Paylocity Holding (PCTY) 6 Feb 252025 Q2 Earnings call transcript

Company Profile

Participants

Ryan Glenn	executive
Steven Beauchamp	executive
Toby Williams	executive
Brad Reback	analyst
Scott Berg	analyst
Samad Samana	analyst
Mark Marcon	analyst
Jessica Wang	analyst
Daniel Jester	analyst
Austin Cole	analyst
Sitikantha Panigrahi	analyst
Raimo Lenschow	analyst
Jared Levine	analyst
Terrell Tillman	analyst
Steven Enders	analyst
Jason Celino	analyst
Aleksandr Zukin	analyst
Jacob Roberge	analyst
Arvind Ramnani	analyst

Call transcript

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Operator

Good day, and welcome to the Paylocity Second Quarter 2025 Fiscal Year Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Ryan Glenn, Chief Financial Officer. Please go ahead.

Ryan Glenn

to fiscal results December 'XX, welcome second for XX, and of quarter which afternoon, Paylocity's call earnings the XXXX. Good ended on on Steve Glenn, call CEO Toby of Ryan Chief Officer and joining I'm Financial Williams, President today Executive Beauchamp, me are Paylocity. Chairman; and and the our we Today, in be after issued the discussing release will the announced results press market closed. our tab. this call the days on for will next Relations Investor available of website be replay the webcast A under XX

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

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

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

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

be Wolfe let of Conference. the with will Raymond if attending these events. me In Conference the you'd regard like Conference. schedule, Technology Institutional at I and time One-on-One be Please to James Stifel upcoming Toby any be attending Software attending the Toby will schedule I will Investors our conference to and know us

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

Steven Beauchamp

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

Our strong QX and of other the modern differentiated industry software XX% value as providing our growth and continued revenue of in the proposition recurring in marketplace. resonate continues with most results in the to

of Total last QX year. revenue XX% grew over

the Our investment achieving differentiation with our planning into Decision which target air-based expansion Office this launch CFO does $XXX of our the recent strong of sustained expanded our the suite, R&D to The and and from has increased PEPY include August client. resulted in $XXX, XXXX, products. significant durable and growth in set average headcount drive Support product, not of Benefit our yet helped multiyear in we per integrated product revenue and product expansion has any MAX has revenue

We new CFO in also further new the average time. Office product expansion revenue existing our client and and to HCM our ability of over clients with expansion further across products per remain of drive confident and

early generally in pleased to in increase time a key language find reduction for capabilities adoption. XX% as now driven client all features search which available product, chatbot are users available and utilization to such reports. in have admins, over new our Additionally, is and natural are reporting seen XX% an required our levels in our AI launching we with have we assistant Paylocity October, Since of

to additional key our by encouraged investments continue are and driving are over and excited functionality AI-related clients use We cases AI-enabled our adding time. benefits the for

reports. as Award categories GX's was the HCM XXXX Paylocity overall continues TrustRadius Winter product Our by ongoing in recognized commitment Choice awarded to Buyers' XX leader product be to named grid parties and innovation in recently third

to on provide Toby I the call would quarter. now like further to color to the pass

Toby Williams

Steve. Thanks,

guidance As solid 'XX. in increased in selling and the season performance seen profitability into Steve and resulting revenue QX continued quarter, second fiscal for highlighted, the momentum

results macroeconomic environment. by Our are execution, continued and stable driven more strong operational product a differentiation sales and

continue ability investments sales another talented our across to to add helped and our contribute sales and solution continued and consultants training be pleased traction including in also go-to-market strong We team our upmarket. by ongoing of quarter development to reps execution,

in see delivered the across strong Additionally, which more we our again than new another performance are pleased XX% once referral network business to of QX. broker of quarter

and success channel not partners integration do ecosystem, products. is broker broker third-party compete We partnership platform, by remain true and real of marketplace driven and brokers going our of investing selling referring our support continuing our by goal the insurance with to our against and clients. forward deliver in API value The we to and channel sustained committed supporting and broker because modern the capabilities to

is QX believe are the Overall, fiscal which and heading we are we 'XX. back reflected for fiscal increased results our the in with pleased guidance year, well half of positioned into

in pleased from still While with and acquisition the clients we our continue reception existing prospective of will Airbase early the integration very we're the and driving across process platform. the and teams days, both our

target managed conversations, payroll of of integrations third-party our with key which systems with a decision early value through the having resonating proposition a our all and across nonpayroll From spend market. can with robust makers related platform single is be set

businesses with also road pleased target markets. are clients collaborate delivers to the value a that ability map with to drive across mutual to our incremental combined We

annual W-Xs, for to of of filings year. all during of and this for clients they to clients. very XXXXs hard year-end time thank implementation year closely on state our employees tax very their our want to of work agencies our work a and time local busy Finally, form dedication on I of with clients as time of busy this new teams federal, and is all processing payrolls, the and the

Technology in America's addition culture being to most one trusted of strong named of diversity recognized companies externally List America's greatest year. Newsweek consecutive continues were by in as recently Forbes Paylocity for the list at The as and recognized also be workplaces for Workplaces Best Fortune's second in to we to XXXX

review pass 'XX to call to results the like provide now detail would and the increased in guidance. Ryan to I fiscal our financial

