Ladies and gentlemen, thank you for standing by, and welcome to the Paylocity Holding Corporation Second Quarter 2021 Fiscal Year Results Conference C all. 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 the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Mr. Ryan Glenn, VP of FP&A. Sir, please begin. Welcome to Paylocity's Earnings Results Call for the Second Quarter of Fiscal Year 2021, which ended on December 31st, 2020. I'm Ryan Glenn, Vice President of FP&A and Investor Relations, 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. 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. 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 measures to the directly comparable GAAP financial measures because the information which is needed to complete a reconciliation is unavailable at this time without unreasonable effort. In regard to our upcoming virtual conference schedule, Toby and I will attend the KeyBanc Emerging Technology Conference on February 25th. Steve and Toby will attend the 2021 JMP Securities Technology Conference on March 1st, and Toby and I will attend the Raymond James Institutional Investors Conference on March 2nd. 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 2021 Earnings Call. Our solid results continued in the second quarter of fiscal 2021, with second quarter total revenue $146.3 million, an increase of 10.5% versus the same quarter last fiscal year, and coming in $3.3 million above the midpoint of our guidance despite continued COVID-related headwinds. Recurring and other revenue grew by 13.6%, and we continue to be pleased with our sales performance across our entire market amidst a still challenging macroeconomic environment with the resurgence of COVID cases and as many states ramped up mitigation efforts through Q2. Despite these COVID-related headwinds, we still had strong selling season and are pleased to have started more business this January than last January. As mentioned on our November call, our sales teams have successfully pivoted to a virtual selling environment and continue to realize the benefits of improved website performance and digital lead generation, use of video throughout the sales cycle, as well as increased multimedia connection points with prospects, including podcasts and webinars. The accelerated investments we've made through the pandemic in digital marketing efforts include enhancing our website capabilities, increased focus on search engine optimization, and prospect nurturing campaigns will all continue to serve us well as macroeconomic conditions normalize. Similar to last year, we continue to see unit strength coming from clients with under 50 employees, as well as healthy momentum in the core and upper end of our market, which resulted in year-over-year total client growth of 19.5% through Q2. Channel referrals, primarily from benefit brokers and financial advisors, once again represented more than 25% of new business in Q2, led by increased use of virtual broker connection activities, events, and virtual gatherings that helped us maintain strong channel referral levels. Adjusted EBITDA for the second quarter was $35 million, or 23.9% margin, which exceeded the midpoint of our guidance by $7 million. We are pleased with our ability to be efficient with our operational and G&A costs, while we remain focused on incremental investments in research and development and sales and marketing initiatives in fiscal 2021 to continue our momentum in product and sales and to position us for driving future growth once we return to a more normalized macroeconomic environment. Our commitment to product development, including sustained investment in R&D, continues to be a key differentiator in the marketplace, and we believe we offer the most modern platform in the market of more than one million businesses with between 10 and 1,000 employees in the U.S. We remain committed to providing industry-leading software by both expanding our product suite and adding features and functionality to the existing products. To that end, in November, we announced our acquisition of Samepage, which provides an all-in-one team collaboration solution that includes task management, file sharing, real-time document collaboration, and more. We are now focused on building the Samepage collaboration functionality into the Paylocity suite to support a broader set of HR team collaboration use cases, which reinforces our commitment to delivering the most Modern Workforce Suite of solutions. For example, we see an opportunity to enable greater team productivity on our platform within Community, our social collaboration platform, with functionality that provides for co-editing of documents and task management on projects and initiatives, as well as the ability to communicate through direct messaging and video. We believe these expanded capabilities, together with the recent release of Premium Video, will enable clients and their employees to better collaborate and elevate the remote work experience while also increasing productivity and efficiency among teams. Since its release just last quarter, we've seen many examples of how clients have utilized Premium Video throughout their organization, from a client CEO recording a video to provide insights to their remote employees about a recent company-wide survey to the other clients creating video job descriptions to bolster recruiting efforts. Our clients and their employees are amplifying their voice and their engagement experience with our Premium Video offering. We also remain heavily focused on serving our clients during this challenging time. Our product and operations teams quickly mobilized in December to digest the Consolidated Appropriations Act and its impact on our clients. We added functionality to our software to address these legislative changes in an automated fashion, including the extension of tax credits on leave benefits from the FFCRA, the extension and enhancement of employee retention credits, and updated eligibility requirements related to PPP loans, among other changes. In addition to the changing legislative environment, the second fiscal quarter is