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 one on your telephone. Please be advised that today's conference may be recorded. If you require any further assistance, please press star, then zero. I would now like to hand the conference over to your host today, Ryan Glenn, Senior Vice President of Finance. Please go ahead. Good afternoon, and welcome to Paylocity's earnings results call for the second quarter of fiscal 2022, which ended on December 31, 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. 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. 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, 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, Steve will virtually be attending the JMP Securities Technology Conference on March seventh, and I will be in Florida attending the Stifel Executive Summit on March seventh and the Raymond James Institutional Investor Conference on March ninth. 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 2022 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 position 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 increased 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 product. 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 2022, 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 wanna 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 2022 guidance. Thanks, Steve. Total revenue for Q2 was $196 million, an increase of 34%, with recurring and other revenues up 34.1% from the same period last year. As Steve noted, our sales team had another strong quarter, and we were pleased to come in $6.5 million above the top end of our revenue guidance. 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 dollar basis, our year-over-year investment in total R&D increased by 21.6% when compared to the second quarter of fiscal 2021, and we remain focused on making incremental investments in R&D throughout fiscal 2022 as we continue to build out the Paylocity platform to serve the needs of the modern workforce. In regards to our go-to-market activities, channel referrals, primarily from benefit brokers and financial advisors, once again represented more than 25% of new business for the second quarter as we continue to leverage both virtual and in-person broker meetings and events to help us maintain this strong source of referrals. On a non-GAAP basis, sales and marketing expenses were 23.7% of revenue in Q2, and we also remain focused on making incremental investments in this area of the business in fiscal 2022 to drive growth. On a non-GAAP basis, G&A costs were 13.3% of revenue in the second quarter versus 13.4% in the same period last year. We remain focused on consistently leveraging our G&A expenses on an annual basis. Our adjusted EBITDA was $46.6 million, or 23.8% of revenue for the quarter, which exceeded our guidance by $4.6 million at the top end. We remain committed to progressing towards our adjusted EBITDA target of 30%-35% over time. Briefly covering our GAAP results. For Q2, gross profit was $125.2 million, operating income was $8.1 million, and net income was $9.9 million. In regard to the balance sheet, we ended the quarter with cash equivalents, and invested corporate cash of $84.1 million. Additionally, in January, we drew down $50 million from our revolving credit facility to fund the Cloudsnap acquisition. In regard to client-held funds and interest income, our average daily balance of client funds was $1.8 billion in Q2. We are estimating the average daily balance will be approximately $2.2 billion in Q3, and we assume an average yield of approximately 5-10 basis points in the third quarter. Additionally, please note that our guidance does not include any revenue or profitability benefit from potential future interest rate increases that may be implemented by the Federal Reserve. Overall, we're pleased with our performance in Q2, which included another strong quarter for our sales team while also identifying opportunities to demonstrate scale in operational and G&A costs. As Steve mentioned, we continue to see success in hiring across our business, including in key areas such as R&D, sales, marketing, and operations. We expect to continue investing in headcount across all areas of the business in the back half of the fiscal year to ensure we are well-positioned to drive growth and scale the business. With that said, I'd like to provide our financial guidance for Q3 and full year fiscal 2022. For the third quarter, total revenue is expected to be in the range of $239 million-$243 million, or approximately 30% growth over third quarter fiscal 2021 total revenue. Adjusted EBITDA is expected to be in the range of $77 million-$80 million. For full year fiscal 2022, total revenue is expected to be in the range of $829 million-$834 million, or approximately 31% growth over fiscal 2021. Adjusted EBITDA is expected to be in the range of $220 million-$224 million, implying an adjusted EBITDA margin of approximately 26.7% at the midpoint. Note that we are maintaining the margin percentage guidance despite the roughly 50 basis points of dilutive impact of Blue Marble and Cloudsnap. In conclusion, we are pleased with our Q2 results, and we're also pleased to raise fiscal 2022 guidance to 31% revenue growth at the midpoint, which in combination with the adjusted EBITDA margin represented in our full year guide, puts us above the rule of 50 in fiscal 2022. Operator, we're now ready for questions. Thank you. Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster. Our first question will come from Scott Berg with Needham & Company. Please go ahead. Hey, Steve and Toby. Congrats on a good quarter here. I guess, Steve, let's start with your comments about moving the top end of your target segment up to 5,000. Several years ago, you moved kinda down market to, you know, customers at or down to maybe 20, now you're moving up market. I guess, how should we think about your pace of investments there? How prepared are you today versus this is something we should expect to be, I don't know, more on the come, you know, two to four or six quarters from now? You know, help us kinda think through what that looks like for you. I think very much like our move down market, the move up market has happened naturally over time. As the strength of our product portfolio has improved and we've added all of the different modules, and as, of course, we've really doubled the amount of product that we've sold since we've become public, a lot of those products have become stronger 'cause we continue to enhance them year after year and quarter after quarter, and they start to become more competitive in the 1,000-plus market. If you look at, this is really over the last two, three, four years, we've become more and more competitive. We've never capped our reps in terms of being able to sell those clients. Sitting here today, we have a significant number of clients over 1,000 employees and find ourselves competing more frequently in that market. From our perspective, it's just naturally occurred over time. As we continue to make those investments in R&D, which is a really important part of our growth strategy, we think that we'll continue to have success in that market, and we felt like this was the right time to just make that more visible to the street, that was part of our go-to-market motion. Excellent. From a follow-up perspective, Steve, you've given some good customer engagement kind of statistics and data early on in your prepared remarks. How should we think about the retention of those customers maybe versus some customers that aren't using those modules or maybe don't have similar, you know, kind of engagement with their own employees? Do you see a significant difference there that you can quantify or qualify, or am I maybe not thinking about that the right way? Yeah. I think we're still a little bit early in the cycle with a lot of these modern workforce products. We've definitely seen higher attach rates of video. We've seen higher attach rates in Learning Management and Surveys, and Community, which is a free part of our platforms, utilization is increasing significantly. Certainly our theory is the more we can get employees involved and the more that we can offer additional capabilities to our customers that are looking for both digital transformation and engagement, then those customers are more likely to stay with us. I would say the early signs of that are positive in that direction, but I think that the benefit from those initiatives are still to come since we're seeing such an uptick, call it over the last, you know, year, maybe 18 months or so. Great. That's all I have. Thanks for taking my questions. Congrats again. Thank you. Our next question will come from Terry Tillman with Truist. Please go ahead. Hey, guys. This is Joe Mierzwa for Terry. Thanks for taking the questions. I was just wondering how is early customer feedback with the recently released new scheduling tool, the COVID tracker, and diversity tools, and do these drive higher ASPs, or is this more just a differentiating factor that customers actually get for free? Sure. Those are all included in the platform and free and available, and so I think they definitely drive differentiation. We've had good receptivity of all of those. I would say the COVID tracker obviously was launched on the idea that there would be legislation mandating a lot of customers to track that. We still get usage from some of our customers who are choosing to track that, but that is not necessarily nearly what we would have forecasted had that law passed. It still provides great differentiation, and it highlights some of the workflow capabilities that we already have built in the platform. You can look at something like COVID tracking and find other use cases to be able to use those capabilities. It definitely is a differentiator. That's super helpful. Then just as a follow-up, you posted 24% EBITDA margins. The target's 30%-35%. Could you just remind us and investors what are the biggest puts and takes on the P&L that gets you to that range over time? Is it a timeframe thing, or is it like a revenue size thing? How should we think about timing on that? Yeah. I think we remain committed to the 30%-35% margin target. Think that's achievable over time. Don't think that is a ceiling. But I think if you go back to the pre-COVID timeframe, we were making pretty consistent progress from a year-over-year EBITDA leverage standpoint, and we were just below that 30% mark. I think you've seen a bunch of noise certainly over the last, call it, you know, 18-24 months, introduced by COVID. But I think we still believe that we, you know, post-COVID, over time get to that 30%-35% range. I think as it relates to this year, you know, calling it flat, just under 27%, and, you know, feel like we're on a pretty good path this year performing against that, especially in the context of, you know, essentially maintaining that margin guidance in the context of also doing, you know, two acquisitions that are providing, you know, roughly 50 basis points of headwind to that. Still the same, I think, target over time. Certainly, you know, this is a business where you get margin leverage with scale, and so the other part of your question is there's time, but there's also you get the benefit of scale with larger revenue size. I think the growth profile remains as we've described it, and, the margin target does too. Appreciate all the color. Thanks. Thank you. Our next question will come from Brad