Ryan Glenn

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

a second quarter. Our revenue than strong fiscal QX our results solid team, another to quarter primarily year and were in us sales driven end guidance resulting the come our by top million for consecutive our for the our to by above of allowing beat in more raise guidance $X

fiscal, in leverage as of gross continue basis service last QX was our Our points for to representing XX.X% profit XXX while versus adjusted QX on costs scaling we industry-leading focus levels. maintaining XX.X% of operational

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

dollar X.X% year-over-year investments XX.X% compared by R&D to leveraging total sales out quarter, G&A our revenue quarter basis, basis. on when On on we an as our to of go-to-market regards build in in revenue were fiscal to we we of to second quarter. second activities. 'XX R&D platform expenses remain a annual were in the in on G&A and On expenses of And expenses XX.X% In modern workforce. increased investment a second and of needs fiscal the the non-GAAP the 'XX, throughout making continue focused on basis, marketing a the remain consistently and serve basis, the Paylocity non-GAAP our focused

the our for XX.X% EBITDA guidance million. million margin adjusted $XXX.X the midpoint Our was by second $X.X of quarter or and exceeded

QX. on income held interest guidance funds for EBITDA of impact also the million, Excluding clients, for was $XX.X exceeding our adjusted

GAAP Briefly covering results. our

million For funds and average QX, acquisition. $XXX.X cash to regard related with gross sheet, operating of equivalents debt was million, to profit $XX.X the and income ended in balance balance daily the we was In $XXX of QX. regard $XXX.X funds client the cash net our funding was approximately and $XX.X was $X.X million, income and of quarter in client-held interest million. outstanding million to billion In the Airbase income,

we yield in average $XXX points, billion approximately of an XXX are We $X.X will approximately of representing approximately income average are billion in basis interest XXX approximately million full the million balance estimating On estimating $X.X with average the average approximately daily balance of an representing be basis, QX, yield points, basis annual income. approximately will QX. a be interest of with annual year daily $XX

In interest point to basis guidance Fed to cuts rate cut all regard our May. additional rates, an reflects date XX in assumed with

continue we share. our common given and to utilize have cash Additionally, the approximately in million with repurchase an shares $XXX.XX of average we or price flows, share $X.X at our and of QX stock program confidence our repurchased XX,XXX strong per business in

execute share the program against million of remainder reminder, a and approximately As the $XXX anticipate to remaining repurchase year. our program we continuing over of under have the

midpoint revenue further $XX.X full guidance strong impact QX provide 'XX in momentum and Finally, revenue includes our QX and full our increase the in $XX.X by which season beat Note total as and fiscal result fiscal team, at and our for I'd 'XX. like of million back sales other guidance recurring and million that the guidance. our of fiscal by revenue guidance across half selling a increasing our we are to 'XX continued guidance financial a

to to third are is to or 'XX. to of fiscal to other and for in other million, the guidance $X.XXX range follows: of the of to income for With increased million and Additionally, in and Recurring the million million the in million. driving fiscal the EBITDA as to range XX% be 'XX billion guidance continue $XXX our XX% or be increased EBITDA approximately and to interest And approximately recurring now is million over to 'XX $XXX is over total our recurring on quarter adjusted held impact expected range which guidance profitability 'XX or And fiscal revenue of business, we to EBITDA, funds third $XXX includes expected $XXX $X.XXX growth aspects full is success revenue. is fiscal that increasing expected said, growth expectations quarter other be total of XX% increased beat range to be $XXX expected all for we revenue. be for XX% revenue. our third and billion fiscal 'XX, of $XXX $XXX excluding revenue in in year $XXX profitability growth clients million to across revenue Adjusted QX recurring of adjusted expected of quarter fiscal over 'XX million approximately resulting in realize the the guidance range in

be to be $X.XXX revenue to adjusted of fiscal funds million. is Total billion the expected range is million, 'XX. EBITDA, EBITDA in or on in billion XX% Adjusted million guidance the and to to to held $X.XXX $XXX approximately is million income to the clients excluding range of expected be for of $XXX $XXX in range growth expected over $XXX interest

In we are conclusion, our busiest our are exit operations ready with team momentum year. we and now we the have pleased across we time for sales Operator, of results the and questions. QX as our

Operator

The [Operator question from Instructions] Stifel. of the with will line Brad come Reback

Brad Reback

Not M&A Do the the taken sure with go-to-market? to coming out. opportunity clearly brokers. Paycor it's to had for, as accelerate your competing and a They're getting that broker going but broker in now They those Great. you channel. see an who market be with big

Toby Williams

it's integrations us it's if relationships to time a made the think to been at provide with meaningful channel, broker we've Brad, I those I over what's that you successful business. mean Toby. into provide investments It's build look the products. made technology sale compete mean, matter. to with with being And that broker able the ultimately, channel get them their the to to insurance of don't I visibility we the

build channel. that to that I us we look relationships as things And the that's so made helped want are And with have meaningful what be able successful we those us I think to like we think forward. do there's be provide relationships where brokers any that to to positioned want those deal that disruption from I be And a with of types if able are comes successful. to think that's that, and

Brad Reback

it that, longer you does typically them months, broker get Toby, just as build quick And quarters relationships, follow-up a or productive? take to on

Toby Williams

in to relationships the I And when field. to over that get our tend in I be them communicate ability have It's the time able make through. relationships when been then And doesn't It think built about and term. I sales to to all productive we productive. force ran the that Well, those productive. do be relationships that, value exist, can can we our being of we lot years a with build connection take they those the just near make usually those think the to

