The operator welcomes participants to Paycom's earnings conference call and introduces James Samford, Head of Investor Relations. Samford reminds listeners that certain statements made on the call are forward-looking and subject to risks and uncertainties. He also mentions the use of non-GAAP financial measures during the call.

The company uses non-GAAP financial measures to review and assess performance. The President and Co-CEO, Chad Richison, announces the promotion of COO Chris Thomas to Co-CEO and expresses confidence in his leadership. Richison will focus on product innovation and strategy, while Thomas will focus on other aspects of the business. The collaboration between the two leaders is expected to strengthen the company.

Paycom has strengthened its leadership team with the addition of Jason Clark and Steve Sturges. The organization's focus for 2024 is on world-class service, solution automation, and client ROI achievement. They aim to be the leading provider of comprehensive payroll and human capital management solutions and are bringing the power of Paycom to more employers and employees. Their product, Beti, has shown significant ROI for clients through AI and automation, with an average reduction in errors and processing time, and improved employee engagement.

In addition to high engagement rates, Beti has also introduced a new tool called GONE that automates time-off requests using AI and decisioning logic. This has greatly improved the experience for both employees and managers. Beti has also expanded internationally, with their global HCM product now available in 180 countries and in multiple languages. They have also launched native payroll solutions in Canada, Mexico, and the United Kingdom. The company is excited about the potential impact of these developments and their future in product development.

The company is experiencing excitement and growth due to its innovative products and talented employees. In 2024, they will continue to focus on client satisfaction and product enhancements. The CEO thanks the employees for their contributions and introduces the new leader, Chris, who is prepared to help take the company to the next level. The company has received multiple accolades for its leadership and culture.

The speaker is proud of the leadership group for strategizing and implementing a client value achievement strategy. They have spent a lot of time engaging with clients and the feedback has been positive. The company's innovations in automation and user experience are delivering high ROI for clients and strengthening relationships. The service and client relations groups are working closely together to drive further ROI. The speaker then hands over to Craig for a review of the financials, which show solid results for the fourth quarter and full year of 2023. Revenue grew by 23% compared to the previous year, driven by new business wins. Recurring revenue accounted for 98% of total revenue and grew by 17%. The company also saw strong net income and adjusted EBITDA in 2023.

In 2023, Paycom's non-GAAP net income increased by 26% to $449 million or $7.75 per diluted share. Adjusted EBITDA for the full year was $719 million, with a margin of 42.5%. The company also repurchased 1.2 million shares of common stock and paid over $21 million in dividends. They ended the year with 36,800 clients, a 1% increase from the previous year. The number of employee records stored in their system was 6.8 million. Paycom's annual revenue retention rate was 90%, with most attrition occurring at the low-end of the market.

The company has made changes to their annual revenue retention rate calculation and their adjusted R&D expenses were $51 million in the fourth quarter of 2023. They continue to invest in areas of automation, AI, and innovation for long-term growth. Their tax rate for 2023 was 28% on a GAAP basis and is expected to be 29% on a GAAP basis and 25% on a non-GAAP basis for 2024. They anticipate stock-based compensation expense to be around 8.5% of revenue in fiscal year 2024. Their balance sheet remains strong with cash and cash equivalents of $294 million and zero debt. Cash from operations increased by 33% in 2023. They estimate their total CapEx to be around 12% of revenues in 2024. Their approach to guidance remains consistent with their historical approach, taking into account relevant trends, opportunities, and potential constraints.

In 2024, the company is factoring in various factors such as interest rates and strategic initiatives. They expect 11% year-over-year revenue growth and an adjusted EBITDA margin of 39% at the midpoint of the range. For the first quarter of 2024, they expect a 10% growth rate and an adjusted EBITDA margin of 44%. The CEO expresses confidence in the company's performance due to their strong product and client initiatives. They will continue to invest in various areas to strengthen their competitive position. The first question from an analyst is about customer retention and growth in 2023, as there was only a 1% customer growth and a 90% retention rate.

The paragraph discusses the company's EBITDA guide and retention rate. The CEO explains that the retention rate decreased due to the addition of smaller clients during COVID and the impact of macroeconomic factors on those clients. They also mention that the EBITDA margin has slightly decreased in order to allow for investments in innovation and sales. A question from an analyst follows up on the retention change, which has decreased from 94% to 90%.

In the paragraph, the speaker, Chad Richison, is responding to a question about the increase in client attrition during the COVID period. He explains that the increase is mostly due to clients going out of business, but they have also changed the way they mark client losses. He also mentions that the fourth quarter results were better than expected, possibly due to a conservative approach after the third quarter. The next speaker, Samad Samana, asks a follow-up question about the strength in the fourth quarter, and Richison responds that they were more conservative after the third quarter but saw better results. The next question comes from Mark Marcon from Jefferies.

