumption for there or levels, level anything what thinking on Great. for same you the Okay. a full like the follow-up or I

Ryan Glenn

Yes. Ryan. Terry, is this

back the I we've toward with methodology I think beginning and think been this the consistent pandemic. same the of going approach,

the levels at months going point. said what see. guided can effectively really as workforce flat to been we we we to XX back And So have prepared remarks, in XX this

balance as into we fiscal. we'll flat those you we of So levels, deeper but the and certainly the certainly and all get assumed for for QX, watch update 'XX,

Operator

Raymond next James. Our of is line Peterson question from with the Brian

Brian Peterson

wanted I a hit different maybe on through Steve, So but AI, to lens.

is development about of I cycles. people to really think product ability talking accelerate things that and software are the one the

you about And you products? have I'd do margins how develop of in be terms are either hear new thinking think the curious it guys or So can that meaningful internally. quickly you to how using a difference can

Steven Beauchamp

Yes.

and will building think deliver whether impact service and using that's that's building onboard stepping I the tools we're AI for software whether business, we products back, customers, drives that every how code, them. customer where I there's generative how part actually the that just think capabilities of efficiency and we to then can customers

We've looking So all scenes. the that been using it. we're actively at of certainly aspects behind

pretty across business. a lot of found probably that we've really all on success we cases perspective. use this think of is are kind That's generating a a I But are journey. of, we, interesting from test that where aspects code opportunity passionate our

Brian Peterson

I Great. of just you in tenure the sales how that 'XX? follow-up. on headcount. XX% fiscal growth quick And thoughts year maybe the comments mentioned and a Any for know the on expectations group looks

Toby Williams

staffed really overall, I fully I the Toby. few did came Brian, with which mean, think over the year. been into about. last staffed, year, industry which happy growing talent XX%, we it's at And into we done I overall, towards at has I really this that us. consistent And a into mix years, least. as of sales we're we're really what we last case how Yes. force folks we're productive with come with came the Yes, for the always And think we as I about That's year skew Certainly, 'XX. have happy coming fiscal have think that. we been in in good the historically feel would experience, overall

Operator

the from with Patrick line comes Securities. Walravens question JMP of next Our

Owen Hobbs

This is for on Owen Hobbs Patrick.

with up adoption. -- curious to of I'm So time the customers' the kind line product ramping about like

if it suite? say, them long of would take how product, the with products in to kind out start payroll the other So like, they adopt

Steven Beauchamp

Yes.

it think So different at X ways. you I through look can

on the which to the calculate PEPY. realized employee really been have, has you one talk -- about kind got of PEPY, count, platform, number customer you maximum you we XX% XX% So typically the the can we size of our kind is that we of employees give if of that that average we've

they're a a And in package, available that gives of bundle of sense total and so you we because opportunity. buying what that sense the gives terms you

there's lots opportunity that of still higher. So drive to

so probably look to And at easiest way that's it. the

as XX% range modules, to module into we that I customers. over XX% the the of to That conceptually, like the we to think be time. gives new definitely build that get for kind we feel build ROI and conviction able can something us

Some modules below penetration are rate. build We've and of our get But XX%-plus got product. launch can XX%. we still got we've actually some that into product before to have we that conviction range a that

Owen Hobbs

then I customer's like of a isn't kind And right the Awesome. employee count new the that driven opportunity term, of kind now, the but so this -- of increasing within via the products? business, how know expansion by in versus main is focus increase PEPY longer much thinking

Steven Beauchamp

Yes.

to of So environment, people additional GDP which that client employee X% a get employees, was base GDP same because or historically, number translates pay or in say, in us revenue basis. growth a X% growing would per X%. typically our growth roughly X% We on

that was typical. So pretty

platform the of on Ryan for As over been flat. year employees a now, mentioned, the number has

So our adding also clients employees, losing they're employees. not aren't but

there's that. from necessary So tailwind no

selling new look the from us results this there's from all at we're just at on extra comes really, point, employees delivering, So platform, the no customers clearly. when that you help

that actually having client portion back really so that the I inside new of sales customer spoke being to And that's every base, selling to then second coming part about the driven more earlier board. selling And than first. team it's being smaller a from on kind

Operator

comes & the Our of next Company. from Scott Berg with Needham question line

Michael Rackers

I mean thoughts maybe opportunity payroll the growth quarter. just the there? on Michael curious I your general the trends international are Congrats next see on global kind the do just of term? commentary what This your some around kind space. of Rackers is today. of on stage of as and for the thoughts with was the you on long Scott kind over And

Steven Beauchamp

Sure. Yes.

