Paylocity (NasdaqGS:PCTY) Q2 2026 Earnings call February 05, 2026 05:00 PM ET Company ParticipantsAustin Cole - Equity Research AssociateBrad Reback - Managing DirectorDaniel Jester - Managing Director of Software ResearchJared Levine - Equity Research DirectorJohn Messina - Research AssociateMatt VanVliet - Managing Director of Equity ResearchRyan Glenn - CFOSamad Samana - Managing DirectorScott Berg - Managing DirectorSean McMahon - Equity Research AssociateSiti Panigrahi - Managing DirectorSteve Beaucham ...

Paylocity (NasdaqGS:PCTY) Q2 2026 Earnings call February 05, 2026 05:00 PM ET Company ParticipantsAustin Cole - Equity Research AssociateBrad Reback - Managing DirectorDaniel Jester - Managing Director of Software ResearchJared Levine - Equity Research DirectorJohn Messina - Research AssociateMatt VanVliet - Managing Director of Equity ResearchRyan Glenn - CFOSamad Samana - Managing DirectorScott Berg - Managing DirectorSean McMahon - Equity Research AssociateSiti Panigrahi - Managing DirectorSteve Beaucham ...

Paylocity (NasdaqGS:PCTY) Q2 2026 Earnings call February 05, 2026 05:00 PM ET Speaker8day and thank you for standing by. Welcome to Paylocity Holding Corporation second quarter fiscal 2026 financial results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raise ...

Core Insights - Udemy has announced a partnership with LG CNS to expand into Korea's corporate learning market [1] - The partnership will leverage LG CNS's distribution network, which includes over 500 enterprise clients and millions of professionals [1] - Udemy will provide its AI-powered platform, including features like MCP Server, AI Assistant, and Role Play [1] Company Overview - Udemy is positioned as a global AI-powered skills acceleration platform [1] - The collaboration with LG CNS marks a strategic move to enhance Udemy's presence in the Asian market [1] Market Impact - The partnership is expected to significantly increase Udemy's reach within the corporate learning sector in Korea [1] - Access to LG CNS's extensive client base may lead to increased adoption of Udemy's learning solutions [1]

Group 1: Income Lab's AI Tools - Income Lab announced a suite of AI tools designed to assist advisors in retirement income planning, including AI Plan Builder, AI Interviewer, and AI Assistant [1][2] - The AI tools aim to reduce manual processes, allowing advisors to focus more on strategy and client relationships [2] - The AI Interviewer captures key financial information from clients through a series of questions, while the AI Plan Builder automates data entry by processing unstructured data from various sources [3] - The AI Assistant provides support to advisors by answering questions and assisting with software training [4] - The AI tools are available as a free tech preview for all Income Lab users until the end of the year, with a webinar scheduled for October 28 [5] Group 2: Advyzon's Financial Planning Initiatives - Advyzon is enhancing its financial planning capabilities by developing new tools and has appointed industry veterans Kevin Hughes and Tony Leal to lead these efforts [6] - The upcoming planning tools will integrate goal-based investing and cash flow planning features into the Advyzon platform [7] - Advyzon plans to launch these new tools in 2026, following the recent introduction of its Sphere platform for managed portfolios [7]

Core Viewpoint - Kingdee reported a revenue increase of 11.2% YoY in 1H25, with a net loss of RMB97.7 million, which is an improvement from the previous year's loss [1][5] Financial Performance - Revenue for 1H25 was RMB3.19 billion, aligning with forecasts and consensus [1] - Net loss attributable to ordinary shareholders was RMB97.7 million, improved from RMB217.9 million in 1H24 [1][5] - Cloud services revenue grew 11.9% YoY to RMB2.67 billion, accounting for 83.7% of total revenue [3] - Cloud subscription revenue reached RMB1.68 billion, up 22.1% YoY, making up 52.8% of total revenue [3] - Annual recurring revenue (ARR) for cloud subscription was RMB3.7 billion, an increase of 18.5% YoY [3] Strategic Focus Areas - Kingdee's three strategic focuses are subscription, AI, and globalization [5] - AI contract value exceeded RMB150 million in 1H25, with expectations for AI-related revenue to contribute over 30% of total revenue by 2030 [4][5] - Management anticipates international business revenue to contribute 5-10% of total revenue in the next 3-5 years [5] AI Development - Kingdee launched the Cosmic AI Agent Platform 2.0 and has an active user base of 170,000 enterprises for its AI Assistant [4] - AI-powered applications have improved bookkeeping efficiency by 80%, invoicing efficiency by 40%, and tax filing efficiency by 60% for SMEs [4] Future Guidance - Management maintains guidance for breakeven and over RMB1 billion in operating cash flow (OCF) generation for 2025 [5] - Target for OCF is over RMB3 billion by 2030 [5]

