The operator introduces the Paycom Software Second Quarter 2024 Quarterly Results Conference Call and passes it to James Samford, Head of Investor Relations. Samford discusses the forward-looking statements and risks and uncertainties associated with the company's performance. He also mentions the use of non-GAAP financial measures in assessing their performance.

Paycom's CEO, Chad Richison, discussed the company's progress on their 2024 initiatives during a recent earnings call. He highlighted their focus on providing excellent service to clients, achieving client ROI, and deepening automation capabilities through product innovation. Richison also mentioned the company's success in increasing client usage metrics and net promoter score, as well as doubling development productivity rates and implementing automated solutions for clients. Paycom is committed to continuing to lead the industry in automation and providing a differentiated value proposition for clients.

Beti is a unique solution that allows employees to process checks, resulting in measurable ROI for clients. One client was able to reduce their payroll team by half and significantly decrease processing time. Beti continues to evolve and has recently added GONE, an automated time-off solution that has been recognized for transforming the time-off process. GONE automatically approves, denies, or warehouses time-off requests, saving time for employees, managers, HR, and payroll. A retail client with over 100 stores has seen significant benefits from using GONE, including increased control and visibility for managers and reduced liability for the C-suite. Overall, GONE has taken Beti to the next level.

The implementation of GONE has greatly improved the efficiency of time-off requests for clients, resulting in increased productivity and employee retention. The use of AI technology has further enhanced the functionality and value of the product. Paycom's international expansion has also been successful, with new clients being won and strong sales momentum being seen. The company recently added a large number of new sales reps to their team.

The speaker expresses excitement for the enthusiasm in the sales division and progress with product strategy and strategic initiatives. They also mention investments being made in 2024 and a focus on client value achievement. The CFO, Craig, then announces his plan to retire in the next nine to 12 months and remain in an advisory role. They then discuss the second quarter results, with revenue reaching the top end of the range and growing 9% from the previous year. Recurring revenue was $430 million and GAAP net income was $68 million. Non-GAAP net income was $92 million.

In the second quarter of 2024, the company's adjusted EBITDA and margins exceeded expectations due to expense discipline. They are investing in areas of AI, automation, international expansion, and their value proposition for clients. R&D expenses have increased compared to the previous year as they focus on building more automation. The company anticipates effective income tax rates to be approximately 28% and 23% for Q3 and full year 2024 respectively, with a non-GAAP effective tax rate of 26%. They expect stock-based compensation expense to be around $30 million per quarter for the remainder of 2024. The company has a strong balance sheet with no debt and has repurchased approximately 2.3 million shares since July 2023. They have recently increased their buyback authorization to $1.5 billion for the next two years.

The company plans to continue buying back stock and paying dividends. They are on track to meet their growth and margin targets for the year. They have a strong balance sheet and will invest in areas to improve their competitive position and client ROI. The call is now open for questions from analysts. The first question is about Beti.

The speaker responds to a question about the increased inbound interest in Beti, Paycom's AI platform, and its impact on the company's installed base. The speaker mentions a client who was able to reduce their payroll department by half and the company's focus on helping clients maximize ROI. The speaker also mentions that there has been no change in the number of new clients coming in and that the company has had more unit sales this year than in the past. The speaker then addresses a follow-up question about the record number of sales reps added this quarter and how the company plans to continue hiring in the future.

The company is focused on fully staffing all teams with sales managers and has hired experienced staff to improve sales tactics and techniques. The guidance outlook has narrowed due to changes in assumptions and timing of initiatives. The recent sales hiring may be a leading indicator of increased opportunities in the market.

Chad Richison, the CEO of Paycom, discusses the company's recent developments in terms of sales and staffing. He believes that their sales organization is the best and that being fully staffed has allowed them to focus on unit growth and sales skills development. The company has seen success in the second quarter, with 24% more units sold compared to the previous year. In terms of investments, the company has ramped up investments in service and R&D, which has resulted in higher NPS scores. Richison does not provide specific details on the pace of these investments, but believes they will continue to contribute to the company's success.

