PAYC - Earnings call transcript Q3 2024

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Operator

Good afternoon. My name is Elliot, and I will be your conference operator today. At this time, I would like to welcome everyone to Paycom's Third Quarter 2024 Financial Results Conference Call. [Operator Instructions] I'd now like to turn the call over to James Samford, Head of Investor Relations.

You may begin.

James Samford

to XXXX. conference welcome third for and of quarter you, Paycom's call earnings the Thank made this plans, statements meaning of those performance, Certain XXXX. on forward-looking of related facts, not are Litigation to including the historical Private our Reform within future statements objectives Securities expected call and the that Act are These of call. this represent outlook as only our statements conference forward-looking of date the

are any risks materially and are believe we statements on reasonable, including because recent report forward-looking differ our results may uncertainties. are our on expectations call While current annual SEC, in statements on this actual risks the with and and based our to XX-K. the Form filings most discussed made subject uncertainties These

results non-GAAP today, the CEO I that Paycom's over is release income included adjusted Chad? Chad will or and call relying the You non-GAAP as should the market information, any non-GAAP EBITDA, and during our adjusted update expressly we on speaks statement to net including law. in alter non-GAAP the on information. Any to President. of we and turn and expenses. We Also to refer our refer and it financial after of as use close only the made today's statements, forward-looking do review and or planning to is forward-looking certain showing at whether required measures, and is now purposes. versus applicable schedule when disclaim on as certain GAAP we these available factors to for such which date events website undertake obligation investors.paycom.com. except will future issued Richison, measures made, press of by not forward-looking performance consider assess new these financial call, and our A reconciliation result otherwise,

Chad Richison

client wins Thanks, I'll I'd recognition. to and continues to recent and industry, review how transform then our everyone today. joining call like you our Paycom's some thank to James, discuss automation industry

will guidance over our Before turning questions. financials who to and Craig, it review before taking

highly our user automation they for towards need industry, for that day-to-day Paycom And our We more driving for the system are full more most platform Paycom automation, without We ROI years they the delivering ago, system we the them in buy already do do solution to wanted people software. to are because ROI themselves. is investing for for wanted differentiated today, in buyers the bought because automated the moving rapidly involvement even clients. in and our more have clients. XX

X a solution tasks just how was reason. through product recently the for simplifies good that automated off fully is Executive all-time by decisions time GONE off Magazine, is GONE, requests. of example solution, and Paycom GONE award-winning first automation. named Our top industry's HR HR

GONE locations. employees labor on and shortages also areas study hospital appreciates generate is greatly a This on-the-Go, nearly reports managerial recent organization. of the DDX their were individual XX% a Utilizing recently its with consistent only Manager the benefit payroll it GONE time to saved hours are save GONE, from team Forrester app, scheduling, X,XXX-employee time software positive tracking also and companies fatigue a off is an GONE mundane client all BETI, unmanaged. A a their this X XXX operational HR, every approximately XXX per single disruption. One and boasts management, be organization's process We that an of it overpayments, leaders. of With Before time-off from bilingual of the automating clients user-friendly client across organization found their utilizing ensuring time GONE, nearly year. XX%. differentiator, spread processing using decisions approvals, This up having that already dealership cost which multiple impact of consolidated experiencing costs managers GONE, organization. reflecting onboarded and reduced decision XX unproductive in Paycom errors client this unproductive nearly automating unmanaged, auto and using across week currently Not can workforce to of applicant and accounting hours Without organization PA increased task on while tasks, score, average, study has of ROI that annually. a off their XXX%. continues for managers into finance substantially client in unproductive staffing this reduced a among nearly The decisions, with benefits. streamlining over By GONE more. weeks GONE employees. BETI having week an example resulting saved request a found [indiscernible] goes is time a management by XX.X% power locations. managers

