Paycom Software, Inc.

Software Second Quarter 2023 Quarterly Results Conference Call. My name is Kate, and I will be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the call over to our host, James Sanford, Head of Investor Relations. You may go ahead.

Thank you, and welcome to PACOM's Earnings Conference Call for the second quarter 2023. 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 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 made 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. A reconciliation schedule showing GAAP versus non-GAAP results is included in the press release that we issued after the close of the market today and is available on our website at investors.paycom.com. We now turn the call over to Chad Richeson, PACOM's President and Chief Executive Officer. Chad?

Thanks, James, and thank you to everyone joining our call today. We delivered very solid results in the second quarter, and we continue to expand our opportunity both within and outside the U.S. I'll start with highlights from the second quarter and progress on our initiatives. Following that, Craig will review our financials and guidance, and then we'll take questions. Second quarter 2023 revenue of approximately $401 million represented strong growth of 27% year over year. Second quarter adjusted EBITDA came in at 157 million representing an adjusted EBITDA margin of roughly 39% up approximately 130 basis points year over year. We are delivering a solid combination of growth and high margins while maintaining a disciplined investment strategy and product and international expansion. On the product front, the ROI that our clients are achieving from Betty is unquestionable. We recently commissioned a total economic impact study from Forrester Consulting that quantified the savings from using Paycom and Betty, including a 90% reduction in labor for payroll processing and saving HR and accounting teams more than 2,600 hours per year. Companies that are not adopting Betty are missing out on a significant opportunity for savings from this structural change to how payroll should be done. With millions of employees already doing their own payroll and organizations seeing incredible ROI with Betty, there's no reason not to adopt it. The product is working as we anticipated and our messaging is resonating. So we will remain disciplined in promoting the power of Betty to new and existing clients. In April 2023, we launched access to our global human capital management software in more than 180 countries and in 15 languages and dialects. Today, we announced that we have expanded our HCM solutions to include self-service payroll for organizations with Canadian employees. Now, more North American businesses will be able to improve their payroll processing by giving their employees a more transparent and user-friendly experience in Canada with betting. We are seeing continued success selling across our entire target market range, and our efforts upmarket continue to be strong. With our recent launch into Canada, we've opened up a new large cross-border opportunity. As we continue to expand our geographic reach, I expect our move-up market to continue to accelerate. As a result, we are redefining our target market range to include organizations with greater than 10,000 employees, which represents an enterprise segment that our sales reps can now directly pursue. With our new expanded market opportunity, we now estimate our market shares well below 5%. This expansion gives me confidence that we can grow at an impressive pace for many years to come. In addition to launching our payroll services in Canada, our product development team also rolled out two significant tools in our software, Everyday and the Client Action Center. Everyday allows employees to get paid on a daily basis. Unlike other products on the market, with Everyday, employees access their earned pay early without being charged a fee, and employers are not exposed to potential losses from all factors that impact pay, including early departures, garnishments, or benefit deductions to be collected. Every day is a fully compliant payroll as opposed to a pay advance like many other daily pay services. The Client Action Center furthers our dedication to creating software that simplifies the lives of our clients by providing them with an intuitive dashboard within the Paycom mobile app. This new tool makes it even easier for our clients to take action and get updates on service-related items. We've received great feedback from clients on this streamlined approach since we rolled it out in June. Finally, Paycom was recently recognized as one of America's greatest workplaces in 2023 by Newsweek. The award highlights companies dedicated to providing employees with an enjoyable work environment that also fosters growth and development opportunities. In addition, for the second year in a row, comparably named Paycom one of the best career growth opportunities among all companies. In summary, our highly differentiated product and realized client ROI continue to drive our strong results. I'd like to thank our employees for their hard work and commitment to excellence as we continue to change the way payroll is done. With that, I'll turn the call over to Craig for a review of our financials and guidance. Craig?