| Metric (USD)          | Q4 2022          | Q1 2023          | Q2 2023          | Q3 2023          | Q4 2023          | Q1 2024          | Q2 2024          | Q3 2024          |
|-----------------------|------------------|------------------|------------------|------------------|------------------|------------------|------------------|------------------|
| Funds Held for Clients | $2,202,975,000 **[0000950170-23-003049_payc-20221231.htm:82]** | $2,387,778,000 **[0000950170-23-017840_payc-20230331.htm:1]** | $2,002,492,000 **[0000950170-23-037954_payc-20230630.htm:1]** | $1,899,346,000 **[0000950170-23-058167_payc-20230930.htm:1]** | $2,327,366,000 **[0000950170-24-012190_payc-ex99_1.htm:6]** | $2,727,991,000 **[0000950170-24-051272_payc-ex99_1.htm:6]** | $2,303,159,000 **[0000950170-24-088567_payc-ex99_1.htm:5]** | $1,439,651,000 **[0000950170-24-118991_payc-ex99_1.htm:5]** |

e0e51242343ef354b896a8986184c51f74776c8047d7355452ea02ed4771a0ef

Paycom Software, Inc. is a leading provider of a comprehensive, cloud-based human capital management (HCM) solution delivered as Software-as-a-Service (SaaS) **[0000950170-24-015863_payc-20231231.htm:6]**. The company's solution spans the entire employment lifecycle, offering functionalities such as talent acquisition, time and labor management, payroll, talent management, and human resources management applications **[0000950170-24-015863_payc-20231231.htm:6]** **[0001193125-24-080589_d519779ddef14a.htm:40]** **[0000950170-24-089322_payc-20240630.htm:27]**. Paycom's software is designed to be user-friendly, enabling employees to self-manage their HCM activities in the cloud, which reduces administrative burdens on employers and enhances employee productivity **[0000950170-24-015863_payc-20231231.htm:6]** **[0000950170-24-089322_payc-20240630.htm:27]**.

1. **Payroll Applications** - Provides comprehensive payroll solutions that are the primary revenue driver, facilitating efficient payroll processing and management.
2. **Talent Acquisition** - Offers tools for recruiting and onboarding new employees, streamlining the hiring process.
3. **Time and Labor Management** - Manages employee time tracking and labor allocation to optimize workforce productivity.
4. **Talent Management** - Supports employee development and performance management to enhance workforce capabilities.
5. **Human Resources Management Applications** - Delivers HR solutions that cover various aspects of employee management and compliance.

02105fab4fc5f48ab29760a344c87417518676751062a643dab4fa7cb30638c1

1eeaf4d4db5e841077514de180156c0a3cd6893f57f64338c5d625c506316eab

9555951addcd7f3c306ca9152b1fe21e0d10e47e9214583ae4f8b49337659acc

Adjustments for Non-Cash Items (USD, thousands)

Stock-Based Compensation (USD, thousands)

Changes in Working Capital (USD, thousands)

Capital Expenditures (CapEx) (USD, thousands)

Proceeds from / Repayments of Debt (USD, thousands)

Share Repurchases (USD, thousands)

Dividend Payments (USD, thousands)

Net Change in Cash (USD, thousands)

125e931137361bd0e58c455b495f817b843251649dd9a958ba9dda4dcdacf623

| Metric (USD) | Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
|--------------|---------|---------|---------|---------|---------|---------|---------|---------|
| Total Revenue (Million) | N/A | 451.637  **[0000950170-23-016670_payc-ex99_1.htm:6]**  | 401.139  **[0000950170-23-037954_payc-20230630.htm:33]**  | 406.303  **[0000950170-23-056850_payc-ex99_1.htm:6]**  | N/A | N/A | 437.512  **[0000950170-24-088567_payc-ex99_1.htm:6]** **[0000950170-24-089322_payc-20240630.htm:30]**  | 451.934  **[0000950170-24-119531_payc-20240930.htm:31]**  |
| Recurring Revenue (Million) | N/A | 444.421  **[0000950170-23-016670_payc-ex99_1.htm:6]**  | 394.522  **[0000950170-23-037954_payc-20230630.htm:33]**  | 398.763  **[0000950170-23-056850_payc-ex99_1.htm:6]**  | N/A | N/A | 430.4  **[0000950170-24-088567_payc-ex99_1.htm:6]** **[0000950170-24-089322_payc-20240630.htm:30]**  | 445.002  **[0000950170-24-119531_payc-20240930.htm:31]**  |
| Implementation and Other Revenue (Million) | N/A | 7.216  **[0000950170-23-016670_payc-ex99_1.htm:6]**  | 6.617  **[0000950170-23-037954_payc-20230630.htm:33]**  | 7.540  **[0000950170-23-056850_payc-ex99_1.htm:6]**  | N/A | N/A | 7.112  **[0000950170-24-088567_payc-ex99_1.htm:6]** **[0000950170-24-089322_payc-20240630.htm:30]**  | 6.932  **[0000950170-24-119531_payc-20240930.htm:31]**  |

715ab53286600aef263c378a0be96efc052587847ce9bb1bae059c114429c4e8

- Automatic Data Processing, Inc.
- Cornerstone OnDemand, Inc.
- Dayforce, Inc.
- Gusto, Inc.
- Intuit, Inc.
- Insperity, Inc.
- Oracle Corporation
- Paychex, Inc.
- Paylocity Holding Corporation
- Paycor HCM, Inc.
- People Center, Inc. d/b/a Rippling
- SAP SE
- ServiceNow, Inc.
- Ultimate Kronos Group
- Workday, Inc.
- Other international, national, regional, and local providers  **[0000950170-24-015863_payc-20231231.htm:21]** **[0000950170-24-015863_payc-20231231.htm:32]** 

cbb478d4b312079f7e193eed57d9637f18533e07431c16b2d1b10aa81f802289

1. Your revenue guidance for fiscal 2024 indicates approximately 10% year-over-year growth, which is a deceleration compared to previous years. What are the main factors contributing to this slower growth, and how do you plan to address them to return to higher growth rates?

