Paylocity Holding Corp. Q1 FY2025 earnings call

• Started fiscal 2025 with strong financial results, with recurring and other revenue growth of 14.2%.
• Acquired Airbase, a modern finance and spend management software solution, which closed on October 1 and will impact future revenue.
• Launched the Paylocity AI Assistant at the Elevate Client Conference, designed to streamline HR processes and elevate the employee experience.
• Recognized as an overall leader in 10 HCM product categories in G2's Fall 2024 Grid Reports and named to Fortune's Best Workplaces in Technology in 2024.
• Sales team had a solid start to the year, with the referral channel delivering more than 25% of new business in Q1.

Total revenue for the first quarter was $363 million, an increase of 14.3% with recurring and other revenues up 14.2% from the same period last year. Adjusted gross profit was 74% for Q1 versus 72.4% in Q1 of last year, representing 60 basis points of leverage. Recurring and other revenues contributed significantly to the revenue growth, with the majority of the Q1 revenue beat coming from this segment.

• Increased fiscal 2025 revenue guidance based on strong Q1 results, momentum in the sales organization, and the impact of the Airbase acquisition (expected to represent approximately 1% of total revenue in fiscal 2025).
• Updated adjusted EBITDA guidance, considering strong Q1 results and increased organic profitability expectations, though offset by the dilutive impact of Airbase.
• For Q2 2025, recurring and other revenue is expected to be in the range of $337.5 million to $342.5 million, total revenue in the range of $364 million to $369 million, and adjusted EBITDA in the range of $116 million to $120 million.
• For full fiscal year 2025, recurring and other revenue guidance is $1.427 billion to $1.442 billion, total revenue guidance is $1.535 billion to $1.550 billion, and adjusted EBITDA is $530 million to $540 million.

• Forward-looking statements are subject to numerous important factors, risks, and uncertainties that could cause actual results to differ from those implied. These include factors related to market conditions, competitive landscape, and the impact of acquisitions like Airbase. Also, non-GAAP financial measures have limitations in reconciliation to GAAP measures.

Q: Good day, and thank you for standing by. Welcome to Paylocity Holding Corporation's First Quarter 2025 Fiscal Year Results Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] Please be advised, today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ryan Glenn, Chief Financial Officer. Please go ahead.

A: Good afternoon, and welcome to Paylocity's earnings results call for the first quarter of fiscal 2025, which ended on September 30, 2024. I'm Ryan Glenn, Chief Financial Officer. And joining me on the call today are Steve Beauchamp, Executive Chairman; and Toby Williams, President and CEO 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're 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, I will attend the Needham Virtual SaaS one-on-one conference on November 21, the Cowen Virtual Human Capital Management Summit on December 9, and the Barclays Global Technology Conference in San Francisco on December 12. And Toby will attend the Needham Growth Conference in New York on January 14. 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.

Q: Hi everyone. Really nice quarter here. Thanks for taking my question. Toby, Steve, I wanted to start off with Airbase. You've had the asset for about 30 days now. Maybe any initial observations since you've had it? And then how do we think about specifically kind of your go-to-market motion around this product and enabling the sales force? How much of a different type of the sale will this be, and will you also really need a separate sales force to sell Airbase? Or can your existing sales force effectively sell this?

A: Well, I think as you mentioned, Scott, it's been 30 days. And I think so far, we've spent a bunch of time with the team. We're really happy with the team that's kind of come over in the acquisition. We started very early stages integrating things like go-to-market motion, product strategy. So I don't think we have all the answers right now. I think we still feel very confident with the thesis, which is the ability to be able to sell back to our customers spend management solution where we leverage the employee data to really automate many of the workflows, much of the spend activity. And then on the back end of that being able to really leverage the data insights. I think our conversations with their teams and our teams together, we feel really confident that, that will offer a tremendous amount of value. I think if you look at historically how we've approached acquisitions, it typically has taken us somewhere in the 12 months to 18 months to have a fully integrated product to market. We'll do this in stages. This is obviously bigger and stand-alone. And so we won't wait that entire time to start gaining value from it. But we feel like we can leverage some of our internal go-to-market motion as we've sold back to the client base many other products and be able to do the same thing with the Airbase solution.