Paycom Software Inc at Robert W Baird Global Consumer, Technology & Services Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Mark Marcon - Robert W Baird & Co. - Analyst : Chad, we basically have 28 minutes, and then we're going to get into the [Aster Suite]. There's lots of different questions. I was in New York last week, meeting with investors and then also in the Midwest. So I'm going to ask the big question that a lot of people asked when they saw the announcement on Friday first, just to start out. Can you tell us a little bit about the leadership change and, you know, to what extent is that going to affect the future of the company? To what extent was it completely voluntary on Chris's part?

Question: Mark Marcon - Robert W Baird & Co. - Analyst : Yeah. And the fact is, you've had other people leave before who ended up getting severance, but it didn't -- they left for personal reasons. And in certain cases, we ended up finding out, like, what those reasons were. And you guys were basically taking care of them. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 6:00PM, PAYC.N - Paycom Software Inc at Robert W Baird Global Consumer, Technology & Services Conference

Question: Mark Marcon - Robert W Baird & Co. - Analyst : Great. Obviously, there's been a lot of discussion around Beti. And what sort of impact that has had. Before we get into, like, the nitty gritty, the session upstairs where we were talking about the CRRs and the overall productivity, can you just talk a little bit about, like, your vision for Beti and why you're as focused on it? Because I think there's some real positives that come out of Beti.

Question: Mark Marcon - Robert W Baird & Co. - Analyst : And in terms of, you know, they actually end up fixing the payroll, can you describe those steps that they actually take to fix it? Because I've demoed Beti. I think it's a fantastic product. We've talked -- AndrT and I have talked to various people who use it on a daily basis or a weekly basis. They don't know that it's called Beti. But they love the features about it. What are the steps that somebody has to take in order to fix things? Because, like, if the hours are off, it's like you're basically just submitting, hey, my hour's off, and it goes to an approver who changes the hours, right?

Question: Mark Marcon - Robert W Baird & Co. - Analyst : So and just to back up, for people who aren't familiar, I mean, part of the reason for asking about Beti and focusingthere is that Paycom has been, historically, one of the fastest-growing players within the space with the highest margins. And with this focus on Beti, we did see a bit of a slowdown. So one question, and part of the reason why you're focused on Beti is not only does it give them a great ROI. But obviously, if you get all the employees to use the solution, that creates a barrier to everyone. To exit, because you've got everybody that's engaged, and so your client retention ends up being better. Can you talk a little bit about that client retention, but then pivot to talking about, like -- I've demoed Beti. I don't understand why it's difficult to get a client to fully utilize it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 6:00PM, PAYC.N - Paycom Software Inc at Robert W Baird Global Consumer, Technology & Services Conference

Question: Mark Marcon - Robert W Baird & Co. - Analyst : And so is the change management the barrier coming from the payroll department or is it coming from the employees or both?

Question: Mark Marcon - Robert W Baird & Co. - Analyst : What percentage of the installed base now has Beti?

Question: Mark Marcon - Robert W Baird & Co. - Analyst : And the clients that haven't taken Beti. You're not getting rid of them now. And you used to have some competitors that would actually say, hey, you better switch to us because Paycom is going to force the switch and you don't want to do it. But you've made it clear to them that you're not forcing anybody.

Question: Mark Marcon - Robert W Baird & Co. - Analyst : So one thing that I hear from investors all the time and your very frequent topic of discussion is like, why not allow certain clients to come on without using Beti? Like new ones? I know lots of companies that utilize Paycom that actually don't have Beti as well. And they're very, very happy. They pay you guys on a regular basis. Why not allow them to come on? And maybe at some point they switch as opposed to insisting on that right up front.

Question: Mark Marcon - Robert W Baird & Co. - Analyst : Can you talk a little bit about Salesforce productivity and how you think about that? I mean, you've got -- your top salesperson last year sold $4 million worth, which is the equivalent of what a market used to sell when you first went public. So some people are being very, very successful in this environment. But on the whole things have slowed down, not just for you, but for everybody. Your slowdown has been a little bit more dramatic because of some of the factors you've discussed with regards to Beti. But how are you thinking about that Salesforce productivity in terms of finding a base and now potentially reaccelerating?

Question: Mark Marcon - Robert W Baird & Co. - Analyst : Great. How about the CRR group, which is basically the group that does the upsells? Their productivity ended up changing. You mentioned on a call that they were down $20 million relative to the prior year because of the focus on Beti and upsells. How's that trending now?

Question: Mark Marcon - Robert W Baird & Co. - Analyst : But is the CRR group doing more in terms of selling other solutions now as opposed to just focusing in on Beti?

Question: Mark Marcon - Robert W Baird & Co. - Analyst : Okay. So you are seeing -- but I mean, the sales productivity is improving now.

Question: Mark Marcon - Robert W Baird & Co. - Analyst : You've been going upmarket. You've got some clients that are -- have 28,000 employees. When you go upmarket, what are some of the headwinds versus some of the tailwinds in terms of going after some of those larger clients? And to what extent is having an open system important when you start going upmarket?

Question: Mark Marcon - Robert W Baird & Co. - Analyst : Okay. And then in terms of margins. You've had some of the -- outside of paychecks, you had the highest margins in the group. You still have the highest margins outside of paychecks, but they've been coming down just a little bit. You've been making some investments both in terms of your service infrastructure, and then you've been rolling out some international capabilities. Can you talk -- and you also have early wage access, can you talk a little bit about, like, how investors should think about the margin profile on a

Question: Mark Marcon - Robert W Baird & Co. - Analyst : Okay, so I mean, given where the margins are currently, should investors expect them to be steady state? And again, I'm talking ex-float.

Question: Mark Marcon - Robert W Baird & Co. - Analyst : Yeah. But I mean, given the scalability of the business, margin should go up over time. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 6:00PM, PAYC.N - Paycom Software Inc at Robert W Baird Global Consumer, Technology & Services Conference