In the second quarter, the company saw an increase in depreciation due to the acquisition of a new building and hiring new employees. They are focused on sales, service, and product development, with ambitious goals for their products. The company is mindful of spending and generating quality revenue. The increase in units sold in the year so far may lead to an acceleration in revenue growth in the third quarter, along with the contribution of new salespeople.

The speaker clarifies that the 24% unit growth mentioned earlier is for the second quarter over the prior second quarter, and year-to-date growth is around 15%. July starts are up 40% in revenue, and the company is confident in their 2024 plan and next year's growth. The impact of additional payroll runs and efficiency gains still exist, but there are also mitigating factors that give the company confidence in their sales, service, and product.

During the last quarter, Paycom has been focused on improving utilization of modules that have already been sold to customers. This has resulted in positive impacts on their service model and net promoter scores. The company remains committed to helping clients achieve ROI and is working on developing new products to aid in this goal. The back to base motion is still important and the company is focused on meeting clients where they are and ensuring they are utilizing the product to its full potential.

The company has made changes to ensure clients are satisfied with their ROI. Beti usage continues to increase each month and new clients are starting with higher usage. Some clients may not be fully utilizing Beti yet, but the company is focused on meeting their needs. The company wants new clients to receive the full value of Beti to achieve ROI.

Chad Richison and Craig Boelte discuss the technical advancements and improvements being made to their product, Beti. They also mention their opportunistic approach to their buyback program and their plans to expand Beti to other countries. The company has also increased their EBITDA margin guidance by 50 bps and attribute this to increased efficiency.

The speaker discusses the organization's focus on efficiency and how they are not deliberately pulling any levers to achieve it. They mention that the second quarter's results will carry over to the full year and they are not taking any specific actions to increase efficiency. The next question asks about the CRR teams and their focus, but the speaker declines to provide specific details for competitive reasons. They mention that the approach of the CRRs varies depending on the client's situation and that their main focus is on helping clients achieve value before upselling. The speaker notes that this is not a significant change from previous quarters. A question from another participant asks about the CRR teams' focus and the speaker states that their approach depends on the individual client and their current situation.

Bhavin Shah asks Craig Boelte about CapEx and future building plans. Boelte mentions that CapEx is expected to be around 11-12% for the year and potentially single-digits next year. Paycom has partnered with an employment verification service, but Chad Richison doesn't see it as a strategic or differentiated opportunity. Daniel Jester from BMO asks a question next.

Chad Richison, in response to a question about the company's product roadmap and focus on automation, explains that they prioritize solving problems and automating processes, regardless of whether it's in their current system or a new addition. They do not start with revenue opportunities, but rather focus on solving problems for clients. As for international expansion, they have sold to clients in Canada, and while they may have some clients in Mexico, the UK, and Ireland, they likely have a U.S. connection.

The operator introduces a question from Jake Roberge about the demand for global payroll, specifically in Canada. Chad Richison, the speaker, explains that they have learned a lot from developing native payroll in Canada and other countries, and have also improved their global HCM product. Roberge then asks about the revenue cannibalization and when they will lap the tougher comps, to which Richison responds that the same factors impacting them now will continue to do so, but there are also mitigating factors to consider. Ultimately, the speed of adoption and usage of their product by clients will determine the impact.

The company has quantified the potential cannibalization of opportunities from good usage, but believes there are mitigating factors that can help achieve client value. They are considering extending duration in light of potential rate cuts. The notable new logo acceleration is primarily in the mid-market group, while the below 50 employee segment represents a small percentage of revenue.

In this paragraph, Zachary Gunn asks if there has been any change in the mix of new client wins for Paycom, specifically in terms of competitive takeaways, in-house clients, or regional clients. Chad Richison responds that there has been no significant change and they continue to compete with the usual suspects in the industry. Richison also thanks his colleague Craig for his dedication to the company and mentions upcoming conferences where investors can learn more about Paycom.

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