Ladies and gentlemen, thank you for standing by. And welcome to the Paylocity Holding Corp. First Quarter 2022 Fiscal Year Results Conference Call. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. I would now like to turn the conference over to your speaker for today, Mr. Ryan Glenn. You may begin.

Good afternoon and welcome to Paylocity’s earnings results call for the first quarter of fiscal 2022, which ended on September 30, 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. 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 Exchange Commission, 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. 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 on our press release, which is located on our website at paylocity.com, under the Investor Relations tab, and filed with the Securities and Exchange Commission. Please note that we are unable to reconcile any forward-looking non-GAAP financial measures to their directly comparable GAAP financial measures, because the information which is needed to complete a reconciliation is unavailable at this time without unreasonable effort. In regard to our upcoming conference schedule. Toby and I will be virtually attending the Stiefel Midwest One-on-One Conference on November 11, and the Needham SaaS One-on-One Conference on November 18. Steve and Toby will also be attending the Needham Growth Conference on January 11. 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 first quarter fiscal 2022 earnings call. Our value proposition of providing the most modern and comprehensive product suite in the industry continued to resonate with clients and prospects in Q1, as we exceeded the top-end of our guidance by $6.2 million. Total Revenue was $181.7 million or 33.8% growth over Q1 of last year, which represents our highest quarterly growth since Q1 of fiscal 2017. And recurring revenue and other grew 34.1% as a result of strong execution across all areas of our target market. Our sales team also continues to build off the strong momentum they had to end fiscal 2021 And we are well positioned heading into the hardest selling season. Adjusted EBITDA for the first quarter was $46.1 million or 25.4% margin and exceeded the top-end of our guidance by $5.3 million. While we are pleased with our ability to drive efficiencies within our business, we also continue to see our award-winning and remote-friendly culture resonating with prospective employees. And we plan to take advantage of our strong hiring momentum throughout FY 2022, as we continue staffing across all areas of the business, including sales, marketing, R&D and operations. In October, we held our Annual Elevate Client Conference, where we virtually hosted a record number of attendees for the second year in a row. We highlighted a number of new product enhancements across our suite, including more tightly-integrated machine-learning capabilities within time and labor for new scheduling features, like open shift claiming, schedule rules and forecasting hours. We’ve also looked to digitize and improve our clients’ manual processes through expanded workflow capabilities, that also serve as the foundation for the new Paylocity COVID Tracker, enabling clients to collect their employees vaccination status, and…

Thanks, Steve. Total Revenue for Q1 was $181.7 million, an increase of 33.8% 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 $6.2 million above the top-end of our revenue guidance. Our adjusted gross profit was 70.5% for Q1 versus 69.4% in Q1 of last fiscal, as we continue to focus on scaling our operational costs. We continue to make significant investments in research and development. And 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 16.1%, when compared to the first 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 first quarter as we continue to leverage both virtual and in-person broker meetings and events, to help us maintain the strong source of referrals. On a non-GAAP basis, sales and marketing expenses were 24.1% of revenue in Q1. 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 13.1% of revenue in the first quarter versus 13.6% in the same period last year. We remain focused on consistently leveraging our G&A expenses on an annual basis. Our adjusted EBITDA was $46.1 million or 25.4% of revenue for the quarter, which exceeded our guidance by $5.3 million…

Thank you. Our first question comes from the line of Scott Berg with Needham. Your line is open.

Hi, everyone. Thanks for taking my questions. Congrats on a strong quarter. I just got a couple here. First of all, Steve, we obviously attended the customer conference, love some of the new product innovations that are coming out there. But specifically, in collaboration, collaboration is a piece of functionality within HR, which is, I feel like it was tried 10 years ago. And the functionality you’re building in right now seems to be kind of a repeat of something that maybe didn’t work quite as well. Why is that collaboration functionality well suited today? And how you want to sell the product going forward? Thank you.