2. You have raised your adjusted EBITDA margin guidance to approximately 39% for the year. Can you provide more detail on the specific areas where you're achieving greater efficiencies and whether these improvements are sustainable long-term?

3. With the completion of your fifth building and expectations for CapEx to be single digits as a percent of revenue next year, how will this reduction in capital expenditures impact your operations, and what are your plans for deploying the increased free cash flow?

4. You mentioned focusing on client value achievement strategies to improve module utilization and ROI for clients. Can you provide specifics on the challenges you've faced in driving adoption of already-sold modules, and how you're addressing these to enhance client satisfaction and retention?

5. Given the increased staffing in your sales teams and the highly competitive industry, what are the key differentiators in your sales strategy to capture market share from competitors, and how do you see the current economic environment impacting your ability to achieve your sales goals?

7badb2e970c36e80dd71088380ce5a2ae834dd95e8e4d8916a177e7f296aafb7

b1487c351f781788294b00bf1e7a3eff0f04021603e24f2173d8302d15c5b06f

Funds Held for Clients

dca4ce418fdabc20f0b2111b5c974fe27a78b1216b5e66ad193b26cb35b540b7

749a28f7305169dfb69e28454d14fc459f53d6e85dc7281c2759fd07671facc8

### Q3 2024 Earnings Call
- **Issued Period**: Q3 2024
- **Guided Period**: FY 2024 and Q3 2024
- **Guidance**:
  - **Full Year 2024 Guidance**:
    - **Revenue**: $1.86 billion to $1.875 billion (10% year-over-year growth at midpoint)  **[PAYC_3395362_5]** .
    - **Adjusted EBITDA**: $727 million to $737 million (39% margin at midpoint)  **[PAYC_3395362_5]** .
    - **Non-GAAP Effective Tax Rate**: 26%  **[PAYC_3395362_4]** .
    - **Stock-Based Compensation Expense**: $30 million per quarter  **[PAYC_3395362_4]** .
  - **Third Quarter 2024 Guidance**:
    - **Revenue**: $444 million to $449 million (10% growth at midpoint)  **[PAYC_3395362_5]** .
    - **Adjusted EBITDA**: $155 million to $159 million (35% margin at midpoint)  **[PAYC_3395362_5]** .
    - **Effective Income Tax Rate**: 28% on a GAAP basis  **[PAYC_3395362_4]** .

### Q2 2024 Earnings Call
- **Issued Period**: Q2 2024
- **Guided Period**: FY 2024 and Q3 2024
- **Guidance**:
  - **Fiscal Year 2024 Guidance**:
    - **Revenue**: $1.86 billion to $1.875 billion (10% year-over-year growth at midpoint)  **[PAYC_3395362_5]** .
    - **Adjusted EBITDA**: $727 million to $737 million (39% margin at midpoint)  **[PAYC_3395362_5]** .
    - **Effective Income Tax Rate**: 23% on a GAAP basis, 26% on a non-GAAP basis  **[PAYC_3395362_4]** .
  - **Third Quarter 2024 Guidance**:
    - **Revenue**: $444 million to $449 million (10% growth at midpoint)  **[PAYC_3395362_5]** .
    - **Adjusted EBITDA**: $155 million to $159 million (35% margin at midpoint)  **[PAYC_3395362_5]** .
    - **Effective Income Tax Rate**: 28% on a GAAP basis, 26% on a non-GAAP basis  **[PAYC_3395362_4]** .
  - **Stock-Based Compensation Expense**: $30 million per quarter  **[PAYC_3395362_4]** .
  - **Capital Expenditures**: 11% to 12% of revenue  **[PAYC_3395362_18]** .

### Q1 2024 Earnings Call
- **Issued Period**: Q1 2024
- **Guided Period**: Q2 2024 and FY 2024
- **Guidance**:
  - **Second Quarter 2024 Guidance**:
    - **Total Revenues**: $434 million to $438 million (9% growth at midpoint)  **[PAYC_3381910_5]** .
    - **Adjusted EBITDA**: $151 million to $155 million (35% margin at midpoint)  **[PAYC_3381910_5]** .
    - **GAAP Effective Income Tax Rate**: 33%  **[PAYC_3381910_4]** .
    - **Non-GAAP Effective Tax Rate**: 25%  **[PAYC_3381910_4]** .
  - **Full Year 2024 Guidance**:
    - **Total Revenues**: $1.860 billion to $1.885 billion (11% year-over-year growth at midpoint)  **[PAYC_3381910_4]** .
    - **Adjusted EBITDA**: $720 million to $730 million (39% margin at midpoint)  **[PAYC_3381910_4]** .
    - **GAAP Effective Income Tax Rate**: 22%  **[PAYC_3381910_4]** .
    - **Non-GAAP Effective Tax Rate**: 25%  **[PAYC_3381910_4]** .
    - **Capital Expenditures**: Approximately 12% of revenues  **[PAYC_3381910_4]** .

