Sheldon McMeans

Sheldon McMeans, on for Raimo Lenschow, asked about learnings from past economic cycles and whether the company is adjusting its sales message to focus more on efficiency and the Office of the CFO.

Answer

Executive Chairman Steven Beauchamp stated that Paylocity's platform has always balanced employee engagement with operational efficiency. He noted that while the efficiency message can be emphasized more in uncertain times, the company is already well-equipped to address this and sees no need for a major change in its sales script, as the value proposition is strong in any market.

Sheldon McMeans, on for Raimo Lenshow, asked about engagement at the recent Elevate conference compared to last year and questioned if Airbase has a target 'sweet spot' by customer size that could help Paylocity move upmarket.

Answer

President and CEO Toby Williams reported that the Elevate conference was a success with increased attendance and broader role representation. Executive Chairman Steven Beauchamp explained that a key appeal of Airbase was its strong overlap with Paylocity's average customer size, providing a core near-term opportunity, with the potential to move upmarket over time as the product matures.

Sheldon McMeans from Barclays Capital asked if the success of Dayforce's 'twelve-to-one' system consolidation story is a cyclical trend driven by efficiency demands or a more structural shift caused by factors like AI highlighting the value of a single database.

Answer

Chairman & CEO David Ossip argued the demand for a single system is structural and has always existed. He stated that Dayforce's unique single-database architecture provides a strong cash IRR for customers through simplification and a fundamental advantage in leveraging AI. He believes the combination of this cash return and superior AI capabilities is driving the company's strong win rates and sales momentum, as competitors lack a similarly integrated data model.

Sheldon McMeans, on for Raimo Lenschow, asked for more context on the drivers behind the improved customer retention rates, questioning the influence of sales execution, AI solutions, and the macro environment. He also questioned the reasoning for an expected sequential ARR decline in Q3.

Answer

President and CEO Steve McMillan confirmed that the meaningful improvement in retention rates seen in H1 was expected to continue for the full year, moving past the outlier erosion of 2024. CFO John Ederer reiterated that the Q3 dynamic is due to a change in linearity; a bigger step-up in Q2 ARR growth will lead to a flatter Q3 before another step-up in Q4, but the company remains on track for its full-year total ARR goals.

Sheldon McMeans inquired about the current macroeconomic environment compared to the previous quarter, the impact of foreign exchange rates on Q1 results and full-year guidance, and initial customer feedback on the new consumption-based pricing model for agentic automation.

Answer

CFO & COO Ashim Gupta stated the macro environment remains variable, and the company has prudently adjusted its revenue linearity based on Q2 visibility. He noted that FX impact was minimal and assumptions for the year are materially unchanged. Founder & CEO Daniel Dines added that the initial reaction to the new pricing model is positive as it ties cost closer to adoption and simplifies business case creation for customers.

Sheldon McMeans, on for Raimo Lenschow, inquired about the potential for a consumption-based model in the federal sector to align monetization with value, and whether customers were delaying decisions to wait for Agentic AI to mature.

Answer

CEO Daniel Dines confirmed that their Document Understanding solution, used by customers like the IRS, is already consumption-based. He clarified that while there is some market confusion around AI, customers view UiPath's Agentic offerings as pragmatic and capable of delivering tangible value, much like their established unattended robots.