Yeah, it’s a good question, Scott. So I think if you take a step back and you really think about how work has changed significantly over the last couple years, and where it’s going long-term, then I think it’s really an opportunity to reimagine so many of the HR processes that have kind of been the same for so long. And I would just first point to the use of video that we have, and the traction that we’re getting with video. I don’t think anyone would have imagined 3 years ago, that video would become an integral part of how we kind of communicate and connect within an HR platform. But we’ve had great success seeing both our clients use it, and then embed it in different parts of the processes. So, including a job description, a video job description in recruiting is a great way to attract talent as an example. We think about that collaboration opportunity the same way, which ultimately, there is going to be a lot of part to the HR process that need to be reinvented. And it’s going to require things like chat, document sharing and editing, communicating, connecting with people across the organization. And as remote work or hybrid models become more popular, we think that this is the time where that capability will be both useful and be really valuable to our customers.

Got it, helpful. And then, from a follow-up perspective, Toby, when we look at results in the quarter, all the headlines, numbers look really, really strong. So, how should we think about the Blue Marble impact of the quarter? I get the less than 2% and my math tells me that’s $16 million or less for the year. So the guide up was obviously quite strong, but any color on maybe the impact in the quarter?

Yeah, I mean, I think your rough math that you’re describing is right from an overall, in terms of how we’ve described it for the year and in terms of the timing within the quarter. I mean, we only got a month of contribution from Blue Marble. So I think that’s how you think about it.

Excellent. Congrats on the good quarter. Thanks again, guys.

Thank you.

Thanks.

Thank you. Our next question comes from the line of Brad Reback with Stifel. Your line is open.

Great. Thanks very much. Steve, as we think about collaboration and employee engagement becoming a bigger and bigger part of the story, can you give us any sense of what daily active usage has looked like on the platform? This quarter versus a year ago, how that’s expanded?

Yeah, so I would tell you that we definitely have seen overall usage on the platform expand pretty significantly. And it’s expanded beyond the traditional transactions. So, yes, a lot of people use to look at their checks. They request time off. They’re punching in. They’re doing that in a mobile environment. Some of them are doing on desktop. And so those activities really have increased over time, and that has become more popular as the self-service environment for employees. It’s just naturally expected in the marketplace. But what we’ve really seen in terms of the increase is coming from other places. So community is a great example, where our clients are actually using it to create announcements. They’re creating question-and-answer groups that employees are interacting with and using. And we’re actually finding that not just the HR department is necessarily the ones that are content creators. And so, different groups are being created across the organization, sharing employees’ stories and creating connections. And so, community has driven an increase in that daily active user stat. Learning management also has increased significantly. Surveys has been more popular over the last 18 months, just harder to collect feedback from your employees. And you can do that in a nice automated fashion. So we’ve been really pleased with the increase. It’s certainly been much higher than what you’d see in terms of overall number of employees on our platform or clients.

Excellent. Thanks very much.

Thank you. Our next question comes from the line of Bryan Bergin from Cowen. Your line is open.

Hi, good afternoon. Thank you. Question on sales-force productivity, can you give us a sense on how that’s progressed relative to your expectations and versus the pre-pandemic level?

Sure, yeah. So pre-pandemic, I think, as you recall, we were really seeing a nice improvement in sales-force productivity. In fact, we had called out just prior to the pandemic, the quarter prior we had actually. That year, we had gone up almost 40%, in terms of overall new kind of sales growth. Obviously, that kind of took a dip throughout the pandemic. I think the last earnings call we talked about we’re approaching this pre-pandemic levels. And so, I think that trend continues. So we’re continuing to make improvement on that. We’re very much starting to see this type of momentum that we had pre-pandemic from a sales-force perspective, which is one of the reasons that we called out, you’re going to see us really take advantage of the momentum we have in the market and continue to accelerate hiring. We still do most of our hiring in the spring for sales folks, but we try to get as many people as we can on board early. And so, we’re going to continue to hire not only there but across the board because of the momentum we’re seeing.

Okay. And then, Toby, a question on margin as far as some of the puts and takes there. Just first on one 1Q outperformance on the gross margin, can you talk about the tailwinds that drove that? And then, as we roll forward to 2Q and look at EBITDA margin, it is implied to be down year-over-year versus the strong 1Q outperformance. I heard the 40 bps for Blue margin. But aside from that, can you just comment on some of the drivers to consider in 2Q and kind of the balance of the year?