Core Viewpoint - Kingdee's share price dropped 8.4% due to profit-taking after its 1H25 results slightly missed expectations in terms of revenue and ARR, but the company shows a decent turnaround in profitability and operating cash flow [1] Financial Performance - 1H25 revenue grew by 11% YoY, with gross profit margin (GPM) improving by 2.4 percentage points YoY to 65.6% and operating profit margin (OPM) increasing by 5.6 percentage points YoY to -5.5% due to effective cost control in R&D, partially offset by one-time layoff compensation of around RMB80 million [1] - Net loss narrowed by 55% YoY to RMB98 million, missing consensus of RMB73 million mainly due to less interest income [1] - Net operating cash outflow reduced to RMB18 million from -RMB166 million in 1H24 [1] Cloud Subscription Business - Large enterprise business (Cloud Cosmic/Constellation) revenue increased by 41.1% YoY to RMB276 million, with a net dollar retention (NDR) rate of 108% [1] - Medium enterprise business (Cloud Galaxy) revenue grew by 19% YoY to RMB740 million, with total clients reaching 46,000 and an NDR of 94% [1] - SME business revenue grew by 23.8% YoY to RMB537 million, with NDR at 93% and 88% for Cloud Stellar and Jingdou Cloud respectively [1] - A new segment disclosure groups all non-subscription revenues, with management planning to outsource non-core business, which may slow group revenue growth but improve margins and profit [1] Positive Guidance - In 1H25, ARR was RMB3.7 billion, up 18.5% YoY, and cloud subscription contract liabilities were RMB3.4 billion, up 25% YoY [1] - Management maintains a breakeven target for 2025 with net operating cash expected to reach no less than RMB1 billion despite macro uncertainties [1] - Management anticipates subscription GPM to exceed the current 96.2% due to high platform reuse rates and paid AI solutions [1] AI Growth Potential - In 1H25, Kingdee's AI contract value exceeded RMB150 million, with AI Assistant reaching an active user base of 170,000 enterprises [2] - Management is confident in its latest AI agent, which received positive client feedback and secured over 800 advanced AI service orders [2] - Kingdee is positioned favorably to leverage proprietary data with clients to explore underlying value [2] Valuation Adjustments - Sales forecasts for 2025/26/27 were cut by 6%/9%/13% to reflect the outsourcing strategy, while EPS was raised by 4% and 21% in 2026/27 due to a smooth subscription transition and clear long-term AI upside [2] - The new target price is set at HK$18.08, down from HK$18.90, based on a sum-of-the-parts (SOTP) valuation approach [2]

Core Viewpoint - The article discusses the limitations of current AI Assistants, which primarily function as conversational agents, and emphasizes the need for the next generation of AI Assistants to evolve towards actionable intelligence, focusing on multi-modal interaction, real-time responsiveness, and cross-system execution capabilities [1]. Group 1: Limitations of Current AI Assistants - Current AI Assistants are still in the "dialogue" phase and are far from becoming true "universal agents" [2]. - The development challenges for AI Assistants are concentrated in four dimensions: intelligent planning and invocation, system latency and collaboration, interaction memory and anthropomorphism, and business models and implementation paths [2]. - Different technical paths are being explored, including general frameworks based on foundational models and scenario-specific closed-loop systems [2][4]. Group 2: Technical Pathways for AI Assistants - One core approach is to build a long-term, cyclical, and generalizable task framework that encompasses the entire process from goal understanding to task completion [3]. - The Manus framework exemplifies this approach by using a multi-step task planning and toolchain combination, where the LLM acts as a control center [4]. - MetaGPT emphasizes the need for components like code execution, memory management, and system calls to achieve cross-tool and cross-system scheduling capabilities [4]. Group 3: Scenario-Specific Approaches - Another technical path advocates for deep exploration within fixed scenarios, focusing on short-term task execution [4]. - Genspark, for instance, automates PPT generation by integrating multi-modal capabilities and deep reasoning modules [4]. - This scenario-specific approach is more stable and easier to deploy but struggles with non-structured tasks and domain transfer [4][5]. Group 4: Future Directions and Innovations - The Browser-Use approach aims to enhance agent capabilities by allowing them to interact with web interfaces like humans [6]. - Open Computer Agent can simulate mouse and keyboard operations for tasks like flight booking and web registration [6]. - No-Code Agent Builders are emerging as a recommended solution for the next generation of AI Assistants, enabling non-technical users to create and deploy workflows [7]. Group 5: System Optimization Challenges - AI Assistants must optimize for low-latency voice interaction, full-duplex voice capabilities, and the integration of hardware/system actions with application data and tool invocation [8].