### Q4 2023 Earnings Call
- **Issued Period**: Q4 2023
- **Guided Period**: Q1 2024 and FY 2024
- **Guidance**:
  - **Full Year 2024 Guidance**:
    - **Revenues**: $1.860 billion to $1.885 billion (11% year-over-year growth at midpoint)  **[PAYC_3372278_5]** .
    - **Adjusted EBITDA**: $720 million to $730 million (39% margin at midpoint)  **[PAYC_3372278_5]** .
    - **Effective Income Tax Rate**: 29% on a GAAP basis, 25% on a non-GAAP basis  **[PAYC_3372278_4]** .
    - **Stock-Based Compensation Expense**: 8.5% of revenue  **[PAYC_3372278_4]** .
  - **First Quarter 2024 Guidance**:
    - **Total Revenues**: $494 million to $497 million (10% growth at midpoint)  **[PAYC_3372278_5]** .
    - **Adjusted EBITDA**: $218 million to $222 million (44% margin at midpoint)  **[PAYC_3372278_5]** .

4999d8148989f26fe671ac28b994dab8b06cf06d37c1dadf1c7be2a636b9b89b

Recurring Revenues

Implementation and Other Revenues

Total Revenues

cbe6e4dfc26cbf961af13c89d6a195ae7b64e604332c2d67dfc338b45b62576e

| Name               | Position                              | Start Date          | Short Bio                                                                                                                                                                                                 |
|--------------------|---------------------------------------|---------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Chad Richison      | Co-Chief Executive Officer, President | 1998                | Chad Richison is the Co-Chief Executive Officer, President, and Chairman of the Board of Directors at Paycom Software, Inc. He has been with the company since its founding in 1998  **[0001193125-24-080589_d519779ddef14a.htm:34]** **[0001193125-24-080589_d519779ddef14a.htm:16]** .                                                    |
| Chris G. Thomas    | Co-Chief Executive Officer            | February 2024       | Chris G. Thomas has been serving as the Co-Chief Executive Officer of Paycom since February 2024. He joined the company in 2018 and has held various leadership roles  **[0001193125-24-080589_d519779ddef14a.htm:35]** **[0001193125-24-080589_d519779ddef14a.htm:37]** .                                                                   |
| Craig E. Boelte    | Chief Financial Officer               | February 2006       | Craig E. Boelte has served as the Chief Financial Officer of Paycom Software, Inc. since February 2006. He also took on the role of Treasurer in May 2017  **[0001193125-24-080589_d519779ddef14a.htm:35]** **[0001193125-23-081403_d115109ddef14a.htm:33]** **[0001193125-23-074088_d115109dpre14a.htm:33]** .                                                                             |
| Jason D. Clark     | Chief Administrative Officer          | December 4, 2023    | Jason D. Clark has served as the Chief Administrative Officer at Paycom since December 4, 2023. Before joining the executive team, he was a member of Paycom's Board of Directors  **[0001193125-24-080589_d519779ddef14a.htm:35]** **[0001193125-24-080589_d519779ddef14a.htm:68]** .                                                      |
| Holly Faurot       | Chief Sales Officer                   | April 2021          | Holly Faurot has served as the Chief Sales Officer at Paycom since April 2021. Prior to this role, she was the Senior Executive Vice President of Sales and Client Relations  **[0001193125-24-080589_d519779ddef14a.htm:35]** .                                                               |
| Bradley S. Smith   | Chief Information Officer             | April 2018          | Bradley S. Smith has served as the Chief Information Officer at Paycom since April 2018. Before this role, he was Paycom's Director of Software Development  **[0001193125-24-080589_d519779ddef14a.htm:35]** .                                                                                |
| Amy Walker         | Executive Vice President of Sales     | April 1, 2024       | Amy Walker was appointed as the Executive Vice President of Sales at Paycom Software, Inc. on April 1, 2024. She has been with the company for nearly 14 years, serving in various senior leadership roles  **[0000950170-24-042263_defa14a-45.htm:1]** .                                  |
| Archana Vemulapalli| Board of Directors, Class I Director  | July 30, 2024       | Archana Vemulapalli serves as a Director on the Board of Paycom Software, Inc. She was required to file an initial statement of beneficial ownership of securities on July 30, 2024  **[0000950170-24-088758_xslF345X02/ownership.xml:0]** .                                                        |
| Joe Binz           | Board of Directors, Class II Director | December 10, 2024   | Joe Binz was appointed to the Board of Directors of Paycom Software, Inc. as a Class II director on December 10, 2024. He currently serves as the Chief Financial Officer at Atlassian Corporation  **[0000950170-24-135784_payc-20241210.htm:1]** **[0000950170-24-135784_payc-ex99_1.htm:0]** .                                     |

