PAYC - Earnings call transcript Q2 2018

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Operator

Good afternoon, and welcome to the Paycom Software Second Quarter 2018 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Craig Boelte, Chief Financial Officer. sir. ahead, go Please

Craig Boelte

good and afternoon. you Thank

regarding call. started, Before Securities represent of forward-looking that conference not statements as like objectives Litigation those note only within statements the the Act would statements we historical expected made Private this are including are Reform get forward-looking certain that during to call of our date plans, These of I outlook this performance, future the our meaning of facts, and conference XXXX.

and the While to forward-looking are or actual XX, on Annual including because any and we in are in our results make discussed are expectations with year statements XXXX. materially on Exchange made risks risks our believe XX-K Form ended Commission, are have we and Report uncertainties. statements December subject differ this for based reasonable, presentation current uncertainties the These the our could filings Securities and

to we investors.paycom.com. these President You events such schedule Officer. over consider the market should that our website Also otherwise, reconciliation release whether which relying Any on versus GAAP showing now any included statements, do except I Chad today during the date made the financial law. Executive as and it refer course Richison, the Chief which result will or information. turn a by not of new results statements press on today’s of call, is on non-GAAP the update required we expressly available our non-GAAP and measures. after alter will refer A at Paycom’s close call forward-looking to is speaks in to is obligation disclaim issued certain future of and of applicable as forward-looking we only and factors undertake information, when to as forward-looking or

Chad Richison

XXXX second Thanks, Craig. review today everyone quarter thanks joining to call results. our our to And

HCM at to quarter, the and on provide calls, update on As will the human as in our comments guidance. software in or speak with I’ll prior well then achievements Company the then and developments market. financials start second as management Craig our payroll some with an capital

will strong share, up results powerful continues quarter of Paycom’s questions. of with solution our growth market powering comparable to million, revenue Following the over line open second gain and XX% year representing prior that, we for the period. intuitive $XXX.X

profitable a XX.X% EBITDA margin. Our $XX.X representing EBITDA adjusted model delivered million, of adjusted

of by engage Additionally, is becoming see workforces, solution. can attain our our about over conversations with using second more the power repurchasing the by prospective Paycom, advanced to technology. excited and companies and value we At XXX,XXX more HCM our our during quarter, are to and efficiencies improvements manage we potential pleased stockholders In our the our software goal were better their hire, return they helping shares. them achieve success deploying that help to clients by clients,

a of the capabilities the our of our set lifecycle, the Our been development believe that spans solution best offers broad offering by organically marketplace. which employee have internal We remains in built option team. entire all

beginning data basis. the remains becoming HCM has trend employee HCM Significant of and by increase of is by to usage experience is system people still through the satisfaction usage vision from mostly our still a are an that supported leveraging At accustomed further software our systems broad of This with for to employee employers their potential We converting also by HCM greater competitors technology employees. among on provide software greater useful, Employee transformation vision also self Today, service clients on by to working our than employers. employees. and see systems at to experience believe reliable is and HCM solutions the we of our operators. mobile clients’ supported years daily their used are Paycom, of usage optimal. which return HCM investment less substantially both

and to more usage any I mobile allow part overall and range in and requirements, apps to last mobile has they and and us On innovative popularity employee quarter, positions devices, and device offered app our every success driving is we’ve developing in refining optimistic Paycom’s well time. our handle And functionality people employees. pleased report log gaining usage believe to mobile employee how that desktop clients, capacity if is for spending from at employees by a our all continued and mobile employee providing However, our time strategy, usage this mobile the the with desktop meets needs use. using access of you more our highlighted will to put our I’m into our is also self-service and app is app in any easy HCM We are an have wide goal only work self-service to growth. application. redesigned our those solution client this our application of that realistic we the grow. with that

improve part updates the roll we out that Additionally, our several second to our of our overall introducing offering client monthly we in to entire quarter, continue enhancements base. as

continue We our new will position. functionality introduce to to competitive maintain

In we in including prospects be second generate half that the marketing our XXXX, start into in investing to to campaign continuing this as QX. targeted We certain expect are a capture head in to effort initiatives momentum share. late national excited an about we of will we for market year

best sponsor, of in is list annually conferences. XX are recognizes the the which of the honored to Oklahoma backs the Preseason includes Jim Additionally, college we Paycom excited in Award defensive nation’s December. see XXXX release best we Paycom Thorpe Fame Award and representing The List. Jim backs, Thorpe to Sports were XX defensive football Hall Watch This awarded

Turning to growth. our internal

sales our San also offices sales reach and quarter, in We in Columbus the second opening Diego. expanded

first campus bring markets. City, Oklahoma total construction team we excited our our main XX. best-in-class started footprint fourth our additions here building and count expand in sales of to in HCM These to completed are move to businesses to We sales offer our to On our as many solution these This City it. data buildings into that data create square-foot in centers own a and center existing Dallas. state-of-the-art can Oklahoma will employees where three combined our also space, features XXX,XXX building our offers complement studio as and and we our content including large is

