Q3 2022 Paylocity Holding Corp Earnings Call
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Good afternoon, everyone. Thank you for standing by and welcome to be lots of D. Q3 F Y 20 twenty-two earnings conference call.
I would now like to hand conference over to Mister Ryan Gwen Chief Financial Officer.
Good afternoon, and welcome to pay lots of these earnings results call for the third quarter of fiscal 22, which ended on March 31st 2022, I'm, Ryan Glenn Chief Financial Officer Enjoining me on the call today are see Beauchamp and Toby Williams co C E O as a philosophy today, we will be discussing the results announced in our press release issued after them.
<unk> closed the 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 contained 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 president information and are subject to risks and uncertainties that can cause actual results to differ materially from those projected in a forward looking statements for additional information. Please refer to our filings with the Securities and Exchange Commission for.
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 was a reconciliation schedule detailing. These results currently available in our press release, which is located on our website at <unk> Dot com under the Investor Relations tab and filed with the Securities and Exchange Commission.
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Please note that we are unable to reconcile any forward looking non-GAAP financial measure to their directly comparable GAAP financial measure 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 attend the J P. Morgan Global Tech conference in Boston on May 25th I will turn the Jeffrey software conference in San Francisco on June 2nd Toby and I will tend to stifle cross sector insight conference in Boston on June 7th and the Bird Global Consumer Tech and services Conference in New York on June 8th and Steve.
[noise] attend the William Blair growth stock conference in Chicago also on Junius. Please let me know if you'd like to schedule a time with us at any of these events with that let me turn the call over to Steve. Thanks.
Thanks, Ryan and thanks to all of you for joining us on our third quarter of fiscal 22 earnings call. The momentum from a record setting selling season continued throughout the third quarter with strong sales execution across our target market Q3 revenue growth was 32.2 per cent, marking our third straight quarter with more than 30 per cent revenue growth as are differentiated value prop.
Physician of providing the most modern software in the industry continues to resonate in the marketplace. In particular are products focused on the modern workforce are resonating with clients and prospects as they navigate how to best connect communicate and collaborate with their employees and an increasingly digital world.
The momentum from the digital transformation is reflected in improving attach rates across our suite of modern workforce solutions, including community, which is seen usage among our client base increased significantly since its initial launch two years ago, culminating in 1 million monthly active users in January morever, the number of discussion groups and public pier.
Recognition through the use of impression has increased every month, while employer announcements post and reactions have increased by nearly 60% over the last 12 months. This level of increase usage by our clients demonstrates community the ability to help companies more readily engage and connect with their disperse workforces.
To that end in April we announced the release of community, plus which introduces new functionality, including one to one and one day, many chat functionality the ability to create edit and share files and the automated edition of employees to team groups as they joined the company. We believe the addition of these new premium features will drive even greater utilization of community.
An increase modern workforce index scores, which have been shown to improve employee sentiment productivity and profitability. The launch of community plus will increase our P. E P y from $420 to $440.
Our commitment to product development also continues to be recognized in the market with velocity once again being ranked among the G. Two best software products and best HR products list for the third consecutive year. Additionally, Pelosity was named an overall leader for all 12 H R. I S categories in the G. Two spring 20 twenty-two grid rapport.
Art as well as being recognized as a leader across our target market.
I would now like to pass the call to Toby to provide further color on the border. Thanks, Steve throughout Q3, we continued to see strong performance from our sales teams and robust demand environment. Also is Steve highlighted are differentiated value proposition of providing the most modern software in the industry continues to gain traction and has resulted in increased product detach rates.
With both new and existing clients.
Are sustained investment and R&D has created products purpose built for the modern workforce, while providing our sales teams the ability to distinguish pelosity from competitors during the sales process.
Strong sales performance and operational execution helped drive our total revenue to 246 million or 32.2% growth over Q3 of last year meeting the top end of our guidance by 3 million as we continued to build momentum across our target markets.
