Jacob Smith

Jacob Smith asked how Paylocity's retention rate, consistently around 92%, might evolve over the next few years with cross-selling of finance and IT offerings and greater AI adoption. He also inquired if there's early evidence that multi-module customers have different churn characteristics than single-product customers.

Answer

Toby Williams, CEO and President, highlighted that Paylocity's retention rate has been north of 92% for over a decade, attributing this to the value added through broader platform adoption coupled with their strong service model. He emphasized that adding more value to clients through a comprehensive platform and dedicated service teams is the recipe for maintaining high retention rates, reflecting the overall value proposition.

Jacob Smith from Guggenheim Securities asked about Paylocity's strategy to win new referral business through the broker channel, particularly in light of market consolidation and competitors who directly compete with brokers. He inquired about efforts at both leadership and individual producer levels to deepen trust and capitalize on potential disruption in the channel.

Answer

Steve Beauchamp, Executive Chairman, explained that the broker channel is a key part of Paylocity's go-to-market, driven by individual relationships between salespeople and brokers. He noted that the channel consistently contributes over 25% of new business and has been a factor in overperformance, with less competition in the market presenting a clear opportunity that Paylocity is actively pursuing.

Jacob Smith asked about Paylocity's strategy to win new referral business in the broker channel, especially amid consolidation, leveraging its broker-neutral stance. He also inquired about the benefit seen from any disruption in the channel.

Answer

Executive Chairman Steve Beauchamp explained that the broker channel is a key go-to-market motion, driven by individual relationships between salespeople and brokers, sharing leads and getting referrals. He noted that Paylocity consistently exceeds 25% of new business from this channel, which has contributed to overperformance. Mr. Beauchamp added that less competition in the channel is seen as an opportunity, contributing to the strong fiscal year start.

Jacob Smith asked about the ramp and consistency of IWant usage, seeking to understand its stickiness and if users maintain engagement beyond initial use. He also inquired about gross margins, asking if Paycom is optimizing GPU usage to handle millions of queries and if this could extend the runway of GPU investments.

Answer

Chad Richison, President and CEO, explained that IWant is a quicker way to access data and information, often the only way for certain users like executives, and eliminates the need for training. He noted that new employees predominantly use it, and Paycom is not seeing users abandon it after initial use. Regarding GPUs, Mr. Richison stated that Paycom performs daily analysis and optimization, including load testing for simultaneous inquiries, to manage capacity efficiently. He reiterated the strategic decision to purchase and operate their own GPUs for control and cost-effectiveness, expecting this investment to be a key differentiator.

Jacob Smith asked about the ramp and consistency of Iwant usage, seeking insights into its stickiness and whether users maintain engagement or revert to old habits. He also inquired about gross margins, efforts to optimize GPU usage, and how this might extend the runway of GPU investments given the millions of queries.

Answer

Chad Richison, President and CEO of Paycom Software, explained that Iwant provides quicker data access, is the sole method for some users (like C-suite), and eliminates navigation/training. He noted new employees predominantly use it and they are not observing abandonment, though users learned to phrase queries effectively. Regarding GPUs, Mr. Richison discussed daily analysis and optimization efforts, including load testing for simultaneous inquiries. He reiterated the strategic decision to purchase their own GPUs for control and cost-effectiveness, emphasizing it was a significant, planned investment for 100% client coverage.