Good day ladies and gentlemen, and welcome to the Paylocity Holding Corporation, Fourth Quarter and 2014 Fiscal Year Results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this call has been recorded. I would now like to introduce your host for today's conference Peter McGrail, Chief Financial Officer.

Good afternoon, and welcome to Paylocity's earnings results call for the fourth quarter of 2014 which ended on June 30, 2014. I am Peter McGrail, CFO, and joining me on the call today is Steve Beauchamp, Chief Executive Officer 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 in this discussion including statements made during the question-and-answer session contain forward-looking statements. These statements are subject to numerous important factors, risks, and uncertainties which could cause actual results to differ from the results implied by these or other forward-looking statements. Also, these statements are based solely on the present information and are subject to risks and uncertainties that can cause actual results to differ materially from those projected in the forward-looking statements. For additional information, please refer to our filings with the Securities and Exchange Commission for the risk factors contained therein and other disclosures. We do not undertake any duty to update any forward-looking statements. Also, during the course of today’s call, we will refer to certain non-GAAP financial measures. There is reconciliation schedule detailing these results currently available in our press release, which is located on our website at www.paylocity.com under the Investor Relations tab and filed with the Securities and Exchange Commission. With that, let me turn the call over to Steve.

Thank you, Peter. And thanks to all of you for joining us today. Peter will review our financial results and 2015 guidance in detail, but let me share a few of the highlights from fourth quarter and fiscal year 2014. We finished the year with strong performance across all of our key metrics. As demand for our cloud-based unified payroll and human capital management solutions continues to grow. Total revenue was up 41% for both the quarter and the fiscal year. Recurring fees grew even faster at 42% for the quarter and 41% for the year. We completed the acquisition of one of our resellers in May, which yielded a lift in Q4 gross margin. Adjusted recurring gross margin was 67% for the quarter and 66% for the year. Recurring revenue was 95% of total revenue in the quarter and 94% for the year. Revenue retention continues to exceed 92% which is best-in-class for company targeting mid-size firms. Our client count at year end was 8500 up 24% year-over-year. We have achieved 25% compounded annual growth in client count over the last four years. Adjusted EBITDA was just slightly negative for the quarter as we ramped up our spending on sales and marketing and research and development, as well as the addition of certain public company expenses. Adjusted EBITDA however was $5.4 million for the fiscal year. A highlight of the year was our March IPO which strengthened our balance sheet raising net proceeds of over $82 million. The increase in our resources provides us with the ability to execute against our strategic growth initiatives and fully capitalize on our market opportunity. Let me take a moment to review our strategic opportunity. We deliver cloud-based payroll and human capital management software tailored specifically to the needs of medium sized companies.…

Thanks, Steve. Let me walk through the results and provide a bit of color, as well as review some of the key aspects of our financial model. Revenue. Total revenue for the quarter was $28.6 million, which represents a robust 41% increase from the same period in the prior year. Total revenue for the year was $108.7 million, and as with the quarter was up 41% in the prior year. As you may recall, our revenues have two major components, recurring and non-recurring. Our recurring revenue has historically represented about 94% of our overall revenues, and is separated into two categories. First, we have recurring fees attributable to our cloud-based payroll and HCM software solutions. Second, we earn interest income on funds held for clients. We collect funds for employee payroll payments and related taxes in advance of remittance to employees and the taxing authorities. Given the current interest rate environment, we do not derive a material amount of recurring revenue from this source, 1% to 2% of overall revenue. But we obviously would benefit from an increase in interest rates. For the fourth quarter, our total recurring revenue of $27.1 million was up 41% from the prior year and represented 95% of our total revenue in the quarter. Recurring fees were up 42%, while interest income actually declined 7%, with declining rates offsetting balance increases. For the year, our total recurring revenue of $101.9 million was up over 40% and represented 94% of our total revenue for the year. Our non-recurring revenues are comprised of implementation services and other and primarily consist of implementation fees charged to new clients for professional services provided to implement and configure our payroll and HCM solutions. We charge fee services when our implementations are complete and do not defer revenue. These fees typically…

Thank you. (Operator Instructions) Our first question comes from the line of Justin Furby with William Blair & Company. Your line is open. Justin Furby - William Blair & Company: Great, thanks guys and congrats. Steve, maybe to start, can you maybe give us essence for, in Q4 the average pricing that you saw on new deals just sort of what that look like in terms of, per employee per month, and maybe what that look like a year ago? And as you look out over the next three to five years, where do you think that’s heading over the medium term?