Reback with Stifel. Please go ahead. I believe we've lost Brad. We'll go to Pat Walravens with JMP. Please go ahead. Oh, great. Thank you, and congratulations, you guys. Steve, 34%, 30%. I mean, I know the comps are easy, but you've always sort of, you know, consistently guided us to suggest this is sort of a 20%+ grower. Is something changing, or is it just easy comps? Yeah. I think if you go pre-COVID, you know, we had kind of accelerated probably from kind of 23 to 24 to just above 25%, so we were kind of in that mid-20s. We definitely are focused on 20% plus from a long-term model perspective. That still seems to be our target. Then during COVID, you know, for the main reason is the less employees on the platform, you saw that go down into the low teens, and now we have the easier comp, as you mentioned. Two quarters of 34% certainly feels good. I would tell you the business feels pretty normal to what it did pre-COVID. Just the momentum that we've got in the business, the way we're growing the business. I don't necessarily think fundamentally our long-term model has changed because we've gotten a little bit of an acceleration. We'll see if we can certainly ride some of that momentum, and we feel good about the guidance going forward. It's easier comps. It's a little bit of momentum in the business, and it's kind of getting back to what we were doing before. What do you think as you think about staffing up on the sales side and building your quota capacity? What do you target in terms of the growth of that? Well, the part of the equation ends up being what do we think we can do from a productivity perspective? We always love the idea of being able to drive productivity. We are on a good productivity pace post or pre-COVID, and then as COVID hit, you know, that bounced around on us. We called out the last couple earnings calls that we're very close to pre-COVID levels of performance in the sales force. I would tell you that we're actually seeing productivity increases in the sales force again, which is very encouraging. We'll take that, we'll factor that into next year. I would think about it the same way we've done historically, which is kind of a similar number of reps that we add to be able to kinda get us to our financial targets and get back to productivity increases, which is great for us to see. Okay, great. Thank you. Do we have another question? Operator, do we have another question? I think we just wait. We're just waiting to get somebody into the queue here. Should just be a second. Seems like we're having some technical difficulty getting someone in the queue. We have somebody yet? Well, we're definitely having some technical difficulties. We're gonna have to dial back in, you think? All right, we're online with the operator. They're trying to figure out what's going on. Appreciate your patience here. We can get the next question in the queue. Seems like we do great with Zoom calls all day, but somehow we're struggling with the old-fashioned conference call. I did get a message from one of you. You can still hear me, so that's good. We can't hear you, and we can't get somebody into the queue. We're online with the operator, messaging back and forth, trying to figure it out. Toby, you have any stories you wanna share while we're waiting for the next question? Well, we're sitting here in Schaumburg, and it has been a cold and snowy couple of days, so bearing out the blizzard that's been here. Feel like I should be recording a podcast or something now. Our next question comes from Brian Bergen with Cowen. Hey, guys. You hear me? We have you. Finally, we got somebody. Thanks for your patience. All right. Thanks for keeping us on our toes here. First one for demand. Clearly sounds like it was real strong in 2Q. Do you see any change in the number of meetings or any change in client decision-making later in 2Q or thus far in 3Q just due to Omicron? Yeah. I would say we didn't see impact from Omicron, you know, whether that was within our client base, in the number of employees that were on the platform or even in our sales motion. We had a really strong January, such a big sales month for us, and we're really pleased with sales going into January and then with our starts in January and our ability to guide strong for the back half of the year. I wouldn't say anything changed from number of meetings or activity in the market. It definitely feels kind of very pre-COVID like in terms of getting back to the normal number of meetings and activity levels and the conversations that we're having with clients. I think, you know, in a market like this with really tight labor, you know, human capital management is a hot topic, and I think it's at the forefront of people trying to figure out how do they attract and retain talent. I think that part of the conversation has certainly elevated and become more important, but definitely pre-COVID level of activities. Okay, that's good to hear. Then just on the formal raise of the target market, the 5,000, can you just talk about a bit around, you know, the sales cycles and the implementation time frames of clients in that kinda 1K to 5K level versus your average client size in that prior target market? Sure. As I mentioned earlier, the prior question, we've been in that market for a while. We definitely see our most experienced reps really tackle those opportunities. It does have a larger sales cycle. You know, our typical sales cycle of that 100-employee is more like 60 days, and that can be measured in, you know, some number of months. Could be three-six months on a sales cycle, in that upper tier, in the 1,000+. Then from an implementation perspective, you know, we're typically, in that 100-employee customer, it's really gonna be kind of almost three-six