also a very busy time of year for our operation teams as they work closely with clients on year-end processing of payroll, W-2s, 1095s, and annual tax form filing for 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. The dedication of our employees was a key driver in Paylocity being ranked number nine on Fortune's list of 100 fastest-growing companies, while we also earned Great Place to Work certifications during the second quarter. I would now like to pass the call to Toby to review the quarter's results in detail and provide updated guidance. Thanks, Steve. Total revenue for Q2 was $146.3 million, an increase of 10.5%, with recurring and other revenues up 13.6% from the same period last year. As Steve noted, we were pleased to come in $3.3 million above the midpoint of our guidance, despite the continuing COVID-19 related headwinds. Our adjusted gross profit was 68.8% for Q2, with continued pressure from both COVID-19 and interstate-related headwinds. We continue to make significant investments in research and development. To understand our overall investment in R&D, it is important to combine both what we expense and what we capitalize. On a combined non-GAAP basis, total R&D investments were 15.9% of revenue in Q2. On a dollar basis, our year-over-year investment in total R&D increased by 22.3%. On a non-GAAP basis, sales and marketing expenses were 23.1% of revenue in Q2, as we remain focused on making incremental go-to-market investments in fiscal 2021. On a non-GAAP basis, G&A costs were 13.4% of revenue in Q2 versus 14.9% in Q2 of last fiscal year, and we remain focused on consistently leveraging our G&A expenses on an annual basis. Our adjusted EBITDA was $35 million, or 23.9% of revenue for the quarter, which exceeded our guidance by $7 million at the midpoint. We remain committed to progressing towards our adjusted EBITDA target of 30%-35% of revenue, once we return to a normalized macroeconomic environment. Covering our GAAP results for the quarter, gross profit was $92.8 million, operating income was $6.4 million, and net income was $9.6 million. In regard to the balance sheet, we ended the quarter with cash equivalents, and invested corporate cash of $232.3 million. We're pleased with our performance in Q2, which included another strong quarter for our sales team, helping us beat the top end of our revenue guidance. From a cost perspective, we remain focused on incremental investments to drive growth, while also identifying opportunities to demonstrate scale in operational and G&A costs, and we're happy with the progress we've made to that end in Q2. In regard to client-held funds and interest income, our average daily balance of client funds was $1.5 billion in Q2. We're estimating the average daily balance will be approximately $1.8 billion in Q3, and we assume an average yield of approximately 5- 10 basis points in the third quarter. Before reviewing guidance, I would like to provide some additional context on the current operating environment. As Steve mentioned, we continue to be pleased with the performance of our sales team this fiscal year and this past quarter. We are also pleased with the performance of our operational teams, as we started more business this January than last year in the face of a still challenging COVID-19 environment, and our service teams continue to help clients navigate new legislation. Product differentiation, primarily driven by Community, Premium Video, and LMS, continues to be the number one reason why companies choose Paylocity, as we continue our focus on delivering the most modern platform in our market. In regards to the ongoing impact of COVID-19, we continue to see double-digit headwinds on recurring revenue growth, primarily related to the sustained level of lower client employees on our platform. Within the quarter, we did see slight incremental improvements in client employees on the platform. However, the trend was not consistent on a monthly basis. We saw a marginal improvement in October. November levels went backwards. December saw a slight increase, while January levels trended backwards slightly, and the environment continues to be highly uncertain. Finally, I'd like to provide our financial guidance for Q3 and full fiscal 2021, which incorporates known and some estimated impacts related to COVID-19. Our Q3 guidance includes the impact of a COVID-related headwind of approximately $3.5 million-$4 million related to annual W-2 billing, which is fully recognized one time per year in our third fiscal quarter and is directly related to a lower level of hiring throughout 2020 across our client base. While growth in total clients through Q2 is up 19.5% year-over-year, January W-2 volumes were up only mid-single digits. The impact of COVID-19 on overall workforce levels at our clients, including reduced hiring activity throughout 2020, resulted in lower W-2 revenue than we would see in a normalized macroeconomic environment. In regard to employees per client, our guidance incorporates the mild improvements we have seen from the depths of the pandemic, but no further increases during the remainder of the fiscal year. For third quarter fiscal 2021, total revenue is expected to be in the range of $182.5 million-$186.5 million, or approximately 6%-9% growth over third quarter fiscal 2020 total revenue. Adjusted EBITDA is expected to be in the range of $59 million-$62 million. For full fiscal 2021, total revenue is expected to be in the range of $623.5 million-$628.5 million, or approximately 11%-12% growth over fiscal 2020, which implies approximately 22% revenue growth for the fourth quarter of fiscal 2021. Adjusted EBITDA is expected to be in the range of $152 million-$156 million. In conclusion, we are pleased with our Q2 results, particularly in the context of the current operating environment, and we remain committed to investing in the business to ensure we are well-positioned to regain our momentum once we return to a more normalized macroeconomic environment. Operator, we're now ready for questions. Thank you. Ladies and gentlemen at this time if you have a question please press star then one key on