Earnings Call Transcript - PCTY Q4 2023

Operator, Operator

Hello, and thank you for joining us. Welcome to the Paylocity Holding Corporation conference call to discuss our results for the fourth quarter of the 2023 fiscal year. I will now hand the call over to Mr. Ryan Glenn. Please go ahead, sir.

Ryan Glenn, CFO

Good afternoon, and welcome to Paylocity's Earnings Results Call for the Fourth Quarter and Fiscal Year '23, which ended on June 30, 2023. I'm Ryan Glenn, Chief Financial Officer; and joining me on the call today are Steve Beauchamp and Toby Williams, Co-CEOs of Paylocity. Today, we will be discussing the results announced in our press release issued after the market closed. 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, 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 by 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 filings with the Securities and Exchange Commission 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. We believe that non-GAAP measures are more representative of how we internally measure the business, and there is a reconciliation schedule detailing these results currently available in our press release, which is located on our website at paylocity.com under the Investor Relations tab and filed with the Securities and Exchange Commission. 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 will be attending the Stifel Tech Executive Summit in Deer Valley on August 29 and the Citi Global Tech Conference in New York on September 7, and I will be attending the HR Tech Conference in Las Vegas in mid-October. Please let me know if you'd like to schedule time with us at any of these events. With that, let me turn the call over to Steve.

Steven Beauchamp, Co-CEO

Thank you, Ryan, and thanks to all of you for joining us on our fourth quarter and fiscal '23 earnings call. Our differentiated value proposition of providing the most modern software in the industry continues to resonate in the marketplace and help drive total revenue growth of 34.7% in Q4. For fiscal '23, we reached a key financial milestone for the company with total revenue crossing the $1 billion threshold and finishing at just under $1.2 billion or 37.8% growth over fiscal '22. Our solid results were once again driven by both adding new clients and employees and increasing average revenue per client. We ended fiscal '23 with 36,200 clients compared to 33,300 at the end of last fiscal year, an increase of 9%. While the total number of employees on the platform grew by the mid-teens, consistent with the historical growth trends, we are also seeing upmarket success as larger clients realize the benefits of our sustained investment in product development and the most modern platform in the industry. Revenue retention also remained strong at greater than 92%. Average recurring revenue per client was over $30,000 in fiscal '23 compared to just over $25,000 in fiscal '22, an increase of 19%. This can be attributed to the increase in employees on the platform, rising product attach rates across our client base, and success with larger clients. We continue to attach more products at the time of sale and have seen increased success selling back into existing clients as our products focused on the modern workforce resonate across our entire client base. Our sustained investment in product development allows us to continue to expand our product suite, evidenced by the recent announcement of several new premium offerings and feature enhancements, including Advanced Scheduling, Learning Management, and Market Pay. Advanced Scheduling is built upon our existing scheduling capabilities by adding advanced features, such as the ability to match scheduling needs with employees based on job function or role, skill set, and certifications as well as manage shifts directly via mobile devices. Similarly, new enhancements to our Learning Management module allow users to create and share new training easily. Lastly, the most recent addition to our suite of modern workforce solutions, Market Pay, allows our clients to explore, track, manage, and compare market pay data across different job families and positions. Collectively, these three new product offerings, along with continued investment across our product suite, have increased our PEPY to $500, achieving the target we set four years ago. As a result, we are now raising our PEPY target to $600 and are confident in our ability to achieve this goal in the coming years. Our commitment to product development continues to be recognized in the market with Paylocity recently being named an overall leader in 10 HCM product categories in G2's Summer 2023 Grid Reports. Additionally, we earned recognition as TrustRadius' top-rated HR management software platform for 2023; won the 2023 Best Human Capital Technology Solution award in the SIAA Business Technology CODiE Awards; and achieved a leader ranking in NelsonHall's 2023 Next-Gen HCM Technology NEAT Report for both the SMB and mid to large market segments. Our strong culture, industry-leading software, and exceptional sales and operational execution would not be possible without the dedication and commitment of our employees. As we close out a very strong fiscal '23, I'd like to thank all of our employees for a fantastic year. I would now like to pass the call to Toby to provide further insights on the quarter and fiscal '23.

