Good day ladies and gentlemen, and welcome to the Paylocity’s Earnings Results Call for the Third Quarter of Fiscal 2014 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instruction will follow at that time. (Operator Instructions) As a reminder, this call has been recorded. I would now like to introduce your host for today’s conference Peter McGrail, CFO. Go ahead.

Good afternoon, welcome to Paylocity’s earnings call for the third quarter of 2014, which ended on March 31, 2014. I am Peter McGrail, CFO, and joining me on the call today is Steve Beauchamp, Chief Executive Officer of Paylocity. Today we will be discussing results announced in our press release issued after the market close. 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 in this discussion 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 with 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 prospectus and other Security and Exchange Commission filings for 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. There is reconciliation schedule detailing these results currently available in our press release, which is located on our website at www.paylocity.com under the Investor Relations tab and filed with the Securities and Exchange Commission. With that, let me turn the call over to Steve.

Thank you, Peter. I’d like to thank everyone for taking the time to join us for our first earnings call as a public company. We are here to discuss the strong results from our fiscal third quarter which ended March 31st. Peter will review our financial results in detail, but let me share few highlights upfront. Our third fiscal quarter is always our largest from a revenue and gross profit perspective due to the annual fees we charge for preparation of W-2s and another required tax filings that we process on behalf of our clients. Our third quarter is also very important quarter for on-boarding new business revenue and I’m pleased to report that demand for our cloud-based unified payroll and human capital management solutions was the primary driver of our strong revenue performance. With $33.8 million in total revenue, we posed 41% growth versus the same quarter last year. Recurring revenue, which represents 92% of our revenue grew 40% year-over-year. Our revenue retention rate continues to be in excess of 92% which is best in class for a Company targeting mid-sized firms. Our third fiscal quarter is the largest quarter for our sales team with many clients preferring to switch solutions at the start of our calendar year. Our sales organization delivered robust revenue growth from new clients. While we continue to invest aggressively in product development and sales and marketing, we also generated a small net profit for the quarter. Lastly, our balance sheet was strengthened by our IPO which raised net proceeds of over $82 million. Our total cash at the end of the third quarter was approximately $89 million. The increase in our resources provides us with the ability to execute against our strategic growth initiatives and fully capitalize on our market opportunity. Since this is…

Thanks Steve. Before reviewing our financial results in detail, it’s worth covering the key aspects of our financial model as this is our first call as a publicly traded company. Our recurring revenues have historically represented hundred 94% or more of our overall revenues and is comprised of two components. First, we have recurring fees attributable to our cloud-based payroll and HCM software solutions, which make up greater than 92% of our overall revenues annually. These recurring fees generally include per client base fees, in addition to our fee-based on the number of clients employed and the number of products a client uses. In our third fiscal quarter, we also charge fees attributable to our preparation of the W-2 documents in annual required tax filings on behalf of our client. Second, we also earn interest income on funds held for clients. We collect funds for employee payroll payments and related taxes in advance of remittance to employees and taxing authorities. Prior to remittance, we earn interest on these funds through financial institutions with which we have automated clearinghouse arrangements. Given the current interest rate environment, we do not derive a material amount of recurring revenue from this source, 1% to 2% of overall revenue. But we would obviously benefit from an increase in interest rates. Our non-recurring revenues are comprised of implementation services and other, and primarily consist of implementation fees charged to new clients for professional services provided to implement and configure our payroll and HCM solutions. These fees typically represent 5% to 6% of overall revenues on an annual basis. Implementations of our payroll solutions typically require only 3 to 6 weeks, at which point the new client’s first payroll is run using our solution. At this point our implementation services are completed, so we invoice and recognize…

(Operator Instructions) And our first question comes from Justin Furby from William Blair & Company. Please go ahead. Justin Furby - William Blair & Company : Steve, I guess to start off big picture, where do you think (indiscernible) five years from now, are they still growing and then obviously they’re not going away but which of these two do you think is better positioned to push back threats like you guys like OTN [ph] and some of the others out there?

