Paylocity Holding Corp (PCTY) Q1 2022 Earnings Call Transcript

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Paylocity Holding Corp (PCTY -1.71%)
Q1 2022 Earnings Call
Nov 4, 2021, 5:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Paylocity Holding Corp. First Quarter 2022 Fiscal Year Results Conference Call. [Operator Instructions]

I'd like to turn the conference over to your speaker for today, Mr. Ryan Glenn. You may begin.

Ryan Glenn -- Senior Vice President of FP&A and Investor Relations

Good afternoon, and welcome to Paylocity's earnings results call for the first quarter of fiscal '22, which ended on September 30, 2021. I'm Ryan Glenn, Senior Vice President of Finance, and joining me on the call today is Steve Beauchamp, CEO of Paylocity; and Toby Williams, CFO 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 measures to their directly comparable GAAP financial measures because the information, which is needed to complete a reconciliation, is unavailable at this time without unreasonable effort. In regards to our upcoming conference schedule, Toby and I will be virtually attending the Stifel Midwest One-on-One Conference on November 11 and the Needham SaaS One-on-One Conference on November 18. Steve and Toby will also be attending the Needham Growth Conference on January 11. 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 -- Chief Executive Officer

Thank you, Ryan, and thanks to all of you for joining us on our first quarter fiscal '22 earnings call. Our value proposition of providing the most modern and comprehensive product suite in the industry continue to resonate with clients and prospects in Q1 as we exceeded the top end of our guidance by $6.2 million. Total revenue was $181.7 million or 33.8% growth over Q1 of last year, which represents our highest quarterly growth since Q1 of fiscal '17.

And recurring revenue and other grew 34.1% as a result of strong execution across all areas of our target market. Our sales team also continues to build off the strong momentum they had to end fiscal '21, and we are well positioned heading into the heart of selling season. Adjusted EBITDA for the first quarter was $46.1 million or 25.4% margin and exceeded the top end of our guidance by $5.3 million. While we are pleased with our ability to drive efficiencies within our business, we also continue to see our award-winning and remote friendly culture resonating with prospective employees, and we plan to take advantage of our strong hiring momentum throughout FY '22 as we continue staffing across all areas of the business, including sales, marketing, R&D and operations.

In October, we held our annual Elevate Client Conference, where we virtually hosted a record number of attendees for the second year in a row. We highlighted a number of new product enhancements across our suite, including more tightly integrated machine learning capabilities within time and labor for new scheduling features like OpenShift Claiming, Schedule Rules and Forecasting Hours. We've also looked to digitize and improve our clients' manual processes through expanded workflow capabilities, that also serve as the foundation for the new Paylocity COVID tracker, enabling clients to collect their employees' vaccination status and test results in order to comply with regulatory mandates.

Lastly, we released new diversity, equity and inclusion tools, including a demographics dashboard, which provides real-time visibility into the gender disability, race, generation and turnover distributions within their employee base and candidate data masking functionality within recruiting to help ensure a fair and equitable hiring process. We believe our product focus on DE&I can help drive positive culture and business outcomes for our customers and early data from our clients shows that a focus on DE&I can drive higher employee engagement, retention and productivity.

During the quarter, we also completed the acquisition of Blue Marble, a leading global payroll provider for companies seeking more control and convenience in managing and paying their employees outside the U.S. The pandemic has accelerated the shift to a more remote workforce around the world with many companies increasingly looking for talent across the globe, particularly in such a tight labor market. As we work toward fully integrating Blue Marble into the Paylocity suite, we're excited about the opportunity to offer new and existing clients a unified solution to pay employees, automate processes and maintain compliance in 150 countries around the world.

From a financial standpoint, we expect Blue Marble to represent less than 2% of our total fiscal '22 revenue, while providing a slight headwind to adjusted EBITDA of approximately 40 basis points, all of which we've incorporated into our updated financial guidance. I'm also excited to welcome our new Chief Technology Officer, Rachit Lohani who recently joined us from Atlassian on September 27. In addition to holding senior technology roles at Atlassian, Rachit also had leadership roles at Netflix and Intuit, where he helped build and scale successful software platforms. I would also like to thank Ted Gaty for his impact and dedication to Paylocity as SVP of Product and Technology.

Prior to his departure on October 1, Ted was part of the Paylocity team for more than eight years and was instrumental in our product strategy and growth, and we will look forward to maintaining the significant momentum we have in product development. The strong momentum across our business has been recognized by third parties as Paylocity was recently named a Fortune 100 fastest-growing companies as well as being named Inc.'s inaugural list of best led companies for 2021. A big thank you to our more than 4,000 employees for everything they do for our clients to help us achieve these awards.

I would now like to pass the call to Toby to review the financial results in detail and provide updated guidance for fiscal '22.

Toby Williams -- Chief Financial Officer

Thanks, Steve. Total revenue for Q1 was $181.7 million, an increase of 33.8%, with recurring and other revenues up 34.1% from the same period last year. As Steve noted, our sales team had another strong quarter, and we were pleased to come in $6.2 million above the top end of our revenue guidance. Our adjusted gross profit was 70.5% for Q1 versus 69.4% in Q1 of last fiscal as we continue to focus on scaling our operational costs. We continue to make significant investments in research and development and to understand our overall investment in R&D, it is important to combine both what we expense and what we capitalize.