We also continue to be pleased with our success and go to market hiring and attracting talented sales reps and we are very confident in our ability to hit our staffing targets to start next fiscal year as we head into the heart of sales staffing season. Additionally, channel referrals, primarily from benefit brokers and financial advisors. Once again represented more than 25 per cent of <unk>.
New business for the third quarter as we continue to leverage both virtual and in person broker meetings and events to help us maintain the strong source of referrals.
We will continue investing to support channel referrals and in digital marketing efforts, both of which have driven increased top of sales funnel activity and productivity this fiscal year.
Are strong revenue outperformance, coupled with continued operational execution helped drive adjusted EBITDA of $85.7 million or 34.8% margin, which exceeded the top end of our guidance by 5.7 million.
Our award winning in remote friendly culture continues to resonate with prospective employees and we expect to continue investing in head count across all areas of the business as we close out the year to ensure we are well positioned to drive future growth and scale the business in fiscal twenty-three and beyond.
Are strong culture has also been recognized externally as Pelosity was recently named to the Forbes 20, twenty-two America's best mid sized employers and best employers for diversity less a.
Big Thanks to our more than 5000 employees, who live in represent our values every single day and her were worked so hard to support our clients in Q3, I would now like to pass the call to Ryan to review the financial results in detail and provide updated fiscal 22 guidance.
Thanks, Toby total revenue for Q3 was $246 million, an increase of 32.2% with recurring and other revenue up 32.4% from the same period last year as Toby noted our sales team had another strong quarter and we were pleased to come in 5 million above the mid point of our two three guidance and to raise fiscal twenty-two revenue guidance by now.
<unk> 7 million at the midpoint, resulting in physical twenty-two guidance of 32% to 33% revenue growth.
We continue to make significant investments in research and development and understand our overall investment R&D is important to combine both what we expense and what we capitalize on a dollar basis are year over year investment in total R&D increased by 28.8% when compared to the third quarter of fiscal 21, and we remain focus on making incremental investments and R&D.
D. As we continue to build out to pay off the platform to serve the needs of the modern workforce.
In regards to our go go to market activities on a non-GAAP basis sales and marketing expense was 19.3% of revenue in two three and we also remain focus on making incremental investments in this area of the business to drive growth going forward.
On a non-GAAP basis, G&A cost or 12.2% of revenue in the third quarter versus 11.9% in the same period last year.
Our adjusted EBITDA was 85.7 million or 34.8% of revenue for the quarter, which exceeded our guidance by 5.7 million at the top and and we remain committed to progressing towards our adjusted EBITDA target of 30% to 35% overtime brief.
<unk> our GAAP results two three gross profit was $170.4 million operating income was $47.4 million and net income was $34.8 million.
In regards to the balance sheet, we ended the quarter with cash cash equivalents and invested corporate cache of 96.5 million.
In regard to client held funds in interest income or average daily balance a client funds with 2.4 billion in Q3, and we are estimating the average daily balance will be approximately 2.2 billion in queue for with an average yield of approximately five to 10 basis points realized in the fourth quarter. Additionally, please note that our guidance does include the impasse.
<unk> of recent movement and the fed funds rate and although we expect impact to be more material in future periods. We do not expect this to have a material impact on two four results given the recency of the increases in interest rates.
Overall, we're pleased with our performance in Q3, which included another strong quarter for ourselves team will also identifying opportunities to demonstrate scale and operational in G&A costs.
With that said I'd like to provide our financial guidance for Q4 and full fiscal 22 for.
For the fourth quarter of fiscal twenty-two total revenue is expected to be in the range of $215.5 million to $219.5 million or approximately 30 per cent growth over fourth quarter of fiscal 21 total revenue.
And adjusted EBITDA is expected to be in the range of $49.5 million to $52.5 million.
And for fiscal year 22, total revenue is expected to be in the range of 839.2 million to $843.2 million or approximately 32 to 33 per cent growth over fiscal 21.
And adjusted EBITDA is expected to be in the range of 228 million to 231 million, implying an adjusted EBITDA margin of approximately 27.3%, which represents leverage of 60 basis points versus last fiscal year as we've driven scale across our business to more than offset the roughly 50 basis points of dilutive impact of the blue marble.