Well, first I would point you to the fact that over the last several years, you see we've had a fairly consistent growth rate and then fairly consistent unit growth rate over that time period. And so the balance of that is really coming from new customers buying more of our modules. We saw the average revenue per customer increase by over 13% this past fiscal year. And I wouldn’t give you any color that that was different in the fourth quarter versus the rest of the year. It was really gradually throughout the year we see ourselves, getting a little bit more attached rates to those new customers and then selling them more. So, nothing happened in the fourth quarter to create those dynamics. That was something that happened over the entire fiscal year. Justin Furby - William Blair & Company: Okay. And if you think about the guidance, revenue guidance for fiscal 2015, are you assuming sort of similar dynamic or you have 20%, 25% unit growth and the balance is price or is there something different that may, maybe thinking about I guess.

Well we tax our sales force with bringing new business revenue in. That is the way our sales quarter works. And so from my perspective, the market somewhat dictates whether it is going to be more unit growth or more average revenue per customer combined with obviously our products that we have available to them. So, I'm not that worried if it's a little bit different. I think in order to magnitude that makes sense. It wouldn't surprise me if it's a little bit different and its really just going to be a reaction to the marketplace. The customers want more from it. There are sales force focusing on that or we’re going to end up with little more, little less unit growth. But I think in order to magnitude that kind of what would we expect, but don’t be surprise if there is some differences around that. Justin Furby - William Blair & Company: Okay. And the new products, the onboarding, the benefits. What's the – as it relates to fiscal 2015, is there much impact to whatsoever in the model or how do you expect that to play out?

Yeah. So, first let's talk about onboarding. We are very excited about the onboarding offering. We released that at the SHRM show which I said in my opening remarks. And we are seeing really great early feedback and it really automates a fairly manual process of bringing on new hires, getting them involved, working them to the company. So we’re seeing good early traction with that module. That is an additional per employee per month. We have just started actively selling that. That was trained at our annual sales kickoff. So we should start to see a little bit of revenue leak into fiscal 2015 but I don’t see that being a big contributor simply because as customers come on, we only get the part of the annual revenue for that year. So it's certainly helpful to us this fiscal year. I think Web Benefit is probably another fiscal year away to being at all material. We’ll have our first clients doing online enrollment this fall. We don’t have current clients on that as of yet. We are selling that into the marketplace for customers that are in a really target market, so think of 100 to 200 employees. And we anticipate that some of those customers will come online. We’ll continue to add every quarter to that product. Get that better throughout the year and we think that’s going to be a great revenue contributor to the falling fiscal year. Justin Furby - William Blair & Company: Okay. And then in terms of the earnings guidance for this fiscal year, I just kind of love to hear your thoughts on how you're approaching that? As a year from now as you end up outperforming revenue expectations, is it likely that you also outperform on earnings or you'd like to reinvest those incremental dollars back into other areas?

So, I think we highlighted on a couple of areas where we have made some incremental investments already and those would certainly be the area that we would evaluate if we have over performance. So, we look at research and development, we’ve got a very broad roadmap from a product development perspective that we think we can execute against. If we do get over performance, we certainly would look at the opportunities continue to add to that team. We've got great performance from them. And then secondly, we’re in the very early innings of our very large market opportunity. And so, from a sales and marketing perspective, we always look for opportunities where we can get our return on those. I would characterize both those things as incremental opportunities and not, big differences in terms of our history. But to answer your question, we would evaluate if we have over performance, whether we have those opportunities to invest this ultimately, we'll really try to capitalize on a huge opportunity in front of us, and that's really the way that we think about it. Justin Furby - William Blair & Company: Okay, great. And then last one if I may, on the gross margins Peter, for fiscal 2015, any reason why, since you get a full year of that resell or buyouts in the numbers. Any reason why they wouldn't pick up another 100, 200 basis points in fiscal 2015 on recurring side?

Yeah, there's no reason why they would not. That blip you saw on the fourth quarter, will carry into the new year. Justin Furby - William Blair & Company: Okay, great. Thanks guys.

Thank you.

Our next question comes from the line of Terry Tillman with Raymond James. Your line is open.

Hey gentlemen, good afternoon. Thanks for taking my questions. And I would also add congrats. Maybe Steve, start with you in terms of the benefit side. It's highly dynamic right now in terms of ACA requirements, healthcare reform et cetera. I know this benefit solution is still brand new and you don't have customers up on it yet. But I am curious about your referral network. Is this a potential calling card or an incremental calling card for them to call on the CFOs or key level executives of these mid-sized firms that could help accelerate from your regeneration or introducing these benefit solution. Does that actually create channel conflict because, maybe they’re selling those kind of solution?