On a dollar basis, our year-over-year investment in total R&D increased by 16.1% when compared to the first quarter of fiscal '21 and we remain focused on making incremental investments in R&D throughout fiscal '22 as we continue to build out the Paylocity platform to serve the needs of the modern workforce. In regards to our go-to-market activities, channel referrals, primarily from benefit brokers and financial advisors, once again represented more than 25% of new business for the first quarter as we continue to leverage both virtual and in-person broker meetings and events to help us maintain the strong source of referrals.

On a non-GAAP basis, sales and marketing expenses were 24.1% of revenue in Q1 and we also remain focused on making incremental investments in this area of the business in fiscal '22 to drive growth. On a non-GAAP basis, G&A costs were 13.1% of revenue in the first quarter versus 13.6% in the same period last year. We remain focused on consistently leveraging our G&A expenses on an annual basis. Our adjusted EBITDA was $46.1 million or 25.4% of revenue for the quarter, which exceeded our guidance by $5.3 million at the top end. We remain committed to progressing toward our adjusted EBITDA target of 30% to 35% over time.

Briefly covering our GAAP results. For Q1, gross profit was $118.4 million, operating income was $10.3 million, and net income was $30.9 million. In regards to the balance sheet, we ended the quarter with cash, cash equivalents and invested corporate cash of $69.6 million, which includes the impact of the Blue Marble acquisition for $60 million in the quarter. In regard to client-held funds and interest income, our average daily balance of client funds was $1.7 billion in Q1. We are estimating the average daily balance will be approximately $1.8 billion in Q2, and we assume an average yield of approximately five to 10 basis points in the second quarter.

We're pleased with our performance in Q1, which included another strong quarter for our sales team, while also identifying opportunities to demonstrate scale in operational and G&A costs, and we're happy with the progress we've made to start the year. As Steve mentioned, we are successfully hiring across our business, including in key growth-driving areas such as R&D, sales and marketing, particularly in the back half of Q1 and into the start of Q2. Additionally, given the strong execution across our target market, we continue to add staff in our operations teams to deliver industry-leading service to our customers.

In regard to Blue Marble, while we do expect it to represent a headwind to adjusted EBITDA margin of approximately 40 basis points in fiscal '22, we remain focused on driving operational leverage within our business to offset this impact. With that, I'd like to provide our financial guidance for Q2 and full fiscal '22. For the second quarter of fiscal '22, total revenue is expected to be in the range of $185.5 million to $189.5 million or approximately 27% to 30% growth over second quarter fiscal '21 total revenue. And adjusted EBITDA is expected to be in the range of $39 million to $42 million. And for full year fiscal '22, total revenue is expected to be in the range of $815 million to $820 million, or approximately 29% growth over fiscal '21.

Note, this represents an increase of $25 million to our initial guide for fiscal '22. And adjusted EBITDA is expected to be in the range of $216 million to $220 million, implying an adjusted EBITDA margin of approximately 26.7% at the midpoint and note that we are maintaining the margin percentage range despite the dilutive impact of Blue Marble. In conclusion, we are pleased with our Q1 results, and we're pleased to raise fiscal '22 guidance to 29% revenue growth at the midpoint, which in combination with the adjusted EBITDA margin represented in our full year guide, returns us to above the Rule of 50 in fiscal '22.

Operator, we're now ready for questions. Thank you.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Scott Berg with Needham. Your line is open.

Scott Berg -- Needham -- Analyst

Hi. Thank you for taking my question. Congrats on a strong Quarter. I guess I got a couple here. First of all, Steve, we obviously attended the customer conference, love some of the new product innovations that are coming out there. But specifically in collaboration, collaboration is a piece functionality within HR, which is I feel like it was tried 10 years ago. And the functionality you're building in right now seems to be kind of a repeat of something that maybe didn't work quite as well. Why is that collaboration functionality well suited today in how you want to sell the product going forward? Thank you.

Steven Beauchamp -- Chief Executive Officer

Yes. It's a good question, Scott. So I think if you take a step back and you really think about how work has changed significantly over the last couple of years and where it's going long term, then I think it's really an opportunity to reimagine so many of the HR processes that have kind of been the same for so long. And I would just first point to the use of video that we have and the traction that we're getting with video.

I don't think anyone would have imagined three years ago that video would become an integral part of how we kind of communicate and connect within the HR platform, but we've had great success seeing both our clients use it and then embed it in different parts of the processes. So including a job description, a video job description in recruiting is a great way to attract talent as an example.

We think about that collaboration opportunity the same way, which ultimately, there's going to be a lot of parts of the HR process that need to be reinvented and it's going to require things like chat, document sharing and editing, communicating, connecting with people across the organization. As remote work or hybrid models become more popular, we think that this is the time where that capability will be both useful and be really valuable to our customers.

Scott Berg -- Needham -- Analyst

Got it. Helpful. And then from a follow-up perspective, Toby, when we look at the results in the quarter, all the headline numbers look really, really strong. So how should we think about the Blue Marble impact in the quarter? I get the less than 2%, my math tells me that's $16 million or less for the year. So the guide up was obviously quite strong. But any color on maybe the impact in the quarter?