of think low that still we're terms after. definitely going have relatively opportunity I in in We the the on squarely market U.S. the target penetration So we're focused

a see we've to global we that got may number able headquartered U.S. differentiation. we've see So do we customer, focus some be TAM need have a product to you've got that got And who on. huge we creates think when some set of a have Where is capabilities to abroad. employees definitely

that why so that had that's Marble our we purchased for so handle integrated customers. can obviously need suite, into Blue And and we

So XX, employees through they pay we that their customer network can Paylocity and Blue abroad and they XX, can XX, Marble partners leverage. XX the of

that that so And got we'll of be of think strategy us, always opportunity companies. has primary the the been with U.S.-headquartered our but And there. interesting front size our there's for opportunities, plenty And will focus globally. look we've in TAM of we

Operator

of with Our next Jefferies. question Samad line comes from the Samana

Samad Samana

one. first Maybe

how does to booking compare cadence you Just June, went, or May the trends that bookings in quarter. April as I help the fourth normal to the and think linearity about from fiscal Can seasonality maybe quarter? just us in to how, understand

Toby Williams

look or in back first perspective. half of to or I a look at as ago, few this in, But think, year, you had we different in. in don't anything in perspective of fiscal I compares quarter mean year, performance you saw I obviously, anything terms half. than mean saw you we think I in the I a coming think coming got when the I at linearity of terms from last as seasonality for different said year-over-year I the we difference a minutes -- don't bookings heavy last from fiscal think when sales

few that note a reflects back just made only just I going over competitive the probably of over from that But there the performance seeing solution product what is Steve the how more we've last of that ago made in minutes time. done comments I we're think to terms incrementally being just upmarket. perspective, handful better the probably strength just a probably thing think and we've a of quarters and

Samad Samana

deals? Does it going just worked And growth ask think -- Or it question. sales-related in larger rep bad one. is does you curious reps. this think the as about if the of never number unit Great. deal? on please still sales I'm customers a when I'm I've count how more reps to assigned, so targeting you're larger a sales But number sales, of and much about me a larger if work targeting the should count? we matter same is heads Do just indulge

Steven Beauchamp

Yes.

have recurring based new revenue reps off we quoted annual revenue. So sales annual recurring consistently and

significant is customers also we natural reps' go will is, give more revenue. business sales larger a But Now there's there the them and they the behavior employees referrals. more that get new for through because reality broker

business. XX% over that's our of So

those to So leads got follow you've find wherever them. you of kind can

referrals, You get kind go. so you wherever of follow client you

So the can't customers. target just purely larger you

what's really available that volume after well product frankly, to we've at You've and I say, the specialized as productivity of talked having got last you. would when thing best And look as to they've unit about that of And we the reps, the got our amount great the reps, you some also them fact sell. they focus some upmarket. our experienced of most go

and don't for larger chasing focus So best that's that good way And that's experienced deals, those for success bigger on a people to us. get the go customers. everybody most the but formula we another we after been

Operator

Marcon Mark of line the from comes with Baird. question next Our

Mark Marcon

I've got two questions.

wouldn't as ago? a one you're reason little force historically year is to talk sales can currently and been? is that compare that conversions to The pipeline they that the basically, a as active be good productivity Any How bit seeing? first you think have does about How it?

Steven Beauchamp

continue there's add of no say is to call-out pipeline history perspective. we as a reps, would we the challenging in real top they big little look pipeline. put more opportunities I The It's Mark. question, good nicely funnel. growing when a at That's from a and

COVID, all things out think people a of terms bounce you a came that COVID COVID a out You not had having of came while. you in you little of of bit and -- of environment the for done

We're kind back a now environment. into getting of normalized more

And ramping so seeing we're pre-COVID and think from good really about look we and we the see that I continue almost reps. pipeline as levels to we're level, activity feel new the at that we a build how

Mark Marcon

Great. financial And targets. updated really appreciate the

of top the margin this impact range, end roughly out XXX think of target interest improvement for of in of when year. of improvement How going towards -- about should basis targeting terms float You're towards the cadence margin the points the income? the the we strip we

Ryan Glenn

Ryan. it's Mark,

I we think the a few been set back adjusted since on of time, particularly confidence R&D. years I points of G&A we you've ability the about gross to on sit journey cash free prepared over targets, in X if flow targets ago and of and well remarks you into sales data EBITDA here marketing period in 'XX, lot the initial and previous historically think and leverage, probably that same we said, in and step I have those our to in as time. referenced continue we've as And at that August leverage invested in have think a drive you in seen margin the

on certainly significant and And initial something forward think the and I think 'XX, to initial 'XX you north that out what across leverage as that guide, pull annually. setting I EBITDA reasonably when guide saw be is to the flow points close leverage, target that adjusted in of our is would that backs said, you of basis XXX EBITDA of of adjusted free we cash

where at started growth continue up. time same had take I good number, been to think to leverage through start the the to to on being feel we that closer over I year But XX% of we years XX guide adjusted the there progress make EBITDA. points able think able we've at have performance and basis revenue