Toby Williams, Co-CEO

Thanks, Steve. As Steve highlighted, we continue to build upon our differentiated value proposition of providing the most modern software in the industry with the introduction of new premium products and feature enhancements. While still early, the value proposition of these new capabilities is clearly resonating in the market. We have been actively leveraging market pay to analyze compensation for comparable positions. In Q4 and fiscal '23, this dynamic was reflected in solid sales execution across our entire target market. We plan to continue investing in go-to-market initiatives to carry this momentum into fiscal '24. We've expanded our sales force for fiscal '24 by 18%, increasing from 694 sales reps in fiscal '23 to 820 reps in fiscal '24. We are pleased to enter the new fiscal year fully staffed. We also continue to invest in our channel initiatives and are pleased with the consistency in our referral channel, which accounted for more than 25% of our new business in Q4 and full fiscal '23. In addition to an 18% increase in sales reps for fiscal '24, we are committed to continuing our investments in digital marketing and digital lead generation to enhance our go-to-market strategy. As a result of our strong financial performance, including our adjusted EBITDA margin of 31.9% and a free cash flow margin of 18.4% in fiscal '23, we are increasing certain financial targets beginning in fiscal '24. This reflects our strong fiscal '23 performance and our capability to continue to grow while maintaining scalability and leverage in our business model. While Ryan will provide additional detail, we are pleased to continue targeting over 20% total revenue growth, along with an increased adjusted EBITDA margin target of 35% to 40% of revenue and an increased free cash flow margin target of 20% to 25% of revenue. The strong culture at Paylocity continues to be recognized externally this fiscal year as we were named to Built In's Best Places to Work and among the best and brightest companies to work for in the nation. Additionally, for the second consecutive year, we earned placement on the Forbes list for best companies for diversity and best employers for women. Echoing Steve's comments, I would like to express my gratitude to our more than 6,000 employees for a fantastic fiscal '23, made possible by their unwavering commitment to our clients. I would now like to hand the call back to Ryan to review the financial results in detail and provide fiscal '24 guidance.