Regarding XXXX our Texas. Texas about our facility facility announced of new to plans plan expanding Texas. construction We on commencing our relocate our are Texas operations, presence we center new excited recently a in and this to in in operation Grapevine,

Finally, management. I provide executive update our regarding would like to an

quarter, all to continued call I’ll financials business extend Chief a With leading Craig? to PR second our her our as To continued over at taking optimistic her for been to to increased for on several efforts years our in Paycom, Craig of marketing we contributions forward for success we across the Oden-Hall, areas to thanks and to responsibilities. up, prospects We XXXX. turn our our the Executive We for service. Kathy guidance. our has for of and our Kathy extend and have Marketing are Officer our promoted like Officer remainder look grow. Kathy instrumental recently I’d that, momentum review to and team. sum the of

Craig Boelte

certain results for the full-year quarter the quarter on to that second X, basis. measures accounting the be for everyone would like and I our related new required period standard, financial ASC utilizing XXXX, which XXXX third XXXX, non-GAAP presented. retrospective our transition, will recast method Also, my adopted remind XXX review January I and us to on the we full to prior a Before of also outlook comments

GAAP reflect measures compensation transaction review non-cash today that call net today’s Non-GAAP other in included those earnings in to the net also use financial taxes. to our are Reconciliations are EBITDA release measures income income discussed afternoon. certain earlier reflects Adjusted assess and of adjustments and and exclude expenses and comparisons planning non-GAAP to measures discussed expense purposes. and performance our issued this the core adjusted stock-based and for effective net non-GAAP non-GAAP are EBITDA press Our adjustments. income for not operations. supplemental that the as We non-GAAP income

with of total million, revenues period. our We the year are representing prior $XXX.X growth pleased quarter comparable XX% of with second over results

Our revenues Within continued are with new million of revenue revenue $XXX.X quarter was primarily to pleased business wins, growth performance. second recurring our by XXXX, revenues, be driven the continues excellent total for and profit we for representing gross for Total growing and of was the total XX.X%. the quarter from XX.X% of year million, second adjusted period. XX% representing quarter $XXX.X gross the prior margin comparable adjusted an

XXXX in the including of of year of R&D in adjusted for million million of R&D the second portion as compared our to revenues. in expense prior marketing million $XX.X of total to XX% for $XX.X administrative of $XX.X XX.X% to the XXXX, quarter the second range million period. $XX.X quarter or For the quarter $XX.X XX%. XXXX $XX X.X% compared Adjusted will Total and cost adjusted EBITDA was to the sales XXXX. of million was be million. within was we was total second second in adjusted Total XXXX expenses XXXX. or Adjusted the million revenues quarter total in gross million quarter full-year the $XX.X XX.X% of second quarter a $XX.X Adjusted expense quarter of in of XXXX or compared second the the revenues were anticipate margin capitalized that

based $XX on second $X.XX GAAP quarter million based share, income Our shares was diluted million share million period. for million the the on in approximately $X.XX shares XX prior versus $XX.X per or or diluted net per XX approximately year

XXX,XXX fully XX% In our by we income $X.XX an per X.X We shares approximately tax will XXX,XXX in $XX.X over returned $X.XX shares value net market. including the to XX full-year XXXX the million million non-GAAP a Since We income be On was rate be initiated or repurchase to anticipate million over X program, of million be income basis. on year XXXX second Non-GAAP shares rate quarter effective the GAAP open we XX% XX per rate the on basis, approximately stockholders the repurchased shares shares have including income effective full-year in XX% quarter, in Our million XX.X%. XXXX. to third or outstanding shares, in to market. quarter tax second share, versus we the we shares, repurchasing diluted tax open to the based million effective over was our period. the quarter diluted our of prior anticipate purchased of $XX.X second XX%. anticipate for for share diluted

cash balance million and We million. $XX.X quarter with $XX.X Turning to the of of debt the cash ended sheet. and total equivalents

represents corporate this at As a a financing our debt of reminder, construction headquarters.

