Paylocity Holding Corporation (NASDAQ:PCTY) Q3 2018 Earnings Conference Call - Preliminary Transcript
May 03, 2019 • 05:00 pm ET
call. We had a very good quarter with total revenue of 113.4 million, an increase of 25.6% for the same period last year. Recurring revenue grew by 25.7%, driven by new client additions, improved HCM product penetration, and an increase in interest income on fun helper clients. The third fiscal quarter represents our largest quarter of new client starts as many companies prefer to switch providers at the start of a calendar year. We were pleased with the volume of new sales in the quarter and the execution by our implementation teams in onboarding our new clients. We also continue to generate more than 25% of our new business revenue from the broker channel, which has remained consistent over the last several quarters.
Our sales performance for the quarter was a key factor in our ability to increase revenue guidance for the fiscal year by $4 million. Our largest increase in the last two fiscal years. Adjusted EBITDA in the third quarter was 35.8 million or 31.5% of revenue expanding from 26.8 million or 29.7% of revenue in the third quarter of fiscal 2017. As a reminder, the third fiscal quarter is our highest margin quarter due to the recurring fees collected for W twos and annual tax form filing. Calendar year ended a very busy time of year requiring significant operational planning and coordination to handle the increased volume of client interactions. We continue to make investments in a variety of cross functional process improvement initiatives, which has allowed us to improve the client experience as we continue to grow our product portfolio. These investments along with our continued focus on product innovation has allowed us to consistently maintain revenue retention above 92%.
During the third quarter, we completed the acquisition of a third party benefit administrator Bennett flex, welcoming 36 employees to our organisation. Bennett flex provides us the opportunity to offer flexible spending accounts, health savings accounts and health Reimbursement accounts to both our current clients and new prospects. We believe these additional products will strengthen our value proposition with a broker channel, who in the mid market typically refer clients to a number of local and regional third party providers. We are actively developing a seamless employee experience that provides savings account data to our mobile and online platforms, which will allow employees real time access to their information at the point of purchase. With so many of our clients employees already logging onto our mobile and online platform we believe the addition of the FSA and HSA data will provide a differentiated user experience centred around convenience and ease of use.
We have also increased our total investment in R&D by 24.6% over the third quarter of last fiscal year, when you consider what we expense and capitalise. The investments in R&D and the strength of the product offerings continue to be the number one reason clients switch to Paylocity. Clients are increasingly searching for a solution to automate manual processes, while also driving employee