Okay. Let me take a step back and talk about some of the things going on in the benefit space, and one of the things you didn't mention, but I would like to start with that is certainly, some of the legislative changes around healthcare reform. And I think we talked about this on the last call. We introduced a module in our application that really allows clients to forecast to healthcare reform impact, and we’re going to continue to add to that module. That has been very well received in the broker community, and has increased a partnership opportunity. We think that our benefit offering is going to another step in that direction. So, we don’t see brokers typically offering these type of technology solutions, and frankly these technology solutions are not readily available in our core target market segments. So, think of 20 to a thousand being our core segment, 20 to 200 or 300 employees, very hard to find an automated benefit enrollment solution, certainly available beyond that, and that's where we obviously partnering with Bswift. So, we think that the combination of really investing in healthcare reform tools for our clients and for the brokers combined with this benefit solution is really going to solidify our channel strategy.

Okay, great. And I guess, Steve, I have in my notes here, you had made a remark about where you ended FY '14 in terms of volunteering sales reps, 95? Did you actually say you’re already at your target of 126 or that's where you’re striving for as the year progresses, so would it be fun and loaded, just more comments on where we are in the 126 goal?

So, I did say we are at our target hiring of 126. We had 126 the quota carriers at our sales kickoff in late July. So, we are very happy with that progress, just to review from a hiring perspective, we typically hire in Q4 of the prior year, in the Q1 of the current year. So, sitting here today in August, we were very happy to have all of our quota carriers in at the conference being able to take advantage of some of the training we’re able to put in front of them. So, we’re fully staffed.

And then one of these newer sales reps, when did they start to hit kind of their, yield kind of full productivity, is it the third or fourth quarter of the upcoming fiscal year or is it earlier?

It certainly depends on the start date, because we obviously can start bringing them on as early as the start of fourth quarter. But we generally try to think about it in terms of really takes six months before we start seeing decent levels of productivity. And then from a full year perspective, it's probably another quarter before on a run rate basis they're at – the full first year productivity that we expect them at.

Okay. And just my final question. Peter, in terms of acquiring a reseller, there is a benefit to gross margins on the recurring side but just remind us is there any kind of impact on the top line or there is no impact?

There is no impact on the top line.

Thanks guys.

Thanks Terry.

Our next question comes from the line of Nandan Amladi with Deutsche Bank. Your line is open.

Hi, thanks for taking my question. So, I might have asked this before on the last call, but since you came public and you have more of a public presence now, is there any change in the size of your typical customer? And also in the regional presence that you've had obviously started out in the Midwest and that's where you have your highest density today?

So, let me start with the second part first. Our history obviously is the company started here in the Chicago land area. We really started expanding nationally, call it six or so years ago. And today we've got at least small presence in most of the major markets across the countries. So, as we add new business, it's happening more outside of the Chicago land area than it is here. And so, from a new business perspective, I think you can absolutely think about it as a national presence from that perspective. So, the number of customers in the Illinois marketplace has shrunk on a percentage basis simply because of that national expansion strategy. From a customer size perspective, we generally stick to our target market of 20 to a thousand employees. In an employment growth environment, when you look at GDP numbers, we do typically get a little bit of increase in our customer base as they add employees a very small percentage when you think about growing 40% and customers adding 1% or 2% of employees. It does slightly increase the average size but not materially, no change in our target market focus.

Okay. And then, second question on Ultimate's recent earnings call, they talked about creating a new segment to address the 300 to 500 employee market. Historically they've played in the two tiers about that. What is your response or perhaps any commentary you might have heard from your prospects about whether you might end up competing with them?

I think I would echo, what I said last time in terms of Ultimate, which is, we don’t run into them very often in the marketplace at all. They were for a time period if we go back several years, they were in the 100 plus marketplace and we didn’t see them frankly very much in the marketplace then. It's a very large market opportunity. So, they certainly can have some success in that strategic account marketplace. But we think that we will continue to have success in our core market segment even where it overlaps with them, we take a different approach to the marketplace from the sales and marketing perspective, we think from an implementation perspective and from a product design perspective. And so, when we compete with them, we think that we can be successful but we really don’t see them at all in the marketplace and although that might increase a little bit with this new focus, we don’t think it will be material.

Thank you.

(Operator Instructions) Our next question comes from the line of Pat Walravens from JMP. Your line is open.

Thank you, it's Peter Lowry in for Pat. Can you talk about whether you’re seeing a more favorable or perhaps even accelerating demand environment for SaaS payroll solutions overall? And then, if you are maybe you could talk about what your take is on what might be driving there?