Cloud snap acquisitions.
In conclusion, we are pleased with our queue through results and we're pleased to raise physical 22 guidance to 33 per cent revenue growth at the top and which in combination with the adjusted EBITDA margin represented in our full your guide achieves the rule 60 for fiscal 22 <unk>.
<unk>, we are now ready for questions.
To ask a question you would need to press star one iPhone.
To withdraw your question just press the pound key.
<unk> component of Kunai roster.
Our first question comes from the <unk>.
From Neato your line is open.
Scott Your line is open.
Sorry about that I hate it when I'm talking to myself on mute sorry, guys [laughter]. Thanks, everyone for taking my questions and congrats to Toby and Ryan them, there or promotions mid quarter I guess, a couple of things here is just wanted to kind of talk about your.
Mark attraction and they'll last quarter, you talked about expanding the top end up your target market above a thousand employees.
Yeah, you've been there historically this is just kind of a formal announcement did you see anything in the corner you know maybe that was beneficial in yourselves efforts.
After this quote unquote formal announcement or was it kind of you know I guess operation just normal there.
Yeah, I think I would call it business as usual, we had really strong performance across the entire sales force. So you know the team that's focused on some of the larger clients as we call them out in the past is having some really good momentum in terms of bring it on customers about 500 employees and that even in that 1000 to 5000 market already and and that was continued ma'am.
<unk> within in the quarter, but overall really pleased with seeing the productivity boost that we're getting in the Salesforce. When you look at it on a year over year basis.
Got it helpful. And then from a follow up question I don't know if Super Toby wants to take this is I know historically over the last several years, we've talked about your customers by more and more modules over time in the.
The reasons are many today, it's difficult to hire the all the environment certainly more difficult than what it's been you know over the last several years engagements.
Engagements a big deal, but if you look at your product suite today kind of a two part question is one how penetrated as your average customer with your modules today and then two how <unk>. How do you think that his friend had maybe over the last three or four years <unk>, maybe at 50 per cent today than it was 25 per cent before you any viewpoint on that will be all sir Thank you yeah.
So we've added a lot of product obviously since going public we're now more than double the time that we went public in terms of product and now at $440 per employee per year. We give you the number of clients in roughly the average sized customer every year. So you can kind of calculate the actual realize P. P Y when you take the recurring revenue and so when you do that <unk>.
Math, we've historically been in the you know maybe early on days below 50 per cent, but more recent years, we'd been above that 50 per cent in that 50 to 60 per cent realized potential of the total available product to sell and so as we add product. We also increase attach right and we've kind of stayed in that same range over the last three years, which.
Means the new products that we're adding are attaching at similar rates to the prior products that we have in the market and then of course, we're driving incremental attach right even on those prior product so something like recruiting that we've had in the market for a long time as up year over year pretty nicely Uhm, just add something like video, which is only two years old is is up even more.
More on a percentage basis, and so we've had that natural rhythm of attaching the new products at a nice rate, but still driving higher tax rates from the products that we've had in market for a longer period of time.
Scott that's helpful. Congrats on a good quarter make sure. Thank you.
Alright next question will come from the.
Peterson from Raymond James Your line is open.
Congratulant. Thanks for taking my question. So I wanted to start on community, it's great to hear on the adoption.
Steve <unk> personally offering are things that maybe I wouldn't traditionally C as kind of within that H B M. Swim Lane and I know you guys are a product driven company I'm curious you know given the adoption that you'd see in that product does that change kind of the product roadmap into other potential areas over the long term.
Yeah. That's a good question. So I think the way we see it is this is a challenging time to be leading in H R organization and you know not only is it a very tight labor market, but you've got different dynamics in the workforce in terms of work from home trends that are increasing rapidly different demands from G. N Z as they entered the workforce.