weeks to get somebody up and running and live. We can do the larger clients in six weeks, but we find with what the customer's needs are and the complexity, it's typically gonna be more like eight to 12 weeks, depending on that customer. We have our most experienced people already dedicated. We have processes already established for those larger customers, and we have, you know, different level of handholding that goes into those customers that, you know, has allowed us to get a significant number of customers in that space. There's not a lot newer changes internally. This is something we've already been doing, and we feel like we've got a good number of referenceable customers and great level of activity in the 1,000-plus market. Thank you. Our next question will come from Matthew Pfau with William Blair. Hey, guys. Thanks for taking my questions. I wanted to just, you know, follow up one more question on, you know, 1,000-plus customers. How much of the platform do those customers typically take relative to, say, you know, your more average client with around 100 employees? You know, it seemed like some of your recent acquisitions, like Blue Marble and even CloudSnap, would be providing functionality that would probably be more important to customers on the larger end of your market. Is that sort of a deliberate motion, and, you know, do you continue to plan on making acquisitions to provide the functionality for that upper end of your market? Sure. What I would say is the newer that we've launched a product, then sometimes the more features we need to continue to add for those larger clients. Something like Recruiting that's now been in the market for several years becomes naturally more competitive in that thousand-plus base. Learning Management, something that we've released, probably one of our latest HCM products, we continue to add features over time that will become even more competitive. You do see sometimes those thousand-plus customers say, You know, I've already got a solution for one of these components. I like the rest of your platform. I'm gonna use the rest of your platform. You are correct to say data integration becomes an important part of that element. Maybe a little bit less product adoption than the average size customer, but you also get a lot more employees, so you have a lot more volume. We've seen the products as we've improved them, we've seen those attach rates increase over time. Then I think the last part of your question was, does an acquisition like Blue Marble target the larger clients? It does. I mean, it's applicable. You've got customers with 100 employees that have customers in different countries. But yeah, it happens more frequently as you get a little bit larger. You know, acquisitions like this that we think can have benefit to the entire client base can sometimes skew a little bit to the upper end of the market. Okay. Great, guys. Appreciate it. Thank you. Our next question will come from Brad Reback with Stifel. Please go ahead. Mr. Reback, your line is open. You can go ahead with your question. Brad, I don't know if we wanna hear your question. Somehow you're not able to kinda get through. We're riding the wave of technical difficulties here. Let's go on with the flow. All righty. We'll move on to Samad Samana with Jefferies. Please go ahead. Hi. Great. Thank you. Guys, nice to see the strong results. I will channel my inner Brad Reback and ask the questions he might have been thinking about as well. Toby, first, I think we've you know dug into the operational side of moving to larger customers. When I think about from your perspective as CFO, any change or how do you think about the guidance philosophy, just given those customers may take longer to implement or, you know, from booking to revenue or, you know, just obviously there's different maybe retention dynamics. Just how do you think about the revenue guidance as the up-market progress ramps, and are you gonna change the philosophy in any way? Yeah. I mean, our philosophy's been pretty consistent over time in terms of how we think about the business and how we guide, you know, quarter to quarter and year to year. I don't see this move in particular as having an impact on our guidance philosophy or on how we think about or provide the guidance, quarter to quarter, year to year as we go forward. I mean, one of the things I'd add to, you know, Steve's description of the move-up market is, if you think back to how we described down-market initiatives, you know, two, three years ago, what we'd said was we'd been seeing a lot of traction there, and we adjusted the TAM from an external perspective to really just describe the traction that we were seeing. I think it's very much the same case here with the up-market move. I mean, I think we've been seeing that happen successfully. We've seen the traction, and I think this is a reflection just, you know, externally of what we've seen. I don't think there's any significant change in terms of how we think about the operation of the business or, you know, how we think about the guidance philosophy aside from, you know, some of the descriptions Steve gave in terms of probably have, you know, slightly longer cycle times on sales and slightly longer cycle times on implementation. But we've been seeing that and, you know, we've been seeing that and seeing the traction over time. Great. Maybe if I think about, you know, larger customers, at least in some pockets of software, you tend to have kind of a higher net revenue retention level, right? Just as you have more opportunities for cross-sell and upsell. Any early data from your larger cohorts or customers. If they generate a higher NRR versus maybe your core SMB base or just anything that we can kind of