Paycom Software Inc Q2 2025 Earnings Call Transcript

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

Question: Raimo Lenschow - Barclays Capital - Analyst : Thanks. Two quick questions and congrats from me as well. The first chat is, if I think about IWant, how should we think about that in terms of a driver for the overall business? Is it just like it's just differentiation tool and that basically helps you kind of against someone that doesn't have that kind of clean data structure that you guys have. And so then you kind of sell better. And as far as I remember, there's not that many guys out there as clean as you. Or do you think eventually down the road, there will be some monetization offerings as well? And then one for Bob, if you think about more AI, it probably means you need some GPUs, et cetera? How should we think about gross margin impacts that potentially could come there because obviously, they need a lot more money in computer? Thank you.

Question: Mark Marcon - Robert W. Baird & Co Inc - Analyst : Good afternoon. Thanks for taking my questions, and congratulations on the strong quarter. Chad, the product is really slick. I like it. I'm wondering if you can talk a little bit about what the marketing plan is. Is it already turned on with all of your existing clients? If not, what do they need to do? What's the training methodology just in terms of making them all aware of it and how they can use it? And then how are you going to unfold that in terms of national advertising? Are you going to switch your campaign in order to focus on this?

Question: Kevin McVeigh - UBS Equities - Analyst : Great, thanks so much. My congratulations as well. I guess in terms of IWant, how are you going to monetize it, Chad? Is it kind of part of kind of a base [Paycom] Is it an individual? Or is it just a core package you have to adopt based on a certain number of modules? Any way to think about

Question: Steve Enders - Citi - Analyst : Okay, great. Thanks for taking the question here. I guess just to start, I just want to understand like what actually maybe was different versus what you were expecting coming into the quarter? Because it looks like the upside looks pretty solid versus maybe what we've seen in the past few quarters. So I guess, a, what has kind of happened there? And then, I guess, secondly, just as we think about IWant and what that means, is there any implications for what that means for Betty adoption or need to adopt Betty to get the kind of full functionality of IWant? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 06, 2025 / 9:00PM, PAYC.N - Q2 2025 Paycom Software Inc Earnings Call

Question: Daniel Jester - Bank of Montreal - Analyst : Hey, good afternoon. Thank you for taking my question. Bob, I wanted to go back to a question earlier in the comment you made about free cash flow. I just wanted to clarify, is that free cash flow dollars or is that free cash flow margin. And I wanted to see if you contemplated any sort of tax benefits from the new tax bill.

Question: Daniel Jester - Bank of Montreal - Analyst : Okay, thank you. And then just on the sales and marketing investments. I guess, should we anticipate -- this is a very intuitive product, but maybe you want to devote a little more resource back to the base to sort of help people out in those initial phases. Is that where -- is this maybe temporary investment that we're going to be able to harvest in 2026? Or do you think there's going to be a more substantial push? Thank you.

Question: Jared Levine - TD Cowen - Analyst : Thank you. I just wanted to dig in, in terms of 2Q, you had a pretty notable sequential increase in the -- within CapEx, specifically on PP&E and it sounds like you're contemplating pretty healthy spend there as well for the remainder the year. Can you dig into what exactly you're spending there and kind of when potentially that could taper off?

Question: Jared Levine - TD Cowen - Analyst : Got it. And then just one more here. Can you talk about your back-to-base sales productivity by CRRs year-to-date?

Question: Alex Zukin - Wolfe Research LLC - Analyst : Yeah, hey guys, So maybe on IWant specifically, when you think about how it fits into the overall product strategy with Beti, maybe help us a little bit where you're getting the most customer interest, what does success look like for IWant? And also, any update or mix around retention with Beti and kind of as you see that mix with Beti and IWant across your customers growing kind of where is the opportunity for retention in that well to go to?

Question: Bhavin Shah - Deutsche Bank - Analyst : Great, thanks for taking my question. Chad, you just kind of mentioned earlier that you think the CapEx will be a little bit more transitory as you build this out? And kind of with you owning the entire tech stack and once inside customer base is up and running on IWant and extending usage, why shouldn't there be more continued spend from a CapEx perspective as users kind of use it more and you're kind of running through GPU cycles?

Question: Bhavin Shah - Deutsche Bank - Analyst : And just -- I guess, just following on that, just given how like useful IWant books and how into it is, like why not more directly monetize it on a Pepin basis or a usage basis versus kind of indirectly monetizing it on better sales and driving attach above the modules?

Question: Joshua Reilly - Needham & Company LLC - Analyst : All right, thanks for taking my question. All right. I was just curious, maybe a little different angle and some of the other things we've been talking about, but how are you adjusting your sales and marketing processes internally with all the new different AI sales tools that are out there for front-end lead automation? And then also, along with that, the way that customers find you might be changing as well with organic Google search traffic declining TAM on a secular basis over time. How do you kind of square all these items up to manage sales efficiency over the next few years?

Question: Joshua Reilly - Needham & Company LLC - Analyst : Just a quick follow-up. Is it fair to say that the new sales activity was up sequentially from Q1 to Q2? And how do you think about that in terms of visibility for revenue in the second half and how -- what level of visibility that you have into the updated revenue guidance? Thanks guys.

Question: Siti Panigrahi - Mizuho Securities USA LLC - Analyst : Oh, thanks for taking my question and Chad, I want to ask about a demand environment, how you're seeing in the first half and your expectation for second half. And then are you seeing any kind of changes in the competitive landscape, especially with all the consolidation that happened recently in your space?

Question: Siti Panigrahi - Mizuho Securities USA LLC - Analyst : Great. Thank you.

Question: Jake Roberge - William Blair Capital Partners - Analyst : Yeah, thank you for taking questions. When you talk about IWant taking off for you, where do you think it shows up most? Is that new logos? Is it retention? Is it new product adoption? I guess, what should we be looking for on our end? And when do you think it actually starts showing up more meaningfully in the numbers?

Question: Jake Roberge - William Blair Capital Partners - Analyst : Okay. That's helpful. And then can you talk about how the initial rollouts of the new offices in L.A., Raleigh and Providence have been going? And now it feels like the business is in a much healthier place. Should we expect a more regular cadence of office launches moving forward?