Steven Beauchamp

exclusive, oftentimes, we might just somebody I other in they refer premier be They relationships. different obviously want meaning relationships are to think that would use the broker circumstances, add I each not is, to mention Paylocity. multiple of in necessarily They providers, that the might may, thing else. these to Brad, provider to to refer

the positioned reputation since that so that. happens really options to I there in less less to Toby's of be very we like And think feel then really with available, well the we market of take point, if advantage we've great competition the start in to from a been doing market are Paylocity, and

Operator

One our that moment will Scott Needham. line for and question, Berg the come next with from of

Scott Berg

today? Nice guess quarter. able and a a Steve you're last in of stabilizing. optimism as that get and up in something I renewed here It sense the some your maybe sense Is like payrolls your is guess? to quarter you it that like making of sounds that way properly, view pre-scripted deal call Toby, my I have the I and comments of is kind track made I quarter, this to remarks, right maybe Or maybe business. head, you I'm that seems flow

Toby Williams

I would you lot hear think Well, a approach. I mean, you that consistency our I we in of would think hope --

we I well value clients to optimistic channel. always ability as and we're and think about So just talking to been have serve delivering broker I continue our about grow the to mean,

I I time, perspective growth a both think a that think and to from over to been you I and so communicate holds pretty I tried and approach that's I think And consistent approach strategy today. true. that the that Steve And think hear algorithm. to have, still I I think, continue And mean,

Scott Berg

Understood.

you 'XX season that selling certainly we're how the how you start at to Because hiring, think made QX, busy fall, all when calendar from in start it sales Now are as change about hire into or know you calendar capacity does you last the to you into think about your year. the viewed But obviously for and hiring sales spring busy through year your I for plans we're it's think when know next fiscal much year? I about do this 'XX. typically not season. during selling least

Toby Williams

Yes.

in headcount so you into that starting if the go-to-market to would be the our had and would -- we here season the X%. And saw as I time And across invest in to be talked this around throughout think would And think by first productivity we the fiscal if was marked sense. we macro, really still back of course coming if change teams. go coming room about year, hiring really sit sales I our mean, the that a leaning -- in have to we made point. What was year at continue able come the growing driving we through we half. the that I focus on to

we performed I environment year. have than have good would go-to-market momentum we season. stable it's selling been feel teams last think a well our that We had. in I about like feel And more the seen

made so be our investments we industry. talent, themselves, go-to-market those remain for into about we I think feel a ability we're and the in that coming in optimistic about to ready. opportunities when And I destination still think year And the the present good particularly

Operator

moment line next of from One and Samad for Jefferies. the with Samana our will that question, come

Samad Samana

strong quarter. see a to Good

your on remember inside Scott. doesn't Just happening earth head, friend, be be could that, Dumbledore one Scott. it for note good mean said my it shouldn't real just it but either,

receptivity well that seen the it see in help So Airbase level customers numbers. in the want them you from put sold what that can have engage customers about early something that and what Steve, upfront that maybe I ask you're as the us help are -- the them been of acquisition, has you're it's understand and rest it Maybe the that's you getting conversation for you've you the just you -- manifested down understand to along how the and buy with of suite? just I road? the you us them guess Toby since Or seeing it for and I to been received. know guys. talking impression about

Steven Beauchamp

Sure.

obviously, two, indications relatively that So still early said still when both that, all you is But small Airbase look are Number number with pleased a having this we one. very in stream at our scenarios. the overall is integration, in revenue business. understanding early

First, how can solutions with Airbase interactions our look as seeing team they are clients sales bringing upfront. about some them interested help that where that conversation on activity We're HCM there board having suite. are at in modernizing their product customers

good some So there. examples

back might the to we're help value as go being same acquisition will done think over we talked We're we interest. increase and And some integration, them customers, as this able them. we we then about which at and That's the to to time. seeing product existing also our the time, only working be on all how proposition

So the I prospects with market. -- early the the our Airbase brought both reception and with the and on in both think we're happy customers we team over from early that

Samad Samana

And Ryan, the an -- Airbase contribution can of the was I positive about upward that? of you. Great. the have think the influence much us that you Airbase outcome. business? And that's what revision the a from maybe how obviously, in idea on a And core quarter? was then, Or really just follow-up guidance, Any for for to all an give as

Ryan Glenn

it being fiscal is Yes. so think which I of contribution roughly quarter, we how or consistent X% would sized with this the revenue from last Airbase of year.

expected fairly overall small. business think is I Steve's the and to as So is performing that businesses point, relative to

view would driven about the raise core as results back both in that overperformance. the QX I guidance year, larger of Paylocity So and think you by the in when half the really

Operator

Baird. Mark come line our question, next will of with Robert that from the Marcon moment W. for One and

Mark Marcon

you or end. tone? areas Great of little talked you're Let the Are of what In a you seeing had talk cycles receptivity about about me more strength? the in terms of of in end in my quarter. change you areas competitive? are relative can differences mid-market bit upper longer if in Wondering And the seeing past, And the congratulations. are or target your the you market. less to upper seeing decision any add just what any that between terms

Toby Williams

it's Toby. Yes, Mark,

And the sales I to seen with demos, due was I think think as fourth market. we last market. through year, and that things more if we talking also year that particularly third part quarter little cycles, of we how started go And like that. this in came more this to the and I stability we And about that's think longer the into cycles last more the we through end time you of fact think of back then I were set a year, had seeing year, we the decision-makers to really came see upper et quarter cetera, through the in up. as bit the

think and that's we what QX. would I say, saw stable I QX, through through

it we in coming think stable. QX I saw was And into teams feel season. our the dynamics change And the quarter market, some significant execution selling I for think we selling any more I through strong carry the think in of and teams how but from momentum don't executed did it a in like QX. really they think was I proud season,

Mark Marcon

benefits planning, of more helpful. support getting of are to the there And goes of good feel start. decision the it particularly which be How receptivity. of a appealing little Can that the terms give a into bit sounds CFO. terms is Office much of a both in in of are the sales? to, off headcount in new would terms planning Anything then Who you headcount like us you and great. level That's

Steven Beauchamp

Yes.

