Paylocity Holding (PCTY) 8 Feb 242024 Q2 Earnings call transcript

Hello, and thank you for standing by. Welcome to Paylocity Holdings Corporation Second Quarter 2024 Fiscal Year Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Ryan Glenn. Sir, you may begin.

Good afternoon, and welcome to Paylocity's earnings results call for the second quarter of fiscal '24, which ended on December 31, 2023. Financial Chief Glenn, Ryan Officer. I'm our on And Beauchamp discussing today after in Steve call Toby joining the market Williams, announced be me and will Co-CEOs are we issued the of closed. release press results the Paylocity. Today, this under webcast website available for on Investor Relations tab. will the A call be XX next of days replay the our

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

and Investor internally non-GAAP tab other for available release we undertake forward-looking a We representative that more how Exchange the information, the to Commission. factors Relations contained additional Securities the of with statements. Also, For located on results Exchange and and We of financial is non-GAAP refer certain Securities with refer is believe please the call, update today's paylocity.com any which risk are and the filings business, and course in duty to our at disclosures. there do Commission will during reconciliation we under these measures to detailing measures. press schedule measure currently therein any our website the our not filed

the the York which a measure to schedule, March New I Florida at Raymond Conference in Summit reconcile call February you'd to be to financial Please is with XX. unable needed Orlando me the Stifel like conference attending James unavailable will X. Wolfe forward-looking turn regards Steve. early if be upcoming the on any events. With And Toby measure Investors this attending on reconciliation in our are time know to without that, at is financial Executive the GAAP March over complete we and schedule time in and unreasonable to non-GAAP that I note these will Please let me in the to directly Conference comparable Institutional information, of effort. In because let any us

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

industry revenue solid providing in growth proposition XX% fiscal million QX last Our results continued QX the value of to Recurring continues and marketplace. other of year. the modern in with of our the total of growth or differentiated 'XX, resonate most in over XX% revenue software $XXX.X as was

to We our as modern such Voice. positive and receive continue Recognition Scheduling, Rewards feedback and products suite, Employee Management, including Learning Advanced on product client newer

connect the XXX with custom our industry to one mobile is recognition automotive employees the employee in create Management highlighted for celebrate core module employees client easier values. positively a via to how the that new another a awards custom XXX employees Specifically, sentiment with to better ability app over X,XXX company's has retail making with and over client employees to it by trainings are impacting ways. Similarly, mission Learning vision, the created shareable in

generative business to AI-driven further the new description improve features Community announcement and efficiency, year, help generative in plans, Voice Recognition, optimized the released continue upon Recruiting learning the and Community. Building and clients. schedules Rewards Employee recommendation we AI the upon personalized end user in and workforce AI-driven for build our AI launch Additionally, invest leadership embedded industry to communication calendar last experience job and of within HCM our with these and and

on third was Hall the Paylocity expectations Award to headwind Winter and platform ranking. I and the leader pass to to the in results the with and quarter as the Reports, suite further employment call once Brandon in recently continues Group the the category over be invest to versus quarter challenging this Bronze an HCM GX's Engagement XX marking in named overall few we last in in consecutive Paylocity has our categories macro Grid now pleased provide a environment to levels presented achieved QX like our Excellence we're commitment XXXX parties challenges, as XXst increasingly Technology would on While our the product innovation as months continue and to results, in in awarded again become color leader moderated Technology by fiscal Toby incremental guidance. Despite 'XX product to Employee macro the quarter. Advance to and recognized Best product which

time of Thanks, head early filings state hard implementation we clients Trace, fiscal with the materially Steve. XXXXs Steve's across a and the improve Trace's From profile help record closely their plans, is of count our in employee changes. data execution. for our 'XX. to this our our all busy announced season. Building in capabilities local employees drive acquisition revenue form count December, Trace overall business head to margin year-end perspective, our work which forecast to new head as decision-making budgets during and of our year manage on count dedication to we and valuable contribute very When impact innovation, believe and financial federal year-end enables product organizations of agencies in approve clients for the or faster to on on will and head platform, will around count planning combined busy not want teams processing W-Xs, with and very clients. tax work of a all This clients thank of annual payrolls, comments they I the

longer, success take motion, volumes by the pressured and on has weighed upmarket funnel for we 'XX, are to sales and the and last With longer upmarket date, sales go-to-market and efforts, to we our our of have end target of and market we've which reps top that significant To it we've grow we realized cycles new our size in market. of activity to invested in several respect upper of product in up, the differentiation pipeline sales our team. fiscal taken has new years, remain and over seen our of of our drive has ability and in 'XX January growth the pleased ramp go-to-market confident fiscal the That said, growth. team productivity to fiscal