this automation across have are a this such promotions changes teams recently automation base. management automates or restructure. reporting that physician more and quarter we've launched changes large-scale the impact development throughout we focused individual due by enhancement to Our enhancements and an of needed structure having HR changes any our such as There and easily client that our than platform are the several big products been company's both are time on is organizational acquisition Because of that launched transfers automating employee on and and hierarchy tasks as our examples in such year, recruiting focus, adopted or history. departments. One

very now is already clients connect dramatically utilizing advances how response have of in with to out recruiting additional What recruiting any completion even we before. our team. right own significantly without enables immediate AI our service time clients enhanced search semantic knowledge-based our quickly and automation on and clients rates ever for by Paycom. module. improves to product we own value time XX% the The agent more application improving and AI reduced apply agent impact an agent, technology This XX%. Internally, AI our increased was help to example more a developed solution time consistently Another us of model and service continually fill. our fast faster, relationship having by their has our process over By rates provide and than deployed been we an utilizes is our able to to interaction. our the were helping The human our to reduced achieve

a XX result As on Net also of our Score service, year-over-year. world-class focus we automation, increased Promoter ROI achievement, continued solution our points

on more continued delivering before, is On of our with the solution market. force extremely than we executing reps. clients on less automation ROI driving will for seeing outside have needs, our ever still addressable X% particularly side, are matters and business which automation that the continuing and our to automation. System to goals. We is produce sell sales differentiate our market's than while sales high strategies remain We focused the to momentum, our

overall that the Finally, and was companies world's the Forbes workforces best technology as testaments one culture having by Time globe. pleased I'm our showcase one recognized of is Paycom workers impact over our and of all best Magazine. These tech the for by on employers the

We on our XXXX plan, I'm executing the are and with very pleased progress.

success turn to let the Our me foundation future Craig? that, growth. With for will Craig. it over set in XXXX

Craig Boelte

Chad. Thanks,

year delivered certain comments third solid coming and our will with XXXX, review my to results, for fourth and outlook remind related that I'd expectations. quarter revenue in XXXX to financial the basis. third I on measures adjusted be our above Before full results and quarter EBITDA We everyone a quarter like non-GAAP

million and revenue quarter XX% comparable revenues period. revenue total $XX quarter $X.XX $XX $XXX XX the revenues, the Third third per of quarter comparable diluted from growing year or $X.XX share million of period. diluted million prior on million GAAP quarter was Within net prior XX% share. $XXX of net year was recurring the based for the XX% in increased the Non-GAAP income or for income representing per quarter shares. was total million for the approximately over XXXX, third nearly

R&D $XX margin was adjusted year automation upside expense portion, including EBITDA XXXX. third in third to international We in Third primarily increase focus were than AI, quarter costs, prior expanded in resulting XX% to million of in the million our capitalized better period. million of the $XX investments due R&D or and the compared adjusted expansion, of quarter of Adjusted in in $XX revenue the the area XXXX total million to automation. and expected, a $XXX on quarter continued our XX%

tax in expected, in came to than primarily quarter adjustments. the to largely in third recorded items the higher Our related provision quarter discrete due rate to return onetime

estimate income XXXX QX XX%, For and and to XX% effective We year QX the a be full XXXX, anticipate tax we our approximately full rate be tax basis. GAAP XX%. respectively, rate effective non-GAAP on year to and

fourth of expense For expect be to compensation $XX stock-based approximately quarter we the million. XXXX,

The debt. approximately cash on clients up balance the XX% ended average balance equivalents funds We $X.X quarter of the $XXX of strong balance Turning quarter approximately including third and very sheet. behalf with billion million XXXX, no of to a and cash in daily of was year-over-year. held sheet, the

quarter, on third repurchased approximately outstanding, and buyback the for year, X have million. $XX X.X XXX,XXX shares Since During we of total our representing shares shares billion million repurchased X% have last we we July of nearly $X.XX approximately remaining authorization.

quarterly the quarter cash approved we next of third dividend approximately XXXX, of per the earlier in mid-December. in this our and $X.XXX payable During Board share dividends, week, paid million $XX

turn let me Now to guidance.

the year-over-year to range. our results approximately range quarter, $X.XXX XXXX growth increases Following guidance the solid and for fiscal QX the our or billion midpoint revenue $X.XXX at for XX% of fourth expectations to billion

We expected at EBITDA the to margin the adjusted our million, of midpoint representing EBITDA of $XXX raising are adjusted XX% million $XXX an to range range.