I for the So definitely we're with happy headcount start think planning.

the where yet, product deliver probably is to mentioned, getting and the some That's the existing more who also probably planning advantage and oftentimes base new that CFO that being category those got from back to to of taken the headcount in existing starting you customers. it even of both fully in but many our we've Office January of feedback haven't As of first and are able customers, of customers.

an going and use have they they're that planning As cycle, would were oftentimes going through doing annual been through in they headcount better planning manually. spreadsheets their to than able do tool cycle, to

So off a to start. good

XX% off you as know, get Mark, always say I I a these would get penetration the products. into that's new think, good them XX% over to certainly start. case to both target we try time, them with to And the products, these

Decision into nature Benefit concentrated the of the Support little Benefit fall. bit the throughout a year, it. it to think happens but little bit enrollment is more a I has cyclical

year, some So on better to fall. brokers. using on get but tool, the that we were we've new and as And in some are to this for customers and that plan think our nice great feedback use again momentum able got fall benefit customers deliver from that they much we also to employees tool it's enrollment the going experience real a both has value coming

Operator

that for Brian moment of our Raymond will question, next the come James. Peterson One with and from line

Jessica Wang

Brian. for Jessica I on question. have a is quick This

saying you're has What thought $XXX reached forward? your target now reached your about that you've going and a the goal. on rethinking you're new of and is recalibrating PEPY target how this high-level So

Steven Beauchamp

Sure. that. I'll take

IPO. that that back sell. we're in We've XXXX able tripled really yes, of goal of product at we've amount to being So able to the proud reach been

to we that to a for of certainly And that. HCM do you model be well us one also very opportunity think works so able the PEPM products. is see big when

the the those of be Office pricing some into model. CFO, move we that not of might same As

don't think of ARPU new and over I However, mix time. the that units changes

the But model you'll that of it's per growth, a depending product kind focus which average continue different priced bit to we've customer really on that on So revenue same operated. little category. might the be see us

have thought a discuss that go-forward terms basis. so we in on we'll give to And how some of

early mentioned acquisition. the very I as earlier, we're into Airbase still But innings

continue new continue existing to would in formula I expect units drive to well for drive as And so to back as and change more customers the products color over focus, as customers more both ARPU the no growth. time, new but

Jessica Wang

little of as but little penetration XX the launches I a a also existing driving Airbase Airbase then months and are continuing the integration you next with integration, speaking And driving balancing about new about prioritization of was early know continuing of products? integrated it's this path, thinking versus days XX the I you're bit. product to still these bit how curious,

Steven Beauchamp

Yes. I would our performance That $X.X invest at of We've scale, say, the been product belief our current what's revenue. to similar continued a back R&D. roughly that differentiation consistently is billion has percentage over into part time. in the really driving

And terms new capabilities so then enhancements innovation AI we new will things our balance to make the existing categories. investments with time, the products, investments same features of into and both in customers HCM and at products, with like

I think to to good those market had of been a first many that able pretty history in do being have and categories. of we've

integrate that. our to customer would the strategic it's investments to like And acquisitions that. we be us an made the positioned so we're where we've some and We and certainly, to to great balance cases, In of increased so do But build feel product, we've think that organic. to we do size we well able some from scale allows something that's most that portfolio a spend perspective. to of time, got R&D continue time experience Oftentimes, and mirrors the fit.

Operator

question, the next our One with come from will Daniel Jester BMO line moment Capital of that for Markets. and

Daniel Jester

on guess waters is year-over-year the of Airbase cash bit there. My doesn't business, at free great flow Ryan, little a expansive that is If basis. of I the as kind the on muddying outcome a line. the look look EBITDA

working to be year? model. us any help flow puts you can free the So about we're the we If conversion considering there's and cash of of takes for think our the should EBITDA as through rest

Ryan Glenn

guide don't we around with moves specifically. Obviously, to cash flow certainly, of number spend. that quarter-to-quarter, Yes. Sure. And timing

the your call we've So to a be nothing a concerning roughly EBITDA. headwind fiscal or for that obviously would to that Airbase acquisition onetime this point characterized point, which year basis adjusted there's I XXX with headwind out would relative

pretty cash free to similar. headwind the think flow is I

balance we TTM where margin, think cash you a on are flow, over year. when headwind free have of fiscal roughly So today we basis, this the the do XX%

leverage up think expect XX% and of continue be year, hit beyond, drive not to able to QX, when I relative I when you will this going at the end to that's think specific but flows cash look guidance. going timing year. concerns XXXX some within forward have north forward, we of of just where to goes But we this wouldn't any somewhere into some formal the