your touchtone phone. If your question have been answered and you wish to remove yourself, you may press the pound key. Please stand by while we compile the Q&A up. Our first question comes from Brian Peterson with Raymond James. Your line is open. Hi, gentlemen. Congrats on the results, and thanks for taking the question. First off, just higher level from COVID in terms of the go-to-market, and it sounds like this is a really strong onboarding quarter. What lessons would you say that you've learned in terms of selling and onboarding customers? I'm just curious if there's anything to learn from that going forward in how you guys are relating to your customers. Sure. I think as we said in the prepared remarks, we've been pretty happy with how resilient the sales team has been. Obviously, there's a lot of industries in the market that are affected by COVID-19 and the shutdowns. It is a huge market for us, and so the sales team, I think, has pivoted really well to focus on those industries that are less affected, and then be able to deliver very similar client growth to what we had last year through the first six months of the year. I think the lessons learned are that you can do a little bit more virtually, and then maybe we would've done before. They've done a great job really managing the whole sales process in a virtual fashion, keeping people engaged and interested. I think that we will get back to a time where they'll be face-to-face with customers again. We'll be able to leverage this experience that we've learned virtually to be able to sell in maybe a little bit more of a hybrid world post-pandemic. Thanks, Steve. Maybe just another one. When you think about the new customers that are coming to the platform, has that changed over the last couple of quarters? I'm just curious if it's displacement, greenfield. I'm just curious what you're seeing- Sure. ... in terms of the new customers added. Yeah, no, I don't think a lot has changed. I think you probably see a little bit less customers from the industries that are impacted the most, just because they've got other bigger priorities in front of them. You definitely still see some customers from those industries, like hospitality, making the move. We were very automated in terms of how we interacted with customers prior to the pandemic. Everything was being done remote. Our implementation specialists didn't typically spend much time on site. We have remote tools that we interacted with clients. We trained them that way. I think all of that has been relatively seamless. I think the last comment I would make is, sometimes there's a little bit more disruption on the client side. We've had to do some extra work for them at times to get them up and running and really making sure that clients are starting on time. There's a little bit more delays because of COVID, and that might just because the person on the other end might have personal issues or their business might be more impacted. We've seen in places where there's a little bit delay in starts, but we're still able to get all those customers started and do that very efficiently. Great. Thanks, Steve. Thank you. Our next question comes from Scott Berg with Needham. Your line is open. Hey, Steve and Toby and Ryan. Congrats on the good quarter. Thanks for taking questions. I guess I got two here, Steve. I know we've talked over the last six months or so, and it was certainly highlighted at your fall customer conference about engagement in your platform, increasing as the Paylocity platform's kind of been a central communication hub. I guess as you look back over the last maybe 9- 12 months since the pandemic, are you seeing that engagement alter or make changes to what your customer retention rates are today? That's a great question. We continue to have over 92% customer retention. I'm really proud of the job our team has done, staying engaged with our customers through this difficult time with a bunch of changes in legislation and a ton of questions from our customers. We're really happy with where we sit from an overall client retention perspective. I don't think we've necessarily seen that move that needle meaningfully. What we have seen, though, during the pandemic is customers start to use more of the features that we've delivered to them, particularly more of these modern features, such as Community, as you mentioned. Then add on the video capabilities on top of that. We see also other leaders within the organization start to use some of these capabilities. Rather than just the HR team, you might see their C-level folks actually using our announcement capability and our video capability, or managers of their teams interacting in Groups. It's been really interesting to see the types of activity we see on our platform expand over the last calendar year. Yeah, that's been helpful. I guess from a follow-up question perspective, you obviously serve a customer base that's relatively wide at the end of the day. A customer is maybe as low as 20 employees. I know maybe you have a few that are even smaller than that, but certainly the customers that have 500,000 or maybe more than 1,000 employees. I guess as you look at that kind of span, is there a segment or two that you've seen drive maybe better net new customer additions over the last quarter or two? We think the trends are pretty strong across the space in general, but I just didn't know if one of those segments you would call out maybe in particular having better strength. I think the interesting thing is, if you look at the unit growth, and that's one of the reasons we want to provide that data, it's pretty consistent with where we were last year, and we're getting customers in, call it, the under 50 market, at fairly similar rates from a growth perspective. The core market's been strong for us, kind of that 50-500 space. Last year, I think we called out the fact that we were doing a little bit better than we had previously in that 500 + space, and I think that has kind of continued. While I really feel good about the sales forces that we're seeing really resilience across the board, and that we're actually onboarding