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

adjusted the EBITDA midpoint million the and at million, significant to with We a the $XXX.X expect EBITDA range. Overall, EBITDA better-than-expected of QX $XXX.X XX% of in revenue margin adjusted for quarter was the representing of range fourth good an adjusted quarter, upside. approximately

an with debt model, a strong solid have attractive flows. recurring We no cash business sheet and balance high-margin

strengthening will ROI on will open the even line to more competitive focus and achievement. With questions. through we clients that, We our delivering Operator? to position through our value for continue automation

Operator

Barclays. question line first Lenschow comes Your the Raimo with Instructions] [Operator from of

Raimo Lenschow

color you or some demand, how you are Like going in year? terms Perfect. out then still market, names, cetera? the kind and pipeline Congrats how more have quarter. Chad, next you recovery. What if and the the a Do seeing everyone stable comment evolve? does float like at there of payroll float about on solid for you how think really any the Like And it et moment? any is stabilization [indiscernible] about conversations are reporting of speak going end into please? think like far a like on like for so Craig, there, for the great more of sort hoping towards season of does a

Chad Richison

Yes.

automated an have mean demand more and the to solution, out there. I I we automate. So strong looking are more is and mean people

We stronger. continue get to

fact, month our our last history September, year largest month, over company. as In was this of well sales as the for both

get that us So so the from stronger and the to in can continue fully that to we sales, market, move to into derived important been the to the automated that's experience can product clients be continue ROI solution.

Craig Boelte

the annualized seen basis. And basis Yes. say, would every much year. I cut, more couple us impact cut, million point could as on we've float point already XX basis revenue, an as it XX $X maybe for a this Raimo, on

So but in balances. to going to us. we're some then be that's that's term year, going layering looking as more -- also at look And longer something into that to next starting on float we're impact

Operator

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

Samad Samana

serve Interesting at be and Craig into you. like for I about have thinking the Chad, if savings that, that that the a organization. that about something if some can service follow-up or AI and to point customer that's how well? one, think as technology And you're for you're has first curious can hear a translating you party, built a cost feature third that side, Paycom as in to do be on I'm using Maybe the then after. monetized using

Chad Richison

Yes.

We internal. it using and ourselves, So that's it. built we've been

to clients sped whether better question as mentioned It's up what being question, process solution the to that as have as so we on gets tax And by call. a better it XX% the able our configuration quicker, be you. a or far connect and

that And helpful been perspective. let from more answer. Craig so to to continues that's and And us, it do I'll really more and

Samad Samana

should about guidance good see And quarter BETI the it on maybe corner Great. acceleration, about Have Craig, and the as And XXXX turned think we that. follow-up. cross-sell as headwinds reacceleration? any then, CRR we've a I the When was a that starting started see to think we associated headwinds? to for point good just a now the fourth

Chad Richison

even mean being year down time, you they're tax when by benefits BETI. resolutions utilize versus still that year there's mean X/X. I clients gained look I last at this same our

help efficiencies They product, the to amongst well. But the they're have still to additional utilizing continue continuing is an as purchased. products of to CRRs. you make full in and and far the as do they've achieve currently a BETI to value that they're that those clients software, driving So having order client sell success with really clients sure

clients got so And we of lot CRRs in a their solution. right that have have the

lot and quotas have over them plan of well a We their now.