Yeah, I think just building off what Steve said a second ago, I mean, you saw stronger – we’ve seen higher momentum through last quarter and through this quarter ticked up a little bit towards the back half of the quarter. And we expect that to continue into second quarter. So I think in terms of the puts and takes, Q1 to Q2 on margin, that’s probably the biggest story. It’s just timing. I don’t think there is any – there is no onetime items or something like that to think about it. It’s really just the timing of bringing in some of the hiring that Steve was talking about. We have seen great momentum across every area of the business from that perspective. And we expect that to continue, to continue to invest in that way, as Steve just referenced. So I think that’s really the story from a put and take perspective quarter to quarter.

Just to clarify, is that throughout the income statement, is gross margin remaining strong? Or does that also see a little bit of pressure?

Well, I mean, I think we would expect, from a gross margin standpoint, I think, we’re pleased with what we saw coming into Q1 year-over-year. And, I think, we – based on how we’ve guided from a revenue and from adjusted EBITDA perspective, I think we feel pretty good about how we’re set up for the rest of the year on gross margin.

Yeah, I think the theme here is, the 34% was a great result for us and we’ve got to make sure we hire across the board to be able to both service the customers that we’re bringing on at an accelerated rate. And at the same time, we’re excited about the momentum. So we actually want to make those investments, because we’re seeing good return on the investments were making in product and sales and marketing. And so, when you look at the EBITDA guide, it is different than it was in first quarter, because we want to take advantage of the momentum that we’ve got in front of us.

Okay. Thanks for all the color.

Thank you. Our next question comes from the line of Terry Tillman with Truist Securities. Your line is open

Hey, everyone, this is on behalf of Terry. Just following-up on a couple of earlier questions, we’re curious about community, premium video, recognition solutions. And really, what type of traction are you seeing with that, and any identifiable returns or increased engagement that customers can report a document?

It’s a great question. So a couple of things, I would say is, we’re really happy with the penetration rates that we’re seeing so community is a free product. So that’s really more driven by the utilization comments I made earlier. We’re seeing clients really use it to connect to their employees, that would be more difficult than an environment where they have people in hybrid work environments, or even completely remote. I mean, we’re seeing people kind of create groups, some of them are workgroups, where they’re trying to get work done, some of them are just culture driving groups, where they’re trying to share stories. And so, that’s really been powerful. From a video perspective, we’re really pleased with the attach rate that we’ve got in terms of new sales. So that has been faster than we would have expected, we believe that that certainly has been helped just by the increased comfort level with overall video capabilities. And we see a ton of video announcements is probably the biggest use case where instead of me sending out an e-mail or a post in community, I’m actually going to record a video for all the employees, or for even subset or groups of employees, and then that’s going to get much better interaction. So we see videos get much greater views in our platform than if we just post with text, people comment, they react, and they’re able to share that content more effectively. And so that’s probably the most common use case that we see with video.

That’s great. Thank you. Congrats on the great quarter.

Thank you. Our next question comes from the line of Mark Marcon with Baird. Your line is open.

Hey, good afternoon. Let me add my congratulations, really, to the quarter. Wondering if you can talk a little bit about what you’re seeing in terms of both ends of the spectrum in terms of your client base. You’ve had a move to go down market, also a number of the features that you’ve added, certainly would appeal to larger clients. So what are you seeing just in terms of from a bookings perspective and a pipeline perspective across the range of the various clients that you could end up getting? And what’s the impact with regards to adding Blue Marble those capabilities? Where does that impact you the most from a spectrum perspective? And then, I had a follow-up.