Ryan Glenn, CFO

Thanks, Toby. Total revenue for the fourth quarter was $308.5 million, an increase of 34.7%, with recurring and other revenue up 24.3% from the same period last year. Our sales team performed well again this quarter, exceeding our guidance by $5.3 million. Adjusted EBITDA for the fourth quarter was $100.6 million, representing a 32.6% margin and exceeding the top end of our guidance by $4.1 million. For fiscal '23, adjusted EBITDA was $375.2 million with a 31.9% margin, resulting in a 400 basis points increase compared to fiscal '22. We made significant progress with free cash flow, reaching an 18.4% margin in fiscal '23, up nearly 650 basis points and representing an increase of 111% on a dollar basis from fiscal '22. We remain confident in our ability to continue expanding our free cash flow margin in fiscal '24 and beyond. We continued to invest significantly in research and development. To understand our total investment in R&D, it's important to combine both what we expense and what we capitalize. On a combined non-GAAP basis, total R&D investments were 15.2% of revenue in the fourth quarter. On a full-year basis, total R&D investments were 14.5% of revenue. In dollar terms, our year-over-year investment in total R&D increased by 45.7% in fiscal '23 compared to fiscal '22. We believe these investments will provide us with valuable product differentiation and the ability to drive future growth. Non-GAAP sales and marketing expenses represented 22% of revenue in the fourth quarter and fiscal '23. Non-GAAP G&A costs were 10.7% of revenue in the fourth quarter compared to 13.2% in the same period last year. Full-year G&A costs were 11% of revenue compared to 12.9% in fiscal '22, and we remain focused on consistently leveraging our G&A expenses annually. Briefly covering our GAAP results, for Q4, gross profit was $211.7 million; operating income was $49.4 million; and net income was $37.3 million. For the full year, gross profit was $807.6 million; operating income was $155 million; and net income was $140.8 million. Regarding client health funds and interest income, our average daily balance of client funds was $2.5 billion in Q4 and $2.4 billion for fiscal '23. We estimate the average daily balance will be approximately $2.3 billion to $2.4 billion in Q1 of fiscal '24, with an average annual yield of approximately 410 basis points. On a full-year basis, we expect the average daily balance to be $2.5 billion to $2.6 billion in fiscal '24, with an average yield of around 420 basis points. Our guidance includes last week's 25 basis point increase but does not currently account for any other changes to interest rates in fiscal '24. Before I provide our financial guidance, as Toby mentioned, we're updating certain key financial targets. Since setting our current targets in August of 2018, our adjusted EBITDA has risen from 21.5% of revenue to 31.9%, an improvement of over 1,000 basis points. Free cash flow margin has increased from 12.9% of revenue to 18.4%, a 550 basis point improvement. As a result of our strong financial performance and scalability of our business model, we are revising specific key financial targets that we expect to progress against beginning in fiscal '24. Regarding total revenue, our target of over 20% growth remains in place, and we are confident in our ability to meet this goal. Our adjusted total gross margin target has risen to 75% to 80% from 70% to 75%. Our general and administrative spend target has been reduced from 10% to 15% of revenue to 5% to 10% of revenue. The adjusted EBITDA target has increased to 35% to 40% from 30% to 35%, and the free cash flow margin target is elevated to 20% to 25% from 15% to 20%. Please refer to our earnings press release for additional details. Finally, I’d like to provide our financial guidance for Q1 and full fiscal '24. For the first quarter of fiscal '24, total revenue is expected to be in the range of $314.1 million to $318.1 million, approximately 25% growth over the first quarter of fiscal '23. Adjusted EBITDA is expected to range from $89.5 million to $92.5 million, representing about 250 basis points of leverage over Q1 of fiscal '23. For fiscal year '24, total revenue is expected to be in the range of $1.405 billion to $1.410 billion, approximately 20% growth over fiscal '23. Adjusted EBITDA is anticipated to be in the range of $464 million to $468 million, representing about 120 basis points of leverage over fiscal '23. Regarding the macro environment, workforce levels continue to be flat overall. This contrasts with our historical experience in a normalized business environment, where recurring revenue typically benefited from 2 to 3 points of growth driven by GDP expansion and workforce levels. Our guidance assumes this trend of flat workforce levels continues in Q1 and fiscal '24 and represents an equivalent 2 to 3-point headwind to recurring revenue growth. After crossing the $1 billion threshold in fiscal '23 and with continued investments in our go-to-market strategy and product roadmap, we enter fiscal '24 with a high level of confidence in our ability to continue driving strong revenue growth while simultaneously scaling our business and realizing continued adjusted EBITDA and free cash flow leverage. Operator, we are now ready for questions.

Operator, Operator

Our first question comes from the line of Brad Reback with Stifel.

Brad Reback, Analyst

Steve, if we think about the 18% increase in sales force headcount entering the year, as well as the success you're having driving higher ARPU into the base, any reason we shouldn't think of 18% as the absolute bottom and, in fact, not being able to do a little better than that on the subscription side?

Steven Beauchamp, Co-CEO

I think if you look at our guidance, it hasn't changed from a philosophy perspective. So we're at the front end of the year, and there's a lot of execution ahead of us. Being able to guide total revenue growth of 20%, we feel really confident about. We have all the heads on board and up and running, which is always a goal for us at the start of the year. We have significantly enhanced our product suite. So, we are optimistic about the momentum. Certainly, our guidance wouldn't anticipate us going below the 18% on a recurring basis. So I think that’s a reasonable way to look at it. But we feel confident in hitting our goals. I believe we have a history of surpassing our initial guidance.

Operator, Operator

Our next question comes from the line of Raimo Lenschow with Barclays.

Sheldon McMeans, Analyst

This is Sheldon on for Raimo. As your product portfolio grows with the addition of new capabilities and discussing the $600 per employee per year target, how are you considering revisiting your installed base and the installed base opportunity as we enter a more normalized growth environment? Is there an opportunity to focus more on the upsell motion in '24?

Steven Beauchamp, Co-CEO

Sure. We started selling back to the client base in 2018 and have been increasing our inside sales team faster than our overall salesforce since then. This team performed exceptionally well this past fiscal year, and we are thrilled with their success. We are certainly increasing that team beyond the average 18% headcount growth, and it will have a significant impact moving into next fiscal year. While it still represents a smaller portion of our overall revenue growth, we remain focused on landing new customers while enhancing our product portfolio, thus providing more products for our inside sales team to sell back to the client base. So, yes, that will gradually continue to grow, and it is indeed growing faster than our outside sales team.