Toby Williams -- Chief Financial Officer

Yes. I mean I think your rough math that you're describing is right from an overall in terms of how we've described it for the year. And in terms of the timing within the quarter, I mean we only got a month of contribution from Blue Marble. So I think that's how you think about it.

Scott Berg -- Needham -- Analyst

Excellent. Thanks for the color. Thanks again, guys.

Steven Beauchamp -- Chief Executive Officer

Thank you.

Toby Williams -- Chief Financial Officer

Thanks.

Operator

Thank you. Our next question comes from the line of Brad Reback with Stifel. Your line is open.

Brad Reback -- Stifel -- Analyst

Great. Thanks very much. Steve, as we think about collaboration and employee engagement becoming a bigger and bigger part of the story. Can you give us any sense of what daily active usage has looked like on the platform this quarter versus a year ago, how that's expanded?

Steven Beauchamp -- Chief Executive Officer

Yes. So I would tell you that we definitely have seen overall usage on the platform expand pretty significantly, and it's expanded beyond the traditional transactions. So, yes, a lot of people use it to look at their checks. They request time off, they're punching in, they're doing that in a mobile environment. Some of them are doing on desktop. And so those activities really have increased over time, and that has become more popular as the self-service environment for employees is just naturally expected in the marketplace.

But what we've really seen in terms of the increase is coming from other places. So community is a great example where our clients are actually using it to create announcements. They're creating question-and-answer groups that employees are interacting with and using. And we're actually finding that not just the HR department is necessarily the ones that are content creators. And so different groups are being created across the organization, sharing employees stories and creating connections.

And so community has driven an increase in that daily active user stat. Learning management also has increased significantly. Surveys has been more popular over the last 18 months, just harder to collect feedback from your employees and you can do that in a nice automated fashion. So we've been really pleased with the increase. It's certainly been much higher than what you'd see in terms of overall number of employees on our platform or clients.

Brad Reback -- Stifel -- Analyst

Excellent. Thanks very much.

Operator

Thank you. Our next question comes from the line of Bryan Bergin with Cowen. Your line is open

Bryan Bergin -- Cowen -- Analyst

Hi, good avfternoon. Thank you. Question on sales force productivity. Can you give us a sense on how that's progressed relative to your expectations and versus the pre-pandemic level?

Steven Beauchamp -- Chief Executive Officer

Sure. Yes. So pre-pandemic, I think, as you recall, we were really seeing a nice improvement in sales force productivity. In fact, we had called out just prior to the pandemic, the quarter prior, we had actually -- that year, we had gone up almost 40% in terms of overall new kind of sales growth. Obviously, that kind of took a dip throughout the pandemic. I think the last earnings call, we talked about we're approaching these pre-pandemic levels. And so I think that trend continues. So we're continuing to make improvement on that.

We're very much starting to see this type of momentum that we had pre-pandemic from a sales force perspective, which is one of the reasons that we called out, you're going to see us really take advantage of the momentum we have in the market and continue to accelerate hiring. We still do most of our hiring in the spring for sales folks, but we try to get as many people as we can onboard early. And so we're going to continue to hire not only there, but across the board because of the momentum we're seeing.

Bryan Bergin -- Cowen -- Analyst

Okay. And then, Toby, a question on margin as far as some of the puts and takes there. Just first on the 1Q performance on the gross margin. Can you talk about the tailwinds that drove that? And then as we roll forward to 2Q and look at EBITDA margin, it is implied to be down year-over-year versus the strong 1Q outperformance. I heard the 40 bps for Blue margin. But aside from that, can you just comment on some of the drivers to consider in 2Q and kind of the balance of the year?

Toby Williams -- Chief Financial Officer

Yes. I think just building off what Steve said a second ago. I mean, you saw stronger -- we've seen hiring momentum through last quarter and through this quarter ticked up a little bit toward the -- in the back half of the quarter, and we expect that to continue into into second quarter. So I think in terms of the puts and takes, Q1 to Q2 on margin, that's probably the biggest story is just timing.

I don't think there's any -- there's no onetime items or something like that to think about. It's really just the timing of bringing in some of the hiring that Steve was talking about. We have seen great momentum across every area of the business from that perspective. And we expect that to continue to invest in that way, as Steve just referenced. So I think that's just story from a put and take perspective quarter-to-quarter.

Bryan Bergin -- Cowen -- Analyst

Just to clarify, is that throughout the income statement is gross margin remaining strong? Or does that also see a little bit of pressure?

Toby Williams -- Chief Financial Officer

Well, I mean, I think we would expect, from a gross margin standpoint, I think we're pleased with what we saw coming into Q1 year-over-year. And I think we -- based on how we've guided from a revenue and from an adjusted EBITDA perspective, I think we feel pretty good about how we're set up for the rest of the year on gross margin.