Okay. So, I think, what I’m really excited about is we’re seeing momentum across all market segments. And so, our customers that are below 50 employees, we’re seeing both good unit traction, and them actually also buying more product. Our core market really for us, we always think about that as kind of the 50 to 500 space, same thing really good penetration of some of our newer products and adoption of some of the more modern tools, which I think is also driving some of the new business momentum in there from a differentiation perspective. And then, lastly, your point is a fair one, in terms of some of the newer things that we’ve added over time to appeal a little bit more to some of the larger customers that has definitely made us more competitive in that space. We’ve called that out a couple times as being a strong part of the market for us. Many times we see customers up to 5,000 employees adopt us as the vendor of choice. And I think to the second part of your question, Blue Marble definitely plays a little bit stronger in the over 100 employee segment. So where clients are get sophisticated enough where they might have a small number of employees in different parts of the world. And it does also create some differentiation in terms of our ability to simplify managing more global employees. And we also believe that that trend will continue over time, as obviously we move past the pandemic state and there’s more mobility around the world, and there’s talent shortage here in the U.S., I think more and more companies are certainly looking abroad. And so, we do think that that will be a relevant solution across our segment with a little bit more natural interest in the upper end of our market.

That’s great. And then, can you talk a little bit about some of the new modules and improvements that you introduced at the conference? It sounds like the time and attendance and scheduling rules that that incorporate, AI and ML are certainly going to be a beneficial COVID tracking is obviously in the news today. How are you thinking about those things and what they could end up adding?

Yeah, so I would tell you, there’s a few concepts in there. So one is really about transparency and control that you’re trying to give back to the employee, and so when you think of the scheduling capabilities, they want to be able to post shifts that they maybe don’t want to take, they want to pick up extra shifts. It’s really about putting that control back in the employees’ hands and giving them very much a gig like experience, which a lot of our customers are trying to figure out how to do. And then the more intelligence you can put behind that in many ways, the more comfortable a customer can be to make sure that they have the right people in the right shifts at the right time. So that’s certainly a key theme that we are driving across the platform with scheduling being a good example of that. It also delivers interesting insights back to them. So you’re not spending your time running reports. And so, we’re going to continue to do that across the platform. The second theme, I would just call it is really the ability to do workflows and automate so many different types of experience. And the COVID tracker is a great example. And, I think, one of the unique parts of our solution is, yes, you can collect vaccination status, you can use a survey like capability to get in front of each employee, have them upload their vaccine cards. But if you have a subset of your workforce that you need to test on a weekly basis, is completely automated, it automatically send out on the frequency that you want. It’ll automatically prompt the employee to collect the test results. And so, we see a lot of opportunities like that with workflows and fillable forms to be able to automate so many of the things that our customers have had to do manually. So…

How do these modules impact the customer, the PEPY?

Yeah, it’s a great question. So I would say that, right now, they’re all differentiation at this point in time. We do see longer term, there are some opportunities around workflows as we build that solution out further to potentially be incremental. We have not necessarily done that yet. We use COVID tracker to really kind of introduce the capabilities, which we are going to include for free for our customers. And I’d say the same thing with the scheduling enhancements longer term, there’s some opportunities where we could continue to enhance that. But at this point in time, their value added.

Great, thank you.

Thank you. Our next question comes from the line of Pat Walravens with JMP Securities. Your line is open. Check to see, if you’re on mute. Pat, are you there? I’m not getting a response. Our next question comes from the line of Brian Peterson with Raymond James. Your line is open.

Hey, this is Chase dialing on for Brian. Thanks for taking the question. Just curious how you guys are seeing demand for the core product, whereas kind of the whole suite, and then just more broadly, how are you guys seeing the switching environment? Are we back to pre-pandemic levels yet? Thanks.

Yeah, I think, overall, we’ve been obviously pretty happy with the revenue growth, we were able to post, the market starting to feel a little bit more like it did pre-pandemic, where there’s certainly a normal course, where a customer is going to have certain needs from an HCM perspective. They’re going to go to the market. They’re going to evaluate. Typically, a handful of providers and choose the best one. That activity was definitely a little bit lower during the pandemic. And so we’re kind of seeing pretty normal level of activity, very much akin to what we saw a couple years ago.

Okay. Thanks.

Thank you. Our next question comes from the line of Samad Samana with Jefferies. Your line is open.