anchor into to see how this could impact the model longer term? Yeah. Let me start with the last part, like, the impact of the model. I'm not sure that two or three years from now, we're gonna have a meaningfully more higher percentage of clients over 1,000 employees. I think the point is we already have a fair number of customers over 1,000 employees. We hadn't called that out as a target market. This is not we're gonna push a much higher percentage of our growth to that market space. This is now meaningful enough. We have been paying attention to the last three years. We've got a lot of great clients there. We should call it out because it is naturally now part of our business. I don't think this has any changes to, you know, the economics or the way the business operates. To answer your question directly, you do definitely see clients that are larger in general, they have less of an out-of-business rate. Therefore, because of the smaller out-of-business rate, you do see sometimes higher, both kind of net dollar retentions, and they have a propensity to buy more products. If you've got great products that you're introducing, you're selling back to the client base, then as the client gets a little bit larger, their needs get more complex, they're more likely to buy it. We love those customers. We've got a lot of them, and you know, we think that there's a great opportunity to serve even more of them over time. Great. Thanks again for taking my questions and congrats on the strong results. Thanks. Thank you. Our next question will come from Brian Peterson with Raymond James. Please go ahead. Hey, guys. This is Chase Donovan for Brian. Congrats on the great quarter. Just one from us. Just on the, you know, benefiting from the great resignation in fiscal 3Q, how should we think about the potential benefit from transactional form filing, like W-2s? Thanks. Yeah, I mean, just context from last year was because there was the trend of lower employees on the platform, which was observable across the industry with all the competitive set. W-2 revenue was down from a year-over-year perspective last year. I think what we've observed so far and have described a little bit is that W-2 revenue, you had employees on the platform coming back over the last few quarters, really leveling out this past quarter. Prior to, you had employees on the platform coming back. I don't think we observed the same level of hiring and rehiring across the client base than you might have seen in prior years. I think W-2 revenue coming back versus where it was last year, not sure quite back to what you would have seen in terms of historical levels year over year. Perfect. Thanks, guys. Thank you. Our next question will come from Mark Marcon with Baird. Please go ahead. Hey, good afternoon, and let me add my congratulations. Is there any change in terms of the source of new clients that you're seeing just in terms of legacy regionals, in-house? Any color? Yeah, Mark. You know, I would tell you the big traditional players is still the place we get the most customers from. We definitely have, you know, had the opportunity over the last couple of years to expand into some, you know, kind of tier two-type markets where you see regional players often having a bigger presence. They've probably come up a little bit as we've just naturally expanded geographies. I think if you look at the big players, some of the growth players like us, in-house and regional players, kind of a pretty consistent story over the last several years. Steve, when you're winning relative to either the big players or some of the more modern players, what is the reason that comes up the most frequently at this point? Yeah. I really think, you know, from our perspective, you know, what we're obviously pitching to customers is, you know, we have a lot of the same modules everybody else has, but we've got a much more modern view of how you should be interacting with your employees. We've got a lot of tools that will actually help you attract and retain talent. It's not just about saving time and automating. That's clearly part of the equation and important. It's really about this idea of communicating and engaging with your employees, creating a great culture and an environment. If you do that, it becomes easier to attract and retain talent. Examples of that, obviously, is Community or video capabilities or some of the newer collaboration-oriented things that we're gonna be launching. I mean, that message seems to really be resonating versus simply a message about getting employees their data and automating, which is still important, but not enough anymore. Great. Then, I mean, with the Community and the widespread use across your clients and from an employee perspective, what are you seeing in terms of changes in retention rates? Yeah. I mean, we obviously give you an update on an annual basis. We've been over 92% for really our history. We called out last fiscal year that, you know, we saw really record high retention rates. Some of that was probably COVID aided in terms of clients not moving back and forth. We've been able to stay with very high retention rates this fiscal year in a more normalized environment, which we feel great about. That's great. Last question. Obviously rates are starting to move up. How are you thinking about just the investing the float balance, and what the potential is there, particularly as you continue to grow and the average float balance continues to grow? Yeah. I mean, historically, we've had a portion of the—a very small portion of what we hold from a client funds perspective invested outside of just overnight bank. You know, we continue to look at that as the rate environment changes. Obviously, to the extent that we do see rate