Zane Meehan

Zane Meehan asked for additional color on the Q3 recurring revenue results, inquiring if there were any one-time factors, softer workforce levels on the platform, or other notable elements impacting the growth rate. He also asked if current workforce levels were in line with expectations, referencing a competitor's outlook for flat levels.

Answer

Bob Foster, CFO, confirmed there were no one-time factors impacting Q3 recurring revenue, noting it came in slightly above the company's guidance of 10.5%. He mentioned that certain revenue levers could have shifted between Q2 and Q3. Chad Richison, President and CEO, added that Paycom has observed stability in employment numbers, reacting no differently than in the past, excluding the COVID period.

Zane Meehan requested additional color on the Q3 recurring revenue results, specifically regarding the DSEL (Daily Sales Equivalent) growth rate, potential softer workforce levels, or any one-time factors. He also asked if current workforce levels were in line with expectations, referencing a competitor's flat outlook.

Answer

Bob Foster, CFO of Paycom Software, confirmed no one-time factors impacted Q3 recurring revenue, noting it came in slightly above expectations. Chad Richison, President and CEO of Paycom Software, added that employment numbers have shown stability, reacting no differently than in the past, excluding the COVID period.

Zane Meehan asked for details on the new partnership with Commerce, including the go-to-market and monetization model, and whether the increased focus on partners would moderate services revenue.

Answer

President & CEO Jeff Cotten explained the Commerce partnership is starting as a referral and co-sell relationship with a vision to become a reseller model, representing the type of strategic platform partnerships he intends to pursue. CFO Stefan Schultz confirmed that services revenue is expected to moderate as a result of the partner-led strategy, a trade-off the company is happy to make to accelerate subscription revenue growth.

Zane Meehan from KeyBanc Capital Markets Inc. asked for details on the efficiencies driving gross margin improvements and whether macro volatility was causing implementation delays or smaller deal sizes.

Answer

CFO Stefan Schulz attributed subscription gross margin gains to engineering efficiencies that reduce compute costs for real-time results. He noted services margins improved from AI-driven automation in implementation. President and CEO Andres Reiner added that the company has not seen any negative changes in demand patterns, deal sizes, or implementation timelines, stating that some customers are even looking to accelerate projects.

Zane Meehan asked about the efficiencies driving gross margin improvements and potential customer behavior changes due to market volatility.

Answer

CFO Stefan Schulz credited cloud and engineering teams for subscription efficiencies and AI-driven automation in services. CEO Andres Reiner stated no changes in demand patterns or ASP.

Zane Meehan, on for Jason Celino, asked about any changes in the B2B business regarding average deal size or sales cycle length. He also inquired about the new Smart Rebate Management solution, its target market, and monetization strategy.

Answer

President and CEO Andres Reiner reported that the B2B sales cycle improvement of 15% year-to-date has been sustained, while average deal size remains constant with last year. Regarding the new rebate solution, he explained it is a strategic, cross-industry add-on designed to increase wallet share. He emphasized its differentiation lies in using embedded AI to optimize rebate offers for profitability, not just automate the process.

Zane Meehan, on for Jason Celino, asked about Dayforce Wallet, inquiring about the level of utilization by employees and whether usage might increase during periods of macro uncertainty.

Answer

CEO David Ossip explained that utilization of on-demand pay is consistently high among unbanked employees, who use it about 25 times per month. He also highlighted new features like direct-to-bank and debit card transfers, which are targeted at banked employees and are already gaining significant traction. These new capabilities are expected to generate several million dollars in revenue and expand the Wallet's user base.