Hi, good evening. Thanks for taking our questions. Steve, I have a question for you that that we’ve been getting from investors. And I think it’s an interesting one, which is when we think about the video offering and versus maybe our own daily lives, and this makes me think about Paylocity, more broadly, when a lot of us come to work, we had to start in either Microsoft Office or in either Outlook or Bloomberg Terminal. But, it seems like your customers are increasingly maybe starting today inside of Paylocity, whether it’s in the communities or for getting content from their employers. Are you seeing that as kind of maybe gaining traction? Is the core starting point for productivity workers on your install base? Is that a good way to think about it?

Well, I think, where I would start from is the challenge that we heard from HR departments, when we started to imagine what community might be from a product perspective, as they were largely e-mailing their employees. And if they had a subset of their employees that were, as you mentioned, on a Bloomberg terminal or in a Slack channel, it wasn’t all of their employees. And so they didn’t have a tool, either an e-mail that would actually reach every single one of their employees. And so for us, that’s kind of where it starts, which is you’ve got an HR team that instead of sending out a weekly or monthly newsletter, they actually are doing videos and posts and reacting to comments from employees and getting kind of real time engagement with employees. And so that kind of announcement capability, and then you get all the analytics behind it in terms of how many people have interacted with it, and you can share it and you can follow people. That is really where it’s all kind of started. I don’t know, if I would say we’re at the point yet where people are starting their day there. They’re definitely spending a lot more time there, you get a nice notification on your phone, you can click on that, you can see a message from the HR team or from the CEO. The second thing I would say to you is, we’re now starting to see not just the HR team use that. So it could be a sales team that has a group of sales folks, and they use that to post the results or they use that to make announcements. And so this idea of it being a more engaging alternative to e-mail for our clients for all company type of communication, Q&A groups, culture groups, diversity, equity and inclusion groups, that’s where we’re seeing the most traction today.

Great. That kind of leads me to maybe a follow up question, which is, is it making it easier, as you see more of that and more people interacting in the system in terms of getting additional module usage and showing maybe the ROI of add-on modules as you bring them into the fold?

Yeah, I think that’s a great point. So one of the reasons, I think, surveys has been up pretty significantly, first of all, it’s an environment where it’s harder to get feedback. But secondly, you can really embed this into the way you use community. So whether you’re doing polls, whether you’re launching surveys, and the ability to actually analyze that data quickly, and then be able to then communicate back out to the organization in terms of what the results might look like from that survey. So that’s an example where we do think the community is absolutely driven higher utilization of surveys, it’s driven higher utilization of videos. And I would even say it’s driven higher utilization of LMS, because there’s so much of that content end up coming at you in videos, you start thinking about, well, how am I going to train my employees? I can’t send announcements in videos, but then I’m training them with PowerPoint, I’ve got to have a multimedia type experience for that. And so, we definitely have seen increases in utilization in all those products.

Correct. Thanks for that feedback. That was a really solid quarter. Yeah.

Thank you.

Thank you. Our next question comes from the line of Matt Pfau with William Blair. Your line is open.

Hey, guys, thanks for taking my questions, and congrats as well, for me. I wanted to just ask about the challenging labor market and both in terms of how that’s impacting employment levels within your customer base, as well as if it’s impacting demand for any parts of your suite? Thanks.

Sure. So I think a lot of our customers would tell you this has been the most challenging hiring environment and employee retention environment that they’ve seen, we’ve heard that kind of loud and clear in terms of customer challenges. And so, I don’t think that would be a surprise to anybody, I do think that it does raise the importance of what an HR team is doing for your organization, it becomes very strategic, you’ve got to be able to find the talent that can drive your business objectives. And, I think, HR being part of those boardroom conversations, and being more strategic is become very important for a lot of customers today. And, I believe that that certainly then translate directly to what are the tools that the HR team is actually using to be able to kind of engage with employees? What are the tools they’re using to recruit people? And how are they differentiating themselves from the rest of the organization. The second trend I would tell you is on the retention side, which is you’ve got to be able to find a way to really connect with employees, and into engage with employees into collaborate and hear their voice. And more and more customers are also prioritizing tools like that. And this to me is just when you think about the future of work changing, pandemic accelerated a lot of these trends. And so we’re just seeing our value proposition of having the most modern platform with all these not only HCM capabilities to automate, but also all of these modern workforce tools that really engage with our customers. And, I tell you, that’s one of the big reasons we’re seeing the success and acceleration of revenue growth.