increases come from the Fed, that'll be a tailwind for us from both a revenue and from a profitability perspective, depending on the magnitude of those rates, you know, obviously the magnitude of the tailwind. Just, you know, I think the first thing is to see what a rate increase looks like. Second thing is, you know, that takes a little bit of time to come through to us, and then there's always discussions around how much of that we actually end up receiving. I think to the extent we see rate hikes coming at us, that'll be a tailwind for us dependent, and then it's just a question of the magnitude and the timing. Appreciate the color. Thanks. Thank you. Our next question will come from Alex Zukin with Wolfe Research. Please go ahead. Hey, guys. Thanks for taking the question. This has been asked a couple of ways, but I'm gonna try a different spin on it. If you think about all the tailwinds and headwinds in the business right now, whether it's, you know, the Great Resignation, more employees leaving for different jobs or, you know, harder to hire talent or what. Also a kinda normalization of, you know, the movements between vendors in your marketplace being a potential tailwind. If you look at the tailwind, headwind dynamic, you know, how would you classify the demand environment kind of post-COVID versus what you thought it would be? I'm saying post-COVID. Hope- Yeah. Hopefully we're post-COVID. Right. Give us a sense for that. I'm curious. That's a good question. It's always hard to figure out when you're in the moment as well. You know, things that we look at is, you know, the sales level of activity, you know, the number of presentations, the conversations that we see there, the broker channel referral activity that we're seeing and overall what's happening in the market. That feels very similar to pre-COVID level of activities. It's taken a while to get back to that, but if you net it all out, it feels like we're in a more normalized environment. If I think there was one positive, I think I don't know if it's really a tailwind, but I certainly raised the level of importance of these conversations is, if you ask CEOs of our customers, what's one of your top challenges? They're gonna tell you people, and it's attracting and retaining talent. I'm not sure every single one of those customers would answer that question the same way three, four years ago. One of the things, because of the Great Resignation and the movement that's going on and remote work and all of these trends and Gen Z entering the workforce, it's a challenging environment to be an HR professional and to make sure that you've got all the tools that allow you to drive the initiatives to attract and retain talent. That has become a more important part of the conversation than we saw a few years ago, and we think that our modern workforce strategy aligns really well to those challenges. Perfect. Steve, so I guess, Toby, then the question for you would be, if I look at the guidance, and I think Samad asked this, I'm gonna try a different way. Look, you've beaten your guidance by the most, you've ever beaten it by the last two quarters, and the raise for the year, from a percentage basis is in a 2Q is also larger than I've ever seen it in a 2Q. Is it something that's surprising you? Did you know, have you changed to be, you know, more conservative in kind of the methodology? Just what is leading to this larger variance, dynamic? Which is great, by the way. Not sure you should change it, but I'm just curious what's driving that? I think you've just got to ground in some of the moving pieces that we've had that are still providing impact to the business. I think you used the phrase sort of post-COVID. Maybe we are, maybe we're not. But the recency of being in the depths of that, you know, we're seeing tailwind from, you know, I think to easy comps over these last two quarters. You've seen you've also seen employees on the platform coming back. And I think there's nothing that's changed about our guidance philosophy. I think we've taken the same philosophy. You've just got to I guess to the question that you asked, Steve, you've got headwinds and tailwinds that we've been estimating sort of best you can with a consistent philosophy and consistent sort of method of estimating. I think you get through, you know, some of those, and you start to get into next fiscal year, and I think one would hope that you have a more normalized environment. I think this fiscal year, we are still living in an environment where the puts and takes of COVID over the last 24 months, you know, you don't have a perfect crystal ball in your ability to estimate. I think to some of the earlier questions, though, the things that we are seeing are the demand environment returning to a pre-COVID level. We're seeing employees on the platform return to a pre-COVID level. We're seeing the levels of sales force productivity return to pre-COVID levels. I think overall, when we came into the pandemic, what we had said was we were going to try and drive things such that when we came out of the pandemic, we'd return to the same level of momentum that we were seeing coming into it. You know, I think we're starting to see that come through. Perfect. I guess maybe just to sneak in one final one. If I think about employment trends in general, I think before you had talked about how you thought about employment trends being a general tailwind in terms of revenue growth for the year. With respect to what you're seeing out of the current employment reports, trends, and even the data out of your own system, is there any updated thoughts on how to think about employment trends, both for this year, but even maybe a longer term, given what we're seeing in the market? Yeah. I would say, you