The speaker is asked about the traction with the sales force and new client growth. The speaker mentions success in selling a differentiated solution and pressure in the lower end of the market. They also discuss investing in growth as a priority and focusing on solution automation, world-class service, and client ROI achievement.

The speaker discusses the positive impact of growth initiatives and additional expenses on the company. They mention a different sales approach for the mid-market and up market, with the success depending on the salesperson. The company is well staffed in sales for the upcoming year.

The speaker discusses the company's sales office openings and how they are based on their internal capacity. They mention being better staffed for managers going into 2024 and will consider opportunities for expansion throughout the year. They also mention that they want to retain all clients, regardless of whether they have adopted Beti or not, and that they have lower attrition rates with clients who use Beti. They expect headcount per customer to remain stable in 2024.

Chad Richison, CEO of Paycom, explains that the decision to shift to a Co-CEO structure and focus on product and strategy was driven by the company's growth and the right person to do it with, Chris. He also mentions that he has been excited about this transition and has been involved in special projects since September of last year. He clarifies that he is not retiring and will continue to work with Chris to achieve more together. Regarding the adoption of Beti, he states that they are not forcing it on clients, but are meeting them where they are in terms of usage and helping them achieve value regardless.

The speaker discusses how Beti drives efficiencies for businesses and has a significant impact on both them and their employees. They mention that their go-to-market strategy has been 100% Beti since July of 2021 and that their clients are seeing a lot of value from using the product. They also mention their GONE product, which automates tasks for businesses. The speaker then answers a question about the company's buyback program and mentions that they have been actively buying back shares. They believe that there will continue to be clients who see the value of Beti and choose to use it.

The company is meeting clients where they live with their product and helping them achieve value. The introduction of GONE has led to more conversations and success in automating time-off requests. The CRR strategy is focused on cross-selling Beti, but they are also converting existing Beti customers. This takes time and may prevent them from performing other tasks.

In the competitive environment, the company has not noticed any significant changes in the first quarter or fourth quarter. The market is still highly competitive and the company has celebrated its 25th anniversary.

In this paragraph, the speaker discusses the long-standing competitive relationship between the company and its competitors. They also mention that the first quarter guidance may be impacted by a lack of new form filings and that the range of guidance for the full year is wider than in the past due to factors such as potential changes in interest rates. They also mention plans for customer growth and potential initiatives to reaccelerate it.

The speaker, Chad Richison, discusses the company's focus on their go-to-market strategy and revenue opportunities. He mentions that they are not changing much in terms of strategy, but their message is becoming clearer. They have recently released a report on the value of Beti, and have received a lot of interest from businesses. When asked about client attrition, he states that they have had a lot of success with Beti and any potential pushback is handled by the sales team.

Chad Richison, CEO of Paycom, was asked about the ability for clients to use the latest version of Paycom and turn on and off certain options, such as self-certifying payroll and requiring employees to certify their paychecks every two weeks. Richison explained that clients have the ability to choose from 34 modules, with some being critical for processing payroll and others being optional. He also mentioned that clients can decide whether or not to require employees to certify their paychecks. In response to a question about strategic initiatives impacting revenue in 2024, Richison stated that it is dependent on the client and could take multiple years to play out.

In response to a question about the company's strategic initiatives for 2024, Chad Richison, the CEO, mentions that they may have an impact on the company's revenue and expenses. He clarifies that they are being less aggressive in pushing their product Beti to customers, which may decrease some of the revenue headwinds mentioned in the previous quarter. When asked about the trajectory of gross margin, Richison states that it is less of a focus than EBITDA, but they have seen compression for the past three years and it may continue due to investments being made.

The company does not provide guidance on gross margin due to various factors. One of the main factors is the number of employees in the service side, which will continue to impact gross margin in 2024. The company has recently expanded its native payroll services to Canada, Mexico, and the UK, which will replace vendors in those countries. The company's sales organization is strong and will continue to drive growth.

The company has had success in training and selling to clients, with expectations to sell more this year. Retention has been impacted by the low-end of the market, which they are investing less in. The call concludes with congratulations to the 2023 Paycom Jim Thorpe Award Winner, Trey Taylor, and a mention of Jim Thorpe's connection to Oklahoma.

The company plans to attend two conferences in March and thanks its employees for their contributions to its success. The operator then ends the conference call.

This summary was generated with AI and may contain some inaccuracies.