Daniel Jester

Okay. And like headcount something past, is in sounds very to customers customer going That's that your It base. the great. is try then something you your into be to said interested back going in. certainly push you're to current Airbase also that planning current are

gatherers changing merge. was think potentially And investments about sales sort it between sales forward, about going your to do you As and you mix hunters if think of in the like organization? what could that look

Toby Williams

we've called both. we and I have this have time, invested yes, mean in out we over -- Toby. it's Dan,

course to that's 'XX, in going to and started customer base, then. probably a the So team grown back sell back since frame, the 'XX into of time I -- invest time think 'XX to over

growth set I while that the $XXX to and back ago, to Steve's new back in from our a expanded really the the of a now of that's selling client the standpoint into to growth algorithm I percentage as shifted absolutely to team the has continually mix in a field. relative focus base But higher comments go-to-market terms think few think has minutes to our focusing has in ability PEPY. part product investing also important of on units. on in to go ability our base focus the That's spend to been

been some color on and the been important, both So that's -- that's mix. has have certainly

Operator

of line come One the moment will for and Citizens. that from our next question, Walravens Patrick with

Austin Cole

Why Nice deal. Austin get general Steve, more see buy This on but would you do Great. is Paycor Paycor? thoughts the wants Pat to on market high-level Paychex your results. love you do question here, Paychex Walravens. forward? How just think Cole to for going this evolving

Steven Beauchamp

Yes.

businesses have that I been there perspective, high a in just think macro this I industry consolidation inside any can It margin. certainly So information, -- is has over but no from pretty drive time.

that, savings So out. as typically you you're to can some cost able take do

in of called of savings. cost think terms that press I release out their some they in some targeting

has of Paychex sized a than a larger Paycor think I customer little focused historically. bit

doing both think time. I you but I So really to we're competitors. do they're over competitors for we've we innovating. to It's continue from about. the perspective, had put going all would that I together very think that that about against success is our what at someone We've fared sure, before. and strong rationale think well They're that And were those with least

like there's strategy a us. to Otherwise, what customers. feel or do beneficial we be if we the if disruption, to to so there's any and our could most then experience going we're modern of change And to incrementally do that continue type their in deliver

Operator

moment our the will question. from Siti with that for Panigrahi of come line next Mizuho. One And

Sitikantha Panigrahi

excellent on Congratulations an quarter.

Paylocity? so to independent are customer an Paylocity you Or back start again, rebuild your Airbase is opportunity plan even into keep to form? we of go cross-sell your the before to group about when Going as cross-sell to base this? Airbase, this my should you the same that or Basically, to platform Paylocity product now in run on question, planning thinking

Steven Beauchamp

Yes.

some Having over where already to we're so still integrate our experience time take very that dollars, customers be adding all some of going over stepping have to spend capabilities. payroll delivering the integration unified activity think from as we're a well from I That will benefit back a will time. our time. the holistic that, approvals long-term that will those be exists So and management goal platforms perspective, we said all as can and certainly that payroll

sell to continue new will we so And customers.

to will grow way base back our time. will sell over customer in such a We that

fiscal, I would of imagine go we fiscal the fiscal say, I with would integration. we into gain start throughout and momentum throughout as so next back next next half the And to product some

benefit It grow that This will And multiyear but cross-sell. really but Airbase is that be the take seeing bigger that's to continue as even from in point, truly really about at if prospects existing to customers. is look more opportunity It will platform, -- a without as the acquisition. able that larger we're perspective and -- is well is we'll XX happy history, bit from XX we're that But stand-alone integrated -- our little deliver you still XX from opportunity the all within bigger me XX months. surprise months. in receptivity a to our good revenue to be what to a the effort us the if wouldn't to going both your I'm

off start. So a really to good

Sitikantha Panigrahi

Ryan, to follow-up a your then, And great. guidance. That's

that You we your it think look first implies it Or XX% guidance, conservatism pretty I QX recurring is about? And revenue Is if probably there at that here? be had should a below. will or half. anything QX your strong

Ryan Glenn

think Yes, ways. a probably few different characterize Siti, I'd I it,

If you we step back and this think about up guide for initial set year. how fiscal the

And year. we were I to beat we're cadence. to it viewed and beat we be an the felt we we'd clear be able raise. execution wanted halfway that standpoint, to we to a like the think And think I as and if spot through from return we really strong across raise and a operational sales in had team

like is we earnings heard We've both than today raised see have we'd spot by you've beat to again. and have that that to come call, potentially our be think view the we feel in we continue significantly, strong here to relative We raised raised team quarters. guidance while from I and sales raise philosophy, in pretty our within momentum, the if quarters both performance, a we May more us

majority handful in client that we over would really driven. that's think I was vast pull is of saw off of the versus it, of forward QX of relative the QX to maybe a sales performance QX starts little I call see we one did to would the out while earlier. thing We driven revenue And typically recurring some million call dollars expected QX. of bit see that came have in a in

of existing a both So and we get months to those upsells being to the couple able of earlier. clients in new have some

clients positive, get perspective Net the smooth all is I earlier, both it's our of the revenue. us, the product the well implementation for think, process as hands from clients and as in recurring that

year. forward the feel be think quarter to when the quarter, of again, and QX. pull we we beat But see between raise balance and be guide we we able well, that like perform should the both the over you a did QX if So slight about and fourth third

Operator

One will Lenschow our Barclays. And that moment of for Raimo the next line question. with come from