As Chad fourth our of building is mentioned, complete. construction

on expansion on million the for recently addition, second year. the Texas Grapevine, land our expect Cash of behalf revenue model. In in quarter, was clients $XXX The business of half daily planned of performance the purchase quarter of and $XX.X in was our the held announced approximately second our of to second profitability the reflecting XXXX. strong and operations we close funds in average balance from million the

turn me quarter the let fiscal to for third full-year and XXXX. Now, guidance for

quarter XXXX, revenues of of period third to $XXX we of $XXX approximately comparable the For expect at midpoint the growth of year range in total the rate XX% over the range. million million, prior representing a the

for approximately margin of $XX.X expect $XX.X the third the to quarter the of an of EBITDA million, We adjusted the EBITDA midpoint million XX% representing at in range. range adjusted

year-over-year range. For increasing $XXX of to approximately revenue $XXX the of midpoint XX% million at a we fiscal the growth million XXXX, guidance are range our or to

approximately of adjusted XX% we We midpoint representing range a million are open line XXXX Operator? million, increasing to guidance an of $XXX our With questions. of to that, will the $XXX for range. EBITDA adjusted at the the EBITDA margin full-year

Operator

And [Operator from Lenschow Raimo Barclays. ahead. go first from our question comes Instructions] Please

Raimo Lenschow

employees in Can can -- are usage little for are to, about guys about terms Chad, to that been a to of the into the our kind quarter. the there And on you have talk X,XXX the a of you seeing get deeper you’re base talk Thanks what and congrats client talk kind bit like we is are historically well. lot those base? as focus ready you more you’ve a on a those bigger way guys question. to to of enterprise more started a the -- kind Hey. seen of selling employees, historically have commentaries in that in X,XXX the as

Chad Richison

and you time I else in have are the see -- do with slower payroll dealing can our ways that especially as shape. when takes ROI level and employees when because the focused society think so direct we been we our what because clients everything is relationship and have the a as it’s industry significant that’s usage on a the been believe, one database, of bit most digital with to employee because important that the drive in benefits everywhere for that the little at themselves just We’ve transformation attendance so a happening and and you.

I that. We’ve so, that it’s And definitely ones the happen. been the think And that but slower, been the I see in little right a strategy been we’ve seeing that’s future. pushing for

Raimo Lenschow

what quite far you in to half? because Okay. us if talk And want of spend last you you I mean, step-up your of about like the your second profitability, you then, quite to this actually much how how the you it’s timing bit can you a if spend but there, a little you year, guidance can, want talk you want ahead you’ve second so a necessarily ramp-up look much -- in to at do, not a and -- assumes bit gave year, been Can half. like but

Craig Boelte

Chad looking initiatives. mean, ramping of sales and up called in some really out that half the at second we’re marketing I our Sure.

we some the in second as from half we’ve as R&D, seen R&D area. to in on well a quarter well year would so, quarter the step-up see the always as that And prior

Raimo Lenschow

last Like, What what’s is Craig? do in purchase Texas CapEx, like in level you comfortable then, full-year. me -- which the for be you with, And the second will like think this what’s great. half question for are you the

Craig Boelte

Yes.

fourth saw On third up quarter step we guidance quarter absolute give expect CapEx would similar the occur XXXX-XXXX, similar. an remember, from to called be the on year XXXX it Grapevine and kind are as Raimo, And We we second on Raimo, we would you that wrapping a basis, land were -- of the we of full purchase this CapEx, will first out midway we building. but don’t or either quarter. through. down the expect But, to to dollar

Operator

comes question John Jefferies. next from go from DiFucci ahead. the And Please

John DiFucci

revenue this that was quarters. the above three realize contribution a typically very such new quarter one. you recurring sales growth I from But, I that Chad, mean, over get good So, little you offices. accelerated last

it that question, sort you what which And meaningful usually when question. this acceleration the contribution you of this got any if if is, is the if quarter to? a you people begs answer you So, sort it, or What the do opened offices of new ask any got windfall from -- attribute quarter? the no, three is

Chad Richison

business you’re comes could our of always far to Yes. as the With from be comes logo any revenue overwhelming is record have that revenue one in, adds. new quarter, the as our going majority in, this revenue, new

but Your past as to our offices question about react they new offices, what contribution. our far new don’t than continue have reacted do well offices as as expected, differently

offices mentioned year opened year. reps offices, up last, I’d that I and six think before I two six we sales opened this before. we that outsell had for A

their offices of day. new contributions really XX but make so, And will month are past contributions, started original making they open

John DiFucci

recognizing XX it And gets of I a the up I you usually and don’t running remind guess, really making just too. once if strength Is happens. would the revenue new takes Am business, But until So, the us, I that last on sign this I correct? and impact span you you deal, know us right quarter that before the days guess about remind quarter the start the average, there? can assumption know varies. -- I that it sales,

Craig Boelte

our hit correct it’s would are revenue and until in do account built actually in count. have this case, not You been that. We for

in all a So, bit between also sometimes what need when for you a is in of how motivation take probably you are perspective, data -- the get mean, fix. that are we on six weeks, from of client client little correct between go we a depends somewhat the it in us to there and longer sick six correct that. kind a in And -- It to what can patient -- weeks I up.

and correlation So, you the and our as what between last makeup our profile that changed the you, revenue to to that question. and not the quarter are quarter timing so it of is I’m as right will revenue well. I on relates hasn’t say this what sure quarter about quarter. have from your But

John DiFucci

really the -- is I as very And And is mentioned my why of I quarter business usual. guess so then, is a quarter it are Raimo so, this guess, questions too. as around all And strong. strong

