Paycom Software, Inc. Q4 FY2024 earnings call

• Ended 2024 with strong momentum due to focused execution, organic sales growth, and operational efficiency gains. - Automation efforts: Beti eliminates non-revenue-generating tasks for clients, GONE generates high ROI, and the AI agent provides faster client responses. - Sales growth: Opened three new sales offices in January, with record sales in January 2025. - Culture recognition: Recognized for compensation and culture by Comparably, and as one of America's greatest workplaces for diversity by Newsweek. - Client success: Clients saw strong ROI from automated solutions, e.g., a professional sports client reduced payroll time by 85% with Beti.

Full-year 2024 revenue was $1.88 billion, representing 11% organic growth compared to 2023. Full-year recurring and other revenue was $1.76 billion, also up 11% compared to 2023, and interest on funds held for clients was $125 million, up approximately 16% year-over-year. Fourth quarter 2024 total revenue was $494 million, a 14% growth over the prior year period. Recurring and other revenue in the fourth quarter was $465 million, up 14.5% compared to 2023. Full-year GAAP net income was $502 million or $8.92 per diluted share. Non-GAAP net income for 2024 was $462 million or $8.21 per diluted share. Full-year adjusted EBITDA was $775 million, with a margin of 41.2%. Fourth-quarter adjusted EBITDA was $215 million, with a quarterly margin of 43.5%, up 290 basis points year-over-year. Adjusted R&D expense was $61 million in the fourth quarter of 2024, 12% of total revenues.

• For fiscal 2025, total revenue expected to be between $2.015 billion to $2.035 billion (~8% y-o-y growth). - Recurring and other revenue expected up ~9% y-o-y. - Adjusted EBITDA expected in the range of $820 million to $840 million (41% margin at midpoint). - First quarter growth expected to be the low point, with recurring and other revenue growth accelerating to consistent double digits thereafter. - Interest on funds held for clients expected to be approximately $110 million, down 12% y-o-y.

Q: Raimo Lenschow asked about the decision to not do quarterly guidance and renewal rates.

A: Bob Foster said the guide aligns with long-term business focus; Chad Richison said renewals were stable in 2024 and expected to continue.

Q: Mason Marion inquired about the building blocks in the 9% recurring and other guide and CRR team expectations.

A: Chad Richison said 9% is recurring and other revenue ex-interest, with focus on client satisfaction and CRRs upselling; Craig Boelte said consistent with past guidance.

Q: Mark Marcon asked about revenue vs client growth and margin improvement.

A: Chad Richison talked about client mix shift to larger clients and sales success; Craig Boelte mentioned margin factors like new building and R&D investment.

Q: Kevin McVeigh asked about revenue vs client growth and margin balance.

A: Chad Richison discussed client mix and sales success; Craig Boelte and Chad Richison talked about margin elements.

Q: Jason Celino asked about sales offices and workforce levels.

A: Craig Boelte said offices opened when there's bench strength; Chad Richison said workforce stable with automation benefits.

Q: Bhavin Shah asked about recurring revenue shape and EBITDA efficiency.

A: Bob Foster mentioned year-end forms and interest headwind; Chad Richison talked about automation and high-quality revenue.

Q: Daniel Jester asked about product roadmap and interest income.

A: Chad Richison said product focus on automation; Bob Foster discussed interest rate and form factors.

Q: Michael Funk asked about competitive environment and pricing evolution.

A: Chad Richison said no change in competitive view; Chad Richison talked about pricing based on client value.

Q: Joshua Reilly asked about client retention and R&D capitalization.

A: Chad Richison said retention 90% consistent, R&D capitalization rate unchanged.

Q: Jake Roberge asked about strong January sales and CRR priorities.

A: Chad Richison said internal sales strength; CRR priorities on client satisfaction.

Q: Unidentified Analyst asked about international strategy.

A: Chad Richison said continuing to build international strategy.

Q: Zachary Gunn asked about EBITDA margin delta.

A: Chad Richison and Craig Boelte said guide starts lower then accelerates, first and fourth quarters have higher margins.