So H R departments are really being stretched and they're being asked to communicate collaborate and connect with employees in a different way because ultimately they're trying to drive attraction and retention of talent to help grow their business and so the traditional compliance oriented very R. O Y driven things are still important to them and we have all of those things, but we are seeing increased demand for new <unk>.
Innovative ways to leverage a more modern platform to connect with employees and so the more recent example is if you're a brand new employee on our platform now with community plus and you don't know anybody on the team. The first thing you're gonna get a notification that says come meet your team you can go through the profiles of all the people on your team you can answer some ice breaking questions you can get some backgrounds of those individuals and that.
It's a much more modern scenario, particularly in a remote environment. So it's examples like that that we're seeing really gain traction that as you said go beyond the traditional compliance kind of R. O Y automation driven message and extend into a much more modern experience that we think can drive significant benefits when it comes to retaining talent and.
Ultimately getting our customers to be successful growing their business.
Right No. That's that's that's great to hear and then maybe just on the go to market side as we think about the world maybe returning to more of a kind of an in person dynamic does that influence.
Worst of net new leads or productivity I guess, you know maybe gotten the normal to the virtual engagement strategy here I'll just I'd just be curious you know how do you think that could change as you go back to they'd be more in person.
Hey, Brian is Toby I mean, I I think.
If you think about are two two different motions on this one is the sales force field Salesforce and then the other is relative to.
Referrals from brokers as an example, which continue to be north of of of 25 per cent for for us for the quarter M. They are getting back into the motion of being live with clients certainly that's that's preferred and we we we certainly think that there's productivity.
Productivity advantages with that Uhm teams started to get back into his things have opened up over the last couple of quarters started to get back into live discussions with clients when that works for clients and same thing with brokers and broker that's M. I.
I think continue the productivity momentum that we have across the teams and we certainly think that that helps and continuing to get more and more into that as we sort of work our way out of the pandemic.
Understood. Thanks, guys.
Thank you.
Alright question will come the line, Brian Bergen Cowan Your line is open.
Hi, good afternoon, Thank you and congrats on the promotion skies.
First question I've got is on your community. So just curious if you can give us a sense of a mix of clients that that war using community and how you're thinking about the potential for those clients upgrading to community plot. So any any different I guess assumptions around adoption around this product or attach pace versus <unk> product experienced just.
Giving you have effectively a premium version out there ready right.
Right right, Yeah. So I think just for clarification. So all of our clients had free version of community available to them and we've been really successful at driving higher Utilizations over time. The feature set and then we listened to the customers and we've added capabilities to that free version, which I think is help make a successful we felt like we were at the point, where we've seen enough.
Utilization across the client base that adding some of these premium features would have benefit to the customers and drive a and attach right. So I thought it was worth making the investment and so we're early and that we just launched the product we have as we all we do have early adopters on the product and we have life client feedback from those early adopters and that is trending <unk>.
Really well, we'll do the same thing as we've done with every other product will listen to our customers will add features and capabilities, but if you go back and you look at the success. We had with video most recently video quickly attached at a fairly strong right with new customers and then we really started to have some success selling it back to the client base until we're hoping for similar results with.
Brand new product.
Okay.
And then a follow up on it I'm kind of just inflation pricing and you just talk about your managing I guess internally he's outside levels wage inflation and then on the other side of it from a pricing standpoint have you considered pricing increases into the base can you just talk about it.
Methodology and approach around that.
Yeah. So I think from a from a price increase standpoint, we did and we talked about this before while we hadn't done price increase during the early part of the pandemic. We did look at it as we came through this year and what I would say is <unk>.
Well, we certainly are aware of an observant of the inflationary environment we.
Did go back to a price increase this cycle through and I would say on a relative basis consistent with what with what we have done in other years I would not say there was any you know sort of outsized Lina and this year. Despite recognized as an as an as an inflationary environment and I think the one thing I would say that's the external P. C asked about from.
Internal perspective, what I would say is we've still continued to have I think a high degree of success in our staffing efforts across the business. We are just coming in to the heart of of sales staffing season, we feel really good about our momentum and that so far and we I think feel equally good about the momentum that we've had and continued success.