a062f6aac62fbf2576b50f0e9dd11a6e36987677fb8204d5e8cd93d7d6b57e82

| Program Details          | Program 1               | Program 2               | Program 3               |
|--------------------------|-------------------------|-------------------------|-------------------------|
| Approval Date            | November 20, 2018  **[0000950170-24-119531_payc-20240930.htm:7]**    | June 7, 2022  **[0000950170-24-119531_payc-20240930.htm:7]**         | August 15, 2022  **[0000950170-24-119531_payc-20240930.htm:7]**      |
| End Date/Duration        | May 13, 2023  **[0000950170-24-119531_payc-20240930.htm:7]**         | June 7, 2024  **[0000950170-24-119531_payc-20240930.htm:7]**         | August 15, 2024  **[0000950170-24-119531_payc-20240930.htm:7]**      |
| Total Additional Amount  | $300.0 million  **[0000950170-24-119531_payc-20240930.htm:7]**       | $550.0 million  **[0000950170-24-119531_payc-20240930.htm:7]**       | $1.1 billion  **[0000950170-24-119531_payc-20240930.htm:7]**         |
| Remaining Authorization  | N/A                     | N/A                     | N/A                     |
| Details                  | Extended authorization  | Extended authorization  | Extended authorization  |

cb4d331ad63d6b7257ff800d2d794ae7df3b40a6554321c3bf6f8914d45fe346

**Quarterly guidance for Q3 2024:**
- **Revenue**: $444 million to $449 million  **[PAYC_3395362_4]**  (no change from prior guidance $444 million to $449 million  **[PAYC_3395362_5]** )  
- **Adjusted EBITDA**: $155 million to $159 million  **[PAYC_3395362_4]**  (no change from prior guidance $155 million to $159 million  **[PAYC_3395362_5]** )  
- **Effective Income Tax Rate (GAAP)**: 28%  **[PAYC_3395362_4]**  (no change from prior guidance 28%  **[PAYC_3395362_5]** )  

**Annual guidance for FY 2024:**
- **Revenue**: $1.86 billion to $1.875 billion  **[PAYC_3395362_4]**  (no change from prior guidance $1.86 billion to $1.875 billion  **[PAYC_3395362_5]** )  
- **Adjusted EBITDA**: $727 million to $737 million  **[PAYC_3395362_4]**  (no change from prior guidance $727 million to $737 million  **[PAYC_3395362_5]** )  
- **Non-GAAP Effective Tax Rate**: 26%  **[PAYC_3395362_4]**  (no change from prior guidance 26%  **[PAYC_3395362_5]** )  
- **Stock-Based Compensation Expense**: $30 million per quarter  **[PAYC_3395362_4]**  (no change from prior guidance $30 million per quarter  **[PAYC_3395362_5]** )  

a119abea6215f17b423bf8400c43548143035447f68133972ac20a8f6145765e

| Name               | Start Date | End Date | Reason for Change |
|--------------------|------------|----------|-------------------|
| Grant Thornton LLP | 2009  **[0000950170-24-015863_payc-20231231.htm:92]**  | Present  | Current auditor   |

d4ef189ea11cfed3977bbb80c651219ab55c813bfe2947075ceb06bfcfa00c97

dc4c2a8130f59ac881e5518ce69ef614cfef030c78bbf61ca16946bdc3c4e137

- Total Revenue: $451.934M (+11% YoY)  **[0000950170-23-058167_payc-20230930.htm:2]** **[0000950170-24-119531_payc-20240930.htm:2]**   
- Recurring Revenues: $445.002M (+12% YoY)  **[0000950170-23-058167_payc-20230930.htm:2]** **[0000950170-24-119531_payc-20240930.htm:2]**   
- Implementation & Other Revenues: $6.932M (−8% YoY)  **[0000950170-23-058167_payc-20230930.htm:2]** **[0000950170-24-119531_payc-20240930.htm:2]**   
- Cost of Goods Sold: $88.353M (+28% YoY)  **[0000950170-23-058167_payc-20230930.htm:2]** **[0000950170-24-119531_payc-20240930.htm:2]**   
- Research & Development: $63.047M (+22% YoY)  **[0000950170-23-058167_payc-20230930.htm:2]** **[0000950170-24-119531_payc-20240930.htm:2]**   
- Operating Income: $104.874M (+8% YoY)  **[0000950170-23-058167_payc-20230930.htm:2]** **[0000950170-24-119531_payc-20240930.htm:2]**   
- Net Change in Cash: −$874.241M (**−459%** YoY)  **[0000950170-23-058167_payc-20230930.htm:4]** **[0000950170-24-119531_payc-20240930.htm:4]**   
- Capital Expenditures: $48.214M (−8% YoY)  **[0000950170-23-058167_payc-20230930.htm:4]** **[0000950170-24-119531_payc-20240930.htm:4]**   
- Share Repurchases: $42.04M (−44% YoY)  **[0000950170-23-058167_payc-20230930.htm:4]** **[0000950170-24-119531_payc-20240930.htm:4]**   

d376506a37c572645ab2ea345860b780c3dc411ab0c3c2cf26ced82a56438cb9

1. **Retention Rates and Customer Attrition**  
   **Q:** Why did retention drop from 94% to 90%?  
   **A:** Retention decreased from **94% to 90%**, mainly due to higher attrition among smaller clients added during COVID. These clients are more impacted by macroeconomic factors like higher interest rates and inflation, leading to business failures and increased churn at the low end of the market. ( **[PAYC_3372278_6]** ,  **[PAYC_3372278_7]** ,   )

2. **Revenue and EBITDA Guidance**  
   **Q:** What's causing the EBITDA margin guidance to be lower?  
   **A:** The EBITDA margin guidance is slightly lower at **39%–41%** to allow room for investments in innovation and sales that drive revenue growth. This range has been maintained for the last 4–5 years. ( **[PAYC_3372278_6]** )