Raimo Lenschow

quick questions. Two well. as me from Congrats

if you where market? year you can up one market? there talk like there? -- almost about index before change, you that's hiring, bit post-election, going a a well, little What that the the in year was at of every are especially Obviously, labor And improvement new follow-on. Any week. small on issues last seeing First, it remember I had any actually, seen business we you cetera. kind look had et Have

Ryan Glenn

Yes.

or macro, probably from I think we've fiscal touch employees positive. Within did first you to the not seen really had broadly year. across know, there's net-net modest but a stable board. that we of particularly of in assume a material, guidance. the platform, a upside in think And the say prudence Not I'd and into I conservatism We speaking, increase. macro and standpoint as that's overall half the the any probably

guide back of the continue approach. to we prudent relative year, to think in I a take the half the

been So to a I'd revenue But would there, see to provide overall, pretty different little half call bit it's materially the the stable, of the of year. expectations. in extent modest you particularly upside that out nothing potentially some back as versus upside

Raimo Lenschow

Yes.

the about bit a then ex gross about Okay. you bit And we little should there talk how and a improvement you think little Can can about going that a talk strong really obviously, QX, margins. float. saw forward? drivers

Ryan Glenn

us, time, operational sure QX been making for balance first fiscal think that half and we're sure continuing But we've that because with expanded spend, across certainly team same to at year, mean efficiencies year well as the strong but we are it's I driving the quarter. we're to sure service I automation. to this we're margins absolutely. of investments make we levels. our the industry-leading make driving working really hard And was pleased I Yes, gross had think a last prioritizing

to to that same from some technology sacrifice able while be drive that the a where our at we've I really of and we take and not healthy able scale across having the time, to on retention to pretty feel and been advantage leverage implementation standpoint. balance able investing to we're service size, our think are process side. the fact people, good margin But we're about where we

Operator

will one for the question. And with line that TD moment next from Cowen. come our And of Jared Levine

Jared Levine

of discuss AI thoughts to your you future? on the interest in monetize and client functionality level in the your Can ability Gen

Steven Beauchamp

Yes, sure.

our using. were the chatbot are we remarks, launch in mentioned we customers our of the As happy with internal that pretty prepared

probably really ability the create So better gives a to experience overall.

we're be with they us e-mail in some so seeing built quick And time. it or but when really them there them advice for want We nice increases. maybe answers interact still gives pretty to us them call and they and them, over

so that's been really And strong.

a use like to that job some all got other of and your employees things and got descriptions. of number rewards cases in generative We've things writing announcements or recognition use capability, performance. We've

the And really so customers. approach capabilities better even processes overall really is our our for to make AI everyday embed to

So sometimes that means faster.

Sometimes that higher means quality.

their be just much them jobs get to done. it's means for able easier to it Sometimes

embedded that our But keep great out a we do We product. experience efficiency And and think both client think eye certainly a we longer-term really monetization into we differentiation. a it's number perspective, to opportunity, satisfaction, that's term, to have the service the From of from opportunities. continue bigger we'll differentiation enhance near that. for modules and

Jared Levine

January the some of to levels? how year-on-year that can of for performance, that color retention relative you Great. retention, terms And to your significance and historical year compared provide then the just in given and on

Toby Williams

Yes. Jared, I know is -- you Toby. this as mean,

As the all earlier I And success the service our of an that going a you in know, to implementation, both through would implementation teams handle the of our successfully serving both December efforts a from similar and really clients in standpoint for from and our I proud time selling December and With in the really service made say, standpoint. going our important into volumes season, us. the this then and of through January is really year about remarks teams, and January.

all we'll how our the teams and the today they of time I really happy comes out of beginning So serve busiest obviously, here year. in QX the at of flush that, in together. of put sitting clients think the kind our with effort to proud But really February,

Operator

moment will Securities. and Terry One Tillman next of the line with our that come from for Truist question,

Terrell Tillman

from asked, upmarket maybe they're or on of relegated Running I question. out an mean to quarter. traction Congrats questions Super me the picks Bowl

topic on doesn't latter, I'll So the go picks. for so a it sensitive get into

any and upmarket just was rate buy of maybe what getting to you Maybe little prepared CFO the to on think their of it share mid-market relates payroll about and products evolution I are could these seeing bit other on a attach versus remarks. you in core terms propensity signals more you the of beyond smaller As the traction, products that are or smaller Office early more customers? some in

Steven Beauchamp

Yes.

the end that much credit continued first execution the on better So bring in part increases of of rates. as seeing the increases customers describe attach question, them our to would rates in probably I think would I the gradual of our on upper we And in part. we of as some attach definitely I are market.

number that ago, there do We could I training, we sales like roles called support the year felt was of that staffing, out different organization. a a that things

those of on guidance all executed raise. things, selling and we through think saw benefit that saw well I think the that you I we've the season, and with

We've probably continue that's the attach continue product perform to think bigger increase upmarket gradually to and element. I rates. seen well

things second liked question, the think was of the overlap. the Airbase I your customer about part of we one really

enterprise customer XX,XXX employees in So had but similar the employees, our More average size average very than average sized customer their was that wasn't are XXX to space. the customers. who sized they much

fit. a it's nice think market product we So

enhance strategy start of it you'll of slightly continue therefore, and the And that from appeal like expand us customer product, maybe market, the larger we have to that that the capabilities, just customers see using will getting enhance taking as feedback to voice HCM, to clients And over time. to in you having capabilities. target continually we

and of receptivity think I bulk the early our in see of you'll best so And where the bulk the of have the core our revenue. market, on we our part customers

execute to that, be will able the upmarket, we us opportunity it to take certainly do but So time exists. that strategy and that's think certainly