know, prior to this pandemic and obviously, you know, huge cycles that we've gone through, it was actually, you know, reasonably predictable. What you would see is if you've got a growing GDP environment, and obviously we were in kind of a lower growth environment for a lot of years. If you see GDP growing at a couple percentage points or 2 or 3 percentage points, employees on the platform would grow something less than that. It would grow a little bit. It would provide a little bit of tailwind. I've lived through a couple of recessions in this business myself as well, and you typically would see the employees on the platform do the same thing the other way, which is, you know, you would then start to see them decline. It would stay... It would never be right on GDP, but it would be a little bit less than GDP on both sides of the equation. Much harder to predict right now. I mean, that's the reality of it, and I think that's part of what Toby said before, which is, you know, predicting employees on the platform has been more challenging. I have to think that over time, it probably returns to a similar dynamic when we get to kind of, you know, less variability in those numbers. But that's the way we try to plan it. We try to be conservative in terms of what we're seeing today, not plan for increases into the future. But I don't think there's a lot left in that tank anyways. We feel like we've gotten a lot of that benefit over the last probably, you know, certainly four quarters. Perfect. Well, congratulations, guys. Just another awesome quarter. Thank you. Thank you. Our next question will come from Daniel Jester with BMO Capital Markets. Great. Thanks for taking my question. I mean, I wanna go back to the modern workforce apps. We talked about it a couple of times so far. I guess, who's driving that engagement? Is that clients that have joined in the last year and change, or you're seeing that kind of more broadly across the whole platform? I guess maybe to expand on that, are you doing anything different to push those back into the base relative to other products you released? Yeah, it's a good question. Right now we're seeing it being driven by both. The newer clients, because they're going through the sales process and they're feeling this pressure in the marketplace, and they're looking at our solution, they definitely wanna leverage these types of tools, and they're more active in terms of getting on set up with Community, launching announcements, using things like video, and then just getting engaged with their employees earlier in the implementation cycle. We definitely see January starts actually using Community in January, which if you go back a couple years ago, we didn't see as much of that occurring. Now, there's a lot more features in there, so that's certainly part of the equation. The other thing is, you know, we've definitely taken this kind of best practice approach back to our customers and said to them, Listen, we've got some ideas in terms of how you can engage with your employees differently. We do that a lot through this Modern Workforce Index, which allows us to score customers in the same industry based off how engaged their employees are. We actually tell them how they're doing versus the customers who are retaining employees and growing faster than them. We have a recommendation engine with machine learning technology behind that that is surfacing the recommendations that we think can move the needle. That is a relatively new feature that we've added. We've been driving activity levels over the last six months, higher activity levels into MWI, and I think that's probably been one of the bigger contributors in seeing our existing clients use more Community features or even use things like Surveys and Learning. Okay. That's helpful. Thank you. Toby, I'm sorry if I missed this, but did you call out how much Blue Marble added to revenue in the quarter? We didn't. You know, I think we had initially characterized that as less than, you know, 2% of overall revenue for the year. That was the characterization we provided. Okay. Performance in the quarter was consistent with that? Yes. Okay. Great. Thanks very much. Thank you. Thank you. Our next question will come from Robert Simmons with D.A. Davidson. Please go ahead. Hi. Thanks for taking the questions. Can you talk about what you're seeing in terms of wage inflation, both in terms of customers where it's potentially boosting your float balances and thus float revenue, and then also fee to own hires potentially impacting margins? The question didn't come through clearly. I think I heard the first part was around what's driving, I think, float balances. We saw about $1.8 billion in average daily balance in the quarter. We had provided the guidance of being around $2.2 billion for Q3. I think typically what you see is the Q3 float balance is higher. I think in terms of, you know, sequential quarter-to-quarter change, pretty much in line with what we would have seen in other years and nothing different from a seasonality perspective. Sorry if I. That was best attempt at what we heard come through on the question. Sorry, I was actually asking about kind of wage inflation that's impacted both on the float and then also on your own margins. Oh, yeah. I think wage inflation doesn't have a big impact to our business realistically because it can ultimately allow us to have, you know, a little bit more float. The float happens more on the tax side. There's some float in direct deposit, but, you know, then the wage inflation then translates to a smaller percentage of taxes that you hold for a period of time. Obviously, with rates where they are right now, it doesn't have a very meaningful impact to our business. Now, as rates