Steven Beauchamp -- Chief Executive Officer

Yes. I think the theme here is the 34% was a great result for us, and we've got to make sure we hire across the board to be able to both service the customers that we're bringing on at an accelerated rate. And at the same time, we're excited about the momentum. So we actually want to make those investments because we're seeing good return on the investments we're making in product and sales and marketing. And so when you look at the EBITDA guide, it is different than it was in the first quarter because we want to take advantage of the momentum that we've got in front of us.

Bryan Bergin -- Cowen -- Analyst

Okay. Thanks for the color.

Operator

Thank you. Our next question comes from the line of Terry Tillman with Truist Securities. Your line is open.

Terry Tillman -- Truist Securities -- Analyst

This is Robert on behalf of Terry. Just following up on a couple of earlier questions. We're curious about community premium video recognition solutions. And really, what type of traction are you seeing with that? And any identifiable returns or increased engagement that customers can report or document?

Steven Beauchamp -- Chief Executive Officer

It's a great question. So a couple of things I would say is we're really happy with the penetration rates that we're seeing. So community is a free product, so that's really more driven by the utilization comments I made earlier. We're seeing clients really use it to connect their employees that would be more difficult in an environment where they have people in the hybrid work environments or even completely remote. And we're seeing people kind of create groups.

Some of them are work groups where they're trying to get work done. Some of them are just culture driving groups where they're trying to share stories. And so that's really been powerful. From a video perspective, we're really pleased with the attach rate that we've got in terms of new sales, so that has been faster than what we would have expected. We believe that, that certainly has been helped just by the increased comfort level with overall video capabilities.

And we see a ton of video announcements is probably the biggest use case, where instead of me sending a post in community, I'm actually going to record a video for all the employees or for even subset or groups of employees. And then that's going to get much better interaction. So we see videos get much greater views in our platform than if we just post with text. People comment, they react and they are able to share that content more effectively. And so that's probably the most common use case that we see with video.

Terry Tillman -- Truist Securities -- Analyst

That's great. Thank you. Congrats on a great quarter.

Operator

Thank you. Our next question comes from the line of Mark Marcon with Baird. Your line is open.

Mark Marcon -- Baird -- Analyst

Hey, good afternoon. Let me add my congratulations. Really terrific quarter. Wondering if you can talk a little bit about what you're seeing in terms of both ends of the spectrum in terms of your client base, you've had a move to go down market, also a number of the features that you've added certainly would appeal to larger clients. So what are you seeing just in terms of from a bookings perspective and a pipeline perspective, across the range of the various clients that you could end up getting? And what's the impact with regards to adding Blue Marble those capabilities? Where does that impact you the most from a spectrum perspective? And then I have a follow-up.

Steven Beauchamp -- Chief Executive Officer

Okay. So I think what I'm really excited about is we're seeing momentum across all market segments. And so our customers that are below 50 employees, we're seeing both good unit traction and then actually also buying more product. Our core market, really, for us, we always think about that as kind of the 50 to 500 space. Same thing, really good penetration of some of our newer products and adoption of some of the more modern tools, which I think is also driving some of the new business momentum in there from a differentiation perspective.

And then lastly, your point is a fair one in terms of some of the newer things that we've added over time do appeal a little bit more to some of the larger customers. That has definitely made us more competitive in that space. We've called that out a couple of times as being a strong part of the market for us. Many times, we see customers up to 5,000 employees adopt us as the vendor of choice. And I think to the second part of your question, Blue Marble definitely plays a little bit stronger in the over 100 employee segment, so where clients get sophisticated enough where they might have a small number of employees in different parts of the world.

And it does also create some differentiation in terms of our ability to simplify managing more global employees. And we also believe that, that trend will continue over time. As obviously we move past the pandemic state, and there's more mobility around the world and there's talent shortage here in the U.S., I think more and more companies are certainly looking abroad. And so we do think that, that will be a relevant solution across our segment with a little bit more natural interest in the upper end of our market.

Mark Marcon -- Baird -- Analyst

That's great. And then can you talk a little bit about some of the new modules and improvements that you've introduced at the conference? It sounds like the time and attendance and scheduling rules that incorporate AI and ML are certainly going to be beneficial. COVID tracking is obviously in the news today. How are you thinking about those things and what they could end up adding?

Steven Beauchamp -- Chief Executive Officer

Yes. So I would tell you there's a few concepts in there. So one is really about transparency and control that you're trying to give back to the employee. And so when you think of the scheduling capabilities, they want to be able to post shifts that they maybe don't want to take. They want to pick up extra shifts. It's really about putting that control back in the employees' hands and giving them very much a gig-like experience, which a lot of our customers are trying to figure out how to do.

And then the more intelligence, you can put behind that, in many ways, the more comfortable a customer can be to make sure that they have the right people in the right shifts at the right time. So that's certainly a key theme that we are driving across the platform with scheduling being a good example of that. It also delivers interesting insights back to them. So you're not spending your time running reports. And so we're going to continue to do that across the platform.

The second theme I would just call it, is really the ability to do workflows and automate so many different types of experience. And the COVID tracker is a great example. And I think one of the unique parts of our solution is yes, you can collect vaccination status. You can use a survey like capability to get in front of each employee, have them upload their vaccine cards. But if you have a subset of your workforce that you need to test on a weekly basis is completely automated.