We've had a staffing across the business and what we absolutely recognized as a pretty tough labor market I think we we've definitely seen some pressure there from from a wage perspective, but you know I think we feel pretty good about our success so far.
Okay, great. Thank you.
Our next question will come from the line of <unk> from Jeffries can may begin.
Hey, this is driven breasts on for some Steve Toby running congrats on the strong results. So many are apprehensive about the potential economic slowdown in smaller companies are often impacted before enterprises are so downmarket demand are you guys seeing any changes are either at the time it takes to close the deal or maybe like delays in decision making.
The demand environment has been really strong for us this year as evidenced by the results in probably the commentary around sales you know not only are we seeing great sales momentum in terms of driving catch rates in the products, but we're all seem social seeing strong demand just in terms of activity level, so whether it's <unk>.
First time appointments number of deals that were onboarding all of that has been really positive and so when we look at things on a year over year basis, where we're happy with the growth we're definitely back to the like pre pandemic strong demand environment. No question about that and we're actually driving productivity increases year over year and so from a recent C perspective, we see no change in those dynamics at.
At all.
Awesome, that's great to hear and then a quick follow up on community. So usage has long been the topic of the call and Judy plus seems to make a lot of sense you called out the I may use that so January kind of as the world has opened up post homework raw and Rachel posted January have you seen any impact at usage, either as a holder budget discharge.
Yeah. So I think embedded in the question is is a thesis that maybe there was some pandemic activity driving utilization I would tell you that utilization continues to be really strong you know from that January peak number that we provided the last several months and you know we're continuing to add features were reacting to quiet.
Feedback, we think we're adding more value over time. So you know one of the things that we're finding is even if you're kind of in the office. You know this is a mobile first environment. So a lot of that activity is driven right off your mobile phone and so the fact that maybe they're not working at home and the fact that they're commuting back to work a little bit more you, we don't necessarily see that as drawing away from the <unk>.
Value that we're offering in fact, you know the more you're kind of moving around sometimes the more we can offer value by making the information available to you in the palm of your hands and so uhm, we've seen continued improvement in utilization overtime.
Great again, congrats on a strong quarter.
Thanks.
Our next question comes from the line of Terry Tillman from choice. Your line is open.
Oh, great. Thanks appreciate taking the questions. This is Robert <unk>, just a couple Super quick ones from Bank first one M&A any update on M&A strategy or anything changed in terms of what you're thinking of private markets.
No I wouldn't call any particular update there I mean, I think we you know you you've you've seen what we've done over the last few years been very focused from from product and technology roadmap advancement standpoint M and you know, giving us the the sort of the ground add things like video and ultimately some of the features that we've brought him with community plus.
But I I don't think there's any any change there from either direction or strategy or or activity standpoint.
Great. Appreciate it and then just just one quick follow up Uhm on macros. So you know of course, no. One has a crystal ball, but broadly speaking how are you thinking about potentially front running a potential downturn in terms of maintaining stickiness with customers.
Yeah, well, we've been through many cycles in the past right. So we don't know what this cycle is gonna look like so what I, what I always say is think about with it that G. D. P number looks like an a a growth environment you know gdp's growing three or 4%, we get the benefit we get his pace per grows a little bit, but it doesn't grow up three or four per cent.
It's you know have that roughly and then in declining environment, you're gonna see similar dynamics of G. D. P declines we saw this even with Covid, obviously, COVID-19 accelerated but we had a lower number of employees on the platform that is the primary impact the secondary impact is typically interest rates. This is different because obviously, we benefit if interest rates rise so if there.
Some slowdown in interest rates rise that kind of offsets. It we have not historically seen that affect demand in fact, it when you get to times, where there's a little bit less resources for those H R departments, they become more likely to look at what solutions are available in the market. They are looking for value, that's ultimately going to deliver them, they're looking for some of that automation.
<unk> and connection that we're offering them and so when we look at historical downturns. It's been largely is there potentially slightly fewer employees on the platform what happens with interest rate environment, but we've been able to sell through that in the past and we would anticipate having success in the future.