a very similar number of customers from a growth perspective than we were last year. Great. That's all I have. Thanks for taking my questions. Thank you. Our next question comes from Terry Tillman with Truist Securities. Your line is open. Yeah. Good afternoon, gentlemen. Can you hear me okay? Yeah, we can. Yeah. I'm just curious, Steve, maybe big picture question. Samepage is interesting, because you're delving into potentially every desktop, potentially usage all day long. Collaborative work management is a pretty broad market. What are the conversations like? Are you like, "Hey, you need to modernize your core HR and your payroll, and so we can help you with that. Oh, by the way, look at this Samepage thing." I'm not trying to sound flippant or anything, but I'm kind of curious about Samepage because it actually does get you into another potentially interesting, almost standalone market. I had a follow-up. Sure. Well, I think the example I would give you is when we first launched Community, one of the things that we thought our customers were asking for was the ability to really manage announcements, because the reality is, different parts of their organization might be using different tools. The HR team wanted to be able to make sure they were giving benefit updates, they were announcing policy changes, and they were reaching all of the employees and making sure they get that notification on their phone, and they click into the announcement, and they get the analytics behind that. That really drove us to actually create Community because we felt like this announcement capability was going to be at the core of it. That is exactly what we saw in terms of utilization. The interesting thing we saw then was people wanted to actually include links to YouTube videos. They wanted to include additional content. They saw employees reacting, sometimes with emojis, sometimes with comments. That led us to believe video could play a bigger role here, not just in announcements, but in broader communication across the platform, because HR teams really started to use it for communication. The reason I give you that background is we introduced Groups. The idea behind a group is it could be your team, it could be a group of people working on a project. It could be just a group of people with a common interest, and it could just be fun. We started to see increased utilization there. Within those groups, we started to see people asking for collaboration opportunities. That's what led us to look at Samepage capabilities and bring them into the fold so that we could really enhance groups and collaboration capabilities. The reality is, the way we develop product is we listen and we learn in terms of how our customers use it, and then we just continue to add features based off their demand. I see that when we get to the point that we launch a collaboration capabilities on top of Community within Groups, we're going to learn how our customers use it, and we're going to continue to expand on it. That's always been our product philosophy. Got it. Understood. I guess my follow-up is, you're talking about digital marketing, and it's fascinating through this pandemic on B2B selling and how it's evolving, and there's a lot of innovation going on, but I'm curious from your all's perspective, you all have been using probably plenty of digital marketing tools in the past, but in terms of refining and making new investments, where are you seeing some kind of payoffs or some observations, whether it's driving more of that sub 50, or it's driving more traffic altogether. Just, is there anything to be said maybe about maybe the cycle time speeds up with more automation? Just any kind of takeaways or observations so far? I think fortunately, we had done a pretty good investment in terms of our new website and some of the branding that we launched really last spring, and we were able to leverage some of those capabilities to put more muscle behind our digital efforts. What I would say is you need a bunch of variety of content, right? We've got podcasts available, people. We've done seminars and webinars on legislation changes. We've done seminars and webinars on social movements that you see in the industry. You've really got to be able to connect to the topics that are real-world and top of mind, and you've got to do it in a variety of channels, e-books, email marketing, all mediums. I think that's something that we've expanded a fair amount through COVID. We've benefited from the lead generation that's come from it. Once you get that lead in and you're working with that customer, you've got to find other ways to stay connected during the sales process. I think probably one of the bigger surprises for us is we've used a lot of asynchronous video where we're recording videos, post a demo or after an initial meeting with our client, and we actually use our own video platform to be able to do that. That, I think, has really helped create momentum and keep that sales cycle moving, which, as you know, for us, for average size customers, still 30-60 days. It still happens fairly quickly. We've become adept at using all of those tools, probably faster than we would have if it wasn't for the environment around us. Thanks. Solid job. Thank you. Thank you. Our next question comes from Brad Reback with Stifel. Your line is open. Great. Thanks very much. Steve, as you're talking to existing customers, any sense what they're waiting for to start adding back employees? What types of things they're looking at? Yeah. What I would tell you when we look at the data, right, because we've got a lot of customers, and we examine where customers are significantly different, in terms of whether it's the number of W-2s they produce, which we call that the impact of that, because they've hired less all the way throughout the year, or they're just at a lower employment level. You will find those in affected industries, right? You find those in hospitality, you find those in retail, you find those, in all the places that you would expect. They're ultimately, in many cases, fighting different types of restrictions that make it