Sure, it’s a good question. Obviously we get a majority of our business from those large payroll providers ADP and Paychex. I think you have to go back to what’s happening in the marketplace. There is definitely a shift in SaaS. I think as I said in my opening remarks, we used to really have to introduce the SaaS concept back five years ago. It’s becoming clear that customers are not only looking for SaaS but they’re really looking for a unified experience. We would anticipate that ADP or Paychex will continue to invest in their products and solutions and they certainly do understand this trend. I think also you can look at them historically and look at relatively low unit growth and really pushing additional products back to the customers. So I think that’s the main reason why we feel we need to continue to invest in our technology and continue to extend our technological leadership. If we do that that is what we think is the formula for success and that is what we’re focused on. And we anticipate them trying to react to that but we feel confident that if we do our part, we would be successful for the long term. Justin Furby - William Blair & Company: Okay. And obviously there has been quite a bit of discussion around OTN and potential partnerships with Paychex. I guess can you offer a couple of scenarios A. where they get a yield on with Paychex and then and the other scenario where they build out their own sales team around that? I guess I'm just curious how you think that would play out each of those two scenarios over the next couple of years as it relates to you guys.

Yeah, so scenario A I guess is a speculation in terms of potential partnership between Ultimate Software and Paychex. We think that our winning formula combines the technology that we have in the marketplace, the go to market strategy that we have with our sales force in a unique referral channel that we’ve built combined with really an implementation and service delivery process that is specifically tailored to meet the needs of medium size organizations. So from our perspective Ultimate Software is a great company and they’ve had great success, and obviously there is very little overlap in our current market focus with them today. Paychex, there would certainly be much more overlap but we believe all three of those things would have to replicated to really gain significant market share and we think we’ve got that advantage. And frankly the same holds true for scenario B. So if Ultimate were to expand in that space, they’ve got a very robust platform, clearly a SaaS platform and they’ve had great success and we have great respect for them as a company. We think we just have a different model in terms of go to market strategy, our delivery model in terms of service and implementation, and lastly our product is really tailored to that medium size organization. So we think we’re in a position to be successful if they chose scenario A and B and it’s a very large market opportunity. So we can frankly both have a level of success. Justin Furby - William Blair & Company: Okay. And then I think you are entering the quarter you start to staff up for the next fiscal year on the sales side. Can you give us a feel for sort of how you're thinking about rep addition? Similar to growth rates of last year or what’s your approach as you move into fiscal ‘15?

Yes, as you heard Peter say in the opening remarks we’re definitely squarely focused on the land part of our strategy and we think we have a big opportunity in front of us and our revenue growth is our primary focus. You are correct. We do start staffing in the last quarter towards our sales target for the prior years and we plan on providing you the number of quota caring reps annually. But obviously just giving you an update in terms of tracking towards that goal, I would tell you that we are in a good position towards that target and I look at it from a year-over-year basis and we’re roughly where we were last year and the year prior in terms of the number of people that we want relative to our goal by the end of the fiscal year.

Thank you. And our next question comes from Terry Tillman from Raymond James. Please go ahead.

I guess my first question, Steve, just relates to this broker referral network. In terms of the IPO proceeds and just investing for growth, how much of the investments are you allocating towards just further building out that referral network as opposed to just adding sales reps and just where are you in perspective of how many potential referral partners you could have versus where you are today?

Sure, it’s a great question. So I think the key areas of investment from the IPO from our perspective is one in a technology and R&D and Peter gave you some of the numbers in terms of the investments there. But the second area is really sales and marketing overall and part of that is definitely the broker channel. I would tell you that we have done very little marketing historically. Spend on marketing can take longer time to get the return on that but we see great opportunities to increase our levels of marketing towards that broker channel and we’re doing several things in that regard as we speak. So that certainly is a contributor of the year over year increase in terms of sales and marketing. I think the second part of your question is how many brokers do we deal with today and how big could that be. We get more than 25% of our business through the broker channel today and even though we’ve grown our sales force aggressively, we continue to exceed that 25% threshold this year. We deal with 100s of brokers across the country and there is no reason why that can’t be 1,000s over time.

Okay, and new relations [indiscernible]…

Sorry Terry [indiscernible]...

Okay, that nice, first the new solutions, the benefit analytic solution to help with ACA compliance. So at some point there might be some other additional functionalities, whether it’s on-boarding or some of the other capabilities. But maybe specifically a benefit, what kind of tap on the increase or what could you see from that product and should we think about that as being added in this year or is it just like 1.0 situation where it’s going to take some time to get a good ramp in adoption?