3. **Beti Adoption and Impact on Revenue**  
   **Q:** How is Beti adoption affecting revenue?  
   **A:** Beti enhances efficiencies for clients but reduces some service revenue for Paycom. Up to **5% of revenue** could be impacted due to Beti cannibalization, but not all of it will disappear. The focus is on delivering value to clients, whether they adopt Beti or not. ( **[PAYC_3372278_18]** ,  **[PAYC_3372278_28]** ,  **[PAYC_3372278_29]** )

4. **Sales Effectiveness and Market Focus**  
   **Q:** How effective are sales efforts, and what's the focus?  
   **A:** Sales effectiveness remains strong, with growth in larger client segments: **11% growth** in clients with over 500 employees and **18% growth** in those with over 2,000 employees. There's less investment and more pressure at the lower end of the market. ( **[PAYC_3372278_9]** ,  **[PAYC_3372278_12]** ,  **[PAYC_3372278_24]** ,  **[PAYC_3372278_31]** )

5. **Strategic Initiatives Impacting 2024 Revenue**  
   **Q:** How will strategic initiatives impact 2024 revenue?  
   **A:** Strategic initiatives may affect top-line revenue in 2024 and could have a small tail into future years. These are factored into the wide guidance range due to uncertainties like interest rate changes. ( **[PAYC_3372278_23]** ,  **[PAYC_3372278_28]** )

6. **Investments at the Low End of the Market**  
   **Q:** Are you investing less in the lower end of the market?  
   **A:** Yes, they're investing less due to higher attrition and are focusing on higher-value clients. Exposure to clients with under 50 employees is less than **5%**, closer to **3.5%**. ( **[PAYC_3372278_7]** ,  **[PAYC_3372278_31]** ,   )

7. **Share Buyback Activity**  
   **Q:** Can you discuss recent share buybacks?  
   **A:** They bought back **over 2%** of the company in the quarter and **1.5 million shares** for the full year, remaining active and opportunistic in share repurchases. ( **[PAYC_3372278_17]** )

8. **Gross Margin Outlook**  
   **Q:** Should we expect gross margin compression to continue?  
   **A:** Gross margins have compressed over the past three years due to service headcount costs. While they don't guide on gross margins, these costs will carry into 2024. ( **[PAYC_3372278_29]** )

9. **International Expansion**  
   **Q:** What's the status of international payroll capabilities?  
   **A:** Paycom is now processing payroll in **Canada and Mexico** and has announced expansion into the **U.K.** They're often replacing local providers in these markets. ( **[PAYC_3372278_30]** )

10. **Competitive Environment**  
    **Q:** Has the competitive environment changed?  
    **A:** The market remains **highly competitive**, with no significant changes noted. Paycom continues to compete effectively. ( **[PAYC_3372278_21]** )

6272b0203f5622f87a6c47fcddafb9906e4873e9124ff7e346df3c53f09ba4d5

- **Improving New Bookings and Retention Initiatives:** Paycom is seeing improvement in new bookings and feels positive about its retention initiatives through client value achievement, which are set to have a positive impact.  **[PAYC_3381910_8]**
- **Significant Investment in Automation Enhancing Competitive Advantage:** Paycom is heavily investing in product enhancements focused on automation, such as **Beti** and **GONE**, delivering significant ROI to clients and differentiating the company in a competitive market. Since **July 2021**, every new client has deployed Beti, experiencing success with this product suite.  **[PAYC_3381910_18]** **[PAYC_3381910_23]** **[PAYC_3381910_12]**
- **Accelerating International Expansion Unlocking Growth Opportunities:** Paycom has expanded its native payroll solutions to four countries—**Canada, Mexico, the U.K., and now Ireland**—and is focusing on additional countries that represent over **80%** of the available international opportunity. The global HCM product is also being utilized by clients worldwide.  **[PAYC_3381910_24]** **[PAYC_3381910_17]**

b78a1bcec3a8089609825082e1483e66fcc1a069218256d44211dc86e3387c5f

1. **Sales Acceleration**  
   **Q:** What drove the acceleration in sales and recurring revenue?  
   **A:** Demand for our automated solutions is strong. Last month, **September was our largest sales month ever**. Sales continue to strengthen as we deliver ROI through our fully automated solutions.  **[PAYC_3404765_4]** **[PAYC_3404765_7]** **[PAYC_3404765_11]** 

2. **Impact of Interest Rate Cuts**  
   **Q:** How will interest rate cuts affect float revenue?  
   **A:** For every **25 basis point cut**, we could see an impact of up to **$6 million annually**. We've already experienced a **50 basis point cut** and anticipate a couple more this year, which will affect us moving into next year.  **[PAYC_3404765_4]** **[PAYC_3404765_10]** 

3. **Gross Margin Compression**  
   **Q:** What's impacting gross margin compression, and when will it stabilize?  
   **A:** The pressure on gross margins stems from our new building, which came online at the end of the second quarter, leading to higher costs including depreciation and headcount allocations. Additionally, increased client service headcount has impacted margins. We expect margins to stabilize as we are now appropriately staffed.  **[PAYC_3404765_21]** 

4. **Q4 Guidance and Outlook**  
   **Q:** Why doesn't the Q4 guidance reflect the full Q3 beat?  
   **A:** We narrowed the full-year guidance range, increasing the bottom end. Q4 is challenging to predict due to variable bonus runs, off-cycle runs, and interest rate cuts affecting float revenue. A recent **50 basis point cut**, with potentially more to come, impacts our outlook.  **[PAYC_3404765_10]** **[PAYC_3404765_4]** 