It automatically send out on the frequency that you want. It will automatically prompt the employee to collect the test results. And so we see a lot of opportunities like that with workflows and fillable forms to be able to automate so many of the things that our customers have had to do manually historically.

Mark Marcon -- Baird -- Analyst

How do these modules impact the PEPM or PEPY?

Steven Beauchamp -- Chief Executive Officer

Yes, it's a great question. So I would say that right now, the -- they're all a differentiation at this point in time. We do see longer term, there are some opportunities around workflows as we build that solution out further to potentially be incremental. We have not necessarily done that yet. We use COVID tracker to really kind of introduce the capabilities, which we are going to include for free for our customers. And I would say the same thing with the scheduling enhancements. Longer term, there's some opportunities where we could continue to enhance that. But at this point in time, they're value-add.

Mark Marcon -- Baird -- Analyst

Great. Thank you.

Operator

Thank you. Our next question comes from the line of Pat Walravens with JMP Securities. [Operator Instructions] I'm not getting a response. Our next question comes from the line of Brian Peterson with Raymond James. Your line is open.

Brian Peterson -- Raymond James -- Analyst

This is Jay [Sklar] on for Brian. Thanks for taking the question. Just curious how you guys are seeing demand for the core product versus kind of the full suite? And then just more broadly, how are you guys seeing the switching environment? Are we back to [Indecipherable]. Thanks.

Steven Beauchamp -- Chief Executive Officer

Yes. I think overall, we've been obviously pretty happy with the revenue growth we were able to post. The market is starting to feel a little bit more like it did pre-pandemic, where there's certainly a normal course where a customer is going to have certain needs from an HCM perspective. They're going to go to the market. They're going to evaluate typically a handful of providers and choose the best one. That activity was definitely a little bit lower during the pandemic. And so we're kind of seeing pretty normal level of activity, very much akin to what we saw a couple of years ago.

Brian Peterson -- Raymond James -- Analyst

All right. Thanks.

Operator

Thank you. Our next question comes from the line of Samad Samana with Jefferies. Your line is open.

Samad Samana -- Jefferies -- Analyst

Hi. Good evening. Thanks for taking the question.Steve, I have a question for you that we've been getting from investors. And I think it's an interesting one, which is, when we think about the video offering and versus maybe our own daily lives and this makes me think about Paylocity more broadly. When a lot of this is going to be work, we have started either Microsoft Office or in either outlook or or Bloomberg terminal, but it seems like your customers are increasingly maybe starting to date inside of Paylocity, whether it's in the communities or for getting content from their employers. Are you seeing that as kind of maybe gaining traction at the core starting point for productivity workers in your installed base? Is that a good way to think about it?

Steven Beauchamp -- Chief Executive Officer

Well, I think where I would start from is the challenge that we heard from HR departments when we started to imagine what community might be from a product perspective is they were largely emailing their employees. And if they had a subset of their employees that were, as you mentioned, on a Bloomberg terminal or in a Slack channel, it wasn't all of their employees. And so they didn't have a tool other than email that would actually reach every single one of their employees.

And so for us, that's kind of where it starts, which is you've got an HR team that instead of sending out a weekly or monthly newsletter, they actually are doing videos and posts, and and reacting to comments from employees and getting kind of real-time engagement with employees. And so that kind of announcement capability and then you get all the analytics behind it in terms of how many people have interacted with it, and you can share it and you can follow people. That is really where it's all kind of started. I don't know if I would say we're at the point yet where people are starting their day there.

They're definitely spending a lot more time there. You get a nice notification on your phone. You can click on that. You can see a message from the HR team or from the CEO. The other second thing I would say to you is we're now starting to see not just the HR team use that. So it could be a sales team that has a group of sales folks, and they use that to post the results or they use that to to make announcements. And so this idea of it being a more engaging alternative to email for our clients, for all company type of communication, Q&A groups, culture groups, diversity equity inclusion groups, that's where we're seeing the most traction today.

Samad Samana -- Jefferies -- Analyst

Great. That kind of leads me to maybe a follow-up question, which is, is it making it easier as you see more of that and more people interacting in the system in terms of getting additional module usage and showing maybe the ROI of add-on modules as you bring them into the fold?

Steven Beauchamp -- Chief Executive Officer

Yes, I think that's a great point. So one of the reasons I think surveys has been up pretty significantly. First of all, it's an environment where it's harder to get feedback. But secondly, you can really embed this into the way you use community. So whether you're doing polls, whether you're launching surveys and the ability to actually analyze that data quickly and then be able to then communicate back out to the organization in terms of what the results might look like from that survey. So that's an example where we do think the community is absolutely driven higher utilization of surveys, it's driven higher utilization of videos.

And I would even say it's driven higher utilization of LMS because there's so much of that content ends up coming at you in videos. You start thinking about, well, how am I going to train my employees? I can't send announcements in videos, but then I'm training them with PowerPoint. I've got to have a multimedia-type experience for that. And so we definitely have seen increases in utilization in all those products.

Samad Samana -- Jefferies -- Analyst

Great. Well, Steve payback. That was a really solid quarter. So, there you go. Thank you.

Operator

Thank you. Our next question comes from the line of Matt Pfau with William Blair. Your line is open.

