Hello and welcome to the Paycom Third 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. At this time, I’d like to turn the conference over to Mr. Craig Boelte, Chief Financial Officer of Paycom. Mr. Boelte , you may begin.

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 day of this conference call. And 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 filed with the Securities and Exchange Commission on April 15, 2014. You should refer to 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 a 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 measures. 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 also located on our website at www.paycom.com. I will now turn the call over to Chad Richison, Paycom’s President and Chief Executive Officer. Chad?

Thanks, Craig, and welcome to everyone joining us today for the call. We had strong financial results for the third quarter of 2014. Our total revenues of $36.6 million grew 42% from the comparable prior year period. Highlighting our success annualized new recurring revenue or ANRR was a record $14.9 million in the third quarter of 2014, up 52% from the comparable prior year period. As a reminder, ANRR is the annualized amount of the first full month of already on-boarded new recurring revenue and we view it as a robust indicator of our future revenue. Our ANRR growth is a testament to both of our new client wins and also our ongoing success in bringing on larger clients. It reflects the growing demand for our industry leading software solution. We've made great progress so far in 2014, checking off several of our goals as we strive to become the leader in the payroll and human capital management industry. From our five new sales teams to our ongoing application introductions and enhancements and our initial public offering, our momentum is strong and growing. We are taking active steps to ensure that this momentum is sustained through the fourth quarter and beyond. Regarding our cloud bases SaaS solution we are relentless in our efforts to ensure that our solution remains best in class. We continue to drive our software development in the third quarter of 2014 with adjusted R&D increasing approximately 100% on a year-over-year basis. Our software efforts are helping drive our results. We continue to see examples of clients turning to Paycom when competing offerings like the functionality and ease of use our solution has. I’d like to spend a few minutes discussing an upcoming enhancement to our solution that we believe will drive substantial value to our current…

Thanks, Chad. Before I review our fiscal third quarter results and our outlook for the fourth quarter and fiscal, I would like to remind everyone that my comments related to certain financial measures will be on a non-GAAP basis. Adjusted EBITDA and non-GAAP net income and non-GAAP financial measures that excludes stock-based compensation and other non-recurring charges including transactions expenses related to our initial public offering. A reconciliation of our GAAP to non-GAAP results is included in the table on our press release. As Chad highlighted, we saw continued robust growth in the third quarter. Total revenues were $36.6 million representing year-over-year growth of 41.7% from the comparable prior year period. While our growth was primarily driven by new client additions by our mature sales teams we’re also starting to see additions from our more recently opened sales teams. Additionally, we continue to increase the average revenue per client as we continue to onboard larger clients. Within total revenues, recurring revenues was $35.9 million representing 98% of total revenues for the quarter and growing 42.4% from the comparable prior year period. ANRR was $14.9 million, up from $9.8 million in the same period last year and representing 52% growth from the comparable prior year period. Total adjusted gross profit for the third quarter was $30.2 million representing an adjusted gross margin of 82.4%. This compares to 79.3% in the third quarter of 2013. As we have detailed in prior calls, our cost of revenue consists largely of hosting and support cost, along with employee-related expenses for client support, and ACHDs. The sequential improvement in gross margin was largely driven by cost disciplines across most of the inputs that make up our total cost of sales. While we recognize the gross margin improvement for the third quarter of 2014 we also…

(Operator Instructions). Our first question comes from Raimo Lenschow at Barclays.

Hi guys, this is Harry for Raimo. Thanks for taking the question and congrats on a good quarter. I have a couple of questions. I guess I would just start of by asking how are you guys -- what kind of traction are you seeing and success are you seeing with your non-payroll modules?

Thanks for the question, Harry. This is Chad. We do see it as a one solution as we've discussed earlier. The longer we had a module out the more success we have not only selling it but also implement it and increased. So we continue to drive all products or all modules into the client base.

And good client feedback and from a competitive standpoint otherwise happy clients.

Yes, I mean you have to continuously develop the modules I mean as you put them out initially I mean version seven is always better than version one. We've learned a lot over the years in how we've released the modules. We've taken a lot of knowledge from that in the past and we continue to work on our modules.

And can you guys give a little bit of an update on your plans for new offices that you’ve talked about a little bit of that?

Yes, so our goal is to continue to penetrate both existing cities as well as open new cities with sales teams. As I mentioned in the past, we do take existing sales managers who are proven, we relocate them to a new city or in a current city where we’re going to add a new team as I mentioned earlier like a city like New York and then we backfill them with an up and coming sales executive who is ready to be in management. We've identified several mangers who are ready to relo as well as several backfills to be able to backfill those positions. And as I mentioned in the call earlier we are currently -- we have deployed our office sales team setup group. We are in the process of negotiating leases and getting those prepared to be able to launch sales teams.

Got it. And the five new sales teams that you guys added this quarter, were those existing city expansions or new cities?

We did not add five sales teams this quarter. Those are the five sales teams added earlier in this year first quarter of this year. They are doing well and we did have at least one of the examples I mentioned of one of our current sales did come from one of those new sales teams but they’re trending nicely.

Got it great. Thanks.

All right. Thank you.

The next question comes from Richard Davis at Canaccord.

