Kincaid

Kincaid asked for a breakdown of the 11% of revenue derived from AI solutions and details on how many LLM deals closed in the quarter compared to those that slipped.

Answer

Or Offer (CEO and Co-Founder, Similarweb) mentioned one or two smaller LLM deals closed with new players. He clarified that the 11% AI revenue is a bucket including Gen AI model sales to brands, AI chatbot partnerships (like Manus), and data for LLMs, representing multiple new revenue streams that are tailwinds for the year.

Kincaid from Citizens asked for specific examples of AI tools that Paylocity's sales representatives are using to automate parts of their go-to-market strategy. He also inquired if the contribution of the brokerage channel, which accounted for over 25% of new business in Q1, is at a desired level or if Paylocity aims for further growth in this area.

Answer

Steve Beauchamp, Executive Chairman, explained that Paylocity's approach to AI tools for sales reps is broad-based, focusing on automating daily processes across all go-to-market technology by leveraging available AI capabilities. Ryan Glenn, Chief Financial Officer, noted that the brokerage channel has consistently contributed over 25% of new business for more than a decade, expressing satisfaction with its Q1 performance and commitment to continued partnership.

An analyst from Citizens Bank asked about the incentive structure for Paylocity's sales representatives, specifically what they are compensated most for selling and how incentives might change with the launch of 'Paylocity for Finance'.

Answer

Executive Chairman Steve Beauchamp explained that sales reps are primarily incentivized by new recurring revenue. For 'Paylocity for Finance,' the model involves the general sales rep referring opportunities to a team of experts and receiving a portion of the commission, creating a strong incentive to cross-sell the high-value offering without changing the core compensation structure.

Kincaid asked about the growth of the $500,000+ customer cohort versus the dropping dollar-based net retention rate (DBNR), inquiring if DBNR is expected to reaccelerate at any point.

Answer

CFO Isabelle Winkles referred to the in-quarter DBNR trends, noting stabilization over the last seven months and a slight increase in Q2 compared to Q1, indicating a positive directional signal. She emphasized that while no specific guidance is provided, the moderation of downsell activity and overall business strength are encouraging factors.