Operator

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

Mark Marcon

kind nice to the several a you've recently? to behind about with see extent relative the got you what GONE the increased made to if can things some that and module uptake regards that training things, that Really acceleration. improvements Chad, a wondering been follow-up. talk have And To regards revenue. go-to-market then little mentioned but I've recurring sales is acceleration implemented I'm of the with for of to like bit you it drivers

Chad Richison

Sure. of that sales I one already most included mean GONE I definitely of modules automation. have. isn't that its separately, all would of so GONE clients in our priced helps the say because it's

fantasy way a so it kind do that them XX people I is module bought our automate then more with said of on sales, could just do fully. is that the my set They're I'd call. so that system that to Maybe like mean do people lineup. Today, more systems draft auto kickers auto GONE and can also And draft, season. I go helping ones ago, it. buy X mean, our for without they I'm a win years So football lineup. involvement. I the set can set week, XX on their people have on usually Today, years X and accident. then that and that go and playing the it draft ago, on to draft it

so our concept system. really that's of the And

it's everything to more If you new that, with and that. you. industry, going And in clients to a automate has set Paycom our getting it usage in the our lot for up with clients. success case obviously, and for right, best it's And go-to-market scenario have we more of

Mark Marcon

the to then kind regards any And the Great. process with sales training? of sales just comment and

Chad Richison

I to counts, I unit had as Yes, really have last last elevated. be September yesterday mentioned they more doing the sales earlier largest as sales month, date continue well. Go-to-market, mentioned And is mean and or was sell than continue to we I to in we've time, ever. past. our month

Operator

from comes Your the Brian next of with Oppenheimer. Schwartz line question

Brian Schwartz

the AI Chad, maybe what a in -- you developing. or opportunity I versions other had Do or follow-up on internally, you're you're platform? in in in recruiting of future the your agent the products product to productize AI technology your an developing that future see your like

Chad Richison

would this isn't We which AI. -- I using say the area I only mean in we're

have several in releasing. it that released we have be and both We products will

AI. And so opportunities there's definitely monetize to

back as it's on the far end us As and this particular helping well. our really helping client as solution,

in other benefits to within organization. own I that from our think areas across and the board see of going results we're So efficiency

Brian Schwartz

for then one question And Craig.

upside the it in of we've much seen than EBITDA the a bigger quarters. quarter, terms was previous beat in in Just

Or expenses into Just expense top about you just in wanted from that line? to profile. ask any is the the slip Did upside primarily the QX?

Craig Boelte

them that I mean, it there things I was mean the be that, were a throughout. mean upside top of corporate just bit some level, timing. were of from some of other may the the Yes. But couple the than impacted a of then efficiencies beat. primarily little I and line. of kind in marketing the at

Operator

Needham. line of question comes Reilly next the with Joshua Your from

Joshua Reilly

All right.

that think aggressively should some you've making right kind complete that a elevated be in at implications something up Is about mentioned platform And margins the automation. the should our EBITDA past this the you changes 'XX? towards is scenes? the this potentially that sometime now period behind end the kind investment? been press are of solution full the from in about of move largely You to end investors think where we release 'XX How of we moving move of can is or as period thinking that

Chad Richison

doubt across mean and do areas there very the board. want mean that I ambitious to certain say only from of drive We're I have so the our market, innovating would our no we automations we competitors because there's automation, X% about mean capture. efficiencies. Well, delivering by also founding, differentiating clients focused I I just which everyone. our we on since about and maximum ROI, for ourselves for good that are is

softwares ones the innovation And down will our on years, And automation. so industry the building we're and the in full look couple it. who doubled in we've include different a are used of to

Joshua Reilly

the just team then seemed you that have seeing up that get It it's the quarters, And terms of yourself. few of carefully it the it. the sold. any making the on utilization following monitoring quarters? like utilization the been been in change last you've modules cross-sell higher? back couple what Are kind is of effort with client in already Or pretty Got to of last with been still consistent

Chad Richison

to good Yes, way. it's continuing in go up a

isn't utilization way in can XX people that so is in you, it day. and do Sometimes every be mean decisions lot that the automate I always we in leave you make a the help and we're the utilize trust best way fully time our the more that of making can system. otherwise having decisions configure will actually a system work system. spent it alone Oftentimes, where would X,XXX today something for us to to it up reflected it and set

about market that. And so, so much of what to we doing bring is

Operator

line of Citi. question next with Enders the from comes Steve Your

Steven Enders

I and guide but the it to like guess kind bit Great. the kind rolled the outlook just through to look ask here. want I year. amount maybe full to doesn't to of start, here, [indiscernible] mean the XQ of I I think on little beat a

help So maybe that's and of that for QX can to in takes bit we what's guide a QX? some or the of the leading in thinking about maybe you us puts little change about be happening think the should

Craig Boelte

Yes.