Hey, thanks very much. Two kind of pretty straight forward questions, one, when we kind of talk with companies or customers that use your product, ease of use always kind of comes out as a key factor, and then I know it’s about the back end database but is there anything on the front end that you’re doing to make it easier to use because it’s always easy to use is always kind of a new thing, so just more on the software development side of the house. And then you talked about kind of adding people. The second question would be, are you – because when I thought a lot of companies may -- and it’s hard to find people, you guys are doing a good job on that – could you just kind of triangulate around finding the people I mean obviously you’re doing a good job people. I mean obviously, you're doing a good job here, but help me out on that. Thanks.

Sure. Okay. So on the first question, it's really I think understanding not only why prospects by but also how they are going to use the system. I think ease of use is all about innovation; it’s being able to sit down and watch people actually use the system; we’re users of our own system. We do actually invite clients in; we watch them use the system. And we were active in soliciting, as well as documenting client feedback to make ease of use a key. The easier your system is to use the more they are going to use it and the stronger -- the stronger overall solution we have provided. As far as good people, a lot of what Paycom and lot of what we have done in the past is hire good people and give them the proper training and support they need to grow. And so from that, we are able to find good educate people that want to come in and be a part of our organization. And so, really for us it's finding good people that care, who are educated and wish to be a part of this team. And then, from there we give them the tools to the proper training and support as well as management needed to growth their career.

Excellent. Great. Thank you so much.

Thank you.

Our next question comes from Brendan Barnicle at Pacific Crest Securities.

Thanks so much. Chad, I’m interested in your commentary on the ACA Solutions. And I’m curious as to what people are doing now otherwise and what your competitors are even trying to offer in place of this, given how much it is changing?

Yes. So -- and I appreciate you stating that that fact that ACA is -- it actually is still changing. I mean, there are still rigs that we are looking for. A part of the ACA goes into effect 2015 with report to do 2016. There is a piece of it that goes into effect in 2016 for 2017 and then even another in 2018, and even the range changes for -- who complies with what pace as far as the payer play component. And so, we have done a couple things. Number one, it’s important to mention that a lot of the information needed comes out of both a time and attendance system, because ACA I really based on hours worked to identify who those are, who are full-time employees so that we know which employers are even eligible. As well as there is a component for making the healthcare affordable. And in that case, you need to know how much an employee's premium is as far as what they are responsible to pay, coupled with how much the employee makes. And so -- and then there is documentation of this, including the notice of the exchange from the beginning, and that's notifying employees that are even eligible for the ACA. And so, with the Paycom System, we were actually able to take three of our models that we have currently. And really if clients have already implemented our time and attendance benefit administration and have our document storage system and on boarding process, they are really able to take that. There is very little they are going to need to do to be able to maintain it, because we are able to grab the information from the same system and provide the reporting. Now for those clients that may not have all of those systems and may be they have not chosen to implement those systems yet, we have developed a system that's actually coming out Thursday, which will allow them to input the information that does not currently exist because they are not using that piece of the system that will grab the pertinent data that we do have at a payroll and allow them to comply with the ACA mandate. Regardless of which path someone chooses, at the end of the day, Paycom will be helping clients with their Form 1095 for employees, which will be due in February 2016 for everything done through -- for the year of 2015, as well as the employer copy 1094. And so, there is a lot of moving parts. There is -- if you don't play, you penalize those payments and thus is collecting money for that, remitting it to the IRIS. We’re still waiting on regs on that even for who that's remitted to and how that's remitted. So anyway, I'll stop there, but there is a lot going on with ACA and we feel like what we're providing is strong.

Great. That was helpful color. And Chad, and maybe this is more of a question for Craig. The ANRR was impressive at 52% year-on-year growth. We only have a limited numbers going back. When was the last time you guys saw that kind of growth level?

I mean that's definitely one of the largest growth year-over-year that we have seen in the past. As we reported last quarter, we were in the 40% range on that. So this was a very impressive quarter for growth.

And you highlighted some of the reasons why it was better in terms of the additional products. But in terms of how we think about it the growth trending, should we be thinking of this more than 50% versus a 40% type growth rate?

No, it can have some variability from quarter-to-quarter based on when deals come on. But the 50% growth rate was a very impressive number for this quarter and we look forward to continuing to bring on new business.

Terrific. Thanks, guys.

Thank you.

Our next question comes from Brad Reback at Stifel.

Hey guys. Thanks a lot. On ACA Solutions, will the gross margin on that product be similar than the rest of your portfolio?

Yes. I mean I would say -- I mean, for sure it will be similar to the rest of our portfolio. I mean, payroll is the hardest thing we do as far as keeping it with all the tax laws and what have you. And payroll has other components involved depending on which date we’re filing taxes with and what they’ll actually accept. We’re going, we’re learning ACA as far as how it’s deposited and penalties may be deposited and how it’s all filed and reconciled but we would expect this to be a high gross margin product as we've developed it to be.

Great and just one follow up related, any reasons to think that you won’t have more sales teams added in ‘15 than you did in ‘14? Thanks.

Well that’s a loaded question there. We are definitely always trying to accelerate our growth in all areas and as opportunities present itself I mean we’re looking to capture them. Right now we’re talking with our existing sales management staff to identify who is ready to relocate and start these new teams and then be able to actually backfill them with the strong bench we have ready to do that. And so as we've identified these people we’ll start opening in these cities but we do believe we’re ready to begin opening several here very soon.

Great, thanks a lot.

All right. Well thanks everybody. I want to thank everybody for participating in today’s call and we look forward to speaking to everyone again next quarter. Thank you.

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