Paycom Software Inc Q3 2025 Earnings Call Summary

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

Question: Raimo Lenschow - Barclays Services Corp - Analyst : Perfect. Chad, one question I get a lot from investors here at the moment is that historically, your beat levels were a little bit higher. Can you speak a little bit what you're seeing? Is it in terms of economy kind of, et cetera, that might change the situation there because that we kind of -- you get used to a certain track record. It doesn't -- and this looks like a slight departure from them.

Question: Raimo Lenschow - Barclays Services Corp - Analyst : Okay. Perfect. And then what -- in terms of IWant that was one of the highlights from the HR Tech Conference that we saw there. How does that drive extra conversation for you? Because that was -- you were very early in the market. It seems like you're relatively unique in the market. What do you see in terms of what the sales guys are reporting back to you in terms of how that helps in terms of lead generation, pipeline build, et cetera?

Question: Mark Marcon - Robert W. Baird & Co Inc - Analyst : With regards to IWant, I also demoed it at HR Tech with a group of investors, and I thought it was really slick. I'm wondering, can you talk a little bit more about like what you're seeing in terms of the usage pattern? You mentioned that you're seeing more executives using it. But like how frequently you've got some pretty good data capture in terms of being able to track how people are using it. Like how broad is it at this point? How many times are you seeing executives using it? Are all of them using it? And a little bit more just on the -- in terms of what you're hearing from the field in terms of sales with regards to the potential for the selling season with it?

Question: Mark Marcon - Robert W. Baird & Co Inc - Analyst : Great. And then can you talk a little bit about your cost of service? If we take a look at your operating cost of revenue, it had a pretty nice sequential decline, a significant decline on a year-over-year basis. Can you talk a little bit about those efficiencies? And then I -- there were some press reports with regards to some changes. Are those going -- just in terms of personnel, are those falling into the fourth quarter? And how should we think about that?

Question: George Kurosawa - Citibank Cameroon SA - Analyst : Okay. Great. This is George Kurosawa on for Steve. Just wanted to follow up on the demand environment. If you could characterize what you saw out there in terms of sales cycles, retention, et cetera. Any color commentary would be great.

Question: George Kurosawa - Citibank Cameroon SA - Analyst : Okay. Great. And then I wanted to follow up on the $100 million in CapEx you called out for data center and AI investments. Looking at your free cash flow number, I think we wouldn't have guessed that, that was so big. Maybe if you can -- is it right to think that your free cash flow number ex that, we should think about that basically $100 million higher than what the reported number is? And then REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2025 / 10:00PM, PAYC.N - Q3 2025 Paycom Software Inc Earnings Call if you could remind us the big components of that spend and why you feel like you're now set up and that's sort of a onetime investment, if you will?

Question: Daniel Jester - Bank of Montreal - Analyst : So I want to spend a moment on the product. And now with IWant that you have executives using the product more, are there opportunities in your mind to beyond just AI, build more products on the platform, which serve a broader set of use cases with your clients?

Question: Daniel Jester - Bank of Montreal - Analyst : Great. And then maybe just a quick one about how you're seeing the new offices ramp? And any change in your philosophy in terms of how you're thinking about adding sales capacity as we go into next year?

Question: Jared Levine - Cowen and Company LLC - Analyst : In terms of IWant, are there any initial signs of it driving increasing product attach rates to date?

Question: Jared Levine - Cowen and Company LLC - Analyst : Great. And then in terms of the 540 employees impacted by the recent layoff announcement there, can you talk about expectations surrounding annualized cost savings and how much of that will be reinvested back into the business?

Question: Bhavin Shah - Deutsche Bank AG - Analyst : Bob, just on the 4Q -- I guess, the implied 4Q guide, it's -- you talked about in the past that 4Q growth should be the highest for the year and -- but the guide is kind of slightly below what 2Q and 3Q grew at. And given the 3Q strength, you would think 4Q would benefit from that. Is this just conservatism? Or is there something else that we should keep in mind for 4Q recurring revenue? And is 4Q a good exit rate to think about for next year?

Question: Bhavin Shah - Deutsche Bank AG - Analyst : That's fair and I appreciate that. And just one quick follow-up. You talked about spending on marketing for IWant. How do we think about the timing of those kind of investments playing back from a top of funnel to conversion perspective? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2025 / 10:00PM, PAYC.N - Q3 2025 Paycom Software Inc Earnings Call

Question: Joshua Reilly - Needham & Company LLC - Analyst : All right. If you look at the strong bookings that you've had over the last few quarters, just curious what's the trajectory been of how this has been translating to revenue here in Q3 and Q4? And did some -- maybe more of the starts from earlier in the year get pushed to Q4 or 2026? Just wanted to get a sense of how that may be impacting the upside to the revenue here in Q3.

Question: Joshua Reilly - Needham & Company LLC - Analyst : Got you. That's helpful. And then -- I'm guessing I know the answer to this, but I just want to check and see, has there been any difference in the demand dynamic between the high end or larger customer opportunities versus the mid-market or more SMB opportunities out in the market?

Question: Phillip Leytes - Mizuho Securities USA LLC - Analyst : This is Phil on for Siti. It sounds like IWant is pretty differentiated in the market. Is there an opportunity to eventually maybe monetize the product more directly? Or should we view this as more of like a retention and module cross-sell play? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2025 / 10:00PM, PAYC.N - Q3 2025 Paycom Software Inc Earnings Call

Question: Madeline Brooks - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Maybe more of a high-level one here. If I think about the stock performance year-to-date and the catalysts that are kind of on the horizon for the stock, what I'm kind of thinking is like, look, right, we're getting over some execution strategy here, right? Our sales force is getting more effective now. We should be lapping that data center build-out expense. So free cash flow should be going back up, right? These are all catalysts for the stock. But it feels like from this quarter, the numbers are leaving a little bit to be desired, but the opportunity is there for the taking, right? It's really mostly here on execution. So I guess I'm just wondering what -- from an execution perspective, could go right over the next couple of quarters to really maybe get growth back up to that 12%, 14%. We're also going to see this inflection in cash flow. And maybe what is also kind of viewed as a challenge or what might make it difficult to get there?