Chad Richison

be We’ve entire how usage our we’re focused as resonating technology business look I adopt with that’s their in and use own drive HCM this, of to the believe on about people we been technology, their and stage that else they shifted we’ve work to I for ROI. again talking do very people talking strategy product. mean, Company in of to differentiation beginning we’ve to similarly starting really I And the HCM all been think along able it. about that everywhere the lives. to are

I at producing And do for time. this us results so, believe that’s strong

Operator

from next comes Mark Please Murphy go question Morgan. ahead. the from And JP

Unidentified Analyst

Congrats know for Chad, thanks [indiscernible] trying better dollar This from update did is sitting retention, in contribute Mark. you John to quarter, out, don’t the I And guess, was question. figure on to I topic but all? same for well. the that on the retention at taking a retention me upside my Hey, the in dollar as

Chad Richison

are as efforts about retention. look or we since in a now the start most been of industry going losses the XXXX. of typically, we year, on retention, lot We clients the In of have -- to coming your always at our talking certain work IPOed I’ve to beginning then. your our be losses

year. have throughout also the losses You can

typically -- to increase it number, the start-off throughout And we the with hard retention so, it year. you us, on with extremely know we’re work we

the for last efforts retention of the seven I produced result or same retention far, all So have on years. eight believe rate our XX% and

but controlled, of lot not it that’s of is. a Some

as how finish to going to to would right full-year very focused are as where that we been we focus It now report the will about retention year. that. the plays be we at early talk quarter as of we’ve but past. as have impacts results so the in year, we and the on we continue far And our fourth that And see out on end

Unidentified Analyst

Understood.

productivity I top how offices And was for less constant, teams, I -- assume so, for goal I million, sales about more is the is for mature or of assume that towards think of productivity the mean, I is picking-up guess, if guess. the retention offices which to X.X we half? second your, the would trajectory mature fair should performing that

Chad Richison

Yes.

We with order very hard as as differentiate. comes productivity on hard didn’t better better to product meet our product for the prospects go actually with we very are a working as to aggressively that them and maybe time that reps differentiate that managers it opportunity into our when their in them, and well reps from and opportunity gives as as clients, talk you get product. improve and to go both prospective mean, on set as to both to themselves have sales well I improve continue working continuing in that they they sales to differentiation. around, working for We continue first skills so gives an think get the we well work

And able sales so, point department. overall skills go on capacity have work be our and sales product stronger and to that again, being increase able on those the then, of both I to would that to in to hand, results out probably produce a hand working

point areas I we of would gains some the And are quarter generating to had this the those as so, that

Operator

Hynes Canaccord. from from Please ahead. comes question go David next the And

David Hynes

seeing two, employee what if last, can year growth I look there you’re any quantify or month the expand don’t portfolio. Chad, -- reason landing to back of you way The per asked, you in you per your I over kind that know, price? the continues is

is isn’t landing that really the, on admitted focus you cross-sell, think the large. focus I on upsell,

metric success So, if a would the be I’d good are that seeing you measurement think of there.

help way So, to landing per month per us employee any quantify price.

Chad Richison

been haven’t I I the past due say not since is to over that IPO reasons. guess, and answer and updated question, sell do a from can’t we’ve increase year what focused to get them we your products period it in on to competitive usage, clients time. It’s very number I’d to to say there of chosen that the again. We’ve not use easier than to to been has appropriately. significant that PPM

focused clients that’s order the on in we’ve we actually So, that really help been to ROI to that And our presented been them. focus. deliver

get sell certainly of meet products the does. them sell that So, other to as have? that additional usage, allow you doesn’t continue well, Well, a they to using we really but someone greater who And just it products that I the didn’t percentage currently can does mean, for isn’t it products can, you they business. to help large objective have? the us

So, partner a we want to that. be in

as focus. as both being them I been So, our the the new difference us as in current a prospect into work that’s think It’s able opportunities. And as making clients field references been out go our usage. that’s use we and how product, to leverage well with

David Hynes

Craig, the nature be frankly that that then, more in this you up pick for one Anything, think out onetime basis historically, maybe bit. margins QX? and like year gross quarter, in case see gross seems guidance year? I And And the were strong maybe the for the in margins year-over-year. they would in QX even QX. you. the again I not up Why of we it as drove margins know jumped range points a kicked almost Gross pretty XXX

Craig Boelte

Yes.

then it them and ramp in. to to and people take clients on the in will and been take on bring just able margin, to up on a to XX% gross learn the we’ve full always hires takes greatest XX% to margin that We few when XX%. come then the is capacity. timing be range, to that we XX% up they and tick ramp and gross the to did while a impact the of On in The

we lot would into of call at fourth housekeeping being stock that’s in I’d quarter last up than And called quarter, kind don’t it XX%. X X I timing. I some that the range. read of comp matter, So, of third towards that moving one XX% between to kind million in a other our that million ranges thing and know out and that a as

that. was This quarter, than it lower slightly

I just that keep So, modeling wanted range, to for so. purposes, in that

David Hynes

X% range? in it the X% Keep to

Craig Boelte

X% had in little Yes, some it caused that true-up to second lower. the forfeitures X%. quarter We a