driving driving the higher year We rest focusing will upmarket. productivity a be execution next this going of into and of year level and go-to-market on

focused been remained business new with have and than XX% channels on our again more QX. consistency delivered our of referral pleased We once the referrals, of which our have in

continues list scale Best America's Ryan business be and would EBITDA grow leverage culture Greatest fiscal leverage for Large provide For on Work and and fiscal drive cash Companies both named the recognized as to call in detail like this Ins we updated to financial Newsweek's Workplaces year. now XXXX. I XXX results review with the recently 'XX for as focus Built to in to in we to continued also of at have XXXX to the and and to Diversity We free flow Chicago externally the strong were pass quarter across guidance. The Paylocity this

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

levels. scaling QX maintaining to focus service our XX.X% operational was profit we gross adjusted continue costs while industry-leading as on for Our

last in We to year-over-year important development we our continue out compared overall go-to-market to basis, XX% non-GAAP G&A to XX.X% On year. when investment and capitalize. versus and basis, serve in of to in the period invest in R&D as marketing both investment the expenses dollar in Paylocity the second an the G&A and what research on second basis, in consistently our what R&D workforce. In the versus activities. the quarter 'XX fiscal our and a revenue the leveraging quarter of second to to by a annual we the On a build non-GAAP XX.X% basis. increased understand last continue our combine we focused expenses needs is regards total in same modern and quarter to costs and X.X% XX.X% of expense on of platform remain year, second were On revenue we quarter sales were of

second EBITDA the million $XXX.X of our and versus QX leverage $X.X Our fiscal by top million guidance for quarter was exceeded end and or of basis points XX.X% margin 'XX. of the adjusted XXX represented

growth. Briefly We our cash covering adjusted continue and revenue pleased and GAAP our ability also through to by be to increased leverage results. EBITDA drive gross strong flow maintaining while adjusted profitability free margin,

to client-held $XXX.X gross profit in funds average the client million we cash Operating was and equivalents $XX.X income, daily was QX, quarter debt interest was the million million. to balance For income no In income and ended and sheet, of balance regard regard billion $XX.X In net outstanding. $X.X and was cash $XXX our with funds million. QX. of

daily XX client workforce Fed quarter in an year resulting an approximately growth we note, decline approximately to yield approximately of an expectations average basis a regard the balance headwind be billion $X.X points. On in in a annual are in funds guidance approximately full platform We basis came XXX to to basis points. on of in impact $X.X point fiscal average the will levels, are below will billion employees our be year. estimating in includes the contemplated our estimating the the rate daily Please XXX basis, and billion May. In QX average the balance year-over-year average $X.X yield with with to of XXX QX incremental

guidance further of macroeconomic remainder recent client of the for 'XX fiscal in Given fiscal year. moderation trends, our through back half workforce levels the the includes updated

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

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

are questions. for now we ready Operator,

question first Scott the Our Berg with line Instructions] [Operator Needham. from of comes

Scott. This on is for Josh

size, Or employees. a their under there? growth noted unit level churn at seeing customers of elevated with starting all of the or your is across customers of seeing Are simply just board regardless public you customers employment low terms any segments? Just in here, what the lowering it customer with really the churn of market? potential One anything of end off you across XX an of levels matter are competitors

Yes.

you that that the the platform getting environment. this current seeing is economic would impact growth see necessarily our in I typically of of not think we're on employees type are customers the

back certainly be to And so case in, then and factored was assumed this continue of year. year terms what in the that for to the we half already of we've going seen the that

So in that's the Ryan the referred I to headwind that script. think

just You rate turn That out-of-business typically always see over at something they because the employees, is higher XX our there's a probably that's more under industry. been case naturally customers in trend losses.

losing than out growing consistent of to in you And were space. probably be growing different an space more were terms And that economy think before. we've that's business nothing in would I market. the that more there, in is so think call just that I levels, segment any employment anything fairly if that seen of under the XX and and nature don't you that

active is on be the of Got terms related going any of platform follow-up. to number a employees year-over-year the forms it. And -- quarter a you there on Are in headwinds seeing March year-over-year were basis? in then revenue that just to

Sure.