That's super helpful. Thanks.
Our next question will come from the line up Brad Rebecca from Stifel May begin.
Great. Thanks, very much Toby I think you mentioned during your prepared remarks, some commentary around your digital marketing efforts I'm wondering as you look at those leads versus other leagues in the funnel are those meaningfully better and the clothes retire or is it similar across all yearly. Thanks.
Yeah sure I mean, I think if you. So if you go back to how we would think about Lee Jan overall, I mean, I think you've got the buckets of Rep. January leads you certainly have the the channel and broker generated leaves again that was north of 25 per cent first get on the quarter and then you have us leaning I think a little more heavily.
Over the last few quarters, and probably the last year or so into digital and I think we're really pleased with the progress that we've seen as we get more maturity. There would that's an area that will continue to invest in and I think some from a productivity standpoint, certainly goes to helping <unk> productivity I think we're overall pretty pleased with the progress that we've seen they're both in terms.
Of the you know the clothes rates that we're seeing with those and I think our ability to invest more there as we look forward.
And just add colors that Brad I think channel leads we loved the channel. These because that's a recommendation and so we typically have great success in terms of close race was there. So by no means do we plan on taking any focus away from channels, that's been consistent part of our performance.
But as Toby pointed out we look at other lead sources and replacing some of those other resources with you know digital leads definitely has an opportunity for improved productivity and we've seen some of that and the results that we've been posting.
Awesome. Thank you very much.
Alright next questions online on that song from William Blair give me begin.
Hey, guys. Thanks for taking my questions and nice results wanted to follow up on Blue marble, maybe just an update on how that acquisition is progressing and then I I don't think blue marble offers employer of record services, but you know is that an area that has vinnie of interest to you because.
It seems like that that market's pretty robust right now.
Sure. So so blue marble does not offer employ a record services. There really are providing aggregation services. So that if you want to pay your employees in multiple countries. They aggregate all of that data to provide a software layer in between and then connect with in country providers. So that hasn't changed that's always been their value proposition, we've seen some nice traction <unk>.
By really connecting to go to market teams much stronger and really looking at you know lead generation for that team. So that that's been successful we are still in the relatively earlier stages around the technology integration. So that is progressing well, we see that is still a future opportunity to deliver a much more.
Integrated Sweet and obviously you know the trends around clients potentially having international employees continues to grow so the market as a whole as you mentioned, it's a growth market. So that worked out and about and we've achieved the objectives that we had in front of us, but we are still in the throes of the technology integration.
You know when when we have an acquisition, we Wanna build it such that from a user perspective, it's a single singular platform and the experience is completely unified and so that takes a little bit longer. It takes time, but that's always been our approach and we're in the process of doing that with blue marble, which we think will deliver an even better client experienced then we're doing today.
Perfect. Thanks, guys I appreciate it.
Our next question will come from the line I'm, Alex a ZIP code and Wolf Research you may begin.
Hey, guys. This is Ryan on for Alex just a quick one on the guide so for for queue, you called for 30% on a really tough cop from four Q last year, which is incredibly impressive. So I'm just wondering how we should think about bookings momentum from here given the tougher comps going forward.
Sure. So I think you know take to your point feel really good about about the guy didn't having now had three straight quarters of 30 per cent plus revenue growth and guiding here to the high twenties to 30 per cent for the fourth quarter and I think that's really driven off of all of the momentum you heard about them in the prepared remarks, so a record selling season, some really good momentum in.
And Ah the early parts of our queue for product attach rates, increasing so I feel good about that guide you know obviously, there's still a bit of a tailwind from the employees on the platform waited a COVID-19 that will start to go away as you get into physical twenty-three, but feel like there's a lot of momentum and certainly feel good about the fourth quarter Guide and then the.
The large race to the fiscal year as well.
Great. Thank you so much.
Our next question will come from the line of command Mcveigh from Credit Suisse Alright is open.