Got it. Got it. That’s helpful. And in terms of employment levels, yeah, I think last quarter, you called out that you had seen improvement throughout the quarter, did that continue in the first quarter? Or did those improvements kind of level off?

Yeah, we’ve continued to see improvement on a month-to-month basis through the quarter, and then into first month of this quarter. So I would say from a magnitude perspective, the magnitude has decreased in terms of what you’re seeing on a month-over-month basis, but directional improvement has continued since last quarter in each month of Q1. So…

Great. Thanks, guys. I appreciate it.

Thank you. Our next question comes from the line of Siti Panigrahi with Mizuho. Your line is open.

Hey, guys, this is actually Matt Diamond on Siti’s behalf. I’ll echo that congratulations on the solid print. I’m very curious about the plans for Blue Marble, we can take away that there’s less than 2% of impact in fiscal 2022. How do you feel so far about the integration and what could we expect for that trajectory as the year unfolds?

Sure. So, I think, our philosophy around any prior M&A that we’ve done. We really like to take the time to really fully integrate that solution. And so from a user experience perspective, when you use video on our platform, it would be just like we built it. And that video team kind of contributes to the overall usage across the platform in a way that is seamless to the user. And we’re taking our time and doing the same thing when we look at the collaboration capabilities with same page. And so we’re going to take the same approach with Blue Marble. We do have some mutual customers today, there’s already a level of integration with the platform, but we’ve got big plans to be able to fully integrate that. So from a user perspective, it would very much be a seamless experience. And that obviously takes some time to do that. And it’s important for us to be able to do that, right? We do believe, though, as we do that, and that will happen in stages and steps, that solution will become even better in the marketplace, and create differentiation for any of our customers, where we’re going to be able to handle all the U.S. HCM needs, but also then provide them a much better and differentiated global experience. So think about that happening in stages. And with a little bit of patience, we’re going to be in a situation where from a user perspective, they will be able to navigate and use functionality seamlessly across our entire platform.

So it sounds like they’re really not going to put something out there that for lack of a better phrase, half-baked. It’s really a matter of making sure all the Is are dotted and Ts are crossed that we shouldn’t expect anything in the first half of next year.

Yeah, I think, historically, it often will take us something in the kind of 12 to 18 month range. We haven’t made all the assessment here that could be in that range, it could be a little bit longer. We do have an existing integration. So that’s automatically going to be available to clients. So we don’t have to wait for us to be able to try to continue to add customers. And, I think, you’ll see improvements more incrementally here, because that solution is already in market. And we already have integration. But I think at a macro level for us to really integrate the solution, it’s probably going to fit into the type of time windows that we’ve had historically.

All sensible plans. Thanks so much, guys. Super helpful.

Thank you. Our next question comes from the line of Alex Zukin with Wolfe Research. Your line is open.

Hey there, this is Allan Verkhovski on for Alex Zukin. Thanks for taking the question and congrats on the strong results there. What are you guys seeing from a demand perspective, but it’s changed over the last few quarters given you’re seeing accelerating growth and larger outperformance versus the quarter? And I’ve just got a quick follow-up.

Sure. Well, I think your question asked about over the last few quarters. I mean, so obviously we call out the tailwind you get from more employees on the platform. So that has less than this past quarter. But if you look at it over the last few quarters that’s certainly has been a nice tailwind. I think the second part is the demand environment has started to return to pre-COVID levels. So when we look at the new business revenue generated by our salesforce, we’re really happy at the momentum in the salesforce. So, we’re obviously adding customers, salesforce productivities getting back to that pre-pandemic level, that’s a huge driver. And then, I think, the third thing is our clients are buying more products when they’re coming on board. And so a lot of the new more modern features are really resonating in the market. And we’re seeing the uptick, in terms of that attach rate of those products increase. And, I think, those 3 things in combination really have contributed to the accelerated revenue growth.