I think, if you go back, several years ago, I talked about our national expansion starting almost six years ago. At that point in time, I would tell you that the sales force was doing a lot of market education in terms of what are the benefits of a cloud-based provider, SaaS based payroll offering. Today, we do not have to do a lot of market education. In many cases, that some of the first questions that we’re hearing from the prospects. And I think the market is becoming much more educated in terms of a SaaS alternative to traditional payroll providers. The other part of your question is, are we seeing increased momentum there? I would tell you that it's been that way for probably the last couple of years. So, it's incrementally becoming much more acceptable. But I think a lot of that shift has occurred in from a knowledge perspective. Now clearly many of the clients have not made this shift to a SaaS provider. And that’s obviously why we’re very excited about the opportunity in front of us because we don’t have to spend the time educating them. We just have to spend the time telling them why Paylocity is the best cloud-based alternative as they evaluate options in the market.

Okay. And then, can you talk about – it sounds like you’re very much in the land - part of your land expend strategy, but sort of when - if there is some sort of time period when you might see a shift more towards your expense side?

Well, I think when you look at less than 2% penetration rate into this large market opportunity, we would really like to land as long as we can. We think that getting customers onto the platform is the number one priority at this stage of our growth cycle. So we will stay focused on that. At the same time as we see demand in our customer base, we want to be able to react and provide them the products that we’re looking for. We just haven’t come up with a targeted effort to really push that simply because we want to use all of our implementations resources to make sure that that new client experience is a great one and one that allows us to retain the customers at the rates that we have, which has been greater than 92% revenue retention. So, at this point in time, we will stay focused on the land, part of the land and expand strategy.

Okay. Thank you and nice quarter.

Thank you very much.

Our next question comes from the line of Michael Turn with Needham & Company. Your line is open. Michael Turn - Needham & Company: Thanks very much. Hey guys.

Hey, how're you doing? Michael Turn - Needham & Company: Doing well. Couple of questions for you. First of all, obviously the acquisition of reseller benefits gross margin, I was wondering if there is kind of any other benefits on top of some of the cost of sales benefits that you’re seeing here. And then I didn't know this was at all kind of a hugely relevant question here, but in terms of when you’re thinking about why one reseller acquired versus the other. Was there any rational behind kind of people ordering that you're doing?

Okay. So, let's just talk about the benefits associated with the reseller acquisition. So, the cost of the resellers was paid back as part of our cost of revenue. And so as we purchase that reseller those cost go away and that gives us a lift in gross margin, and we completed that acquisition in May. So, we will obviously continue with that lift in gross margin through on a go forward basis and obviously through this fiscal year. So, think about it in the couple 100 basis point range. And that's really the benefit associated with it. In terms of why we chose to do one or the other, we had an option, based off the IPO and that option had certain notice provisions and periods associated with it. So, that was the only reseller that we had the option to acquire during fiscal year 2014. We have the option to acquire the second reseller in fiscal year 2015. We have not made any decisions around timing of that nor have we started some of those conversations, that option does not even become available till fall of this year. Michael Turn - Needham & Company: Got you, okay. And then in terms of kind of the headcount that you picked up there, was that part of your quota sales headcount that you shared with us?

Yeah. So, it was a great market. One of things that we did is expanded the head count in that marketplace beyond what was there at the time. And we interviewed the people who were in that market at the time we make a decisions on whether we want to bring them onboard but regardless we - the Southern California market was the one that we took over and we've added to that marketplace and that is included in the total 126 headcount. Michael Turn - Needham & Company: Got you, okay. And then, I know that you’ve mentioned several times that there is no real change here in your target market focus and unit count is pretty steady on a year-over-year basis but I was just curious, could you share with us what are some of the larger deals that you're doing in the quarter maybe in terms of headcount. And is this kind of upper bound at all trending in any upper direction? Thanks.

Yeah, sure. So, I think it is true. We absolutely stick to our core target market 20 to a thousand employees. When do we go over a thousand employees. Well, first of all it doesn’t happen that frequently and one of the things we’ll point to is, we don’t have any customers that represent any concentration of revenue, which is certainly a proved point to that. It does happen on occasion. When it happens is, you might get an organization let's say with 2000 employees and maybe they have 100 employees in 20 different locations and they operate like 2,100 employee company. When that's the case, we may have a product that is a perfect fit for that organization. And that's something that we evaluate very carefully. We don't just let our sales force evaluate that. We have a sales engineering team. We get operations involved and if that happens to be a fit, that's when we bring those types of customers on. That customer above 1000 employees have not increased on a percentage basis, overtime we’ve been pretty consistent. So, I would call it opportunistic about that 1000 employees. Michael Turn - Needham & Company: Great, thanks guys.

And I'm not showing any further questions at this time. I'd like to turn the call back to Steve, for closing remarks.

I'd love to thank all of you for taking the time today for the call. And I will actually be presenting with Peter at the Deutsche Bank Technology Conference in Las Vegas. So, for anybody on the call who would like to meet with us, we would love the opportunity to share our story and look forward to talking with you in the coming months. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a good day.