Paylocity Holding Corporation

Hello, and thank you for standing by. Welcome to Paylocity Holding Corporation 4th Quarter 2023 Fiscal Year Results Conference Call. At this time, all participants are in listening mode. After the speaker's presentation, be able to question and answer session. To ask the question during this session, you raise star 1-1 on your telephone. Then you will hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. I would now like to turn the conference over to Ryan Glenn. Sir, you may begin.

Good afternoon, and welcome to Paylocity's earnings results call for the fourth quarter in fiscal year 23, which ended on June 30, 2023. I'm Ryan Glenn, Chief Financial Officer, and joining me on the call today are Steve Beauchamp and Toby Williams, co-CEOs 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 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 their 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, Toby will be attending the Stiefel Tech Executive Summit in Deer Valley on August 29th and the Citi Global Tech Conference in New York on September 7th, and I will be attending the HR Tech Conference in Las Vegas in mid-October. 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 fourth quarter and fiscal 23 earnings call. Our differentiated value proposition of providing the most modern software in the industry continues to resonate in the marketplace and help drive total revenue growth of 34.7% in Q4. For fiscal 23, we reached a key financial milestone for the company, with total revenue crossing the $1 billion threshold and finishing at just under $1.2 billion, or 37.8% growth over fiscal 22. Our solid results were once again driven by both adding new clients and employees and increasing average revenue per client. We ended fiscal 23 with 36,200 clients compared to 33,300 at the end of last fiscal year, an increase of 9%, while total employees on the platform grew by mid-teens, consistent with the historical growth trends, and in part driven by the success we're seeing upmarket as larger clients realize the benefits of our sustained investment in product development and the most modern platform in the industry. Revenue retention also remained strong at greater than 92%. Average recurring revenue per client was over $30,000 in fiscal 23 compared to just over $25,000 in fiscal 22, an increase of 19% as a result of increased employees on the platform, rising product attach rates across our client base, and success with larger clients. We continue to attach more product at the time of sale and have realized increased success selling back into existing clients, as our products focused on the most modern workforce resonate across our entire client base. Our sustained investment in product development allows us to continue to expand our product suite, evidenced by the recent announcement of several new premium offerings and feature enhancements, including advanced scheduling, learning management, and market pay. Advanced scheduling builds upon our existing scheduling capabilities by adding advanced features such as the ability to match scheduling needs with employees based on job function or role, skill set and certifications, as well as swap, claim, manage shifts directly via our mobile device. Similarly, new enhancements to our learning management module allows users to easily create and share new training via community, including a new safety training bundle of 20 courses to help clients ensure on-the-job safety and compliance. Lastly, the most recent addition to our suite of modern workforce solutions, MarketPay, allows our clients to easily explore, track, manage, and compare market pay data across different job families and positions to help make better compensation decisions, evaluate specific roles accurately, and comply with pay and equity job posting requirements in multiple states. Collectively, these three new product offerings, along with continued investment across our product suite, has increased our PEPY to $500. achieving the target we set four years ago. As a result, we are now raising our PEPY target to $600 and are confident in our ability to achieve this goal in the coming years as we continue to develop and deliver market-leading new products. Our commitment to product development continues to be recognized in the market, with Paylocity recently being named an overall leader in 10 HCM product categories in G2's Summer 2023 Grid Reports. Additionally, Paylocity was recognized as TrustRadius' top-rated HR management software platform for 2023, won the 2023 Best Human Capital Technology Solution in the SIAA Business Technology Cody Awards, and achieved the leader ranking in Nelson Hall's 2023 NextGen HCM Technology Neat Report for both the SMB and mid and large market segments. Our strong culture is Industry-leading software and exceptional sales and operational execution would not be possible without the dedication and commitment of our employees. As we close out a very strong fiscal 23, I'd like to thank all of our employees for a fantastic year. I would now like to pass the call to Toby to provide further color on the quarter and fiscal 23.