Sheldon McMeans, Analyst

Great. And a quick follow-up, if I may. It's excellent to see the faster-than-peer generative AI roadmap. I was just wondering how you feel about AI/ML talent and engineering talent at your organization, and more broadly, how do you view R&D headcount investment?

Steven Beauchamp, Co-CEO

Yes. From an R&D headcount investment perspective, we've been consistent in maintaining about 15% of revenue for R&D. This is definitely a competitive space, and it's a dynamic workforce environment with many product ideas we gather from customers that we feel we can add to our product suite. We've maintained a steady level of R&D investment as a percentage of revenue, and that will continue. We've built up a data practice team over the past four years, which has allowed us to integrate predictive capabilities into our platform. This groundwork has positioned us to enter the market quickly with generative AI capabilities, both in community and now in job descriptions. We believe we can continue to expand these capabilities for our customers.

Operator, Operator

Our next question comes from the line of Bryan Bergin with TD Cowen.

Bryan Bergin, Analyst

I wanted to kick off with kind of a fiscal '24 growth cadence question. Can you give us a sense of where you anticipate the recurring growth cadence to peak?

Toby Williams, Co-CEO

Yes. Let me start, and Ryan can jump in as well. When you look at the first half of the year, that’s where the toughest comparisons are relative to last year. We feel good about guiding to the 20% mark for the fiscal year. While the first half faces challenging comparisons, we are optimistic about the momentum across the business from a recurring perspective, especially with the product announcements we've made. Even though it may take time for the new offerings to gain traction, we expect to see more significant impact as we progress through the fiscal year. Overall, we feel very positive about our sales momentum and the product adoption we've seen.

Bryan Bergin, Analyst

Okay. That makes sense. And then a follow-up on the long-term target. Can you discuss some of the larger sources of expansion within gross margin and G&A specifically, while also mentioning any other key levers you see here?

Steven Beauchamp, Co-CEO

Yes. Our gross margins have consistently expanded since our IPO in 2014. The primary reason for this is scale, combined with the fact that new products we have added do not rely on the same implementation or ongoing service lift. As our revenue mix shifts and we bring in new products, we anticipate a natural increase in gross margin. That's likely to be our biggest driver going forward.

Operator, Operator

Our next question comes from the line of Terry Tillman with Truist Securities.

Terrell Tillman, Analyst

I have a couple of questions. In the prepared remarks, you mentioned mid-teens employee growth and larger customers. Was there anything notably different in Q4 about the mix of bookings from larger customers, and can you quantify if the size of larger customers is increasing? Also, based on the 18% sales capacity growth, do you foresee a shift in the mix of business from large, midsize, or smaller customers in FY '24?

Steven Beauchamp, Co-CEO

We did notice a mix shift as we expanded below our original target market and increased our focus upmarket, which has accelerated successfully. We've allocated more resources toward larger customer sectors and are pleased with our current balance. The headcount growth of 18% aligns across these segments, suggesting a stable approach to addressing opportunities across the board.

Ryan Glenn, CFO

Yes, Terry. Our approach has remained consistent over the last year regarding workforce levels. We're guiding based on what we observe. As we mentioned, workforce levels have remained flat for the past 12 to 13 months. Thus, we are assuming they will stay flat for Q1 and the remainder of fiscal '24, which we will update as the year progresses.

Operator, Operator

Our next question comes from the line of Brian Peterson with Raymond James.

Brian Peterson, Analyst

Steve, could you discuss AI and its impact on accelerating product development cycles? How are you planning to use it internally, and do you expect it to affect margins or product development speed?

Steven Beauchamp, Co-CEO

AI will impact every part of the business, from customer service and onboarding to software product development with tools that enhance capability. We are pleased with our early successes in generating code and test cases. We are passionate about leveraging this across all business aspects, and we see it as a tremendous opportunity.

Toby Williams, Co-CEO

I think overall we came into the year fully staffed, which has been the case in the last few years. We are excited about the 18% growth in sales headcount, as we continue to bring in talent with industry experience, which has consistently proven productive for us. We feel good about our staffing heading into fiscal '24.

Operator, Operator

Our next question comes from the line of Patrick Walravens with JMP Securities.