5. **EBITDA Upside**  
   **Q:** What drove the significant EBITDA upside in the quarter?  
   **A:** The EBITDA beat was primarily due to **top-line revenue outperformance** and efficiencies throughout the company. Some impacts were at the corporate level, and there was timing in marketing expenses, but overall it was driven by revenue growth.  **[PAYC_3404765_8]** 

6. **Automation Initiatives**  
   **Q:** How will automation impact the company and its margins?  
   **A:** Automation drives efficiencies across the board. We've doubled down on innovation to include full automation. With only **5% of the market** captured, we're ambitious about expanding. Automation positively impacts our operations and enhances ROI for clients, which could improve margins over time.  **[PAYC_3404765_9]** **[PAYC_3404765_11]** 

7. **Use of AI Technology**  
   **Q:** Is there an opportunity to monetize your internally developed AI technology?  
   **A:** Yes, we've built our AI solutions internally and are integrating them into several products, both existing and upcoming. There are opportunities to monetize AI. Currently, our AI enhances backend efficiencies and client service, and we anticipate further benefits across the organization.  **[PAYC_3404765_5]** **[PAYC_3404765_8]** 

8. **BETI Adoption**  
   **Q:** Has BETI adoption increased among customers slow to adopt?  
   **A:** Yes, more clients are recognizing the value of BETI and are implementing it. All new clients have been adopting BETI for about **three years** now.  **[PAYC_3404765_13]** **[PAYC_3404765_18]** 

9. **New Logo Strength**  
   **Q:** Was the revenue beat mainly due to new logo strength?  
   **A:** Yes, the revenue upside was primarily driven by **new logo additions**, which represent the majority of our new revenue.  **[PAYC_3404765_12]** 

10. **International Expansion**  
    **Q:** Can you update us on the progress in international markets?  
    **A:** We're now operating in **four countries** with native payroll, and our global HCM covers all countries. We've added clients with multinational operations, including a recent manufacturing company with worldwide locations.  **[PAYC_3404765_19]** 

fae1e8eb5560850b19d15cbed991aebe1522ea3d132f9764846abb7a1ff1bf07

- **Increased expenses may pressure margins**: Paycom has ramped up investments in service and R&D, leading to higher headcount and increased depreciation expenses from bringing a new corporate building online, which has impacted gross margins.  **[PAYC_3395362_10]**
- **Potential reduction in float revenue due to anticipated Fed rate cuts**: The company is extending investment durations at lower yields in anticipation of rate cuts, which could reduce float revenue compared to current short-term rates.  **[PAYC_3395362_24]**
- **Limited focus on strategic partnerships**: The CEO indicated that partnerships, such as with an employment verification service, are not considered strategic or differentiated, potentially missing growth opportunities through partnerships.  **[PAYC_3395362_19]**

20950eabef50c49b031b994867db4767225207ab3a6f5e74da4987cdd33ca788

- **Paycom significantly lowered its revenue growth guidance for 2024 to between 10% and 12%, down from approximately 22% growth in 2023**, indicating potential growth challenges ahead.  **[PAYC_3363016_3]**
- **The adoption of Beti, Paycom's do-it-yourself payroll system, is cannibalizing service revenues and unscheduled payroll runs**, as clients experience "perfect payrolls" and eliminate errors that were previously billable items; additionally, cross-selling revenues were lower due to this shift.  **[PAYC_3363016_3]** ,  **[PAYC_3363016_7]**
- **Macro headwinds from inflation are impacting preemployment services**, and the company expects these challenges to continue into the fourth quarter and into 2024, potentially affecting revenues further.  **[PAYC_3363016_18]**

97e2c1be49b3a5842cf8de11baf10b66989b0e26c6af144445a963947ce7bd8b

1. **Sales Growth and Unit Sales Increase**  
   **Q:** What's driving the sales growth and increased unit sales?  
   **A:** We've focused heavily on sales this year, fully staffing our teams under new leadership. In Q2, we sold **24% more units** than the prior year's Q2.  **[PAYC_3395362_9]**  July starts are up **40%** in revenue, indicating strong momentum.  **[PAYC_3395362_11]** 

2. **Guidance Narrowing**  
   **Q:** Why did you narrow the guidance outlook?  
   **A:** With more visibility into the timing and magnitude of our initiatives, we're narrowing the guidance range. This is due to timing and better clarity on our plans.  **[PAYC_3395362_8]** 

3. **Investments in R&D and Gross Margins**  
   **Q:** How are R&D investments affecting margins?  
   **A:** We're investing heavily in product development, doubling our product releases compared to January. This increased R&D expense impacted gross margins, along with depreciation from bringing our fifth building online this quarter.  **[PAYC_3395362_10]** 

4. **Beti Adoption and Revenue Impact**  
   **Q:** How is Beti adoption impacting revenue and clients?  
   **A:** Beti usage continues to rise monthly, with new clients adopting it more fully. Some clients reduced payroll processing time from 4 days to mere hours and cut payroll staff by half.  **[PAYC_3395362_6]** **[PAYC_3395362_14]**  While Beti improves efficiency, it may reduce revenue from extra payroll runs, but we have mitigating factors.  **[PAYC_3395362_12]** **[PAYC_3395362_23]** 