we So we -- of quarter, good for are obviously a is I trending form where QX. revenue the have think where idea in

and we've QX as So fiscal 'XX. for taken account into we've that guided for

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

minutes feel much can economic Toby, you close is How on a the of of you up of commentary spend execution? sales versus some rates, reviewing market. couple that the your force,

put we And I the this in there. more go-to-market the months out a we that probably slightly think traction call to we've sure. I script. as been last, the I about the also slower incremental if to getting the there quarter think talked Yes, go case. and that's upmarket saw And that thing I business sales a X I that think cycles, called -- last we I we've And out years, from success in we seen talked we've quarter. Yes, support the it, you across think, why we've And it seeing growth was over the called reason and were Thanks, about same sales we've having perspective. Brad. think invested think XX back

fiscal, with what to to rest of broader productivity cycles I fiscal look focus how about and part -- the part certainly category attributable heard we think think I a macro know as that drive talked of part a will to it's being of the too. into that have the to this, think have And take next sales I execute and of I a gotten at any that sort in we software space But longer. part it hard and is upmarket, opportunity to will upmarket and further to the think think off in an we've macro. terms others the you've think I because take much be be of as I hard I on further this that better. is, it It's -- able precision, in year don't carry helps. too, I of into think the

only activity I that to I a into the We the is all in there. pipeline see see and of through one of that to is But build come think that January thing we amount seeing nice obviously the had upmarket. are would pretty we in that, a things fair Brad, didn't definitely guidance. the factor add

in And that the from market selling, certainly remain us optimistic market going that response the the terms the forward. in of and to clients the success opportunity so in we're prospects we're getting allows about the

just upmarket means you you? what remind for north north XXX us of of that can X,XXX? Is And

it's how we internally, say of would of would that define I XXX Yes. north employees be kind yes.

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

maybe need Or, has types what of help as rep? reps? Maybe piggyback to And Brad's maybe you type that can it first organization? different to you walk sales make I more be you've need sales through different the able for than you the upmarket, think in there does the us one, do reps done of Maybe question difficult us -- made you them on you historically that. a to hire it understand to either guess, about core

question. think good Yes, I a it's

a space, called ramping to that as rest been of force we've So the of the than in number within. to the it, that the fact been couple on mentioned, X just fiscal be get able has you years. X that the tailwind market over years. that lot reps that. Early do call Toby our in for promotions of sales faster a cycle, We've us last of out common from over It's to very in success last,

start to the bringing you certainly from ramp bigger people numbers, more to As outside. you're in

internal. And learning get figuring cycles reiterate this scale secondly, lot is of take the on bit of the would the a for had of of of of first fact It's does volume at higher those it I someone there but we looks deals to have little here. part the think think rich strong. sales understand the to year, so forward. I look continue pretty is cycle, decision-making trying market to And this like So in that do get going we that what ramp in what know certainly success space, been versus last a tailwind us to think, we've start over outside a going and how that's bumpier a little when But out success. couple years, and on here from pipeline to I to you we the half that then, long

guidance, in because just in employment exit the think versus Ryan it think fair maybe rate at was because in the coming how to seen I what of that and trend growth maybe a term? expectations? upmarket differently And think that short way is kind implies, a the than as the much And I about that going rate for the the you've base follow-up as sluggishness Great. for least of the forward, about about

Yes.

I it's I what relative year, combination the for think execution. have think revised think absolutely about of a Steve when Toby sales to fiscal and guidance this you referenced

an And the seen both in the that moderation part half we as of macro think it. of further fact challenges factored in some the the certainly has it been year-to-date equal standpoint, I some as of we've year. that's back part from the So of well

I specifically contributed more the So exit QX, I XX% the see of referenced, to think in before revised that for some sort range how and guide both we QX, the we'll puts of equally guidance. Relative for implies in I back That year as into of fairly of employment those to what levels. you moderation we have obviously, or further half the 'XX. think goes so

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

segment? Toby, the do system? you out and you break the analyze you wondering by employees of assume I out right? out they of internally how because by you level And have they're that I'm by you that it for Did was Steve do Great. and the trend wondering, disclosing detail, do yourself can UKG it it on where I the and geo just so weakness? I'm so mean are guys break private, But deeply it, And started industry? -- break too. that

look specific there of it you not all ways. things, do that geo of a tell spike at I we wasn't would or -- and big specific a variety different in a in a vertical So we those market.

think hourly there of segments your at out in higher all. when saw of segments markets, Geos, call if markets. vertical decline much, vertical little a you higher I those think I'll you wasn't we employee think bit really

we across up an so it's the month to And a when this factor it starts happened of that month after board bit that of across fiscal you generally and you little all year. But was have the just especially when that kind have impact, in, it customers add weakness.