Owen Hobbs, Analyst

This is Owen Hobbs on behalf of Patrick. I’m curious about customers’ timelines for ramping up product adoption. If they start with payroll, how long does it typically take them to adopt additional products?

Steven Beauchamp, Co-CEO

There are several ways to analyze this. Looking at the average client count and employee mix, we see a realization of PEPY typically in the 50% to 60% range. The continued build-up of new modules and client trust leads to an expectation of progressively higher penetration rates over time. Some modules reach over 50% product penetration, while others remain lower than 20%. We have conviction regarding our ability to attain those higher ranges before we launch new products.

Owen Hobbs, Analyst

Awesome. And then looking longer-term, how much of the business growth comes from increased customer employee count versus increasing PEPY through new products?

Steven Beauchamp, Co-CEO

Historically, in a growing GDP environment, we would typically gain 2-3% growth from additional employees on the platform. However, for over a year, workforce levels have remained flat, meaning we aren’t gaining any new employees on our platform. Therefore, our growth is driven by selling new customers and ensuring that they are able to adopt additional products through our sales efforts.

Operator, Operator

Our next question comes from the line of Scott Berg with Needham & Company.

Michael Rackers, Analyst

Congrats on the quarter. I'm curious about your prospects in the global payroll space. Do you see international opportunities as the next growth stage?

Steven Beauchamp, Co-CEO

While our primary focus remains on the U.S. market due to lower penetration rates, we recognize the necessity for global capabilities for U.S.-headquartered customers with international employees. Our acquisition of Blue Marble was strategic in fulfilling that need while we continue to leverage our partnerships. As such, our primary focus will remain on the U.S. market, but we will explore opportunities globally.

Operator, Operator

Our next question comes from the line of Samad Samana with Jefferies.

Samad Samana, Analyst

Can you discuss the bookings cadence in the quarter? How did trends shift from April to May to June compared to normal booking seasonality in the fourth quarter?

Toby Williams, Co-CEO

I don't think we saw anything out of the ordinary in terms of linearity of bookings. As I mentioned earlier, we face challenging comparisons looking back at last year's first half. However, moving into the back half of the fiscal year, we didn't encounter any differences in seasonality or sales performance relative to the prior year. Our stronger performance upmarket reflects the strength of our solution over time.

Samad Samana, Analyst

Regarding sales rep growth, does unit count really matter in targeting larger deals? Do more reps focus on larger deals, or is it still the same number assigned?

Steven Beauchamp, Co-CEO

We quote sales reps based on annual recurring revenue and new annual recurring revenue. Naturally, sales behavior gravitates toward larger customers, but there's also a significant portion of our business that flows through broker referrals and existing client referrals. Therefore, we have to pursue opportunities wherever they arise. Not every rep is focused on larger clients, as we have specialized our most experienced reps to chase larger customers. This strategy has proven successful.

Operator, Operator

Our next question comes from the line of Mark Marcon with Baird.

Mark Marcon, Analyst

Can you share insights about your current pipeline? How does it compare to last year, and what are the prospects for sales force productivity and conversions?

Steven Beauchamp, Co-CEO

There's no significant call-out regarding the pipeline. The pipeline has been growing as we add reps, and they continue to produce more opportunities at the top of the funnel. It's somewhat challenging to compare historical data. However, we feel confident in the activity levels and the ramping performance of our new reps.

Mark Marcon, Analyst

I appreciate the updated financial targets. You're targeting roughly 120 basis points of margin improvement for this year. Can you discuss the expected cadence of margin improvement when we exclude the impact of float from interest income?

Ryan Glenn, CFO

When you consider our journey since establishing those initial targets in August 2018, you can observe the improvements we've made in adjusted EBITDA and free cash flow margins over that period. As we sit here, we're confident we can drive 100+ basis points in adjusted EBITDA leverage for the year. Historically, we've experienced variability in our initial guidance but are optimistic about the new fiscal year growth targets.

Operator, Operator

Our next question comes from the line of Alex Zukin with Wolfe Research.

Aleksandr Zukin, Analyst

Regarding guidance for next year, can we assume high single-digit net client adds for the year? How much growth do you expect from installed base selling compared to where you ended fiscal '23?