Understood. That’s really helpful. And lastly, how should we think about the incremental TAM opportunity and incremental competitive environment given the Blue Marble acquisition?

Sure, I would say, obviously, we’ve got a huge TAM already in a pretty small amount of penetration. So I don’t think, we really did Blue Marble, because we felt like that was going to be a trend where people would have more interim national employees over time, it would be a point of differentiation to drive our solution. It’s a fair question. There’s definitely some incremental TAM, that’s there. But I’d go back to the answer I just gave, which is going to take us some time to integrate this solution. And we want to make sure that we’ve got the right product in the market for now, if a customer actually has international employees, we can actually handle them in an integrated fashion. But we probably won’t look to really try to size that TAM for you until we get further along in our product roadmap and deliver a more integrated offering.

Got it. Well, thanks, again, and congrats on the strong results.

Thank you.

Thank you. Our next question comes from the line of Robert Simmons with D.A. Davidson. Your line is open.

Great. Thanks for taking my questions. So sequential growth in the quarter was very strong, but guidance for 2Q sequential is relatively low. Where there’s some large one-time revenue items in the quarter beyond that level?

No, there weren’t – other than the dynamics that Steve has described, there was no one-time items. And by that, I mean, we did continue to see come back in terms of employees in the platform, you’ve compared in magnitude to prior quarter. But that was still a tailwind. And then just sales execution, strong demand environment. I mean, those were the largest contributors to, I think, the outperformance and the strong performance we saw in the quarter, so there are no other one-time items. And, I think, in terms of the guide for next quarter, I think it sort of fits in line with how from a philosophy standpoint, for sure. But I think in terms of how we would have initially guided for this quarter and others. So…

Okay. Great. And then, can you give any color on your, where your new business is coming from by industry, geographies, as a client or anything else?

Well, I think the interesting thing about our businesses is truly horizontal. So we don’t necessarily market by vertical, or differently in one geography versus the next. And so, we’re now seeing traction, it really on a national level. I think, as the pandemic was in more of a recovery state, which obviously, there’s some element of that still that exists today, we would see different geographies being coming back at a faster rate than others, we don’t really see that anymore. It’s much more consistent demand across the board, where our sales teams having strong pipeline activity in terms of appointments, obviously, closing the business and driving it. So there’s really no call out for us by vertical market or geography we’re seeing across the board strength.

Great. Thank you.

Thank you. Our next question comes from the line of Arvind Ramnani with Piper Sandler. Your line is open. Check to see if you’re on mute. Arvind, your line is…

Yes, sorry, I was on mute. Hey, congrats on a good quarter. I wanted to ask about product development kind of roadmap and not so much the next 6 months, but more in the medium term, the next 2 or 3 years. And if you can bucket that into essentially kind of completely new functionality, what do you have on the roadmap, and then also from that capability perspective, that’s going to enhance your current offerings?

Sure. Yeah, so I think we started this journey, even pre-pandemic, where we really wanted to re-imagine all the HR processes in a much more modern fashion. And part of that is, if you think of Gen Z entering the workforce, and really being the first digitally native generation in the workforce. They’re just not going to think about things the same way. And so we started a journey several years ago with things like community, and then adding video that we just felt like we had to modernize that. I think, we’re still in the very early innings of that. And you start to imagine a world, where, “Hey, if I’m onboarding myself to a brand new company, maybe I want to meet who my teammates are ahead of time, maybe I need to be able to learn a little bit of background from them, maybe I get up to speed quicker in terms of what they’re already working on.” Workflows is another great example where there are so many opportunities in workflows to help clients automate. So we see a really great opportunity in front of us. And what I would tell you is we learn from how our clients use the platform. And so we look at what they’re doing. We see the problems that they’re trying to solve, and we get great ideas to be able to continue to innovate and add to solution. So there is not necessarily a problem in terms of finding the great opportunities. It’s a matter of us being able to make sure that we can deliver against those and continue to innovate, which we’ve had a great track record of doing.

