Hello. And welcome to the Paycom Second Quarter Fiscal 2014 Results Teleconference. All participants will be in listen-only mode. (Operator Instructions) After today’s presentation there will an opportunity to ask questions. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Mr. Craig Boelte, Chief Financial Officer. Please go ahead, sir.

Thank you and good afternoon. Before we get started I would like to note that certain statements made during this conference call that are not historical facts, including those regarding our future plans, objectives and expected performance are forward-looking statements within 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 we have made are reasonable, actual results could differ materially because of statements are based on our current expectations and are subject to risks and uncertainties. These risks and uncertainties are discussed in our final prospectus that was file with the Securities and Exchange Commission on April 15, 2014. You should refer too and consider these factors when relying on such forward-looking information. We do not undertake and expressly disclaim any obligation to update or alter its forward-looking statements, whether as result of new information, future events or otherwise, except as required by applicable law. Also during the course of today's call, we will refer to certain non-GAAP financial. A reconciliation schedule showing GAAP versus non-GAAP results is currently available in our press release that we issued after the close of the market today, which is located on our website at www.paycom.com. I'll now turn the call over to Chad Richison, Paycom’s President and Chief Executive Officer. Chad?

Thanks, Craig, and thanks to everyone joining us both on our conference call and online. I'm excited to spend this time with the investor community, as we believe that the human capital management industry is at the beginning of a multiyear transformation and that this presents opportunities for well-positioned providers to capture the value offered by this change. We believe that Paycom is leading the charge of this transformation due to our superior technology and unique approach and is poised to grow faster than the industry by continuing to grow our market share. As you can see from our earnings release, this was another outstanding quarter for Paycom. Demand for our software as a service technology and end-to-end human capital management solutions remains very strong and our differentiated offering is resonating in the marketplace. We saw accelerating growth in the second quarter with the 39.3% increase in total revenue to $33.3 million, approximately 98% of which was recurring. Annualized new recurring revenue, which is an estimate based on the annualized amount of the first full month of revenue attributed to new clients also increased in the second quarter to $11.5 million, up from roughly $8.3 million for the same quarter last year. Results are driven by the power of our single database, end-to-end solution and the associated superior data that comes with a single database that spans the entire employment lifecycle. This data is key to our value proposition. We capture employee data from the applicant all the way to retirement and everything in between, providing functionality and talent acquisition, time and labor management, payroll, talent management and human resources, all of the functionalities included in one solution, which eliminates the need for integration with other systems, making it easy to use and more efficient to manage. For employers this…

Thanks Chad. Our momentum continues into the second quarter and we were pleased to see this reflected in our financial results. Before I review our second quarter results in our updated outlook for 2014, I want to again quickly review a few key elements of our financial model. As we detailed last quarter, the vast majority of our revenues are recurring revenues. These are based on client fees for our broad and growing suite of applications which include talent acquisition, time and labor management, payroll, talent management and HR management applications. The services related to recurring revenues are rendered during each client’s payroll period and are charged and collected as part of our processing of the client’s payroll, which provides reasonable collectibility and excellent visibility. Our cloud-based SaaS models supports gross margin of approximately 80% with cost of sales largely consisting of hosting and support cost, along with employee-related expenses for client support, delivery and bank charges. As Chad highlighted earlier, we believe our data is a key competitive advantage and to this end, we operate our own data centers. Regarding our operating expenses, we pay commissions to our sales reps based solely on new sales at the time of their first monthly billing cycle. This is a one-time commission paid which we recoup over the life of the client relationship. While our continued robust topline growth results in near-term increases on our sales and marketing expenses, this is more than offset over the long term, given the predictable recurring nature of our client relationships. With this background in mind, let’s review our results for the second quarter. As a reminder, as I review our fiscal second quarter results and our outlook for the third quarter and fiscal 2014, our comments related to certain financial measures, including adjusted EBITDA and…

Thanks Craig. In conclusion, we had a great second quarter in our first years as a public company. We remain very excited about the opportunity we see for our company. We believe, we are well positioned to leverage our ongoing sales momentum and technology advantages to continue to drive innovation across our technology platform, take share and build our recurring revenue base for the next several years. With that, I’d like to turn the call back to the operator and open up the lines to take any questions.

Thank you. (Operator Instructions) And our first question will come from Raimo Lenschow of Barclays.

Thanks for taking my question and congratulations to a great second quarter. The first question I have -- like I had, was can you talk a little bit about the dynamic of the payroll versus non-payroll this quarter?