Group 1 - The article discusses the necessity of world representation for achieving generalized agent capabilities, highlighting the ongoing debate between model-free and model-based paradigms in AI [4][5][8] - It emphasizes that modern AI agents are expected to perform complex tasks autonomously, distinguishing them from simple bots through their ability to generalize [5] - The model-free paradigm suggests that intelligent behavior can emerge from direct perception-action loops without explicit internal representations, while the model-based paradigm argues for the need of a rich internal predictive representation of the world [6][7] Group 2 - The article references recent research by DeepMind that formalizes the debate between model-free and model-based approaches, demonstrating that agents with generalization capabilities inherently internalize world representations [6][7] - It outlines a core theorem indicating that any generalized agent must have a high-quality world model to achieve long-term capabilities, contradicting the notion that one can bypass representation [7] - The discussion shifts from whether representation is needed to how it should be constructed, noting that existing world model paradigms are not without flaws and there is a lack of consensus in the field [8]

Financial Data and Key Metrics Changes - Total revenue in Q4 was $388 million, growing 16% year-over-year on an as-reported and constant currency basis [30] - Subscription revenue in Q4 totaled $362 million, also growing 16% as reported and 17% in constant currency [30] - Elastic Cloud revenue grew 23% on an as-reported and constant currency basis [30] - Non-GAAP operating margin for Q4 was 15%, with a gross margin of 77% [35][36] - Adjusted free cash flow margin improved by approximately 600 basis points to end the year at 19% [36] Business Line Data and Key Metrics Changes - The number of customers with over $1 million in annual contract value grew approximately 27%, adding about 45 net new customers [34] - Customers with over $100,000 in annual contract value grew approximately 14%, adding about 180 net new customers [34] - Subscription revenue excluding Monthly Cloud was $315 million, growing 19% in Q4 [32] Market Data and Key Metrics Changes - Strong growth was observed in the APJ region, followed by EMEA and The Americas, while some pressure was noted in the U.S. Public sector [34] - Over 2,000 Elastic Cloud customers are using Elastic for Gen AI use cases, with over 30% of these customers spending $100,000 or more annually [12] Company Strategy and Development Direction - The company is focusing on leveraging AI to automate business processes and drive innovation, positioning itself as a strategic partner for enterprises [11][18] - Elastic aims to strengthen its position as the preferred vector database, enhancing its offerings with new technologies like better binary quantization [13][19] - The company is committed to maintaining a balance between growth and profitability while continuing to innovate and expand its product offerings [40][43] Management's Comments on Operating Environment and Future Outlook - Management acknowledged potential uncertainty in the macro environment but expressed confidence in the healthy pipeline and demand signals [39] - The company expects continued growth and strong margins in FY 2026, projecting total revenue in the range of $1.655 billion to $1.670 billion [42] Other Important Information - Elastic Cloud now accounts for over 50% of subscription revenue, with strong growth in cloud adoption [18] - The company announced a strategic collaboration agreement with AWS to enhance solution integrations and accelerate AI innovation [25] Q&A Session Summary Question: Guidance and Metrics - Inquiry about the conservativeness of guidance and leading indicators of business performance [45] - Response highlighted the balance of positive demand signals with macro uncertainty, emphasizing the importance of CRPO and subscription revenue metrics [46][49] Question: Partnerships and Market Opportunities - Question regarding the impact of recent partnerships, particularly with AWS and NVIDIA, on market opportunities [53] - Management noted the growing acceptance of Elastic as a leading vector database and the importance of partnerships for driving cloud adoption [54] Question: Retrieval Augmented Generation (RAG) - Inquiry about the durability of RAG architectures and Elastic's positioning [59] - Management affirmed the critical role of retrieval in enterprise data management and the growing adoption of their vector database for RAG use cases [60][61] Question: Cloud Performance and Consumption Hesitation - Question about the sequential growth in cloud performance and the impact of the leap year [62] - Management clarified that the leap year and fewer days in Q4 affected consumption rates, but normalized growth rates remained strong [64][66] Question: Go-to-Market Strategy and Changes - Inquiry about the effectiveness of go-to-market changes made in the previous fiscal year [69] - Management confirmed that the changes have settled and are yielding positive results, with plans to continue hiring sales capacity [70][72] Question: AI Commitments and Emerging Use Cases - Question about the $1 million AI commitments and emerging use cases [93] - Management clarified that 25% of $1 million customers are using Elastic for AI workloads, with a variety of sophisticated use cases emerging across industries [94][96]