Operator

Alex question Wolfe next Zukin from Research. line Our comes the of with

Aleksandr Zukin

for share it the adds larger can year. come both more guidance you then And going -- from environment, to one from kind where expect base of the you safe and to for just on growth to say for double maybe et of on if where -- the client expense? you fiscal 'XX. selling click maybe lands fiscal single-digit installed net I wanted year, increasingly, compared And is -- where high guess ended the cetera? single-digit net competitive how larger much any year that the bulk we're to maybe the Is you're taking I ask the assuming from come configuration of next about then the comments just where growth to

Steven Beauchamp

Okay.

to start suspects. the our a usual really, solutions kind It's the wouldn't It's been So anything always from and order. very in providing maybe competitive it really down point modern of come And experience. I competitive. very differentiation of call different environment. reverse a

no change there. So

map good our road from about In perspective. to compete we to feel to able be continue that fact,

to some you terms or in want Ryan think of I points, Toby, other other pieces? of the of the handle one

Toby Williams

we're standpoint what it's think I and in mean Yes. every of year, mix your start, we've I I mean, think relative different of don't what question across with the we sort growth target the the to I single now, in I course -- don't 'XX. fiscal in of market. right for terms a I think terms think expectations -- I been of of different kind terms over of I the from seen is to any mean, fiscal business of while have mix 'XX think I seeing think what we

environment competitive been largely Steve's any don't And few it's 'XX last see always there. think to tends shifts I our I contemplates over we've competitive. plan been what the quarters. seeing point, think the -- for of think the major we course I

Operator

question comes of Capital Markets. the next with Dan Jester Our line BMO from

Daniel Jester

I wanted really to year. big seems ask up the $XXX a compared last It PEPY. to step like about

Maybe because get introduce lets organization, help think so just biggest big of marketplace? that it the this of what you're just seems that Is much new types that just the out or productivity easier maybe so years. about in And launching you R&D the it several products seeing I'm step year into the me it's you're wondering better to just product?

Steven Beauchamp

Yes, it's a good question.

I overall. been our R&D think happy velocity we've pretty with in

the doing end. do lot a things where on of these you're back work happen Sometimes,

X take XX can or products to you Some build. months

kind of have you're that multiyear that You working may products on. other are efforts

very timing can different. of So the launch be

And a pretty what strong product of seeing of is so I years the couple think of you're work.

And that capabilities the other across would focused R&D. is us go I we've to faster thing allow would also some say on platform

couple terms to made product new see feel to positions that's a of last importantly, And in over basis, for us velocity be like But high investments you're have to so go-forward able the and we've the starting us. launches. I pretty of more years, now the exciting on I think actually, it

Daniel Jester

new the any into about I inorganic growth capital And allocation, how year? new financial you're going updates appreciate the maybe thinking targets, on Great. then

Toby Williams

Yes, there's from contemplated any capital perspective. I different think don't a allocation

capital I Obviously, view on any organically consistently ability be has our to was our substantive to -- and just to allocation we able you're as talking that use and fiscal we change don't as seeing to to our I think drive the growth. But I been drive market. want differentiation through Steve think strength now, about deliver view to the in think capital there's in product continue think 'XX. right

Operator

with Our the Celino Jason Capital KeyBanc next question Markets. of comes from line

Jason Celino

of When seeing ones. some we is kind and year, quick growth OpEx and two about previous the for we're heavy spending more few return normalized the a investments? to back pretty R&D Just just upcoming years deceleration think after the the

Ryan Glenn

I Yes. think I mean right. that's

If at that we had in you the fiscal look 'XX. spend levels

to a well, then think you'll in R&D of see back fiscal in that what 'XX, XX%, tracks total you'll sales I more growth. think marketing head kind And and cadence historical normalized and I up into much environment both about was see as spend in QX that and R&D closer revenue to as full fiscal the year. we

Jason Celino

headwind check. to the want levels was, year, the coming we Great. from think the of points I to will pretty X being just be for each about consistent staffing And Ryan, I when that quarter? flat it X likely imagine

Ryan Glenn

a I'd seasonality nothing Yes, standpoint. from out call

quarter. of from I There's think it's that pretty consistent note nothing perspective. in each

Operator

Davidson Our D.A. Andrew next Company. of Warren with line comes question from & the

Robert Simmons

this on myself. Sorry, Simmons is This actually me. for Robert is

touched new terms on about Marble clients talk and helping Blue cross-sell? general for But can more the topic. you how You is in of win performing specifically, you

Steven Beauchamp

Yes.