Steven Beauchamp, Co-CEO

There's no significant change in our expectations regarding business growth mix as demonstrated through fiscal '23. Competitive dynamics remain similar, and we have no new insights regarding shifts. We're continuing with our current approach and expect to see stability across our business segments.

Operator, Operator

Our next question comes from the line of Dan Jester with BMO Capital Markets.

Daniel Jester, Analyst

Regarding the $500 PEPY milestone, it seems significant compared to previous years. What enables you to introduce so many new products this year? Is it a result of better productivity from R&D, or were the products easier to launch?

Steven Beauchamp, Co-CEO

That's a good question. We've been pleased with the velocity of our R&D output overall. The timing of product launches can vary based on the duration of development, but the efforts over the past couple of years have culminated in this significant progress. We've invested in platform capabilities that enhance our efficiency across R&D, making us excited for future launches.

Toby Williams, Co-CEO

In terms of capital allocation, our perspective hasn't changed. We want to use our capital aimed at driving growth. You can see our current strength in delivering products that drive differentiation in the market. Yet, our stance on capital allocation remains steady going into fiscal '24.

Operator, Operator

Our next question comes from the line of Jason Celino with KeyBanc Capital Markets.

Jason Celino, Analyst

When we consider OpEx and R&D growth for the upcoming year, is the perceived deceleration simply a return to normalized spending after previous heavy investments?

Ryan Glenn, CFO

Yes, indeed. Fiscal '23 R&D expenditures increased by roughly 46%. We anticipate a return to a normalized spending pattern in fiscal '24, where R&D and sales growth align more closely with revenue growth.

Jason Celino, Analyst

Regarding the 2 to 3-point headwind from flat staffing, are you expecting this consistency throughout each quarter?

Ryan Glenn, CFO

Yes, nothing of note from a seasonality perspective. It should remain relatively consistent throughout the quarters.

Operator, Operator

Our next question comes from the line of Andrew Warren with D.A. Davidson & Company.

Robert Simmons, Analyst

Can you discuss how Blue Marble is performing in terms of helping you win new clients and facilitating cross-sell opportunities?

Steven Beauchamp, Co-CEO

Our focus has been on larger market opportunities, especially with customers needing international capabilities. The integration of Blue Marble into our suite provides necessary differentiation for larger clients with employees abroad. This has certainly supported our efforts to gain traction in these larger client segments and continues to represent an area of growth for us.

Ryan Glenn, CFO

With regard to our long-term targets, it's essential to note that we have made significant progress and are optimistic about continued improvement starting in fiscal '24. Achieving our target depends on maintaining a growth trajectory while scaling operations effectively.

Steven Beauchamp, Co-CEO

To sustain our growth at 20%, we plan to channel resources into product innovation and robust sales efforts. Expanding our talented salesforce and possessing a solid product roadmap give us the confidence required to continue this robust growth. Moreover, our smaller acquisitions will further enhance our capabilities. Thus, we are optimistic about sustaining this growth rate.

Operator, Operator

Our next question comes from the line of Siti Panigrahi with Mizuho.

Sitikantha Panigrahi, Analyst

Can you discuss on-demand pay? Most competitors are now offering this too. How important is it for your customers and what kind of traction have you seen?

Steven Beauchamp, Co-CEO

We were among the first to offer on-demand pay. Clients with larger hourly populations tend to value it more, as they frequently request early access to their wages. The product has been performing well, and we continue to enhance it based on customer feedback. However, it's essential to view this product as a feature rather than a major revenue driver.

Sitikantha Panigrahi, Analyst

Could you provide any feedback from early adopters of your AI assets? How do you anticipate the HR and payroll industry will evolve with AI adoption?

Steven Beauchamp, Co-CEO

HR teams are facing challenges like a dynamic workforce and an increasingly tight labor market. AI presents opportunities for efficiency, allowing teams to focus more on engaging with their employees and fostering a positive culture. Early clients are utilizing our AI capabilities to enhance communication, driving employee engagement via a comprehensive plan for culture initiatives. We're developing numerous use cases that will improve workforce participation. Well, first of all, thank you to all of you for dialing in and expressing interest in Paylocity. I want to reiterate my gratitude to our Paylocity team members, 6,000 strong, for delivering a fantastic fiscal '23. We look forward to another great year in FY '24.

Operator, Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.