Great. Thanks, so much in let me in like congratulations as well Hey is there any way to think about what the potential revenue impact from the two acquisitions are as you kinda allocate them across your existing client base, so kind of not not necessarily what you acquired but she has implemented across the <unk>.
Instant client base, how that can scaling contribute you know based on blue marble and so on and so forth.
Sure Sorry, I think <unk> did you think about the commentary we provided to date, particularly on blue marble the impact is less than 2% to this fiscal year from from revenue standpoint, obviously as you mentioned in the guide there's a headwind from from profitability just Steve's point earlier still working through integrating that.
That product into the broader sweet and have not yet added that to be over our product portfolio, but as we can see those integration efforts I think we'll come back with with more color and then I think I'm on cloud snap. If you think about that that was really a technology acquisition, that's going to allow us to really streamline the ability to integrate with third party applications, which is something that we already do.
Today, but it's a low code.
Kind of No-code environment, where you can do that via configuration, rather than you know a whole bunch of technical work on the back end and so that's less of a revenue opportunity and certainly more of an accelerator around our overall data integration strategy.
It's Super helpful. And then can you just remind as soon as he said this I apologize how are we thinking about you should proceed to an incremental step up and float I know you may not necessarily next quarter, but.
Is that kind of reinvestment in the business or just how how should we think about that particularly as it seems like this little scale it and of course to come.
Sure. So I think the way that we think about that is certainly over time, there is likely upside to revenue in as as you're aware, that's very high profit a revenue as well and benefit there to profitability too I think the way that we would think about that as is likely you know a reasonable portion of that would flow to profit, but certainly, we're we're making incremental and <unk>.
<unk> R and D in in sales and marketing and I think we will look hard at at those growth driving initiatives that we can we can reinvest a portion of those in but no question I think over time is as you see rates continue to rise there. There's some level upside, but we'll think about reinvesting a portion of those for sure.
Thank you so much.
Our next question comes from the line Robert Timmins from D. A Davidson your line is open.
Okay. This is lucky on for Robert I was wondering if you guys can maybe quantify form filing fees, how that looked this year versus last year and in the longer trend.
Sure So I I'd characterize it as as I'm nearing normal levels, but but certainly not not fully back to pre COVID-19 levels uhm, absolutely up on a percentage basis from what we experienced last year, which was kind of mid single digits growth, So certainly better but not fully back to pre COVID-19 levels of of growth that we would typically obscene.
Helpful. Thank you and then and then could you maybe it was it was mentioned previously to some some rumblings in in the macro environment has that almost though Ben.
<unk> for you guys is the conversation shifted obviously, you're still seeing strong demand has that almost been good in terms of people trying to get a head of okay. Yeah.
Yeah, you know I think when you think about our our marketplace or market I should say you know the average size customer 100 employees I'm not so sure that the you know the macro environment news drives their business in terms of you know how they operated on her feet on a street basis I think the broader trend that's been helpful to us as less macro and much more what's happening in H R U.
Remote work and and the demands of the workforce tight labor market those things I think it really made people look at their platforms and say I really need something that doesn't just do the basics, but really allows me to drive engagement connection and retention, which is a big part of the challenge and so I think that part certainly has been come a bigger part of the cons.
Location, but we really haven't seen any impact in terms of those you know appointments with customers and prospects that are really focused on the macro environment, they're typically focused on their micro business.
Thanks very much.
Once again, it's one one for any questions. Our next question comes from <unk>.
March.
Mark Martin from there you may begin.
Good afternoon, and let me add my congratulations.
Steve I just wanted to follow on the the last comment that you made you know clearly most small businesses are really focused on on the tightness of the labor market wage inflation cost pressures.
From if if we take a look at your tools like you know the modern workforce index <unk>.
Community.
You know some of your engagement tools can you talk a little <unk> and certainly your your your applicant tracking you know modules can you talk a little bit more about like how how important those are becoming to helping the clients and and you know providing added differentiated.
Value to those clients relative to.
To to some of the other alternatives that are out there.