Operator

the question from ahead. Marcon And Baird. from go Mark next Please comes

Mark Marcon

progress usage. Chad, you’re you’ve thinking wondering, to it dimensionalize regards I measure how we like you can making it always that how the usage, how increased emphasized was and with over you you of this it should think some how year? trend in about it, do of terms about should or are the course of

Chad Richison

Yes.

a I I that amongst from think say think or So, us And employees in about whole, there’s use amongst an huge I as could opportunity say strategy, industry that that usage, base I what a the started I’m as whole usage base. a they to would really for not, ours I also employee was anemic. usage until has say on low we focusing would employee industry been from usage low. our an would talking

of that want continued out with we with great We’ve But, database very a that for everybody. usage the it. clients have leverage out it. generate be usage to on can really so -- makes there it the easier However, we’re having to employees we much focus not software where direct relationship and

on And that. so, we’re still focused

is forward. business. move because I at level from product, And still we usage create usage greater of our the a product full that to employee And at as that your able using we’re set identify product even of see you’re impact that with the So, other can usage, innings someone in for to once our increase areas early you strategy. of continuing ROI more you

Mark Marcon

are that clients Does like new at gaining against change who most having from? the in you all, terms success of

Chad Richison

the you and for say. that as as ahead wins. Well, suspects business can go it’s our wouldn’t been I No, far I tell us usual

We technologies in -- are C And a be lot types change leverage Suite are departments they notice can even starting different and to as actually that some where they -- for themselves. this I conversations of management. can HR task think of both the

do, to not they do. to Some industry, things have are they like in are our

have might really you choice. to mean, you don’t do a mandated. want They You it, I have not are to. but

greater so, And for in beneficial when or put that can greater types technology the is those hand in allows to very accuracy, situations a base. we that client someone’s of better

And I with to people are got in those collect usage. time, mean expense reports. able want tos, are as I they get They have benefits. part do to benefits. individuals they have to to of COBRA and tos. to they see, I start we from move to, things to have see have to greater the even I But greater you’ve enroll to so, have think will the in to we continue have increase have mean, and off, mean, business. request working things the I on time do are go for as their These can on. -- to these the I that a have

continue on see here. we’ve if And opportunities that from usage very do that. we’re as continuing not done for to increase And continue the I’d quite past. And to us do focused be stay to so, frankly, I disappointed we in to

Mark Marcon

we to dimension it? the any regards with how then, And should spend, additional think about marketing

Chad Richison

it lot of you money about are not in return if from We a strategy. waste marketing can you The measuring a not advertising and marketing it. and the getting you marketing is have thing are

we do we’ve So, ambitious year as had have at marketing objectives every here Paycom.

are We embarking another national going strategy. on be to

one this we that have on. embarked last to similar year We

the quarter the momentum into well differentiate some about, product and effort in as XXXX and that as get head we message. in third as second the We’re new talked as doing we’ve to an again,

that out coming forward the look there with So, quarters in getting to we message.

Operator

the from And from question KeyBanc Brent comes next Capital Bracelin Markets. Please go ahead.

Unidentified Analyst

Anything interested of interested might be think seen so you’ve in whether kind in do talent far of or side that could you at the or legacy they This are assuming was once, this interest anything they had non-primary something is upon? be talent healthy kind call all Chad, Brent. is efforts. looking we’ve no seen to that there I on an might for year a and modernization increased to businesses that system if some Hi. system in momentum. willingness out products, wondering about that I maybe to the Clark if improve of and customers is terms talk the are modernization

Chad Richison

has tell been and and a that I HCM a trend management. can in you payroll and more and what I labor become industry, think Yes. payroll management that time labor it’s was more primarily prevalent

reserved the midmarket. of started the prior market These to products primarily enterprise see start proliferation the products into too. level HCM move to You were for

the say talent to for that’s years, can to that people really a side Meaning continuing plus able this sell as talent a be develop impacts for happening have going really management increase. what strategy talent management be have or been of five I’d last a lot your you usage not product talent to procedures. don’t so, not HCM And implement product but is to we And include you our the it’s to type you and that management a the are managing automates, adopted would business. part have trend the if strategy processes going not that of

an do why should it’s an are So, background people on it’s seeing education we education -- checks. -- both

it if that days surprised background they be many don’t a on do do, out their these the might would ones how of do businesses employee base. You XX% there checks, and

primarily of at were as that. we are becomes work through And attainable that through we practices to practice, that’s lead best best believe technology them are into starting the see midmarket now the larger the you that it companies, themselves today. reserved these for available So, for a as

Unidentified Analyst

and then, a kind expecting call that campaign came and of estimating. we line out on in half lower out for starting of of quarter color you or in could maybe this push of question now than anything there marketing the to Is terms there any were any item? regard? for second that Was Sales the terms And marketing in the Craig.