into that in success so have might and customers more international had is employees multiple opportunity, So we've called up out the market, countries. that we've where run you

has And differentiation product been definitely upmarket. Marble has of some a created our component that Blue nice suite so

employees if can you everything you're different customer for XX have got and that we've got We a So countries, X,XXX you. you solution employees you've and a X in handle need. great

differentiation us does And in a become those terms selling that customers. point of

as from the is opportunities. those And been you differentiation when well to It nice so think risk on it's But a stand-alone contributor at that I biggest look upmarket. focused continues in thing revenue bring the we really grow upmarket. the

Robert Simmons

And sense. revised to makes growth? you then think ranges? That targets. you a you get can those into you for the and it. long-term time can great then, also, how maintain frame when And think achieve those you Got Do do have XX%-plus see long

Ryan Glenn

hit your the of the Sure. Maybe part I'll let last Steve hit question. second part and

ranges. we're of think when the I 'XX, think I set in later, X we years were and well August those we into targets previous

those I We the think year in don't I we'd specific hit annual that it. on progress to same So have continue about the our way But to a probably think right expectation an that's expect basis those. time, think 'XX be at beginning to towards would targets. revised we'd make

of grow a So across high scale degree a as to the at the confidence the rate, business business continue to healthy have time, in well. same at able being

Steven Beauchamp

focused make we've investments that. of on about we're excited going to We're what's growth to the talked to Toby terms how in about definitely out. product. and at got And XX%, coming going We earlier, in priority us drive mentioned continuing we're think as I grow what a for big

gives one able confidence That some the that product rich being key on us focus is of to a have that. pipeline. elements We on

in really in perspective, of We've from a a low headcount increase be Bringing position opportunity. the right? able good relatively drive sales TAM, penetration that. talent to puts got XX% to the us in terms Huge

really us product a to execute. pipeline. great got is the differentiation. it to We've opportunity kind Size enough comes We've big be So down enough. for of of able got

acquisitions capability. Marble. have I that mentioned, the Toby our and question we enhanced around Blue have some answered -- so also strategically as made I just think smaller And

all when XX%-plus. being grow at so think to that's what able to us gives continue of put And in I you together, that confidence terms

Operator

with question next the Our comes Mizuho. Panigrahi line Siti of from

Sitikantha Panigrahi

to competitors is your Any ask most of revenue? of generating it That's solution. -- that something Or you Like win? Is now heard there. How on any back. And the -- of for wanted you on-demand your you pay. of important have to product? that really about is I most that haven't that on from customer? Are color what sort announced kind traction more that? help revamp to you we trying long

Steven Beauchamp

Yes.

to the our of pay So we product. one market on-demand were first with

in have several see frequently. customers to the had that I their So larger really fairly that would actually that we've wages populations available often early hourly years. value will request access say they And that where

customer so product And made, really on We've us. ongoing feedback, well doing that worked well. an basis. the based enhancements product is The to on for product some

mover. big first that that feature this I as needle the date be from could and But And of never really do how us a for a of. a overall. a product to you getting I launched from that's advantage was think out take need customers going it it, I like we big that nice it, I are said kind value think customers played but think isn't for it's I driver us. characterize it

Sitikantha Panigrahi

for this industry to to ask payroll HR the ask where our All assets you guys adopters? right. do AI broadly, about want want we adoption? I that how an do you I early that? like to announced Any then in And as will And see evolve opportunity AI feedback start this you from March. and seeing monetize think But

Steven Beauchamp

Sure.

step take think teams and of back just that HR of you some the big you have. if I challenges a think

as well. a got increasing dynamic globalization Z the gig workforce, entering of You've work and back Gen workforce, very increasing, track kind on

they fairly it's so the complicated a to tight in get for HR need market. that teams really And labor just talent environment a

opportunities overlay to I to culture really drive teams. efficiency use able actually to when environment basis. that creates then AI, you then think that It a efficiency opportunity on with so time and HR AI from a And compete be for engaging more for creates

doing early see clients we our so And that.

rolling it So to be clients employees. really for a make important that And ton for as our think got will more engagement, out plan they're with talent. attempt use culture-building of for over communication, on that's cases the driving so going that initiatives. we to We've war They're much they win their engagement. I easier time communicating

Operator

time, for this closing over call turn Steve At to to like remarks. the I would now back

Steven Beauchamp

restate you thank my having fiscal 'XX of in thank X,XXX forward to Paylocity. our 'XX. of looking kind another in of of you all, just FY and Well, I fantastic Paylocity all interest in members, to delivered for first and a great that to And year team you dialing want strong, for all

Operator

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

You may now disconnect.

Paylocity Holding (PCTY) 3 Aug 232023 Q4 Earnings call transcript