5. **CapEx Outlook and Free Cash Flow**  
   **Q:** What's the outlook for CapEx and free cash flow?  
   **A:** With our last major building project completed, we expect CapEx to be **single digits** as a percent of revenue next year, which bodes well for free cash flow conversion.  **[PAYC_3395362_18]** 

6. **Share Buyback Plans**  
   **Q:** How will you approach the extended share buyback?  
   **A:** We've been opportunistic, repurchasing **574,000** shares during Q3 and a large amount since July 1. With the previous program expiring, we've authorized a new **$1.5 billion** buyback over two years.  **[PAYC_3395362_15]** 

7. **Float Revenue and Interest Rates**  
   **Q:** How are you managing float revenue amid rate changes?  
   **A:** We're considering extending investment durations to anticipate potential Fed rate cuts. This involves accepting lower rates now to mitigate future rate decreases.  **[PAYC_3395362_24]** 

8. **International Expansion of Beti**  
   **Q:** Are there plans to expand Beti to more countries?  
   **A:** Yes, as we develop solutions for each country's employment laws, we expect to expand Beti beyond Canada, Mexico, Ireland, and the U.K..  **[PAYC_3395362_15]** **[PAYC_3395362_21]** 

9. **Competitive Landscape**  
   **Q:** Any changes in competitive dynamics with new client wins?  
   **A:** No significant changes; we continue to compete with the usual industry players we've faced over our **26-year** history.  **[PAYC_3395362_26]** 

10. **Back-to-Base Sales and CRR Focus**  
    **Q:** How is the back-to-base motion and CRR focus trending?  
    **A:** We're still dedicated to helping clients achieve ROI and fully utilize our products. The CRR approach varies by client, and we haven't made dramatic changes from prior quarters.  **[PAYC_3395362_13]** **[PAYC_3395362_17]** 

b3ec38646f1137384dd930c8f2ae5b22bf9d361ae9a578991d5cd77c3663ede5

- **Retention rate declined from 94% to 90%**, with attrition primarily at the low end of the market due to clients going out of business and being impacted by macroeconomic factors like higher interest rates and inflation.  **[PAYC_3372278_7]** **[PAYC_3372278_8]**
- **Customer growth in 2023 was only 1%**, which is unusual for the company and suggests challenges in acquiring and retaining clients, especially those added during COVID who are now churning.  **[PAYC_3372278_8]**
- **Gross margins have compressed for three consecutive years**, and increased service headcount costs are expected to continue this trend into 2024, putting pressure on profitability.  **[PAYC_3372278_29]**

3eba91d0c77f814023f062e5e03589030020b33dfedaaf8b7b3a7f7b387e6da5

- **Paycom leads the industry in automation**, with innovative products like **Beti** and **GONE** delivering significant ROI for clients. For example, a 2,500-employee company reduced their payroll team by half and decreased payroll processing from 4 days to mere hours by adopting Beti  **[PAYC_3395362_2]** . GONE has automated over **1,000** time-off decisions for a client, freeing up hours of nonproductive time  **[PAYC_3395362_2]** .
- The company is experiencing **strong sales momentum**, with a record number of sales representatives added and more units sold this year than in the past  **[PAYC_3395362_26]** **[PAYC_3395362_20]** . Paycom's sales teams are better staffed than they have been in 5 or 6 years, positioning the company for continued growth  **[PAYC_3395362_26]** .
- Paycom's focus on client satisfaction is yielding positive results, with **Net Promoter Score (NPS) up and trending positively**  **[PAYC_3395362_7]** . The enhanced automation and differentiated products are attracting new clients and even returning clients who appreciate the automation lacking in competitors' solutions  **[PAYC_3395362_2]** .

3ce7bc91d501055fb641b3061ed73790ecbd876fdb525a07bf568df4ceb42da2

- **Paycom is experiencing higher client attrition in its small business segment, impacting overall retention rates, and the company did not provide an updated retention rate.**  **[PAYC_3381910_17]**
- **The automation provided by Beti is reducing the number of payroll runs, leading to a revenue headwind in the first half of the year due to fewer processing fees.**  **[PAYC_3381910_22]**
- **Heavy investments in R&D and international expansion may affect margins and profitability, with uncertain returns from the international strategy at this stage.**  **[PAYC_3381910_17]** ,  **[PAYC_3381910_24]**

f77c509cc160b243743f256cc07912c13687ea1d2e82c80835d5ce63d3ba2237

1. **Revenue Growth Reacceleration**  
   **Q:** Why does guidance imply revenue growth acceleration in second half?  
   **A:** Management explains that their initiatives announced last November were front-end loaded, affecting earlier quarters, and they expect growth to reaccelerate in the back half of the year as these initiatives bear fruit.  **[PAYC_3381910_13]** **[PAYC_3381910_14]** 

2. **Sales Performance Improvement**  
   **Q:** How is sales performance varying across offices?  
   **A:** Management notes that the best offices have the best managers regardless of geography. They've observed accelerated sales in the last two months compared to the first two, indicating improvement in moving product. They are not seeing market saturation in the mid-market segment.  **[PAYC_3381910_9]** 

3. **Guidance Assumptions Unchanged**  
   **Q:** Have underlying guidance assumptions changed versus 90 days ago?  
   **A:** Management states that the guidance assumptions have not changed compared to 90 days ago.  **[PAYC_3381910_15]** 

4. **Margin Overperformance**  
   **Q:** Did margins overperform due to hiring or expense management?  
   **A:** Management attributes margin overperformance to better expense management for the quarter. They achieved an adjusted EBITDA margin of **39%** and will continue seeking efficiencies.  **[PAYC_3381910_16]** 