And I you -- tough so a but in this so a X this think is it know, is follow-up, again? row, happens quarters

the in that seen back the last through X quarters half the of continue our into We the factored we've year. guidance trend that would

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

a have I and question follow-up. a

last building couple the on kind of Just of questions.

repeat I think go on second changes? And little it's or that could thinking I execution you of Or I it's upmarket do easier can leadership also is, over-indexed way done, to with quarters of a there forget than share said bit couple and just stuff. a left, guys if you how some lots a the maybe all less more here, activity? that Can are it if is ask stuff macro -- whether about know then XXX I can be of just market? and you on side, under ahead you smaller market is is, there the you that [indiscernible]. you're employers any execution a employees. Is have articulating what Because the question, maybe pivot might all there bit org but

So don't changes. say I would need I think any is think what I we structural major

I feel team our from got of us, internal look receptivity. a and pretty When metrics, pipeline what product execute to in at sits think we've front we great look we've big of of all confident got terms in in the the we perspective at we market, ability place. that

pretty And good about so we feel that.

your X pretty years. or grown the last second say. is have hindsight's upmarket. XX/XX Maybe to been That's X a fiscal question, us great to over for fast tailwind hard in We

we to productive, of on We've fiscal been of focus year, it actually to front received Did terms to in strong. us. on got yes. well the will group and really, is The in successful. road? product Maybe continue like this in execution have a that we've that So But really people productive say what's marketplace. feel pipeline hard is in the bumps being of some be early got and great create really the wasn't in

then is follow-up Got in thing closing, how into curious, point these just off it. play kind you in next actually of of to mean, just get have of some larger stay slowdown Or But, trying play pipeline. did though with real new just the the just for to out are deals larger of sales just that do the these couple could a you. just or I the them because because pipeline. next deals these of Steve, and note out kind potentially I'm understand year? some a cut newer it you could of at kind quick this folks these one they is business some in cycle quarters? deals I'm if

maybe don't you recognition. have So pattern

Sure.

it's question. No, fair a

a last last mentioned with for reps I think earlier, I earnings more really we've over And hires from we've years in up X more where outside fiscal been space the X of of we've significantly. ramped been industry. kind more while, the the expanding as years in this but more significantly probably the of

learn. So we to do continue

space I elongated talk about think you in see many cycles. sales people this

little macro So which to That's to get our I that the just element certainly think hear longer we feedback is there's from reps, bit a a decisions. that. taking the

both of pretty and all We pipeline at through. see as late-stage look well way we pipeline, top strong the as funnel activity

opportunity to a front So half deals and through confidence that that those than the got back on upmarket. did have we've an able the we the gives on half to year some push better half of be back of us

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

me. Two quick ones for

does change least sales and year you're thinking cycles hiring, of ramping, in the sales and given how 'XX that we're at seeing 'XX? your fiscal year the productivity So for terms about what fiscal on plan

Yes.

per how say think segment. more even. question we of the we And So last this couple would -- it's got I terms think adding I last in we about of think quarter times much

adding our we're market of marketplace. core relative So upper in more end not to the the

already kind And made so that of shift. we've

That's absolute I always new specific thought productivity reps. to first. able to there process. we're focused number have we we our be there, an number opportunity think to there's to get ARR on if And opportunity an of us an press a to be versus kind able go -- for always on of

now. into pretty got more we kind have that But feel year. good staffing we as I that level good we the go next that fiscal make decision say fiscal year. next give and We feel the about of right color to initiatives until productivity, we've won't would we we'll drive you into about So the go we

Understood. if in how rate implications interest missed but I'm think help And Ryan, updated the to this, any sorry I on about guidance?

Sure.

and remarks, I assumptions. prepared the and you in went yield balance gave daily through So average

we Fed in -- a obviously XX did contemplated I The basis cut year, funds point bake fourth that fiscal the impact the in May. think middle very of in quarter. the of

muted about to million impact, probably So but that's or so impact and in factored $X QX, it's the guidance.