So narrowed is the the type on the range have the bonus as that off-cycle full narrowed we look increased But as XX a were to based runs would and had and some. is for the potentially end of and range, -- to it hardest we cut I number of full that's what well of really guidance of the the we year. as predict in we more and year, the year. you the couple the say to in as to we bottom the QX other basis as rate, end that -- runs, QX point interest looking towards we're QX a one as the end and thinking relates the

Steven Enders

Okay.

-- going It's it. outlook? [indiscernible] guess, is so factors into And on being side I other it changes the changes for there that assumption in the accounted isn't, the primarily

Craig Boelte

interest more Not that. that call I mean out. would cuts on rate really I

Operator

Your from the with next McVeigh question of comes UBS. line Kevin

Kevin McVeigh

Great.

some how think or of not a the end. about it's little guess, much as was there end automation? that the percentages, terms on is I there back like to there in is frame maybe bit? about terms kind the that EBIT necessarily how numbers, of and through beat, to front but more that to the about of way Is talked much upside And any Is to any organization, you go, you whether way In automation opposed think as how of revenue to revenue automation. much and initiative,

Chad Richison

to for of in a lot there's Yes. mean at you work go. I would it. the just I as look system I world, mean the you perfect automation think

in. wouldn't You to have log even

us course, a to eats office well of own there's to of I go. I So as that We're company think the a is automation lot in our our automation going positive. back impact to so cooking, mean,

investment It's and do. system really being couldn't to watch and be So automation, fun. they about it's to a else. what something do achieving for trust do anywhere able actually it able to client It's can and that it's they're that's fun the is that enact it because to do return fun them on what the

Kevin McVeigh

of is space really ever, And that largest obviously incremental -- commentary Or that just helpful. the any as competitive [indiscernible] sales kind opposed -- nice just month drives September, with is takeaway? white to that way BETI the there point? of it's really, adoption? then to a That's kind because is What how on of much

Chad Richison

Yes.

be to going our that's So bookings.

be new So going that's new much business, majority logo that's overwhelming of the be to pretty to it. adds going

will course, well. as those have that But all of BETI that's, number. Of

Operator

comes line question next from KeyBanc. Your of the with Celino Jason

Devin Au

Was see color double on is Devin today. just quarter you the new beat stronger This your outperformance mainly the click there it among Would be customers? motion? the you on Jason actually within perhaps in for I revenue to on strength in Or maybe more want would side. helpful. back-to-base Just logo just the the better quarter? attribute there retention did employees on

Craig Boelte

primarily logo It's ads. the that's going of our to to I revenue going new overwhelming is logo new adds. majority mean be be just new

Devin Au

That's then And it. just me. helpful. Got one more for

the cohort sales added quarter. Just sales how new rep, you curious I XX-plus guys new rep believe of last

Just those ramping been curious expectations. have how versus

Chad Richison

delivered a and very very strong gave very our they're reflected giving quarter. to would both go some and a the both are numbers about we be that say can bookings we last And have that they've as market. that this reps well. sales very been clients. unit quarter product mean and the up comment starts fired to selling I strong sales well what number very I Yes, our on model, by

Operator

Your comes the line next from Sandler. Piper question Ramnani Arvind with of

Arvind Ramnani

increased that comment wanted to of were folks between of sort some on with of mean slow were BETI customers slow adopt of particularly were who see core of I just to cohort to -- could BETI. adopt. definitely adopt? who you to slow Have adoption, had customers who has that sort if you kind they adoption I the

Chad Richison

Yes.

about achieve to value or continue from new clients now course, with us, they BETI as years. clients coming live well. on see have that BETI do continue to definitely value of the still meeting through clients X all help that we So they products have the But for implement are BETI whether where have not. And utilize they it of to them been you and

Arvind Ramnani

a then update an progress can on international Terrific. that but it's provide And would know details bit the of helpful. I markets? Yes. any of the much around And smaller, be you on some

Chad Richison

Yes.

