Paylocity Holding Corporation

Good day, and thank you for standing by. Welcome to the Paylocity second quarter fiscal year 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1 on your telephone. Please be advised that today's conference may be recorded. If you require any further assistance, please press star then 0. I would now like to hand the conference over to your host today, Ryan Glynn, Senior Vice President of Finance. Please go ahead.

Good afternoon, and welcome to Paylocity's earnings results call for the second quarter of fiscal 22, which ended on December 31st, 2021. I'm Ryan Glenn, Senior Vice President of Finance, and joining me on the call today is Steve Beauchamp, CEO of Paylocity, and Toby Williams, CFO of Paylocity. Today, we will be discussing the results announced in our press release issued after the market closed. A webcast replay of this call will be available for the next 45 days on our website under the Investor Relations tab. Before beginning, we must caution you that today's remarks, including statements made during the question and answer session, contain forward-looking statements. These statements are subject to numerous important factors, risks, and uncertainties, which could cause actual results to differ from the results implied by these or other forward-looking statements. Also, these statements are based solely on the present information and are subject to risks and uncertainties that can cause actual results to differ materially from those results projected in the forward-looking statements. For additional information, please refer to our filings with the Securities and Exchange Commission for the risk factors contained therein and other disclosures. We do not undertake any duty to update any forward-looking statements. Also, during the course of today's call, we will refer to certain non-GAAP financial measures. We believe that non-GAAP measures are more representative of how we internally measure the business, and there is a reconciliation schedule detailing these results currently available in our press release which is located on our website at paylocity.com under the Investor Relations tab and filed with the Securities and Exchange Commission. Please note that we are unable to reconcile any forward-looking non-GAAP financial measure to the directly comparable GAAP financial measure because the information which is needed to complete a reconciliation is unavailable at this time without unreasonable effort. In regard to our upcoming conference schedule, Steve will virtually be attending the JMP Securities Technology Conference on March 7th. and I will be in Florida attending the Stiefel Executive Summit on March 7th and the Raymond James Institutional Investor Conference on March 9th. Please let me know if you'd like to schedule time with us at any of these events. With that, let me turn the call over to Steve.

Thank you, Ryan, and thanks to all of you for joining us on our second quarter fiscal 22 earnings call. Our differentiated value proposition of providing the most modern software in the industry coupled with strong sales execution resulted in our second consecutive quarter of 34% revenue growth. Total revenue was $196 million, or 34% growth, over Q2 of last year, beating the top end of our guidance by $6.5 million. Our sales team continued to build momentum across all segments of our target market and delivered record-selling season results, which positioned us very well headed into the back half of the fiscal year. Adjusted EBITDA for the second quarter was $46.6 million, or 23.8% margin, and exceeded the top end of our guidance by $4.6 million. As discussed last quarter, our award-winning and remote-friendly culture is resonating with prospective employees, and we continue to hire successfully across all areas of the business, including sales and marketing, R&D, and operations. From a product perspective, our sustained investment in R&D continues to pay dividends in the marketplace as our value proposition of providing the most modern product suite resonates with clients and prospects. Our products focused on the modern workforce, including premium video, learning management, Surveys, Community, and Modern Workforce Index continue to see increase attach, utilization, and conversion rates. Companies focused on digital transformation find our products particularly compelling, using products like premium video and community as examples. We continue to see utilization increases with monthly premium video creations hitting a record high in the quarter, while we also saw a record number of monthly active users in our community products. Lastly, clients are seeing higher employee engagement as a result of the action-oriented recommendations from our machine learning-powered Modern Workforce Index, which we provide to all of our clients. We are also focused on continuing to drive innovation and differentiation through our integration strategy. In January, we completed the acquisition of CloudSnap, a low-code integration automation platform that enables the development and deployment of API integrations. CloudSnap's technology will enable Paylocity to deliver modern integrations and seamless data sharing between critical systems more efficiently and effectively while helping to unify and automate business processes across HR, finance, benefits, and other systems. Our continued investment in providing best-in-class integration capability supports our strategy of automating the exchange of data for our clients between critical systems. We believe this value proposition will also resonate with our channel partners, as CloudSnap will expand the breadth of solutions our clients can seamlessly integrate with. From a financial perspective, CloudSnap will not materially contribute to our revenue, but will represent a headwind of approximately 10 basis points to adjusted EBITDA in fiscal 22, which we have factored into our updated guidance. Our value proposition of providing the most modern software in the industry is resonating throughout our target market, and increasingly so with prospects who have greater than 1,000 employees. Given the success we're seeing at the higher end of our market and the fact that today we serve a significant number of clients with more than 1,000 employees, we are raising the high end of our target market from 1,000 employees up to 5,000 employees. The second fiscal quarter is also a very busy time of year for our operations team as they work closely with our clients on year-end processing of payrolls, W-2s, 1095s, and annual tax form filings to federal, state, and local agencies. I want to thank all of our employees for their hard work and dedication during this very busy time of year. I would now like to pass the call to Toby to review the financial results in detail and provide updated fiscal 22 guidance.