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

to Guys, a with of that of way employment just want to of follow some narrowing same but up. in others, for seeing. different it Thanks the them as line kind questioning some down kind The to year-over-year. the couple quarters, slightly trends of you're basis maybe flat regards employees decline about a on now? hourly of we trends you year-over-year being Are employment the last were clients. seeing talking actually The of the

seeing on up half in first year, the They're sequential decline year-over-year. them the softness touch a seeing actually still we're not of a certainly yet but We're basis.

quarter So when flatness. we've what what in we last some are quarter saw October that seeing we called we think of in out through seen December, that first sequential the and and about

year on still But, they fiscal I half. this the back they think, basis. half in turn will of up first certainly if are in negative trend a year-over-year So the the continues,

you're that's And what expecting?

months several is down. factored the guidance, into based yes, seen of have sequential That trend now the we we've fact what on that

Obviously, that aside then challenges. them as when experienced well folks And sales would is imply And quite to hey, talk switching with more of most macro as always performing then words, have that you greater of modern it have words, the there's percentage X, level I'm more any years elongated and your solution? from the the if players maybe a cycles. occurs if was, isn't modernize legacy the sales the it ago there's feedback other compelling regards and X, clients are improved and some other not say, that solutions be? and But of of to to better that. In trending they factors are as Paylocity as is moved urgency wondering, any had, there what X Okay. down, if regards to In with large hearing macro you used to, sales also other to because their have execution? previously solution maybe are some become to employment

Yes.

a that be little many down not of teams It in gate to That's and lot our comes internally top of things process. conversations So our to with I had decision-makers up. processes have more to more line, involved, finish We've heard to reps. stage that. delay they've that of stuff get kind do able that the comes of got across decision-making bit a the more

the It necessarily the more a seen maybe seems it cycle competitive that. different sales environment haven't We on that's -- be caused to elongated just comment driven by prospects.

upsells modules for that in behavior number in the just either modules or Okay. new terms of number Great. want take to And on? change they of terms then are any of in of you seeing logos,

just seen the that, Mark, we've of for just add of last to I yet steady so And we've still, pleased seen all almost we've happy, the been in of rates us stage early but the some or continue, think amount that. no, overall probably think in products, far. fairly significant been that we've on fairly I been terms with differentiation newer added we've but what think change I logos. are of rates which product course the with so. over And with don't think a any not I helped we've to I think in mean, in we've seen year take I of the attach new that's

TD Jared of comes Cowen. the Our Levine from next question with line

underlying size were changes uncontrollable this any consistent, year-on-year, How retention revenue did there segment though churn? January's versus on or compared it's controllable even employer based

Yes.

not we've I So was we the year end historically, did in the of retention the a definitely moving COVID. to call seen certainly much. after to seem think after that be more perspective. out I update any back levels, really specific everybody fairly out give -- of right see And call script performance didn't kind kind of high we an from from something We quite don't a but It I there's called think record seeing pre-COVID at out think People consistent we return the was retention of retention that there. as perspective.

such Got for to you term, you embedded change over to payroll to it. through offerings And software at how the payroll all? access price a if anticipate threat payroll would then medium Does represent solutions the the power? pricing increasing charge as

to slightly really to a market that competitively place I might we've in think all, very as activity see probably larger play That's there. in you that client more market the market, at the a seen don't particularly in that we of get size we you the not small And start in micro serve. much.

-- a don't that no, necessarily we So that factor. as see

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

questions. had X I

You've stayed protect the a EBITDA year little guidance then a the side profitability same. action revenue little have changed bit, you the your the on are to bit Can talk taking And follow-up. one about full but there you I there?

Sure.

driven fiscal so far good I think year. this so about we've feel I profitability -- where certainly

strip impact adjusted So points interest over points in basis XXX XXX of quarter, out second income. basis the EBITDA leverage on of if you

making be those perspective, an and we're prioritizing of across to number of scalability the continue a spend reducing So really we the sure processes with have business that efficiency programs and from and output pleased programs. manual

fact, a margin year. strong to maintain to us as revenue And I allowed take in able challenging in a profitability, has think you standpoint year fiscal for be more maybe that the really from up

happy. really So

both profitability just the in I adjusted the as free we've and flow. that of business, and cash think scalability well in EBITDA as demonstrates it seen

the of position do in was mentioned in the prepared Like your cycles on understanding? in play that how AI the Okay. does remarks, it maturity already? And on side. kind Is play clients and -- the leading Perfect. how a you does how solution? of out? that And And in already script of Where that follow-up the out see the sales are terms you differentiator?