Craig Boelte

third nothing we we have no, mean, did to mention, that fourth of this are additional year. I in pushed the quarter starting Chad going quarter. initiatives some

Operator

the comes Stifel. from question Brad ahead. go next Reback And from Please

Brad Reback

be with first see road, see in two, becoming deals? market, you the mobile down Chad, seems and number foremost, do an win given meaningful product And point monetization additional increasingly the it that? then helping you of opportunities differentiation do to you

Chad Richison

mobile our way the reflection employees an software. Again, to products is believe access. of the do Yes. for overall us. I It’s easier it’s just helping

the version desktop we and mobile. have the obviously then We have

So, prevalent the mobile have today. world devices in become

content then, in we done, what can And part they watch increases can’t increase you so, increase available that employee future create using right No, videos that really there our clients that continuing before we Because I’ve have in we’re making will this a but I will ROI Are opportunities us, that. anything success to to usage we’ve that’s very answer the that but will sell process, not products I there leverage opportunities. all the we get that’s clients for can them I identified that content create are somewhat that’s are we’ve the additional revenue have on the us get in to use our with believe people timely, sure And very some There it creating do not mandated after of also which say which we clients? content. we that, I meaningful greater our to that, people them. And increase significant question, can else LMS to relates we on. Does are. and cannot to generate sure their that what believe returns as level. have investment now. them But, content. your are opportunities products to if But mean for be to we’re able allow they usage will If want right a the very And not on videos get only that system. at additional we’re to just specific again, to delivering, client have embarking content? greater today. got additional, once full really to do, mandated Paycom, now use been of also as as that people that’s that does focused the

Operator

next and the And from question ahead. MacDonald Needham from go Company. comes Ryan Please

Ryan MacDonald

up a bit answer of the on following little guess, question. from last So, I the

and you now thus and you’ve the offering. content -- of that’s XXXX? for perhaps few trending been what quarters and just are for year how content early talk into into about seen and can about roadmap that for created, You the this this half creating a Can you you’ve to extent of that learning back content far talk usage the additional the the -- sort

Chad Richison

Yes.

comment just definitely completed of them was. that they’ve test focused the are content certify We’re an you through want creation. course make as up one certain example them, as as on that on, there their sure to my you as experience I brought mandates product -- earlier want employees as to content well

train industries. that the still additional them their for to ages will getting early of less mandated much do the sense that specific things, people to items want on people in makes the We’re at

I just newer business I being area for And so, opportunities competitors and definitely be of I say other of as use learn the would will think as at the is a is to comes people up, develop it business the that do as workforce out able be just at not believe way just knowledgeable but that -- large, I we midmarket is not market definitely HCM the to more us not leveraged different shifts and way the base, one the do by areas that -- generation our new do they definitely technology, there, believe even our well LMS, content. and they differently. that which continue an for the the for to client way for -- a

a out lot millennial. not whole two-hour a with going to of get course You’re the

along what’s so, the learn to and available things how that other learn there’s them. of way And you people

So, focused we’ve on market. we to been as all go that

Ryan MacDonald

looking that as the at the ago. you of or guess reaching look year follow-up. full Anything comparing I just this perhaps years the that broadly, then, anecdotally them quick group group to are or year back last two offices in seeing full at how versus and acted in maturity? up performed how be quickly, or of or you’re sort more terms past looking offices doing or might maybe accelerating of of what ramped new some offices they’ve the have again, those the And more and maturity better a

Chad Richison

consistent I’ve your best what with I managers. Yes. offices the past, described in have your mean, best

for have territory opportunity in. There your new us a in we it’s best so is territories that new the Your best managers. much say, office are I’d agnostic. offices

best going managed your You by our to offices are best that see are people.

Operator

ahead. next Greendale question Corey First Please comes go from the And from Analysis.