Sure. Raimo, as we've talked about in the past, all of our new business comes in, well, all of our business that we have, every client that we have here now comes in with the payroll offering. And so everything that comes in does have the payroll. We continue to expand our product offerings. And we’re becoming more aggressive in the initial sales call to where we have been able to penetrate more as somebody comes in upfront.

Yeah. Okay. And then on these non-payroll modules like what are the trends that you are seeing there? What are the modules that are easiest to sell and where do you see growing momentum starting to pick up more?

Like our competitors, I mean, this is -- we don't necessarily disclose module by module, we do see it as one solution. I mean, however, I will say unlike others, I mean, we are providing the ANRR. We have 30 sales teams, 6 to 8 reps on each team focused exclusively on new business wins and the overwhelming majority of all ANRR comes in new wins is what they are.

Yeah. We look at that. Okay. So you open up five offices in Q1. Did you open up any more in Q2 or are there plans or are you just now in a staffing mode for those five offices?

Correct. So we did open up five offices in Q1, which was a couple of more than what we had forecast. As we stated earlier, it takes on average 24 months within the ramp-up to maturity and we’re seeing them trend to that point now.

And so -- are there plans for doing more this year or like are you done for the year basically, the next cycle starts next year?

Well, we’re always reviewing opportunity. And as we go into the future quarters, I mean, that something will definitely be looking at. But we didn't open up another one this quarter because we opened two additional first quarter early.

Yes, okay perfect. And then last question for me is like so as now as a public company what has been the reaction that you've seen from the client base and kind of working in the market environment, has there been any change and improvement because you've got more recognition or any change from a competitive nature that ADP is taking you more seriously now or anything along those lines?

Well, I can't speak from the competitors. I know that we are finding it easier to have conversations with the clients and win prospecting.

Yes. Okay. Perfect. That's it for me. Thank you.

All right. Thanks.

(Operator Instructions) And our next question will come from Sterling Auty of JP Morgan.

What’s going guys? This is actually Albert Chi on for Sterling. Great job on the quarter. The results were pretty solid, but just a question I have is, do you think you could update us on the competitive environment from both your HCM SaaS competitors and maybe touch on what some of the larger incumbents have been responding with. I know when your competitors on the larger incumbent side had, kind of had talked about strong demand in the SaaS application. So can you talk about the dynamics between the sort of response and what's currently out there in terms of your direct competitors? Thanks, guys.

Sure. Thanks for the question. So we've been competing with substantially the same people, since I started the company in 1998. It's really been the usual suspects, save a couple of new ones, maybe smaller ones. It’s a highly competitive market and our competitors continue to come out with new products and target new markets and new market segments all the time. We still plan on taking market share and growing. I mean, it's been our model since we started and we continue to be strong at it today.

Thanks.

And the next question will come from Brad Reback of Stifel.

Hey guys, how are you?

Hey, Brad.

Chad, to your comment earlier about higher attach rates, can you give us any sense of how much higher ANRR for your customers today, where it might've been a year ago or two years ago?

I can't give you specifics on that, the specific number, but it's trending up. We have added new modules if you will. Again, we’re selling one solution but we've added new product features over the last three years. So as we go into a new client or a new win, we’ve have more to sell them.

Okay. And then just one quick follow-up on the new office side and the potential to add in the back half of the year. If there is an opportunity, does EBITDA guidance potentially assume some of that or have a factor in for that or would that be added expense to that guidance? Thanks.

I do not -- I'm trying to get to the just of the question. We are -- we would choose to open up an office or not based on the opportunity or demand or our ability to accelerate it once open. And we don't really go into a market that we don't plan to have a lot of success in. So I wouldn't necessarily say it's EBITDA guidance that's driving that decision.

Yeah. No. I apologize. If you did open offices in the back half of the year, would that be a headwind to the $22 million to $24 million EBITDA guidance you gave or it might that already had some wiggle room and conservatism baked in that it could handle it?

As we look to the full-year guidance on adjusted EBITDA, we feel comfortable with the numbers we provided and included in that is increase in sales force headcount as well.

Great. Thanks very much.

Thank you, Brad.

This concludes our question-and-answer session. I would like to turn the conference back over to Chad Richison for any closing remarks.

All right. Well, thanks again to everyone for participating in today's call and for your interest in Paycom. We appreciate your time and we look forward to speaking to everybody next quarter. So thank you.

Our conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.