Paylocity FY Conference Summary Company Overview - **Company**: Paylocity (NasdaqGS:PCTY) - **Event**: FY Conference held on December 10, 2025 - **Speakers**: Sheldon McMeans (Barclays) and Ryan Glenn (CFO of Paylocity) Key Highlights Financial Performance - **Q1 FY26 Results**: - Recurring revenue growth of **14%** - Total revenue growth of **12%** - Raised guidance for revenue and profitability due to strong performance [3][4][8] - **Long-term Targets**: - Increased targets based on significant progress in EBITDA and free cash flow leverage, and strong gross margin leverage [8][9] Market and Demand Environment - **Macro Environment**: - Stable macro and demand environment with slight year-over-year increase in client workforce levels [3][10] - **Client Base**: - Average client has about **150 employees**; successful in moving upmarket to larger clients [17][29] Product and Service Offerings - **HCM Market Growth**: - HCM market continues to grow with mid-to-high single-digit unit growth and increasing average revenue per client [29][30] - **AI and Automation**: - AI embedded in all products; significant year-over-year increase in adoption of AI assistant [46][57] - AI expected to enhance client experience and retention [57][61] Sales and Marketing Strategy - **Sales Headcount**: - Sales headcount increased by **8%** over the last two years; revenue per rep continues to climb [31][34] - **Client Engagement**: - Strong engagement at the Elevate conference with both existing clients and prospects [24][25] Competitive Landscape - **Market Position**: - Continued to take market share in the HCM payroll space; stable win rates against competitors [26][38] - **Defensibility Against AI**: - Complexities in payroll compliance and high-touch service model provide a competitive moat against new entrants [46][49] Future Outlook - **Margin Expansion**: - Optimistic about expanding gross margins through AI efficiencies and maintaining high client satisfaction [92][93] - **Capital Allocation**: - Active share repurchase program with **$500 million** repurchased since May 2024; plans to continue buybacks [109][110] - **International Strategy**: - Focus on serving multinational corporations and adapting to trends of smaller businesses hiring internationally [125][126] Additional Insights - **Integration of Acquisitions**: - Successful integration of Airbase acquisition, with expectations of high adoption rates for new finance products [63][64] - **Client Retention**: - High levels of client retention noted, with a focus on maintaining service quality while leveraging AI for efficiency [91][92] This summary encapsulates the key points discussed during the Paylocity FY Conference, highlighting the company's financial performance, market dynamics, product offerings, and strategic outlook.

Core Insights - Dayforce, Inc. is expanding its collaboration with Microsoft to integrate AI agents into its platform, enhancing HR, payroll, and business operations through a unified application built on Microsoft technologies [1][4][5] Group 1: Collaboration and Integration - The integration with Microsoft Copilot Studio allows for the creation of custom AI agents that enhance the Dayforce platform, providing a seamless experience for employees and managers [3][7] - This collaboration aims to solve workforce challenges by leveraging the global scale and security of Microsoft Azure alongside Dayforce's AI innovations [5] Group 2: Benefits and Features - The unified Dayforce platform enables organizations to achieve greater interoperability, faster innovation, and increased value from their Microsoft investments [1][4] - AI agents can securely access workforce information, streamlining workflows and simplifying decision-making processes [3][7] Group 3: Strategic Goals - The partnership is designed to empower organizations to maximize their technology investments, allowing leaders to automate processes confidently and connect people and data effectively [4][5] - Dayforce aims to improve employee experiences and drive efficiency by addressing the fragmentation often seen in HR, payroll, and business systems [2]

Financial Data and Key Metrics Changes - Dayforce's recurring revenue excluding float grew by 14% on a constant currency basis, reaching $315.5 million [5][25] - Adjusted EBITDA margin increased by 420 basis points to 31.7%, with adjusted EBITDA at $147.2 million, up 27% [5][25] - Free cash flow for the quarter was $87.1 million, representing 18.7% of revenue, and year-to-date free cash flow increased by 500 basis points to $106.6 million [5][6][25] Business Line Data and Key Metrics Changes - Professional services revenue rose by 23% to $71.6 million, indicating strong demand for services [25] - New client bookings across all segments performed well, with bookings growing over 40% year-to-date [8][27] - Back to base sales strategy saw sales to existing customers grow over 50%, representing 40% of total bookings [9] Market Data and Key Metrics Changes - The demand environment remains strong, with year-to-date bookings growth over 40% [27] - Employment levels at customers have shown moderate growth, estimated at just under 1% [27][81] - Foreign exchange rates improved against the U.S. Dollar in Canada, the UK, and Australia, positively impacting guidance [27] Company Strategy and Development Direction - The company aims to grow Dayforce recurring revenue above 15% and has increased free cash flow margins guidance from 12% to between 13.5% to 14% [6][29] - Dayforce is focusing on consolidating an average of 12 systems into one, enhancing customer value and operational efficiency [7][19] - The company is positioning itself as an AI leader, integrating AI across its suite and enhancing product offerings [15][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving $1 billion in free cash flow by 2031, supported by strong operational performance and market demand [6][32] - The company noted that the macroeconomic environment remains favorable for its business, particularly in sectors like hospitality and retail [81] - Management highlighted the importance of a single data model for AI capabilities, which differentiates Dayforce from competitors [19][72] Other Important Information - The company repurchased $20.8 million of common stock during the second quarter, bringing the year-to-date total to $51.2 million [26] - The government of Canada selected Dayforce for HR and payroll transformation, marking a significant contract win [14][49] Q&A Session Summary Question: Sales growth from system integrator partners - System integrator-led sales were up 80% for the first half of the year, with strong full suite attachment rates [36][39] Question: Bookings translating to revenue and go-live initiatives - Onboarding a new client typically takes about 12 months, with add-ons happening quicker than new clients [42][43] Question: AI product introduction and pricing - The company is launching around 30 AI agents, with significant potential to reintroduce these to current clients [47][50] Question: Impact of the One Big Beautiful Bill Act on R&D - The act allows immediate expensing of domestic R&D costs, providing a cash tax benefit of $40 million to $50 million this year [56][58] Question: Phasing of the Government of Canada contract - The contract is expected to phase through the back half of the year, with about half of the revenue recognized so far [96][97] Question: Sales strategy and hiring plans - The company is leaning into hiring additional sellers to capitalize on strong sales momentum [100]