very difficult for their business to operate. I think we feel optimistic that as the vaccine rollout continues to gain momentum and that businesses are allowed to open at capacity levels that was consistent with prior, then we'll start to see the benefit from that. That's largely the message. We don't usually hear from clients saying, "I'm waiting for something to do a whole bunch of hiring. I'm waiting for my environment to change around me and the customers to come back, and then I'm going to back that up with the hiring I need. Great. Thanks very much. Thank you. Our next question comes from Matt Pfau with William Blair. Your line is open. Hey, guys. Thanks for taking my question. Just one for me. I wanted to ask about the current COVID relief bill that was passed under the Trump administration. You discussed that a bit and the functionality that you've added for that, and then obviously there's another one here, potentially going to be passed under the Biden administration. How does that impact you from a business perspective? Does it help drive new business? Do you see additional inbound when these kind of bills get passed, or is there additional revenue for you associated with that at all? I think generally speaking, any legislative change, is fairly challenging for the market that we serve to be able to manage, absorb, and understand. You saw that all the way back to ACA and through the most recent legislative changes. We need to be there for our customers with content. They usually call us and ask us more questions or email us and ask us more questions. We've got to do a lot of training when that happens. I think that's probably the place with the biggest impact, is to do a really good job for your customers so they understand it. Because in this case, they have to make choices in terms of what they're going to do in reaction to that bill, particularly the first iteration of the bill. That's something that we spend a lot of time on. I wouldn't tell you that it's different. I think ACA did have a bit of a tailwind into the market when you go back several years ago. I'm not sure that that's the case with what we're seeing right now. This has been enacted so quickly that everyone just has to go into react mode, whereas something like ACA, you had a long time to prepare for it. You had to think about how you were going to manage it. This is happening so quickly that I don't think it's really a demand creation, but just really an opportunity to show your customers how much you can help them. Great. Thanks, guys. Thank you. Our next question comes from Bryan Bergin with Cowen. Your line is open. Hi, this is actually Jared Levine on for Bryan. I have two for you. First, how did the bookings momentum progress in the quarter following the record sales month in October? I think overall, we've sold more than last year. Last year, we were on a very strong pace. Prior to the pandemic, we were growing new bookings 40% year-over-year. We're definitely not at that type of pace. We are still selling more than we did last year. In some ways, you do set records when you're selling more than you do last year. That momentum has actually continued. Year-end is really important to us, right. We start more business in January than any other month. Then the several months prior to that is our selling season. We were pretty happy with the volume of customers that we were able to onboard. You see that through the first two quarters with nearly 20% unit growth. That momentum continued through selling season. Got it. In terms of the new unit strength in the sub 50 employee space that you noted, was there a skew towards that more emerging market, sub 20 employees, or was it pretty balanced between the sub 20 and then 20 - 50 in terms of new units? What I would tell you is I don't think that the size of the customers has meaningfully changed that we've been bringing on. That mix has been fairly consistent. Admittedly, the market as a whole has less employees, right? There's an employment impact to both your current clients and the customers that you're bringing on. Other than that, we've been focused on the same size customers, and we've been having success from 20 all the way to 1,000. Got it. Thank you. Thank you. Our next question comes from Mark Marcon with Baird. Your line is open. Good afternoon, and congrats on the number of new unit wins considering the environment. I'm just wondering, just to be 100% clear, so when we talk about a 19% increase in terms of the number of units that were brought on, is that across the board? In other words, was it primarily skewed by the below 50, or was it across the board in terms of being close to 19%? I just wasn't 100% clear on that. Yeah. To be clear, through the second quarter, the number of clients that we have on the platform, total clients, was up 19.5% year-over-year. That's driven a mix of adding new customers, and losses, and ending count as the end of December was up 19.5%. I think to just answer your question specifically, it is not skewed to any of the markets that we serve. It's really across the board, a very similar mix to last fiscal year. Great. Then can you talk a little bit about the source of the clients, just in terms of ADP and Paychex versus some regional players versus do -it -yourself? Just what are you seeing- Sure. ... from that perspective? Yeah. Obviously, we look at that information. What I would say is nothing stands out in terms of being an anomaly versus prior years, fairly consistent. Okay. With regards to the EBITDA guidance for the current quarter, how should we think about that? How should we think about the gross margins and the impact in terms of having a slower increase in terms of W-2s and 1095s for obvious reasons in terms of employment versus the step up in terms of investment, both in terms of R&D and sales? Yeah. Hey, Mark, it's Toby. I think you hit on the key elements. One of our consistent themes throughout the year has been that we would continue to invest in the business all the way through, but specifically R&D investments and sales and marketing investments that we would continue to drive