Operator

Citi. our for the question. moment line next Enders that will come Steve One of with And from

Steven Enders

or cycles helpful of you're guess, to maybe guess more, some that I strong a how stabilizing maybe macro sales the around just momentum of commentary maybe bit things? to number funnel the that seeing start, seeing or guess detail potentially think around would be in of just a I on I what little seeing, [indiscernible] is based those you're top kind bit. either I of sales to get in improving manifested and

Toby Williams

I And into quarters see first well. X think fiscal the first all the materialize about think year, we any And after Toby. came more that -- and into significant we all macro stabilize out our saw X those it that year I guess as overhang -- I we software say a characterize of QX that's fiscal in it's you mean I QX. as for Steve, we I to the fiscal year this some we after any would our throughout coming call started movement in that QX. of to I enterprise things. quarters the in perspective industry from setup would saw wouldn't across what that's last in talk how I

and that a was during demand I level that teams our the earlier about hadn't think we of seen And momentum about a quarter. environment to in that stability saw prior in value most just the I think that in and put year. the I prospects our into of talked we their position And in really And continued that good the the talk It to go-to-market just sales prop. proud of execution really really QX.

Steven Enders

perspective great to for quarters? some that's that just in versus that should else some of earlier XQ mind here then the season. maybe But going the How dynamics. I seasonality of maybe about or the some filing of thinking XQ. on hitting starts anything impacts should be calling from between I keep through we out No, Perfect. kind in And Okay. we XQ appreciate those of guess hear.

Ryan Glenn

Yes. Yes, it's a good question.

with recurring has out relative consistent Maybe client filings one is less thing grows expectations. tracked think form I growth typically touch a more platform I'd the consistent than or and call that the to growth. revenue largely grows that with employee

probably the quarter. headwind raise a it's significantly. revenue coming the So But with expectations. third look I into pretty of in touch year we're a would versus core form filings able think one that be recurring when fiscal Obviously, that's the at consistent you to

And the our think then Airbase from I'd be as mention just other I contribution the business. the thing doesn't have same would seasonal impact

standpoint Outside because within QX So call Paylocity you you of material. year-over-year versus Airbase growth seasonal the as impact out see business have of that, there's really year-over-year, QX would from in I'd growth bump core bit QX have a a or to a less does. that little that don't same nothing

Operator

our next the for line KeyBanc. come that And moment with One of question. will Jason Celino from

Jason Celino

a pull paper, don't of Just XX% then we that acceleration XQ saw Or Airbase of QX? would it but bit more you little accelerated the looks out have growth in revenues couple skis get we there? QX on like strip if but the quick did little bit ones. here, I a out recurring of any see to really of you similar want been my forward, strip to ahead too just

Ryan Glenn

No, a fair that's I characterization. think

would think I the be. when QX you items, X to it on spot for almost what very think be revenue or I control recurring would close those growth

Jason Celino

understand be why Okay. it And possibly? to then just to QX QX, was I'm earlier. those you said related. the of start clients forward pull would from it election-related trying Was something

Ryan Glenn

election related all. not No, at

We're that $XXX versus touch characterize it scenario this, versus you've dollars those million tied particularly QX strong anything talked momentum. this the in a of to talking we're start be really the into first election. And and of I But would year slotted get fiscal election clients a would momentum type material And extent period. to right, the be starts think last earlier think the to it able a bookings quarter. got when we've organization about sales really really And related. not pull year, handful on about anything those of again, impact. to of half the from earlier, you them million of about

Operator

our of the line with for Wolfe come moment One next will Zukin question. from Alex Research. And that

Aleksandr Zukin

asked, maybe but been might lot A levels. workforce of on have just

out holidays from some weather. your think peers called I and of impacts

Just what there And you a how out rest seeing of you're what saw quick and I've -- curious the you're follow-up. year? about kind out seeing of and there got for then the thinking what that you're

Ryan Glenn

we to Yes, holidays is Nothing that would this Alex, that. call out Ryan. or weather impact material to relative that have would

approach fiscal pretty think levels, year. We've I earlier, had than mentioned balance in to of workforce expectations the I second touch prudent this quarter. as a better the a probably

within particularly positive, level workforce results. to to continues of year prudence out a the as have fiscal meaningful So it net-net of a half think levels. guidance around And the wouldn't back I call

Aleksandr Zukin

seen any side, just of Perfect. to guys do win often? hear private or about And call Any see kind to just we well-capitalized, pressure call it, you competitive rates? then you down more maybe in continue on some in those competitors, specifically market. kind of the Any -- anything change Have ARPC out general?