Yes, it's question. a good

AI the are much still trying early in And provide in out HCM themselves we're customers platform, think how, I figure think also innings. an to can them benefit. very I

seeing and assistance definitely capabilities And having use get clients many so in descriptions AI tying of writing And the and to LLMs been often with community. we've job it. we're the first market you and into

that option You we've based data to launched. recommendations a ideas schedule the create enhance your that in terms of of that value off adding long a for got easier list have personalization we across the customer can across And about platform, better historical platform. much set. Think like AI we've recommendations

a So opportunity of client that monetization separate by do the answers. questions Clients approach and call of ton. any There's and enhance different a experience. continues be also to interact to SKU. our and think we them I with there's really lot e-mail big type a versus

time. in so to an continue over as that area that's much as we well invest our personalized customers more And to provide better, to responses being able

we've think categories. so And opportunities both in got I

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

QX, for you same QX X% If QX But look revenue only about ask I last like year, the guiding grew a to versus X.X%. was are year. on like, want I seasonality guidance. last like which recurring at your sequentially other your XX%, as and way it it is basis,

So for contribution of revenue I understand kind with guidance see you basically, QX? that or deals any any -- want pushed seeing maybe Or level did this you of your go to to are QX? confidence from Trace? kind got Or live

any Yes, far nothing as out in call that as movements material onetime I'd or deals.

to went X, into We we revenue as obviously, we and his taken challenges saw that Toby, into January well, got think, account starts being we've relative form And upmarket. starts a in guided all remarks to good as I we're able some would account. into prepared January QX. sense that the that have on through February of so take of

onetime that about good months movements nothing would within would or or have the that. far nature guidance, out but in feel as quarters So impacted as specific I call that

what Trace, expect And revenue the of from kind contribution you acquisition? Trace

to Immaterial so has year, no the impact on it guidance.

line comes with the next from Steve Our Citi. question Enders of

and and of Maybe to on start, on dynamics overall following maybe up still for just of growth recurring X kind XQ, line. or seasonality another X the points XQ kind into down assumes

So versus between just delta kind for detail you more X give XQ assumptions maybe can what's little maybe different the in XQ of in on growth the a quarters? the the and bit rates

Sure.

we've obviously Q&A in call the the would starts, think I'd out remarks in here. and factors probably January I referenced X prepared the be which

So that some relative probably headwinds it upmarket. had to in

the in would impact. a the certainly factor other be quarter the macro as So the third into that factor but fourth. And

weakness did in assumed half. moderation X and we So really of now further we've referenced, back see quarters sequentially, we the

QX. you in. the year-to-date as as moderation impact an seen as we that would has have that fourth that additional But factored in So quarter, get to the the well we've all impact

that items think growth in really would it's revenue referencing. slowdown sequential X for that those you're account So I

maybe here? any guide the right. you then now assumed kind that of the baked on have like of of how level you're conservatism about into helpful. All being Okay. in just the change That's And thinking that's kind conservatism

change Yes. there's a any don't in I philosophy. guidance think

matter do then account see a it's a and you it. think trend, long for do how have you to of I

We've and now we quarters. of see any So last you kind flat stayed I sequential seen that continued think X quarter, employment that for wouldn't decline. assumed

be that So we trend take able think it's prudent to for us to into consideration.

a You into potentially obviously and he just included cut, that's as also Ryan took rate said, -- well. account

so And year, back only in X you're talking so half left. quarters of we're the also the

don't different the and approach, things least seen so think take we we should account seem I reasonably So far at in have we all felt anything into possible at into the guidance. that least there's that like but

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

again kind So maybe a questioning. It's of line of multiparter. similar

of million the the taken $XX for out if the it's being about kind about revenue line. guide year, amount just, first think on of The I this I think recurring

QX, year X? something of there [ target? is talking rate be that long-term we of like, XX% then given kind we're to few and the long-term are is might XX%, as of temporal less back -- guide later half kind kind the XX% maybe employment a a XX% dimensionalize get And removed in of or from half Or quarter that gap quarters Just a more of of that's and that either or to exit starts. levels starts of we until this ] air

hit the can I Sure. first question, Alex.

back I on longer headwinds, handle roughly guidance, the second the impact Relative the year. guidance. think roughly wouldn't certainly other. weighed your the impact both to from macro that. term, revised the half same to question I I'll and in one on sales the of let They or weigh Steve particularly the the

some model think time, over products rich that focused year. the something a any We is I into Yes, it's We gone levers pull made extended of business, that going see we've as period on make. can adoption, great to turn to huge pipeline TAM, made changes and that getting fiscal growth and way to We'll there's we into still couple the think consider want pretty the we we as a of and -- be the about We're year priority. this lot full. is of if an of we changes a go long-term still think there's that grow able updates since public. we've