increase, that starts to be more material, but still in the big scheme of things, it's relatively small. Got it. How would you characterize the competitive field upmarket above a thousand versus the lower end of your range and the middle of your range? Well, I think from a competitive set perspective, you know, depending on how high you go, you may see a slightly different competitive set. But I think we would have described The competitive dynamics sort of in that 1,000-employee market as usual suspects you might see in other deals, you might see ADP, you might see UKG or formerly Ultimate there. You go up a little higher, you might see somebody like a Ceridian and I think those are, a Paycom would be there. I mean, I think those are the names that you would see most frequently at sort of the upper end of our market as we would have described it previously around 1,000 employees. I think generally speaking same competitive dynamics that I just described in that 1,000 to 5,000 segment. Got it. Great. Thank you very much. Thank you. Our next question will come from Siti Panigrahi with Mizuho. Please go ahead. Thanks for taking my question. Most of my question are asked, I just want to ask about this Cloudsnap acquisition. I understand the need for the data integration side, but wondering what's the rationale behind that data integration to be owned by HR department. Yeah. Any comment would be helpful. Yeah. I would put this into, you know, a category of if this could really accelerate our strategy that we already have from a data integration perspective. Our clients come to us today, and they ask us to integrate with a wide variety of systems. Some of those systems actually power our broker referral channel, so they can be benefit systems, they can be 401 systems. Other times, it's financial systems like getting the general ledger data back into their GL system, so on and so forth. We have hundreds and hundreds of integration partners that we integrate with today. But what Cloudsnap really does is really take more of a low-code automated approach towards these integrations. We can imagine that leveraging their capabilities to provide a much more modern experience, clearly API-driven, real-time. The whole configuration time, you know, when you're using their tools can shrink dramatically in the transparency that we can give the customers. I wouldn't think about it as like a different business segment that we're gonna go after, but technology that can kind of power our existing integration strategy and have an impact to, you know, the type of value that we're offering both our customers and our partners. Thanks for that color. Thank you. Our next question will come from Arvind Ramnani with Piper Sandler. Please go ahead. Hi. Thanks for taking my question. You know, just a couple of quick ones. You know, I wanted to ask from a competitive dynamic perspective, do you take away business from some of the legacy PEO providers, or you're mostly taking business away from the legacy, so payroll providers? Yeah. You know, the PEO market isn't one that we compete with a lot. It does happen. I think that would be a very small percentage. You typically see PEOs being the most popular as customers are kind of in that growth stage. You know, 20, 30, 40 employees, they're clearly clients that use a PEO that are larger and smaller than that. That's at least where we see it most commonly. Sometimes somebody might be exiting a PEO and coming onto our platform. You might have somebody who might go the other way, but that's a small number that would move from us to a PEO, and it's a small amount of our percentage of new sales. Wouldn't necessarily see them as a competitor that we run into very frequently. Great. You know, can you remind me the math on, you know, kind of float revenue, you know, as rates go up? I know you all have provided previously when rates were more meaningful, but how should we think of like every 25 basis points increase in interest rate impacting your margins? I think the backdrop is now we've seen, you know, and we've called this out from a guidance perspective too, between five and 10 basis points expectation in a quarter on yield. I think I don't know what we might see from the Fed, but I think you can do the math on, say, for example, you know, 25 basis point raise on, you know, $2.2 million. I think the only sort of practical element of that is we don't always get. In fact, we don't get all of that 25 basis points, and we don't get it immediately. It depends on I mean, we have, you know, 10+ banking partners that we work very closely with, and it's conversation with each of them around, you know, the timing and the amount of that 25 basis points that we would get. You know, that's how that practically works. You're talking about, well, how much do you get, and then over what time does that flow in? I think typically, you know, you'd get at least half of that, but it varies by bank, and the timing does as well. Right. Perfect. Thank you very much. Thank you. Ladies and gentlemen, thank you for participating in today's question and answer session. I would now like to turn the call back over to management for any closing remarks. Thank you very much, everybody. Appreciate your patience as we worked our way through some technical difficulties. I'm glad we were able to get to everyone's questions. Just wanna wrap up with thanking all of our Paylocity team, who's really been working hard through a really busy year-end and managing all the changes that have hit us, whether it's the legislation that we've dealt with or obviously Omicron and everybody, you know, working from home. Just a great job by our team. Hope everyone has a great night. Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now dis-