We’ve actually gotten great reception in the marketplace from both our customers and brokers. I would certainly call it as the 1.0 release for us in that category. And we don’t view this as a revenue list per se, we view this as an opportunity to continue to expand the channel. So it’s not something that we’re charging our customers for. We give them the analytics tool included in their package with us. And then brokers also have access to it. And so from our perspective the investment in the analytics tool really allows us to continue to grow that broker channel. So I wouldn’t look at it from a revenue lift perspective but more from a broker penetration over time.

Okay. And just my final one just relates to I think historically you have had about 100 plus employees per average customer. Anything different in terms of average size of new business being won in the quarter. Thank you.

Yes, we are very much focused on the medium size organization 22,000 are roughly the average side varied about that 100 mark. It’s moved around a little bit over time but not much frankly. It’s very consistent. We did not see anything different in the quarter that would move the needle on average size customers outside of that zone.

Thank you. And our next question comes from Nandan Amladi from Deutsche Bank. Please go ahead.

So Steve first question is how has going public in this past quarter changed your profile in the market both from a competitive perspective, how customers perceive you, and looking out to next year, how sales people perceive you?

Thanks Nandan, it’s a good question. I would say from a customer perspective, one of the things that we always thought in the marketplace is we didn’t have a whole lot of brand awareness and so when we got into the sales process we would certainly hear the objection who is Paylocity, I’m not familiar with your story. Some of our large public providers would try to spread fear and uncertainty potentially about us. That has become dramatically easier to handle, that objection. So that has been very helpful from a customer perspective in the sales process. And then from I think -- the second part of it is from an employee perspective. I think you mentioned sales people generally speaking. But certainly one of the key reasons to go public was having the ability to provide the right level of incentives and frankly the right level of investments overall into the company, and so I think you’ll see as continue to take advantage of that by investing further in sales and marketing and R&D then we have historically.

Thanks and a follow up again, this sort of partly was addressed earlier but little different slant on the question. As you look at sales expansion next year you also have the two reseller arrangements that you disclosed in the S1. So how do you balance that in relation to just your normal cadence of sales capacity expansion for next year?

Yes, so our two reseller relationships are assigned to very specific geographies and that I disclosed in kind of the opening remarks we’re in the process of acquiring one of those resellers now. We expect that to close by the end of May and so we will obviously start stacking up in most territories with our own sales head count, but we’ve already incorporated that into our total headcount goals for the year so we’re certainly actively looking at that. We need to complete that acquisition to really start that transition but our plan certainly will be to take that territory over and treat it just like any other major market across the country. The second reseller we don’t have the opportunity to acquire till first time next fiscal year. So that’s something that really isn’t -- isn’t something that we’re really concerned with at the moment.

Thank you and our next question comes from Pat Walravens from JMP Group.

Could you start by sharing with us just sort of what your philosophy is in terms of the rate at which you want to grow this business? You could grow it faster if you wanted to right? If you could just share that, I think that’d be really helpful.

Sure, Pat you know I think our philosophy -- I think if you look at our history it’s been, prior two fiscal years was 40% roughly on a growth rate this year through the first three quarters, similar growth rate as we just talked about. However I would tell you that most important to us is the quality delivery of implementation services, of ongoing services and then clearly of our products that we’re delivering to our customers. The implementation process is one that has to go right. Payroll has to be accurate every single time. So we would tell you that quality is really the governor on growth with less than 2% penetration into the total market opportunity. As you indicate we could invest more and try to grow faster but we’re not willing to do that if that is to compromise quality and we think we’ve been able to balance that at our historical growth rates in terms of quality. So that’s really how we think about that is number one, at what level of jobs can we deliver the right quality to our customers.

Okay and just because it is your first earnings call, I thought it would be helpful if you’d just comment briefly on who do you compete against the most frequently and why do you win.

Okay, sure, more than 50% of our new business comes from the traditional payroll outsourcers. So obviously the ADP and Paychex would be the two most common providers in that space. The number one reason that we win is really the SaaS technology that we have organically built and that is designed for the needs of the medium sized organization and it really starts with the fact that everybody has to have payroll. And we’ve taken that concept and expanded that into other modules, time and labor, talent management, human resources and benefits and it’s so much easier to get it from a unified platform than to buy these things individually or to use systems that have been acquired and stitched together. And so the product is really the number one reason that we win and then we back that up with great service which drives our 92% plus retention.