So and no at continued time, priority And time expansion. success this of growth focus point same first at the changes past. in in for kind formula our same the margin on and that's been

it's kind kind pressure, a not longer everything as competitive maybe both not incremental is kind the on I it. also execution side, that about macro, sales for of confidence And current the go-to-market of Got maybe people? side, time saturation, there's the that think from gives around that referenced follow-up. of really you of well market you've things fix If a what quick just kind it those ramp to the temporal environment increased sales as increased

there. several are there think I factors Yes,

the pipeline, in think service And sales ratios So your deal, they here number looking look time by at folks what I the a I at the have close and around like. that you then and we get force, that it's that one, number with looking in when And this have the especially we're it's product detail conversations offering. the long data we're that been we're the confidence think, level two, those have into. looking at that

And sales so very but and necessarily data I in building a cycles, that that's looking different answer elongated weren't the at. we the to if pipeline these wasn't probably question, have seeing we're that would evident

And resonating end space, the in that have that success. And provides and we're optimism. current lastly, with certainly more upper then conversations we I how us of the it's we're think is the seeing product so the and customers, having

when upmarket. put execute And X the a you opportunity half success things those of have back a And on we we so think the several an includes we the have I TAM we've had perspective, better year. from the in big opportunity think that last to together, years over it's and

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

think a and it? second the horse beat but a the about to moderation sorry there of levels here, baking dead you're the magnitude is the in employment to on way in half, the Really linearity

Yes.

impact it of question earlier. to that we the think magnitude And speaking, about the the think is and half I the way macro, roughly sales hit of revised think to some is of guidance. relative would I be Half that headwinds.

assumed similar seen It of over we level the a in of consistent X the we wasn't the course continued I layered had year. happens further assume back moderation over that concentration. way month very that the the QX. is, into particular we've balance quarter happens or was year each QX and that There the month of we moderation but and a think that half assume the over small months, in decline that of last decline

Trace And can All head maybe that portfolio? broader right. the talk near-term then in kind the fit budgeting the complements and of And some you how with on priority? workforce how seeing about acquisition, environment on you're then levels, fits in, count pressure in or forecasting to of terms does where

Yes.

the they're cost well trying to and business. certainly might and So their think customers, talk be growth that a to our bit as tighter been we certainly see economy they to their as when able I it's in little manage

replace our all already. people new you right it of position? are away? in those to when we to then the And platform improve All parts them become important have. going positions? somebody requisitions of more for And the do they replace the are so about tighter about in going costs data different largest is, organization, us you the economy that replace to Or conversation. And How the our them? of have concepts customers you one even going in a a Are the leaves are tell that challenges people then you one

can you attractive really just rules driving terms done on capabilities today. both those as layer that layer actions customers workflows terms that already you data getting of for And in purely in becomes well to activity our as approvals so happen, the for in when efficiency and efficiency exists of can routing cost and forecasting where

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

Great.

all appreciate market. upper slowdown end I in clarity So the the your on of the

you employees, explicit, of on which the look has in to folks be I a is velocity your average the of the seen new XXX that sales if you at close have bookings cycles? change have you there platform, think size XXX think to just I the or core customer or

Yes.

there. about the I the really called think that Toby in still end That's underpenetrated. that broker market. of big That's obviously called out feel the relatively strong. market, Still had a not momentum referrals out. of the a up something core that driver fact big are we we've ends that good have kind being We we continued

impact feeling in I there. of in we've people we're think lot the kind category, make relatively a some new grown we're that of point upmarket, in macro quickly that is, trying to

You saw from what worth perspective, macro really calling factor overall and the that's we bigger on the add sales an out that into side.

forward? you're with how then north on viewing strategy. your capital of this about you looks in take have ] ways on million kind to Okay. versus Great. maybe end of Most $XXX refresh It thinking of you're capital [ opportunities like maybe fiscal tuck-in sheet. just going And nature. get a is other deploy are allocation your year And the balance in acquisitions organic going been more inorganic? to How there

consistent that, probably on answer a I'd give Yes. Dan. fairly you

will fiscal we that or quarter on with the the certainly [ so million back go ] through of sheet, and as ended $XXX think grow half we year. balance I the

we've as with been growing acquisitions the and strategy able being done use You're to pleased that right, and the portfolio. I I we've mean think drivers for those

this that. that massive go don't think I back continue as capital mentality to we other half us. continues the And the in through interest at fiscal be year, look through to we get I no -- think change of ways as of I to we'll around to our But allocate year.

a on going Trace. then separate quick to a be another to Okay. stand-alone is that going embedded just into that Or SKU? And be Is product? one

Yes.