X native build continue all countries, of product we encompasses developed as to right global in we're having countries now, and So that But actually payroll. out us our well. HCM

we're So now that. had doing in well And Craig comment. a we --

Craig Boelte

we Yes. recently a company over locations the I manufacturing and and with U.S., a they mean native Canada in Mexico. added all payroll had world,

So more and operations, we're adopt seeing more companies, primarily U.S. with that. multinational

Operator

next Shah from Deutsche Your comes question the of with Bank. line Bhavin

Bhavin Shah

guess value their just earlier Just optimized to first, I what are Like spend with Chad, achieve the to through in for CR full helping the percentage going have that clients gone of base you software? have for our back Paycom? and comments, where of back terms they team,

Chad Richison

the sure they sell them products make and that they go is Yes. it's helping say reach the job products, a that's if CRR have I I my sure necessary to all help certain quota, there that utilizing I to to want I'm order and of there have one to mean sell But I I full to current have those a the are products CRRs value. products would they're clients in have. them. out make is groups full clients achieve But ROI, and

working an make do they're at have with is that that CRR usage configured client, a going we clients out systems But individual the or involved in not be do that is process. whether right is helping get purchased. full so a that. sure way during to service value And focus on there individuals and to continue Paycom CRR for they've the to that We where

Bhavin Shah

else what this of more And quarter, gross what gross reps I or at kind is should costs. it dynamics support impacting anything forward? we Can they else? depreciation just be How customer pricing needing to Got when similar might much stabilize industry margin? quarter higher going that into even when or it. margins, of take last like hire consideration Craig, sense us levels a compressed give saw just to on you

Craig Boelte

Yes.

some gross at of the So end brought quarter. new was of pressure on building margin the really the online, we the second

building. had the of we cost quarter a So full that of new

some depreciation, And just of some not of corporate like things that. a so allocations other headcount, it's but headcount the and some

of headcount well, the and some So client it's then headcount. just margins, of gross as some went that into also service

get As that may group. the a we're a high, too place so little be in we staffing-wise on good and margins understaffed,

Operator

Jester next the of question Daniel comes BMO. Your with line from

Unknown Analyst

is Can performance [ you Kyle next year? Dan and on will terms ] the to then spending This evolve on about how upmarket downmarket expect Jester. of call there the that performance, for anything capital versus Everest talk in secondly, out you was segment trends And during quarter?

Craig Boelte

Yes. mean to I going spend I'll I we're mean, first. capital obviously, cover trends. spending growth the for

at to then And there on buybacks the marketing. either looking done And quarter After so We've buybacks. definitely continued stock we're stock grow that's and guys have well you dividends. in front, seen of that, the as going some to invest sales also some. that R&D that's this one the items as line

Chad Richison

from We're strength And no seeing that. change on downmarket, performance, segment up or in both.

Craig Boelte

would would trend say expect year, bit, we to I maybe year also probably down next below we One capital this building Yes. big that so finished little on XX%. CapEx spend, a thing the

Operator

call. question-and-answer today's I'll now turn call Mr. closing Chad concludes to This the of Richison the back session remarks. over for

Chad Richison

All Francisco mid-December. right. success. Barclays to work for hard in and seeing call San may you. forward employees in thank for to commitment all joining thank their I want to and today, our everyone look want We to our the Phoenix I in you disconnect. and several the Conference December this in Conference including quarter, Thank Operator, early investors at UBS conferences Paycom's

Operator

call. This concludes today's conference

now may You disconnect.

Paycom Software (PAYC) 30 Oct 242024 Q3 Earnings call transcript