growth. I think particularly from a sales and marketing standpoint, we would've said pretty consistently starting at the end of last year and through this year, that in the back half of this year, we would continue to drive those types of investments, and I think that's our intention. That is definitely part of the EBITDA equation in the back half of the year. I think specific to your question on W-2s, obviously for everybody in the industry, us included, W-2 revenue is fairly high margin, and so you would feel the impact of that anyways from a revenue standpoint. I think you feel a little bit of an outsized impact because of the type of revenue that that represents. I think that has a probably a little bit heavier impact than just the normal course investments that we would've been calling out pretty consistently. Thanks for the explanation. Appreciate it. Sure. Thank you. Our next question comes from Samad Samana with Jefferies. Your line is open. Hey, this is Jordan Boretz on for Samad. Thank you for taking my question. Congrats on the quarter. A question on the competitive environment. You previously called out that booking strength amid start-ups is really strong with record new business formation. Are you seeing any of your competitors down market, whether public or private, become more aggressive around pricing or promos to capture share within that segment? Sure. I think when we talk about the lower end of the segment, the under 50, what I would tell you is not many of those are necessarily brand new businesses or start-ups. We generally see businesses that they don't have to be super mature, but we don't necessarily get a lot of start-up business because we don't really focus in that under 10 market. We do pick them up as they're growing. That has been pretty strong for us in that under 50 market. In terms of competitive environment, I wouldn't say there are either new competitors or very different kind of pricing models that we're seeing in the marketplace. I think everyone feels a little bit of the COVID headwind just from the macroeconomic environment. At the end of the day, when someone's buying our platform and they pay us maybe a little more than $20,000 a year, these are not big payments for those customers relative to the size of their business. This isn't necessarily the place where you're going to save a lot of dollars, and it's pretty important that they have something that allows them to save the time and connect with all their employees. It ends up being much more of a product and service conversation than a pricing conversation. Got it. Thank you. Thank you. Our next question comes from Daniel Jester with Citi. Your line is open. Hey, great. Thanks for taking my question. On Premium Video, how's demand been out of the gate relative to some other launches recently, like surveys and LMS? Yeah. What I would tell you is, it's been pretty similar to some of the other products. I think something like LMS and recruiting are well-known HCM modules that people will buy. Those both accelerated fairly quickly for us. Newer products like surveys, even looking at utilization on Community and Premium Video, those are newer concepts for the market as a whole. They typically can take a little bit longer to drive the penetration. In the backdrop of COVID-19 and everybody used to spending time on Zoom and understanding the importance of video, we've been really happy with the uptake for our January starts. Okay. Thanks. For Toby, just going back to your prepared remarks about sort of the longer-term financial aspirations for the business. Did you get back on that path just by lapping sort of the toughest of the COVID pandemic pressure, and we should start to see you guys get back on that path later in calendar year 2021? Or you actually need to see macroeconomic improvement, higher interest rates, et c, to kind of get back onto that glide path? Thanks. Yeah. It's a good question. I think there's some sense of a little bit of both. I think when you start to lap the compares, as we look at our next fiscal year planning, you see some of this, I think, even in the implied guidance for Q4, and we said that in the prepared remarks around the implied revenue growth rate. You start to see getting back onto that EBITDA leverage trajectory that we would have been on pre-pandemic. I think we've also said you're not going to snap back unless, and until you see some of the employees on the platform come back in a real way, which to date we haven't seen. I think both of those dynamics are very real in terms of how you think about the rest of this fiscal year, and then as you turn over into fiscal 2022. Okay, thanks. Just one last quick one on clarification on the guidance. What do you have in terms of macroeconomic change, like stable employment base on the platform or any sort of improvement? No, it's stable. I think we called out pretty specifically in the prepared remarks. You've seen on a month-by-month basis, there has not been a consistent trend. You'll have one month step forward, you'll take a small step back. We have seen certainly mild improvements from the depths of the pandemic. In terms of our guidance for the rest of the fiscal year, we're not assuming any improvement to what we've seen so far this year. Great. Thanks so much. Sure. Mr. Beck, your line is open with KBCM. Hey, this is Maddie on for Josh. I just had a couple questions for you guys. When we recently attended a human capital management conference, we picked up a greater focus on HCM tools like childcare, wellness benefits, management performance in a remote world, and new talent acquisition methods. I'm just wondering how much this has played a factor into your new client conversations you're having, and if this could be one of those factors that ultimately improves your win rate versus the legacy players. I have a follow-up. Thanks. I think if you look at the last nine or 10 months here as we've operated in a pandemic world, you probably see a little less conversations in that recruiting bucket and finding talent. There clearly are industries that are still growing. We're still adding employees, as an