Toby Williams

deal. most don't the mean, materially deepest to I any we've of today, provide generally modern clients platform call to think I seen we I the continues it's to think But always some I want the Toby. solution would that in been given comments, that Steve's the doubt, been it's any competitive has a strategy. I think And view no that And to really the be and is think anything this to with and going well mix positioned do set. shift our out industry don't provide the really certainly, material mean, has And Alex think that and back able think our would I space. commentary broadest competitors there's And we're competitive of prospects I in earlier and today. to there. I we in be out. remains we

Aleksandr Zukin

seems it working. guys, like it's Well,

Operator

from our Jake line Blair. one next Roberge William That of come question. And the with for will moment

Jacob Roberge

Congrats on the results.

does more Just follow to for at as Office of of CFO, Airbase, sounds given looking add reps on know there? the the up just days the go-to-market back the change like into all early seller profile year, the of you're the I in front. you're season. more wanted selling looking but it's It to the half you move with strong

Steven Beauchamp

the go-to-market Airbase I motion evolve think for the model. we'll

So I don't want you to the out. that that impression we figured give have all

However, customer back we in base of of products. lot experience terms do for have selling of to a variety a

something to to be And experience so we're going able leverage similar. that to do

less up inside front-end more team seller putting So and burden that to of of model. allows more ends knowledge on have that us an type and the of specialized

that is to us to with. HCM we experience start likely motion when level experience the of So they being leverage than changing therefore, are likely to able continue hire able that the certainly that prospects, interest reps hiring able some allows over of to productivity our And them while driving model to the in to CFO Office profile. more the time, be generate help

Jacob Roberge

sold new Okay. That's a I productivity being the hear it's with now today. helpful. not And gains assistant. that the then SKU But great to shifting AI know as separate we're be monetization an unlock that the that also add AI for AI looking more into platform? season, to kind potentially of to the your you're is agentic on front? And could something

Steven Beauchamp

Yes.

the is lot interesting about there our of thing us There's is business So what a clients' lot for approvals. use a they and workflows. of

manager, -- based off start you the with to they an have routed rules, get to approved. be things go of a employee, organization lot across certain a they they If

by steps, of there able able do and/or shortening experience we AI the of so historical leveraging to that cases skip our really to to use automating have the these And are data some of are the provide that some experiences on the opportunities provide be customers. work insights, really to be maybe behalf

in the we're think I early innings that. of

is or pure the time. printing us better, think we that more Whether right definitely opportunity over it's allows we investment. that software monetization, power translated like gets feel some of into so area modern And just an differentiation, that

Jacob Roberge

the again solid Sounds on Congrats great. results.

Operator

will for moment that Piper Sandler. from the Arvind question. with our Ramnani One next And come line of

Arvind Ramnani

you've of and certainly up the started and to of like the where more is, of of charge terms I like made your GenAI talking show win sort The rates improved showing ability over of the kind or up have has You've financials? kind is quarters. some some benefits in to Like been basically few about investments GenAI of it of in in question last of margins? the better folks terms terms or

at thing kind all? the these some of from DeepSeek does week, Or you of then kind it to of anything? last second is And announcements made does change matter with that

Steven Beauchamp

Yes.

anything create learning models of So in on of it's to it unique use cases. generative being algorithms, leveraging changes whether AI I are terms other don't agentic bullish think whether we how experiences, able it's types or machine

opportunities we're more work. oh, units. all all happen monetize think and talk going I that think it's I leverage a we that's increase clearly able are but way be to is, the really may continue going so add to is over the That drive experience and have us. for But over the those AI we think margins sudden, that client can easy opportunity a to grow to time better to bigger I I to recurring create to continue of to we differentiation And revenue something to time, about don't answer necessarily it. think

platform that to we throughout driving embedding the really approach being the of experience. if by I think embedded maybe all would to that all driving organization us some modern really that's And of And be the AI on is focused the Those we be business, helps we're taking versus do being across driving monetize. most in in productivity, the efficiency, the module try client that, so industry AI has -- singularly that the vision AI organization. parts and deliver

Arvind Ramnani

helpful. that's also of had And level Yes, Okay. broader a question. I

but players elevated You and of had of this step rates, have kind in rates growth cloud few years kind of -- the kind also growth back. Paylocity particularly a in kind others last then taken the obviously, have industry, of the

legacy I'm back the to kind XX% to players And for peers or do rates your growth And of because of either really getting more or to figure of the industry? for competitive it market? in above like I'm trying some is you to is trying of just ever those kind we saturation get get what well out, of

Toby Williams

Yes.

same think modern you've be the to back doubt, time, players consistent think And ups the that highest look there. from certainly, player than been think pre-COVID. bit. the of And to along have are strategy much no perspective, will I got gone industry. you been the little out referenced We I out we're be us doing think downs has would a have continue that cloud they it's strategy bigger the helping most a be the as the the There's our and over At today with platform time COVID. what's been us that I focus helping to It's we in deliverer look growth today. what's win, forward. that

respect And some it's we've the that Airbase made investments into Steve I that go everything of walked just AI to through, it's I doing whether platform out and today, or the those ultimately think think modern to provide released that being we've new the that elements all competition. the there of modules we're able are the most beat the about with and that or talked development whether

Steven Beauchamp

value EBITDA been terms in same I focused the time, Ryan flow, Toby, add, as thing of perspective free on from The is delivering shareholder at would really improved we've mentioned. only and cash a

And as both second so that close line priority, comfortable basis. #X being sure strategy growth we that making our able top delivering it's and on is an bottom improvements, very behind to about we're very that execute but really line ongoing feel and

Arvind Ramnani

progresses. Congrats and looking of as the on these to a more year forward good print

Operator

the at now the to to queue closing I no management call for questions would I'm like remarks. back in time. turn any showing over further this

Toby Williams

your everybody, quarter to night. a joining for a clients. it you call, good our I'd special to of for interest and very employees the to great just all a thank taking in Thanks, you much. Thank have like everyone and making care thank our you of great Paylocity. for and Thanks say

Operator

for all This today's concludes program. you Thank participating.

may disconnect. You now

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