Corey Greendale

advertising. Just questions be folks in loud the about hear and there what on measurable recognition? it philosophies to leads I to Is market needs metrics? sense it mass campaign. outcomes. you hoping the the just you’re us give Can of Is and two what Chad, or just clear ad as value that I’ve accomplish? other brand varying from driving space a to heard you

Chad Richison

Yes. on a are too Again, much I talking think -- it’s marketing. mean, don’t are doing that I and what we on our competitive I what about situation. give we to want away

is a in We competitive consumer. industry. are the Competition very for good

So, want it in using us And it’s the going to are be not than a only time transformation There and message away I a give too our new much to for say digital is people here other future, seeing that. embrace don’t products are branding industry. competitors, another focused we that on to we’re there new branding and everybody these -- prospects Paycom is of the that but that included -- clients and areas. way

marketing only change of use how And our believe brand will be support technologies. the these the to Paycom we for not efforts what but so, and of types people in new advertising future part

Corey Greendale

on on wondering that can than sense change affected -- revenue however for the balances the in some give faster slower in growth then, you recurring of quarter, client one just Could did And how Craig. or or much grow just the info is you us sense some might provide results that? -- interest have I’m a

Chad Richison

rate was number mean, end gave of the a quarter, total the XXth. we balance outstanding daily was quarter. the quarter one increase of towards I average Yes. There the the June for during the

really for was way been. that, only the increase remain that Other than a we have quarter. the the rate So, always

fairly on conservative with funds client there, our are We those funds. investment

there our to strategy on so, really nothing investments. is And change in

Corey Greendale

revenue interpretation that accurate? my in that wasn’t of sequential -- meaningful driver So, [ph] didn’t recurring means acceleration a is it growth,

Chad Richison

would accurate. That be

Operator

comes MacMillan And Capital then, Please go Ross Market. the from next RBC question ahead. from

Ross MacMillan

LIBOR on Craig. look that I to they I were follow Actually rates, point, just up. wanted up like and at

just is of basis like shy couple XX I a historically think points little million. you a of talked annualized

that So, the are instruments what I ballpark? still funds? right you primary make just in which hold wanted client sure, then to is And the

Craig Boelte

that are disclose now bit than you, that little million I strategy going balance not $X.X through are actually lower. million being off for will we less approach hasn’t annualized going consistent. instruments be Where same our to lower from to to we to $X to than now million, our we We other think the XX the very disclose previously and increased or getting will that go in closer was revenue are that numbers changed. or has how not those been has we balance funds and $X.X due it basis, use I invest tell the our was But, your

effort to to but rates to as us We get as XX take didn’t both in more revenue, haven’t get our accretive an the does increase what basis well fact interest XX It EBITDA. are it points. points our hidden adjusted that than nothing basis

have as to do increase. interest rates positive receive a we so, impact lift and continue And and

at I you you’re into that right If layered does look a exactly have in to that banks? it necessarily don’t is to when away. look You play think okay, get trying much some how at quarter,

coming, client they we has today relates we So, with you those of what’s can how ahead these maintained being so, even do one know -- work we’ve negotiate for of funds. it us, aggressive. And as with And it to that if but client approach what time, been potentially position same our to funds not and

Ross MacMillan

any just net of terms pretty that curious one you way what just terms marginal you’ve those one your for consistent describe shift or follow-up of the in the size seen Chad I in of how customers or Chad. average Thanks in for staying quarters they with Maybe you. new employees. wins, clear. other? was Are recent That’s

Chad Richison

upper continuing in which They’ve some been at past. quarters, used would to to the disclose past our range we’ve include with end consistent of as the sell

Operator

And the from next Siti Please ahead. question Panigrahi Wells go Fargo. comes from

Unidentified Analyst

updated then, then apps. cross-selling expect wanted to Yes. employee your about behalf feedback if that? of product on you and any this -- customers of you I standpoint, more mobile products wondering your recently UI just focus a on usage, on share so and overall? Will Could This from And is far you drive from your Siti. talked just

Chad Richison

has in good. reviews base the feedback goes from We been and and client employee our base feedback us client The employees feedback. of good, Yes. very do gives monitor as

So, the is but to a opportunities product. we employee us the to continuously to are to what to Again, Again, solution. and access we navigate just software it’s continuous to overall to device the do gain use used add level. to easier see app not at we to definitely it overall -- app to for that are the make easier making continue changes the

app. develop we as for would be we through so, through those entire go and add products strategies the the it employee and And strategies, product. for leverage

Operator

Shankar The comes Merrill from ahead. of go Please from next Bank Lynch. question Subramanian America

Shankar Subramanian

And on to question. great the just touch upon congrats taking for openings. I want office Thanks quarter. the a new

and that maybe for next how where update second your terms half? you should on expect what beyond? quarters of U.S. and more we maybe should in the across two and of penetration you much us offices And expect terms can we have even on So, in the thoughts beyond of in

Chad Richison

believe solve. in with increasing us include as past, focused looking So, sales we are current which than to when prospects problem does problem, collecting a opening haven’t and to don’t But, use on capacity. have other what of of we And them for us guided we bit we to up also are in We offices, making continuing opening the very front offices. clients. us, we’re our runway are up we start we strategy, currently to quite of that on haven’t say we the additional done focus sales

that not further geographies larger we geographies we even and cities. have to our some in of certain in have exist we expand as other can that We do continue

we be be to for as focused something sense are at for sales increase when do, we of it very us, we the capacity our it But too, force. up continuing if to other So, to sense us would the move that us look time. open throughout makes makes would year for that on would offices