example, and finding talent's important. Because a lot of these organizations are really trying to manage in a difficult environment, I would say there's a little bit less of that. I think your point on wellness, performance management, connecting with employees in a different way, and keeping people engaged, that is absolutely top of mind with customers. In many ways, really trying to feature for us some of our more modern capabilities, whether it's reward and recognition with Impressions or our Journal capability to really have a real-time conversation around performance versus waiting for that annual cycle, all play into that trend. Great. Super helpful. My second question is, how permanent do you expect some of these work -from -home changes to be? Have you seen any change in awareness or general interest in modernizing the human capital management solutions as some people start to go back to the office? Thanks. I do think that some of these trends will persist in a post-pandemic world. That might manifest itself in terms of just increased flexibility that employees have. Maybe in a hybrid scenario. You might even have certain positions go completely remote. Generally speaking, people are becoming more comfortable with that. The second part of your question is, that does put a lot of pressure on the tools that you use because you're not having as many in-person meetings. You're having hybrid meetings where some people are in person and some people are remote. Finding ways to make sure that information is available at people's fingertips whenever they need it, I think, is going to be really important. Also having consistent communication across the board becomes really important. That's where we're emphasizing at Paylocity, a lot of asynchronous video capability so that information can be shared and can be digested without having back-to-back-to-back Zoom meeting and creating that Zoom fatigue. We think some of those trends are definitely going to persist long term, and the investments that we've made in product will position us with the most modern platform for the industry that we serve. Thank you. Super helpful. Thank you. Our next question comes from Robert Simmons with RBC Capital Markets. Your line is open. Hi. Thanks for taking the question. Most of the questions have been asked, but I was wondering how much does Samepage impact your guidance? Yeah, very minimal. Samepage was a pretty small business. Handfuls of employees and no material impact from a revenue perspective on the year for sure. Pretty minimal impact. I guess there's probably a little bit margin delivered there, right? Not in any material way. Got it. Okay. Just given the size of it and the fact that it's not significant from a revenue standpoint, there's very little impact. Got it. Thank you very much. Thank you. Our next question comes from Arvind Ramnani with Piper Sandler. Your line is open. Hi. Yeah, thanks for taking my question. I had a question about your longer-term product roadmap. Certainly, with LMS and Community, these are launched two years back, and now it's getting to the stage where it's being used by more customers, and then eventually you will find a way to monetize it. Typically, your product roadmap, that you start rolling out products at three to four years out. Are there certain large incremental investments you're making on the product side that you think will be monetized over three to five years from now? Yeah. I think we're always working in our product roadmaps on things that we think are just going to be a better experience for our customers, things that are going to drive scalability in our organization, and then, of course, new modules or features that we can monetize. There's always a balanced approach towards those three categories. We don't necessarily come out and issue a multi-year product roadmap ahead of time for competitive reasons. I think we've definitely clearly signaled that being the most modern platform and really adapting to these new use cases that have been kind of thrust upon so many of our customers operating in a more remote fashion is key to that equation. Currently, I think the thing that we've called out is integrating Samepage and building that right into our application so that those capabilities exist to allow our client employees to collaborate in a more efficient fashion as we drive towards monetization of Community is definitely a key focus for us. We've seen very good success with our most recent Premium Video offering. Great. In the prepared remarks, you talked about kind of refocusing on EBITDA growth expansion in a more normalized macroenvironment. When you think of the EBITDA expansion, how much of it will really come from price increases versus operational efficiencies? What I would say, we are focused, as you mentioned, investing, and Toby mentioned this, investing back in product and sales so that as we come out the other side of this pandemic, we can continue with similar momentum that we had as we entered the pandemic. You can see that we're bringing on roughly 20% new customers, 19.5% through last year. We've got that sales engine continues to work. Your point on EBITDA is a good one. As you see, the way we've talked about this is we can return faster to those similar revenue growth based off our ability to execute. EBITDA might take a little bit longer for us to get back because you're comping some areas like no travel for a period of time, and then you start to get travel and gatherings. Obviously, each incremental employee that our clients add creates new revenue for us, and there's not a lot of cost associated with that. If the employment environment returns, that's when you start to be able to build off that EBITDA cycle. We obviously have not given guidance for next year, but we do think this happens in a bit of a two-step process where we can get back to that 20%+ revenue growth, and then we would step our way back into where we were from an EBITDA perspective, and then continue marching towards our long-term stated range, which is 30%-35% Adjusted EBITDA. Great. Just last one for me. The last you've communicated about