But then user of of platform We what have ourselves our to into terms or such time product use a prior the announcements that and I any you build our in the it really try to is. would really acquisitions tell take from that off into build we we is platform. our perspective, big we strategy would what it based you it built we haven't to whether acquired idea it team no acquired that made

right now, work amount of the that doing fair think we're value and we're out. definitely So I that there's figuring a in product.

a efficient then ultimately option. So save people if becomes them time that you both more can and dollars, and drive process certainly save customers' monetizable

that sitting the now. right would lean here be certainly So

from of BTIG. Matthew the comes question next VanVliet Our line with

Curious on of maybe deviate you're from some looks the network business like? Any seeing performed. trends that what how that there direct the referral

the time there, and a selling we and it mean scripts, production in come And advisers I course out I and deals of just successful quick change referral consistent new from major for channels, this over that's called year-to-date. and I financial been year also the channel benefits I terms like. that's plus in the primarily XX% fairly but throughout of think brokers to the the referral up consistent end in fiscal and -- fairly a no has continuing think really us been mean, year think that out Yes. I those refresher. directly, of the business

strength and for producing be to continue continues a see channel us. So of to lot a there

Great. vendors? And Are they deals you are upmarket you'd that more peg little of a certain cycles a Is some more elongating then as those sales anything there? -- you there? look competitive extent, at do it to evaluating Or from in get get just friction foot with on to door, there. trying any and and ask trying to how analyzing the of products the in creating the sort payroll you're trends go there? Curious maybe then your is additional multiple

don't the have think things been those Yes. of case. any necessarily I

couple the think of to I can a made. Steve go that you back comments

pipeline we've to think see the I continued build.

to continued we've think access. I get

what have more have -- of gates might in think reviewers we've process, purchasing. terms more you I might seen actual have decision-makers, the the you you is, more in

those gaining into I challenges been think access dynamics or deal the much something than so around how challenges And have that. a gets or added product more like

products. we've I rates seen We've remain the we've some like product of consistent think been said with with all the also happy seen. seen think also we've of And market. I of attach rates throughout fairly I areas newer the take that sort earlier,

So I what we've seen far. think that's so

of question next Adam Bergere the America. comes line of Bank from Our with

XX growth some macro your of Just can you the that think obviously that out levers to you to is given so say? mentioned control, months, the you these where in next X are pull of

Yes.

us. there's I lot we a the last years growth think to continue levers that for several for the be opportunity So have been of pulling an

initial new So a with we've had robust rates product there. pretty mentioned, we're introduction take cycle. happy Toby pretty the

future So rolling into an those to be getting new back attaching Trace customers and out product and a opportunity. that selling customers Obviously, in those market will become opportunity. the

we're overall, we're And So to from in significant getting as making and enhancements pretty both upmarket. I market we're good we well we've product. core perspective. And got think, receptivity excited then, what products product the of a as presence that got those our the about

strong. to that. good the able really the executing remains It's really we're platform We're about in us be up really with Broker to to leading well we really channel most and So modern there. to feel industry continue execute.

we're there's So And on make we obviously to really, improvements to opportunity on turnover positives. make in, that those this improvements. call of been a areas low. committed rates lot have have really We focus certainly and our

able and do what to the on. to it, focus got got a to be we're going strong that's we've team pipeline, and So we've

say following a lean focused into in guess, little is more And, this to that Or up, I unchanged? bit you'll fair is upsell?

leaning to upsell. We have in more been gradually

certainly internal selling our at last few any back that's out much the has been on sales and this that really for fact rate so -- go-forward a we've has sales forces. force that of And a customers we'll us, grown called well the It's to done basis. continue to is standout year. years, Over faster that our than do other that the team a

turn and to Ladies back would for gentlemen, to time, call the over management at this remarks. closing like I

in echo one Have all of a thank very the all you their want remarks, very evening, Well, of I prepared interest just from And over your great everyone. busy Toby's much Paylocity. of thanking for employees a efforts sentiments year-end. to for our

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

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