5. **Churn and Retention Outlook**  
   **Q:** What's expected for churn and new bookings this year?  
   **A:** Management sees stability and improvement in new bookings. Retention initiatives through client value achievement strategies are expected to positively impact churn, and they feel good about how that's working.  **[PAYC_3381910_8]** 

6. **Competitive Environment**  
   **Q:** Any notable changes in competitive landscape?  
   **A:** Management sees no significant changes; the market remains competitive. They believe their focus on automation and leveraging the employee base for ROI differentiates them.  **[PAYC_3381910_20]** 

7. **Product Innovation and Automation**  
   **Q:** What new product features are you developing?  
   **A:** Management is rolling out products like GONE and focusing on automation. They have several initiatives launching this year but don't disclose specifics until they're in the market. They are experiencing success with these automation efforts.  **[PAYC_3381910_18]** 

8. **Global Expansion Progress**  
   **Q:** What's the status of your international expansion?  
   **A:** Management expanded native payroll and Beti to Canada, Mexico, the U.K., and now Ireland within 12 months. They focus on countries where U.S.-based clients have the most employees. About **18** countries represent over **80%** of the opportunity, and they're focusing on those.  **[PAYC_3381910_24]** 

9. **Sales Leadership Change**  
   **Q:** Impact of Amy Walker's promotion on sales strategy?  
   **A:** Amy Walker was promoted to head sales, leading to enhancements in go-to-market strategies, especially in outside sales, which is the majority of their sales. She's had a dramatic impact, and they continue to improve weekly.  **[PAYC_3381910_21]** 

10. **Revenue Impact from Initiatives**  
    **Q:** How are strategic initiatives impacting revenue?  
    **A:** Initiatives like Beti are making processes more efficient, reducing the number of payroll runs. While this impacts revenue short term, it's better for clients. Most of the impact will occur in the first half of the year, with less impact in the back half.  **[PAYC_3381910_22]** 

11. **Pipeline and Sales Capacity**  
    **Q:** How is pipeline momentum and sales capacity developing?  
    **A:** Management states that the pipeline is very strong, and sales capacity has improved over the last 2–3 months. They're ensuring their 55 sales teams perform at top levels before expanding offices, which depends on backfilling managers.  **[PAYC_3381910_11]** 

12. **Stock Buyback**  
    **Q:** How much stock did you buy back this quarter?  
    **A:** Management states they repurchased a small amount of stock, about **$3 million**, in the quarter.  **[PAYC_3381910_15]** **[PAYC_3381910_16]** 

13. **Forms Filing Revenue**  
    **Q:** How does forms filing impact sequential revenue growth?  
    **A:** Management explains that forms filing revenue's percentage of quarterly revenue has decreased over time due to growth in other products and services. Forms filings are in line with expectations and factored into their outlook.  **[PAYC_3381910_18]** 

14. **Preemployment Services Trend**  
    **Q:** How is preemployment services revenue trending?  
    **A:** Management indicates that preemployment services revenue is stable and in line with expectations. There's no significant change due to job switching or other factors compared to the past.  **[PAYC_3381910_12]** 

15. **Pricing Model Consideration**  
    **Q:** Will you shift to PEPM-based payroll pricing?  
    **A:** Management doesn't comment on specific pricing strategies but emphasizes their focus on winning every deal, implying all initiatives are considered to remain competitive.  **[PAYC_3381910_19]** 

c7c5ab97b14c5e32bd542cc139d02a0f52c827e425c5d24adff2633b68e406f1

- **Strong Demand and Client Onboarding**: Paycom continues to see **strong demand** in the SMB and mid-market segments, with ongoing **client onboarding** and delivery of significant **value to clients**.  **[PAYC_3363016_8]**
- **Expansion into International Markets**: Paycom is expanding its **global HCM product**, now enabling employees in **Canada and Mexico** to use its payroll solutions, indicating significant **growth opportunities** through international expansion.  **[PAYC_3363016_17]**
- **Focus on Innovation with Beti Platform**: Paycom is **leaning more into** its innovative **Beti platform**, which is **revolutionizing payroll** by enabling employees to do their own payroll, driving **long-term shareholder value** and strengthening the company's competitive position.  **[PAYC_3363016_13]** **[PAYC_3363016_11]**

2c8f80cfb55d7aec48f3abec4364df003a02e43c7555f7e4612acb821f541023

- **International Expansion**: Paycom has successfully launched native payroll solutions in **Canada**, **Mexico**, and now the **United Kingdom**, with its global HCM product being used across **180 countries** and in **15 languages**, significantly expanding its **Total Addressable Market (TAM)**.  **[PAYC_3372278_2]**
- **Innovative AI Tools**: The rollout of **GONE**, an AI-driven tool that automates time-off request decisions, has been well received, automating **20 to 30 decisions per employee per year**, enhancing user experience and efficiency.  **[PAYC_3372278_2]**
- **Positive Sales Outlook**: Despite macroeconomic challenges, Paycom expects to sell more in **2024** than in **2023**, which was already a good sales year, supported by a well-staffed sales organization, indicating confidence in future growth.  **[PAYC_3372278_30]**

9bde89a347f8c7f240ed52e83dc543e1d058f821cfdb45ce0d111099d7253ee4

Paycom Software Inc (PAYC)

Financials