Matt Pfau -- William Blair -- Analyst

Hey, guys. Thanks for taking my questions. Congrats as well from me. I wanted to just ask about the challenging labor market and both in terms of how that's impacting employment levels within your customer base as well as if it's impacting demand for any parts of your suite? Thanks.

Steven Beauchamp -- Chief Executive Officer

Sure. Well, I think a lot of our customers would tell you this has been the most challenging hiring environment and employee retention environment that they've seen. We've heard that kind of loud and clear in terms of customer challenges. And so I don't think that would be a surprise to anybody. I do think that it does raise the importance of what an HR team is doing for your organization. It becomes very strategic. You've got to be able to find the talent that you need to drive your business objectives.

And I think HR being part of those boardroom conversations and being more strategic has become very important for a lot of customers today. And I believe that, that certainly then translates directly to what are the tools that the HR team is actually using to be able to kind of engage with employees. What are the tools they're using to recruit people? And how are they differentiating themselves from the rest of the organization? The second trend I would tell you is on the retention side, which is ought to be able to find a way to really connect with employees and to engage with employees and to collaborate and hear their voice.

And more and more customers are also prioritizing tools like that. And this to me is just when you think about the future of work changing the pandemic accelerated a lot of these trends. And so we're just seeing our value proposition of having the most modern platform with all these not only HCM capabilities to automate, but also all of these modern workforce tools that really engage with our customers. And I'd tell you, that's one of the big reasons we're seeing the success in the acceleration of our revenue growth.

Matt Pfau -- William Blair -- Analyst

Got it. Got it. That's helpful. And in terms of employment levels, I think last quarter, you called out that you had seen improvement throughout the quarter. Did that continue in the first quarter? Or did those kind of -- do those improvements kind of level off?

Steven Beauchamp -- Chief Executive Officer

Yes. We've continued to see improvement on a month-to-month basis through the quarter and then into first month of this quarter. So I would say from a magnitude perspective, they've -- the magnitude has decreased in terms of what you're seeing on a month-over-month basis, but directional improvement has continued since last quarter in each month of Q1.

Matt Pfau -- William Blair -- Analyst

Great. Thanks, guys. Appreciate it.

Operator

Thank you. Our next question comes from the line of Siti Panigrahi with Mizuho. Your line is open.

Siti Panigrahi -- Mizuho -- Analyst

Hey, guys. This is actually Matt Diamond on Siti's behalf. I'll echo congratulations on the solid print. I'm very curious about the plans for Blue Marble, we can take away that there's less than 2% of impact in fiscal '22. How do you feel so far about the integration? And what could we expect for that trajectory as the year unfolds?

Steven Beauchamp -- Chief Executive Officer

Sure. So I think our philosophy around any prior M&A that we've done, we really like to take the time to really fully integrate that solution. And so from a user experience perspective, when you use video on our platform, it would be just like we built it and that video team, it kind of contributes to the overall usage across the platform in a way that is seamless to the user. And we're taking our time and doing the same thing when we look at the collaboration capabilities with the same page.

And so we're going to take the same approach with Blue Marble. We do have some mutual customers today. There's already a level of integration with the platform, but we've got big plans to be able to fully integrate that. So from a user perspective, it would very much be a seamless. And that obviously takes some time to do that. And it's important for us to be able to do that right.

We do believe, though, as we do that, and that will happen in stages and steps that, that solution will become even better in the marketplace and create differentiation for any of our customers where we're going to be able to handle all of the U.S. HCM needs, but also then provide them a much better and differentiated global experience. So think about that happening in stages and with a little bit of patience we're going to be in a situation where from a user perspective, they will be able to navigate and use functionality seamlessly across our entire platform.

Siti Panigrahi -- Mizuho -- Analyst

So it sounds like they're really not going to -- you put something out there that -- for lack of a better phrase, half date. It's really a matter of making sure all the eyes are dotted tease across it, we shouldn't expect anything in the first half of next year?

Steven Beauchamp -- Chief Executive Officer

Yes. I think historically, it often will take us something in the kind of 12- to 18-month range. We haven't made all the assessment here. That could be in that range. It could be a little bit longer. We do have an existing integration, so that's automatically going to be available to clients. So we don't have to wait us to be able to try to continue to add customers. And I think you'll see improvements more incrementally here because that solution is already in market, and we already have integration. But I think at a macro level, for us to really integrate the solution, it's probably going to fit into the type of time windows that we've had historically.

Siti Panigrahi -- Mizuho -- Analyst

All sensible plans. Thanks so much, guys. Super helpful.

Operator

Thank you. Our next question comes from the line of Alex Zukin with Wolfe Research. Your line is open.

Alex Zukin -- Wolfe Research -- Analyst

Hey, there. This is Alan Varcos on for Alex Zukin. Thanks for taking the question. Congrats on the strong results there. What are you guys seeing from a demand perspective that has changed over the last few quarters, given you are seeing accelerating growth and larger outperformance versus the quarter? And I've just got a quick follow-up.