And that so, as we well. focused are on definitely

Shankar Subramanian

Obviously, your number more mobile employees. base the on maybe up are better you the be the would your to employees? campaign segment half current you of traction among in within customer customer the kind do opening see side. But, second more run are of This beyond to mobile same and you seeing going products to

Chad Richison

We ROI business for are much U.S. product, very focused to a that businesses exist here delivering business on the we’re in

to that on. we identified believe line. something our do that to we is And would a And in Paycom. develop. And so, any that be impact that’s what in that clients increase can To would that with to choose our Paycom. areas, do that. in that trying would client are ROI on that be making effort look definitely we clients’ focused achieve what looking And we employee can the if bottom an way we usage, are through that’s extent do again, client something allows other to benefits employees But I focused a we

Shankar Subramanian

been how feel feedback with they the use on of what’s maybe your third party base, side, maybe customer your planned thoughts an And with providers And is they increasing like business use to front. seen? to solution? have Do your in partnering tool How for benefit on. then, model benefit do third or on administration seems so at and go certain lastly, least like source benefit it from customers terms that see comfortable they the and trend you what on the party

Chad Richison

Yes.

for developed So, don’t We’ve it us. we brand not of mean the now. we same same we some I within benefits on it’s had years I of software part the a number know have It’s the time own have. but it’s new ours, clients it, that data module administration for our product base.

four probably administration. in years five are to on benefits We

choice we that or dental clients. as healthcare and aid We for vendors As our a they that. them coverage provide reminder, or do not vision help those part to of the in make

you. live files which to insurance the have those your insurance have be would dental health to do vision third parties what your You company, feeds and send

clients appropriate those continue do we where so, we the note, and are files our fact the after to today the taking vendor. to And then and getting

Operator

go Please next question Schwartz our Oppenheimer. ahead. comes from And from Brian

Brian Schwartz

the guide for rate. The around not in much there. the context one sequential question revenue I terms of the QX, had growth was It’s just

you second lead see on overall to as So, just the of you maybe XQ. on the And how with the just forward us that double into for you momentum here business, the from half filling year? to and second if how business XQ any any the half into share out with you check pipeline funnel wanted can comments Chad then, was question is trending look pulled is the up second

Craig Boelte

pulled On forward exist would in first a the into starts it question, it perspective. QX, from the QX still to extent

the may that… that been on think, question I have

Chad Richison

similar our mean, been on I past Yes. we’ve outlook as in the well. guidance how is to

Craig Boelte

that… we what our can then approach changed. second to of see, And part guide We hasn’t your

Chad Richison

was starts. like the of like the I on turn starts. a to see pipeline, and pipeline. pipelines into to too see I’m I for large see starts, If It I looking

just And we R&D so, our excited this year momentum department. has been strong have sales but Specialist last and departments, to continue our in sales our galvanized about department, department. Everybody been our as around this that’s started conversion opportunity I’ve actually same really the really we’re seeing looking and not year And for think second head to we’re galvanized I to have us a we created really year accomplish. quarter. year, an as what great to message Paycom

Brian Schwartz

first clear question. Just to be on that

one up how I know to thinking just and the about were from but [Indiscernible], mentioned I next. deals quarter showing deals the So,

this the from were was terms anything there quarter? unusual of your sounds showing it deals So, commentary, in up where

Chad Richison

when quarter, a if for this. deal it. revenue beginning I say dollars matters will the does the it deal of you of start It matter. get in mean, a you a I starts, XXX%

started to of dollars those and it different client the is with We often you hard are you the work revenue get matter forecast to third If most the but with their a of does it’s work things quarter, client. timeline, the same it’s that we the last deal. But up. because month for times going come

impact dangerous one myopic versus something really revenue it’s for to XXth. to on June try hard your May somewhat it, quarter. so, to and But that And any start can get too Xst going

our see to through guided the as expectations numbers. always move And then we what final and reflected we’ve as -- in always are. that the we’ve so, we And things guidance, what those change, quarter can are in

quarter approach different to than the no has past. our third in it been so, And is

Operator

now would closing conference Chad remarks. to turn And to I for this over session. our concludes any the like question-and-answer back Richardson

Chad Richison

joining investors I Communications Oppenheimer Xth. the Well, on Internet next We’ll to the the meeting the And at thank road month want on for Technology following today. us at be on conferences. and Boston we’ll be everyone Conference with call in August

at We Conference will be Xth. Canaccord Growth Boston August in on

in Forum at in you We everyone’s appreciate Technology forward Global August soon. We the interest Vail, look KeyBanc will meeting to disconnect. of Colorado with may Markets many be XXth. Operator, you Capital Paycom. I Leadership on

Operator

conference The Thank presentation. for you concluded. now is today’s attending

now may You disconnect.

Paycom Software (PAYC) 31 Jul 182018 Q2 Earnings call transcript