Paycom Software, Inc.

Hello, my name is Philip, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Paycom Software first quarter 2021 quarterly results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during that time, simply press star and the number one on your telephone keypad. If you'd like to withdraw the question, press the pound sign. Thank you. And now I'd like to turn the call over to your host, Mr. James Sanford. Please go ahead. James Sanford Thank you.

Welcome to PACOM's first quarter 2021 earnings conference call. Certain statements made on this call that are not historical facts, including those related to our future plans, objectives, and expected performance, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent our outlook only as of the date of this conference call. While we believe any forward-looking statements made on this call are reasonable, actual results may differ materially because the statements are based on our current expectations and subject to risks and uncertainties. These risks and uncertainties are discussed in our filings with the SEC, including our most recent annual report on Form 10-K and our most recent quarterly report on Form 10-Q. You should refer to and consider these factors when relying on such forward-looking information. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. Also during today's call, we will refer to certain non-GAAP financial measures, including adjusted EBITDA, non-GAAP net income, adjusted gross profit, adjusted gross margin, and certain adjusted expenses. We use these non-GAAP financial measures to review and assess our performance and for planning purposes. The reconciliation schedule showing GAAP versus non-GAAP results is included in the press release that we issued at the close of the market today and is available on our website at investors.paycom.com. I'll now turn the call over to Chad Richardson, Paycom's President and Chief Executive Officer. Chad?

Thanks, James, and thank you to everyone joining our call today. I will spend a few minutes on the highlights of our first quarter 2021 results, then I'll review the progress we are making on our goals for 2021. Following that, Craig will review our financials and our guidance, and then we will take questions. But first, I want to thank my colleague and good friend, Jeff York, for his many years of service leading our sales organization over the last 14 years. Jeff has built a sustainable sales organization with a deep bench of like-minded professionals. I look forward to continuing to work with him in his strategic leadership role. One of those like-minded individuals is our new Chief Sales Officer, Holly Perot. Holly is a true success story at Paycom. Her 14-year career with us began with an internship in the sales organization. Holly quickly progressed into a top sales rep, a top sales manager, and a top regional sales manager, earning many of the company's highest sales ranking awards along the way. In 2016, she was asked to further expand Paycom's client relations department, which presents additional products to clients and focuses on creating value by increasing employee usage. Holly has been instrumental in contributing to the success of Paycom across the entire sales organization, and I'm confident she will continue to build on the momentum we are seeing. We delivered strong first quarter results, even with a tough pre-COVID year-over-year comparison. Our 2021 first quarter revenue of $272.2 million grew 12.3% compared to the prior year period and came in above the top end of our guidance range, despite several previously identified headwinds. Unsurprisingly, the first quarter revenue was impacted by lower forms, filings and adjustments due to lower hiring trends in industries most impacted by the pandemic in 2020. Excluding forms, filings and adjustments revenue, our year-over-year recurring revenue growth accelerated again in Q1. As we go through 2021, we will have a cleaner comparison that will provide a truer reflection of our revenue growth profile since the arrival of the pandemic. Turning to profitability, our first quarter adjusted EBITDA was $133 million, representing adjusted EBITDA margin of 48.9%. As reflected in our updated guidance, which Craig will discuss, we believe the combination of revenue growth and adjusted EBITDA margin makes us well positioned to exceed the rule of 60 in 2021. Our marketing plan continues to work very well, delivering strong demo leads in the first quarter. We continue to see success from our advertising spend, and we intend to continue to spend aggressively to fuel future revenue growth and expand our roughly 5% market share in a large and expanding HCM TAM. We are capitalizing on the shortcomings of disparate HCM systems with the value proposition of Paycom's single database solution that is stronger than ever. Employees expect their HR software to be efficient and easy to use. In fact, in a recent survey we commissioned with a third party, employees expressed frustration with complex and disparate HR software that lacked the transparency and usability they've come to expect from consumer-oriented technologies. PACOM's employee usage strategy and single database solution squarely addresses these expectations. We had record high employee usage rates in Q1 as measured by our direct ad exchange or DDX. This is fueling new opportunities for product innovation and automation for products like Betty, our better employee transaction interface for payroll, which we started rolling out to a select few clients during the quarter. Betty is already receiving high marks as it transforms the way payroll is done. I believe over the next 12 to 18 months, Betty will become the standard for how payroll should be done. Now that the first quarter is over, we have substantially lapped the pandemic's impact on our comparable year-over-year numbers. New client additions are driving our growth in Q2 and beyond. The negative revenue impact the pandemic had on our pre-pandemic client revenue remains stable. While we haven't seen any material improvement in employment trends at those same clients, our forecast and future growth initiatives are not dependent on any improvement. Our strategy throughout the pandemic has remained unchanged. We will continue to focus on the three controllable activities of providing world-class service to our clients, rapidly developing new technologies, and increasing the number of new clients added to our platform. We've done a great job and succeeded in these areas, which has kept us on track to achieve our growth initiatives. I'd like to thank our employees for their patience, flexibility, and grit over these last 14 months. In summary, now that we've lapped Q1's tough year-over-year comparison with the last pre-COVID quarter, we expect that the strength of our growth profile will be reflected in our future results. The record new business revenue and record number of new clients added in 2020, combined with robust first quarter sales, is bolstering our long-term revenue growth opportunity. As a reminder, we only have approximately 5% market share of a growing TAM, so we have a long runway ahead of us. Our strategy is working, and our products have never been more relevant. With that, I'll turn the call over to Craig for a review of our financials and guidance. Craig?