Steven Beauchamp -- Chief Executive Officer

Sure. Well, I think your question asked about over the last few quarters. I mean, so obviously, we called out the tailwind you get from more employees on the platform. So that has lessened this past quarter. But if you look at it over the last few quarters, that certainly has been a nice tailwind. I think the part is demand environment has started to return to pre-COVID levels. So when we look at the new business revenue generated by our sales force, we're really happy with the momentum in the sales force.

So we're obviously adding customers. Sales force productivity is getting back to that pre-pandemic level. That's a huge driver. And then I think the third thing is our clients are buying more product when they're coming on board. And so a lot of the new modern features are really resonating in the market, and we're seeing the uptick in terms of the attach rate of those products increase. And I think those three things in combination really have contributed to the accelerated revenue growth.

Alex Zukin -- Wolfe Research -- Analyst

Understood. That's really helpful. And lastly, how should we think about the incremental TAM opportunity and incremental competitive environment given the Blue Marble acquisition?

Steven Beauchamp -- Chief Executive Officer

Sure. I would say, obviously, we've got a huge TAM already in a pretty amount of penetration. So I don't think -- we really did Blue Marble because we felt like that was going to be a trend where people would have more international employees over time. It would be a point of differentiation to drive our solution. It's a fair question. There's definitely some incremental TAM that's there.

But I go back to the answer I just gave, which is it's going to take us some time to integrate this solution, and we want to make sure that we've got the right product in the market. For now if a customer actually has international employees, we can actually handle them in an integrated fashion. But we probably won't look to really try to size that TAM for you until we get further along our product road map and deliver a more integrated offering.

Alex Zukin -- Wolfe Research -- Analyst

Got it. Well, thanks, again. Congrats on the strong results.

Steven Beauchamp -- Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Robert Simmons with D.A. Davidson. Your line is open.

Robert Simmons -- D.A. Davidson -- Analyst

Great. Thanks for taking my question. So sequential growth in the quarter was very strong, but guidance for 2Q sequential is relatively low. Were there some large onetime revenue items in the quarter beyond just Blue Marble?

Toby Williams -- Chief Financial Officer

No, there weren't. Other than the dynamics that Steve has described, there was no onetime items. And by that, I mean, we did continue to see come back in terms of employees on the platform muted compared to in magnitude to prior quarter, but that was still a tailwind. And then just sales execution, strong demand environment. I mean those were the largest contributors to the -- I think, the out performance and the strong performance we saw in the quarter.

So there are no other onetime items. And I think the in terms of the guide for next quarter, I think it sort of fits in line with how -- from a philosophy standpoint, for sure, but I think in terms of how we would have initially guided for this quarter and others. So...

Robert Simmons -- D.A. Davidson -- Analyst

Okay. Okay. Great. And then can you give any color on your -- where your new bookings are coming from by industry, geography, client or anything else?

Steven Beauchamp -- Chief Executive Officer

Well, I think the interesting thing about our business is truly horizontal. So we don't necessarily market by vertical or differently in one geography versus the next. And so -- we're now seeing traction really on a national level. I think as the pandemic was more of a recovery state. Obviously, there's some element of that still that exists today. We would see different geographies being -- coming back at a faster rate than others.

We don't really see that anymore. It's much more consistent demand across the board, where our sales team is having strong pipeline activity in terms of appointments, obviously, closing the business and driving it. So there's really no call out for us by vertical market or geography, we're seeing across the board strength.

Robert Simmons -- D.A. Davidson -- Analyst

Great. Thank you.

Operator

Thank you. Our next question comes from the line of Arvind Ramnani with Piper. Sandler. Your line is open. [Operator Instructions]

Arvind Ramnani -- Piper Sandler -- Analyst

Yes, sorry, I was on mute. Congrats on a good quarter. Just at core product development kind of road map and not so much in the next six months, but more in the medium term, the next two or three years? And if you can bucket that into essentially kind of completely new functionality, what do you have on the road map? And then also from a tech capability perspective that's going to enhance your current offerings?

Steven Beauchamp -- Chief Executive Officer

Sure. Yes. So I think we started this journey even pre-pandemic, where we really wanted to reimagine all the HR processes in a much more modern fashion. And part of that is, as you think of Gen Z entering the workforce and really being the first digitally native generation in the workforce, they're just not going to think about things the same way. And so we started a journey several years ago with things like community and then adding video that we just felt like we had to modernize that.

I think we're still in the very early innings of that. And you start to imagine a world where, hey, if I'm onboarding myself to a brand-new company, maybe I want to meet who my teammates are ahead of time. Maybe I need to be able to learn a little bit of background from them. Maybe I get up to speed quicker in terms of what they're already working on. Workflows is another great example where there's so many opportunities and workflows to help clients automate.

So we see a really great opportunity in front of us. And what I would tell you is we learn from how our clients use the platform. And so we look at what they're doing. We see the problems that they're trying to solve, and we get great ideas to be able to continue to innovate and add to solutions. So there's not necessarily a problem in terms of finding the great opportunities. It's a matter of us being able to make sure that we can deliver against those and continue to innovate, which we've had a great track record of doing.

Arvind Ramnani -- Piper Sandler -- Analyst

Terrific. And just a point of clarification. I know when you started community, it was more like an add-on feature as opposed to something you're going to be able to charge for. Is that kind of status quo? Or has that changed in terms of ability to monetize?