your pricing, the non-discounted pricing is around $500 per employee per year. Are you all ready to kind of talk about the next level, or is it still too early to start talking about the next sort of level? Yeah. I think we've periodically updated that over the last several years as we've launched products to market. Most recently, we went from $400 per employee per year to $420 per employee per year. We'll continue with the mindset as we launch the product to market and we make it available. That's when we'll kind of update the PEPY and total available product in our portfolio. Great. Thank you very much. Thank you. Our next question comes from Pat Walravens from JMP Securities. Your line is open. Great. Thank you. It's Joey Marincek on for Pat. As it relates to those investment plans, how are you thinking about hiring at this point? Secondly, given the Samepage acquisition, can you remind us how you guys think about M&A? Thank you. Sure. On the first point, we're bullish about how our performance has been through COVID-19, and we are in really the start of our hiring season right now. We do most of our hiring in sales and marketing really in the spring and into the summertime. We're very active in the market bringing people on board. We'll give an update, obviously, at the end of your call in terms of what that year-over-year headcount looks like. We definitely feel like we're in a position to add heads, and that we've been able to have success in this environment, and we want to come out the other side of it with momentum. We are going to hire across the business for the rest of the supporting structure, ahead of time, so that we've got people trained and ready to handle those customers as they onboard. I would say no change to our normal hiring pattern that we would have in any other given year. From an M&A perspective, for us, it's all about the customer experience when it comes to product. It really has to be an easy-to-use, unified experience, very seamless. We're not looking to make acquisitions that are kind of bolt-on products that are going to take years and years for us to integrate. In fact, we look for smaller tuck-in scenarios where we can truly integrate that and build that right into the product suite, where from a user perspective, there is absolutely no difference. That team, the VidGrid team, is a Paylocity team that works on video and all of those modern experiences around that. That Samepage team will integrate with our teams that were already working on things like Community, and they will just allow us to move faster. That's the way that we think about acquisitions. It's about driving ahead on the product roadmap, and creating great experiences. It's not really about acquiring revenue or client bases. Awesome. Super helpful. Thank you. Thank you. Our next question comes from Siti Panigrahi with Mizuho. Thanks for taking my question. My apologies if this question asked, I had some phone problem. Going back to your comment on strong January sales, versus last year. I understand that we are still not recovered back fully in our macro environment. What's driving for your customer to switch their payroll and do the investment at this point? Are you seeing strength in certain verticals over others? Sure. That's a good question. There's definitely verticals, as we all know, that are more heavily impacted from COVID-19. For those customers, as you might imagine, if you're running a restaurant with several locations in an environment where you're operating at 20% capacity or you can only have outdoor seating, it's probably hard to prioritize a switch to a payroll and HR platform in that kind of environment. Having said that, we have had success bringing on customers in that vertical. It's not absent, but that's probably not where we're seeing most activity. It's a huge TAM for us. We have hundreds of thousands of customers that we can go after. Our sales force has been pretty effective at pivoting to industries that might be a little bit less impacted, and we've been able to drive very similar unit growth, even though it might come from slightly different industries than we did a year ago. The reasons for people switching, they've always been product and service. That hasn't changed. Some of the features that people are looking for, some of the capabilities like Community, like Video, some of the newer capabilities that we've launched have become a more important part of the conversation, because of the pandemic and the nature of how people are getting their work done than maybe a year ago. That's helpful. One clarification. The one you said about $3.5 million-$4 million impact because of on W-2s. Do you process W-2 based on the number of employees end of the year or any part of the year? Yeah. Generally speaking. You know what I'm saying is- Yeah. ... somebody is, let's say, January, February, they're employed, but they are let go. Do you still process W-2s for them? Yeah. Generally speaking, if an employee has been with one of our clients during the course of a year, we would process a W-2 for them. I think what we were calling out in the script was, which I think is somewhat obvious based on unemployment rates and the experience that we're probably all having day to day is to the extent that the number of employees on the platform are down and to the extent that unemployment is up and people aren't rehiring as they normally would through the course of the year, because of that, you would have fewer employees being employed by clients through the course of the year, and therefore fewer W-2s. Got it. Thank you so much. Sure. Thank you. This concludes the Q&A portion. I'd like to hand the conference over to Mr. Beauchamp for any further remarks. Great. I'd like to thank all of you for your interest in Paylocity today, and just take a quick moment to thank all of our employees. This is definitely the busiest time of the year for us. We've had a very busy January season, and employees have really gone above and beyond to be there for our customers. Thank you, everybody. Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Everyone have a wonderful day.