Terrific. And just a point of clarification. I know, when you started community, it was more like an add-on feature, as opposed to something that is currently going to be able to charge for. Is that kind of status quo? Or has that changed in terms of ability to monetize?

Well, I would say we do kind of. In some ways you get the monetization by differentiation. But to discreetly monetize that has never been our strategy. We really think that the ability for HR teams to communicate and connect with every single employee is just part of the core value proposition you get with Paylocity. We have indicated over time, we will look at maybe more advanced features for monetization, that’s still the plan, but nothing necessarily that is immediately on the horizon that we’ve announced yet.

Okay, terrific. And then, just one last follow-up on this. Some of your competitors kind of talked about essentially on-demand pay. Let’s talk about kind of this kind of self-service. Are those areas where you all are sort of seeing interest from your client-base or not so much yet?

Well, we were actually one of the first to market with an on-demand pay solution. So any employee on our client or any employee on our platform whose client subscribes to that service can simply go into their mobile phone, they can look at their pay from gross to net in real time throughout the payroll period, and they can request part of that pay to be automatically put into their bank account. And that’s something that we’ve had out there for a long time. It’s been growing nicely for us. I think we’ve tried to temper the expectations around that, because it has been more gradual than really exponential. But we got great feedback from our clients, great feedback from the employees who are using that service. And it has been a nice competitive differentiator in the market.

Yeah, great. Sorry, just one last one man. When you say gradual, you mean gradual in terms of engagement or gradual in terms of the revenue for you all.

Gradual in terms of employee usage, because clients have to turn it on. And they have to be comfortable that the hours in the application, that they have a process to make sure those hours are correct. But we’re seeing a nice uptick in that and people are getting more comfortable with it. And then gradual in terms of, therefore gradual in terms of the number of employees that are there for requesting that advance in their pay, and then the revenues tied to that same comment. So we definitely have revenue associated with that. And in many cases, it’s usually a small fee that the employee is paying at the time that they transfer the dollars. On the other hand, the employer can cover that for them.

Great, thank you very much.

Thank you. Our next question comes from the line of Pat Walravens with JMP Securities. Your line is open.

Thanks so much. This is Joey Marincek on for Pat. So, sorry, the last one on the acquisition. But what about Blue Marble stood out the most to you? And then second, we’ve been getting this question a lot from investors, but what would you say are the key differentiators between you and the other monitoring cloud solutions? Thank you.

Yeah, so I think on the first thing, it starts with the trend that we started to see more of our clients have international employees and look for help in terms of ways to be able to manage those employees and get those employees paid. So that was increasing gradually over time. And then, as we started to think about the future state, and as the world opens back up, and as we see talent shortages, we felt like this was going to continue to grow over time, and look like a great opportunity. It was an existing partner that we already had integration with. So we had familiarity there. And there is also scarcity of assets in that space. And we thought that it was unique capabilities. And so, we’re really excited to be able to bring that on board. And we’ll invest in that over time and integrate the solutions, as I discussed earlier. In terms of the biggest point of differentiation, it really comes down to what we continue to say, we’ve got the most modern solutions in the marketplace. And the features that we have are unique, that go beyond just simply automating payroll and HR functions, but it also allows our clients to communicate, collaborate and connect with their employees and drive their culture and make sure that they’re able to attract and retain the talent that they need. And that ultimately is the value proposition that we’re offering in the market.

Super helpful. Thank you, guys. Congrats.

Thank you. I’m showing no further questions in the queue. I will now like to turn the call back over to management for closing remarks.

Great. Well, I appreciate all of your interest in Paylocity. And of course, all the questions that you’ve got. And as usual, I’d love to be able to take the opportunity to thank our more than 4,000 people for, obviously, a really challenging couple of years, but for a lot of hard work that have been put in to be able to produce the results that we are able to share with you today. So hope everyone has a great evening.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participation. You may now disconnect. Everyone have a wonderful day.