Sure I think the conversations that we have with clients and prospects you know really making sure that they have the talent that they need to be able to not only grow their business, but sometimes just be able to handle the volume that's coming into their business is is really top of mind for customers and so if we have the ability to help them you know really engage with their employees.
In a way that makes their employees feel part of that company really get some attached to the company keeps them transfer parent with their communication that ultimately that organization benefits from lower turnover and when you benefit from lower turnover, you're not in the market looking for as many people you don't have the whole productivity lag from bringing new people on board and waiting for them to.
To come up to speed and so that whole concept really resonates with employers and they're willing to invest and sometimes make changes to their processes to really try to find a way to reduce that turnover because as we know with the great resignation turnovers kind of spiked across the board and that is definitely top of mine and we're able to show them with modern workforce indexed.
<unk> customers, who looked like you who might be in the same industry as you and similar size actually are getting different results leveraging our tools and that message is really resonating in the market place and I I think you know our push towards delivering the most modern solutions in the industry is probably one of the bigger drivers for the strong top line <unk>.
<unk>, we've gotten in the sales productivity we're seeing.
I really appreciate the comments on the shelves productivity can you talk about how it goes goes tools ended up Ah resonating in terms of impacting retention you know as you came through the you know that core November through February .
Yeah. So we typically update retention on an annual basis and we we typically give you kind of retention number I would tell you you know without you know necessarily being prepared to give you. The exact number we feel good about wherever attention is pretension has been strong last year was really strong from her attention year. This year continues to be really strong.
From a client retention perspective, and so you know we think the value that we're offering to our clients is producing the right results. Both from you know a revenue that were able to drive but also attack attach and finally, retaining the customers that we've got that.
Okay, Great and then can you just talk a little bit about what would the strong retention and the strong user ratings. You know how is that influencing you know pricing strategy you know as we're going through this inflationary environment, where you have an increased level of permission to race cars and then.
And and how should we think about that with regards to community plus how's the how's the pricing strategy there <unk>.
Sure. Okay. So I would tell you that we have not changed Toby talked about this earlier. So we have not changed our pricing strategy. We look at it on an annual basis. We've got some customers that are at discounts. We look at the price in the market. We looked at the features that we've added to that we we look at what's a fair price for those and then we do a nominal adjustment to price for some reasonable subset of our <unk>.
Customers not every customer gets a price increase every year. We we look at it the same way you know our view is yes. There is an inflationary environment, we've been able to manage you know that environment as you see our increases to the margin forecast and everything that we've been able to do so our goal is not to do anything outside the history from a pricing <unk>.
<unk> because as you know you've got to grow over the next year and you've got the potential to upset some clients during that transition and so we're kind of back to a normal pricing environment deliver more value, you'll get a little bit more out of that and it's helpful to us, but nothing out of the ordinary.
Great and then last question just.
You know with with your user ratings with your momentum into business and with your comfort in terms of you know work from home to what extent is that impacting the types of people that are you know trying to apply to to pay lost city and to and to join the team how would you.
Characterize the quality of the folks that you're you're currently reviewing as candidates to join the team.
Hey, Mark Tobey I mean, I I'd, probably build up my comments from from earlier, Yeah. I think we feel really good about our ability to attract talent in this market. We we all are saying, it's a tight labor market, but we've called out.
The last few earnings calls that we've been actively hiring across the business and including now as we get into the heart of sales staffing season more aggressively there and I think we're just you know we continue to be pleased with our ability to attract the right level of talent into the business as we're needing it and you know I think we've we've been really pleased with the success that we've been having.
<unk> and almost every roll across the company. So I think we certainly recognize that it's a tough labor market, but I think we we've been you know pretty.
Pretty happy that that are employment value prop is really resonating with with candidates in the market to feel good about it.
Great. Thank you so much.
<unk>.
And I'm not going any further questions in the queue I'd like to try and call back over to management for any closing remarks.
Excellent well I wanted to thank all of you for your interest and pay lots of you know of course, a big Thank you to the 5000 people that were able to produce such great results have a great evening.
This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
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