Paycom Software Inc Q1 2025 Earnings Call Summary

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

Question: Raimo Lenschow - Barclays - Analyst : Congrats, great start to the year. Two quick questions, one for Chad. Like at the moment, everyone is obviously worrying about tariffs, volatility. Can you talk a little bit about what you're seeing in your field, I would assume it's not that much, but like what's the feedback from the sales guys, et cetera, on that one? And then one question for Bob. You talked about the efficiency gains that help you on the EBITDA side, like can you maybe give us a couple of examples? And how far can you push that to understand that a little bit better? Thank you.

Question: Samad Samana - Jefferies - Analyst : Congrats to the whole organization. Maybe one for you, Chad, and then one follow-up. Just as I think about the new offices. I know that they usually take, let's call it, 18 to 24 months to ramp. I think last quarter, you had mentioned that maybe this go around -- it could be a little bit faster. Just are those staffed have you seen in terms of early impact? And then a follow-up on the -- just in terms of the shape of the year, I'll go and ask them at the same time. Any shift in the number of processing days? Like does 4Q have an extra day? Just trying to understand the shape of the year with more context. Thank you both for answering my questions.

Question: Mark Marcon - Robert W. Baird & Co. Incorporated - Analyst : So two major questions. One, Chad, can you describe a little bit more about what you've done recently in terms of fine-tuning the sales process, both externally as well as in terms of the internal CRR group in terms of how they're approaching clients, and what sort of results you're seeing from that? That's the first question. And then the second question is just more on the margins. When we think about the Q1 to Q2 transition, obviously, there's going to be some seasonality, and obviously, there's some high-margin work that goes into Q1 and inflated fund balances. Can you give us a little bit of guidance just in terms of thinking through Q2 just in terms of the typical seasonality? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 07, 2025 / 9:00PM, PAYC.N - Q1 2025 Paycom Software Inc Earnings Call

Question: Steve Enders - Citigroup, Inc. - Analyst : I guess -- sorry, I want to ask on, I guess, the kind of free cash flow dynamics was pretty solid here. Is there anything that we should be kind of keeping into account for timing impacts or how we should be thinking about how that maybe compares to the EBITDA progression for the year? And then secondarily, just on the mid-market opportunity, it seems like there was good traction there last quarter. And just wanting to see how that's maybe tracking comparatively from what you saw in 1Q here?

Question: Jason Celino - KeyBanc Capital Markets. - Analyst : I'm just trying to decipher some of the subtleties in kind of the script language today. I think, Bob, in your section, you mentioned the recurring revenue growth being up over 9% this year. I think before it was technically approximately. And then I think you also said that it would be up 10% for the remainder of the year. Is that like an average? Or is that kind of like each quarter? Just curious there.

Question: Jason Celino - KeyBanc Capital Markets. - Analyst : Okay. Perfect. Thanks for that. And then changing topics a little bit. I think in the quarter, there was a press release saying that you received authorization as a payment institution from the Central Bank of Ireland. Curious what this means for the business and the international part of the story.

Question: Daniel Jester - BMO Capital Markets - Analyst : Maybe just another one on the product side. You also talked this quarter about, I think some credentialing on the background screening side. I guess, is that an incremental revenue opportunity? Or how should we be thinking about that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 07, 2025 / 9:00PM, PAYC.N - Q1 2025 Paycom Software Inc Earnings Call

Question: Daniel Jester - BMO Capital Markets - Analyst : That's great. Thank you. And then in the script, you talked about a boomerang client who left and came back. I guess, do you have specific programs targeting some of those customers that may have churned over the past few years?

Question: Jared Levine - TD Cowen - Analyst : Adjusted S&M had limited sequential growth relative to recent years and haven't really seen too many TV commercials in recent months. Can you talk about how advertising spend is expected to impact FY25 margins? And is there any new strategy surrounding advertising spend right now? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 07, 2025 / 9:00PM, PAYC.N - Q1 2025 Paycom Software Inc Earnings Call

Question: Jared Levine - TD Cowen - Analyst : Got it. And then just wanted to clarify in terms of Xflow growth cadance for the year. Can you dig into why the 4Q Xflow growth would be the highest for the year?

Question: Bhavin Shah - Deutsche Bank AG - Analyst : Chad, just back to the authorization you received be a payment institution in Europe. But what are the next steps that you're looking to accomplish to go further into that region? And then how are you kind of thinking about your go-to-market strategy, your product strategy internationally as you progress kind of down the path?

Question: Bhavin Shah - Deutsche Bank AG - Analyst : That's helpful there. Just one quick follow-up for Bob. Just on the flow guidance, can you just remind us what's embedded in terms of rate cut expectations?

Question: Ian Black - Needham & Company - Analyst : Hi, this is Ian Black on for Joshua Riley. Thanks for taking my question. How is gross retention trending given the improving customer satisfaction and the lapping of any churn on the shift to Beti?

Question: Brian Schwartz - Oppenheimer & Co. Inc. - Analyst : A nice start to the year. Chad, in terms of maybe more of a real-time question on what you're seeing in terms of demand. Clearly, the macro pressures did not impact the business at all in 1Q. But how is the business faring in April when those macro pressures intensified? And I have a follow-up for Bob.

Question: Brian Schwartz - Oppenheimer & Co. Inc. - Analyst : My follow-up question for Bob, given the greater operating efficiencies that you're realizing internally from AI, has that made you change the hiring plan for the year?