And then last one from me, when you acquired a reseller and then in the future if you acquire another one, will there be any impact on your guidance from that.

This is Peter McGrail. Yes so, the S1 in our quarterly report will show how much revenue -- has shown how much revenue we got from these resellers and how much we pay them. So as that comes -- so you’ll get from there what our majority of that we’ll get as gross margin lift as we move forward. So as we pull them in, we will build that gross margin lift into our guidance.

So, Pat we obviously are in the process of acquiring this reseller in the current quarter. It will impact in the current quarter. We’ve obviously included that in the guidance, when we give full year guidance next year we will have completed the one reseller. We will absolutely include that in the guidance. If there is some timing delta differences on the second reseller, we obviously would anticipate including what we know at that time.

And as that happens we will include it in our guidance.

Right, going forward.

Thank you. And our next question comes from Cash Begdan from Merrill Lynch. Please go ahead.

Steve can you talk to us a little bit about the average revenue if not in specificity directionally how is the average revenue per client trending, particular average contract size for new clients trending and where are you seeing the increased incremental uptake of some of the noncore new modules in your business. Thank you.

All right thanks Cash, so first and foremost it’s probably important to understand how we manage our sales team and how we incent our sales team. We really incent our sales team in terms of providing new revenue to us and that’s why we also provide you with that new revenue metric versus the existing customers and so we’re as focused in terms of whether that’s coming from client growth or whether those customers to us are taking on more products. And so what you’ll see is on an annual basis, we will give you those counts and you’ll then obviously be able to calculate that average revenue per customer as well as the client growth. So it’s the new revenue that’s number one, our focus. I think just to give you some level of guidance, I don’t -- we have not shifted from the land to an expand strategy. Most of our revenue is being driven by new customers being added to the platform, and we continue to see those new customers uptake more products in all those categories. So HR, time and labor as well as benefits, and talent management still being a little bit new to us, we are seeing more uptick, but it’s just a smaller portion overall. So that’s what we are seeing in the market.

Great. And also any commentary on the average contract size, the growth rate of that average contract size and how that is trending relative to the past few quarters, that will also be useful.

It's a good question. I think we'll give you a better sense of that when the year turns, when we've developed customers, but I think it’s fair to say that we’re not seeing any dramatic shifts in our historical trends with regards to increases in average customers, in terms of the more products that they are buying or the clients that we’re bringing on to the platform. These trends had been similar over time.

Thank you, and our next question comes from Michael Turn from Needham & Company. Please go ahead. Michael Turn - Needham & Company: I wondering if you could talk a little bit about the kinds of assumptions that you might be making around the lead generation benefits that come from being a public company and I’m wondering if you’re seeing any benefits there thus far?

It's certainly pretty early for us to make that assessment. We obviously are seeing benefits as I mentioned earlier in the sales process. We’re seeing benefits with our employees in recruiting in our general brand recognition in the marketplace, and we’re also making additional investments in marketing above and beyond what we’ve done before to try to take advantage of that opportunity, particularly in areas like the broker channel. I would tell you that early reception has been positive, but impossible at this point for us to measure that. Michael Turn - Needham & Company: Okay, and then with respect to assumptions around headcount growth of existing customers, it seems like the employment environment is on a bit of a path to recovery. I’m wondering if you have seen sort of any impacts there at all?

Yes. I would say, in a general growth environment, obviously our customer base would reflect what’s happening on an overall GDP perspective. So we do see our customer is adding a very small number of employees. It’s not enough to really move the needle for us, when you’re talking 40% growth rate. But it certainly is helpful.

Thank you. That’s all the time we have for questions. I would now like to turn the call back to CEO Steve Beauchamp for any further remarks.

Thank you very much Danielle. That will conclude our call for today. One final note, I will be presenting at the Raymond James conference on May 28th in San Francisco, and then again at the Bank of America Merrill Lynch Conference on June 4th, again in San Francisco, and then finally at the William Blair conference, June 12th in Chicago. And we’ll welcome the opportunity to share of story and look forward to speaking with you guys in the coming months. Thank you very much

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day.