Steven Beauchamp -- Chief Executive Officer

Well, I would say we do kind of -- in some ways, you get the monetization by differentiation, but to discretely monetize that has never been our strategy. We really think that the ability for our HR teams to communicate and connect with every single employee is just part of the core value proposition you get with Paylocity. We have indicated over time, we will look at maybe more advanced features for monetization. That's still the plan, but nothing necessarily that immediately on the horizon that we've announced yet.

Arvind Ramnani -- Piper Sandler -- Analyst

Okay. Perfect. And then just one last follow-up on this. Some of your competitors kind of talked about essentially on-demand pay, others talk about kind of this kind of self-service. Are those areas where you're sort of seeing interest from our client base or not so much yet?

Steven Beauchamp -- Chief Executive Officer

Well, we were actually one of the first to market with an on-demand pay solution. So any employee on our client or any employee on our platform whose client subscribe to that service can simply go into their mobile phone, they can look at their pay from gross to net in real time throughout the payroll period, and they can request part of that pay to be automatically put into the bank account.

And that's something that we've had out there for a long time. It's been growing nicely for us. It's -- I think we've tried to temper the expectations around that because it has been more gradual than really exponential. But we got great feedback from our clients, great feedback from the employees who are using that service, and it has been a nice competitive differentiator in the market.

Arvind Ramnani -- Piper Sandler -- Analyst

Yes. Sorry, just one last one. When you say gradual, you mean gradual in terms of engagement or gradual in terms of the revenue for you all?

Steven Beauchamp -- Chief Executive Officer

Gradual in terms of employee usage because clients have to turn it on and they have to be comfortable that the hours in the application that they have a process to make sure those hours are correct. But we're seeing a nice uptick in that and people are getting more comfortable with it. And then gradual in terms of -- therefore, gradual in terms of the number of employees that are therefore requesting that advance in their pay. And then the revenue is tied to that same comment. So we definitely have revenue associated with that. And in many cases, it's usually a small fee that the employee is paying at the time that they transfer the dollars. On the other hand, the employer can cover that for them.

Arvind Ramnani -- Piper Sandler -- Analyst

Great. Thank you very much.

Operator

Thank you. Our next question comes from the line of Pat Walravens with JMP Securities. Your line is open.

Pat Walravens -- JMP Securities -- Analyst

Thanks so much. This is Joey Marincek on for Pat. So sorry, last one on the acquisition. But what about Blue Marble stood out the most to you? And then second, we've been getting this question a lot from investors, but what would you say are the key differentiators between you and the other monitor cloud solutions? Thank you.

Steven Beauchamp -- Chief Executive Officer

Yes. So I think on the first thing, it starts with the trend that we started to see more of our clients have international employees and look for help in terms of ways to be able to manage those employees and get those employees paid. So that was increasing gradually over time. And then as we started to think about the future state and as the world opens back up and as we see talent shortages, we felt like this was going to continue to grow over time.

And look like a great opportunity. It was an existing partner that we already had integration with, so we have familiarity there. And there's also scarcity of assets in that space, and we thought that it was unique capabilities. And so we were really excited to be able to bring that on board, and we'll invest in that, over time and integrate the solutions as I discussed earlier. In terms of the biggest point of differentiation, it really comes down to what we continue to say.

We've got the most modern solution in the marketplace and the features that we have are unique that go beyond just simply automating payroll and HR functions, but it also allows our clients to communicate, collaborate and connect with their employees and drive their culture and make sure that they're able to attract and retain the talent that they need. And that ultimately is the value proposition that we're offering in the market.

Pat Walravens -- JMP Securities -- Analyst

Super helpful. Thank you, guys. Congrats.

Operator

Thank you. I'm showing no further questions in the queue. I would now like to turn the call back over to management for closing remarks.

Steven Beauchamp -- Chief Executive Officer

Great. Well, I appreciate all of your interest in Paylocity and of course, all the questions that you've got. And as usual, I'd love to be able to take the opportunity to thank our more than 4,000 people for, obviously, a really challenging couple of years, but for a lot of hard work that have been put in to be able to produce the results that we were able to share with you today. So I hope everyone has a great evening.

Operator

[Operator Closing Remarks]

Duration: 66 minutes

Call participants:

Ryan Glenn -- Senior Vice President of FP&A and Investor Relations

Steven Beauchamp -- Chief Executive Officer

Toby Williams -- Chief Financial Officer

Scott Berg -- Needham -- Analyst

Brad Reback -- Stifel -- Analyst

Bryan Bergin -- Cowen -- Analyst

Terry Tillman -- Truist Securities -- Analyst

Mark Marcon -- Baird -- Analyst

Brian Peterson -- Raymond James -- Analyst

Samad Samana -- Jefferies -- Analyst

Matt Pfau -- William Blair -- Analyst

Siti Panigrahi -- Mizuho -- Analyst

Alex Zukin -- Wolfe Research -- Analyst

Robert Simmons -- D.A. Davidson -- Analyst

Arvind Ramnani -- Piper Sandler -- Analyst

Pat Walravens -- JMP Securities -- Analyst

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