Good afternoon everyone and welcome to the Paycom Third Quarter 2015 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please also note, today’s event is being recorded. At this time, I’d like to turn the conference call over to Mr. Craig Boelte, Chief Financial Officer. Sir, 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 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 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 Annual Report on Form 10-K that was filed with the Securities and Exchange Commission on February 26, 2015, and as maybe supplemented by subsequent Form 10-Q filings. 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 our 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 included in the press release that we issued after the close of the market today, which is available on our website at investors.paycom.com. I will now turn the call over to Chad Richison, Paycom’s President and Chief Executive Officer.

Thanks, Craig, and thank you to everyone joining us on today’s call. As with our prior quarters, I’ll provide some high level comments regarding our performance and perspective on the marketplace and also I share some examples of customer wins we achieved during the third quarter of 2015. Craig will then provide a deeper look at our financials and finally we will open up the line for questions. So let’s get started. As you may have read in our press release earlier today Paycom enjoyed continued momentum in the third quarter of 2015. Our revenue for the third quarter of 2015 was $55.3 million representing growth of 51% compared to the comparable prior year period. Annualized new recurring revenue or ANRR was $31.8 million, representing growth of 113% over the third quarter of 2014. We believe this robust performance was due to the ongoing market embrace of our powerful yet easy to use cloud-based solution as well as our top-notch sales organization that continues to mature and hit its stride. Let me spend a few minutes providing some insight into our view of the market for human capital management software. From our perspective they remain substantial potential for improvement in how companies recruit, manage and serve their employees. As we speak with perspective customers we routinely encounter companies that have substandard solutions in place, and as a result are not fully leveraging their valuable talent asset. Many of deploying multiple systems that have been piece together over years, in these situations we typically find multiple log on requirements for employees. As well as a difficult user interface. This leads to low employee usage of the system which in turn contributes to already unreliable data for HR managers and few if any actionable insights for this C-suite. The other paradigm we…

Thanks, Chad. Before I review our third quarter results and also our outlook for the fourth quarter and fiscal year 2015, 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 or non-GAAP financial measures that exclude stock-based compensation and other non-recurring charges including transaction expenses relating to our initial public offering and our follow-on public offering. A reconciliation of our GAAP to non-GAAP results is included in our press release. Our sales momentum continued in the third quarter with total revenues of $55.3 million, representing year-over-year growth of 51% from the comparable prior-year period. Within total revenues, recurring revenue was $54.2 million for the third quarter of 2015, representing 98% of total revenue for the quarter and growing 51% from the comparable prior-year period. ANRR was $31.8 million for the third quarter of 2015 compared to $14.9 million in the same period last year and representing 113% growth. As a reminder, ANRR is an estimate based on the annualized amount for the first full month of already onboarded new recurring revenue. Total adjusted gross profit for the third quarter was $46.5 million representing an adjusted gross margin of 84.1%. This compares to 82.4% in the third quarter of 2014. Turning to operating expenses. As a reminder, we pay commissions to our sales reps based solely on new sales at the time of the clients first monthly billing cycle. This is a one-time commission that we recoup over the life of the client relationship. When we experienced strong sales performance in a quarter, but this quarter being a timely example there is a potential for us to see increased expenses in that quarter depending on the timing of the client’s onboard process. For the…

Thanks and congratulations with an amazing quarter. Chad, could you talk a little bit about the strength in ANRR, that sort of growth we’re looking for quite a while, and maybe just talk a little bit about, you mentioned already some of the drivers for the strength, have you hidden any true point whereas some things in Q3 was specific to this quarter right now. Thank you.

Yes, so with ANRR, thanks Raimo, with ANRR we had significant growth this quarter. I mean, to remind everybody ANRR is the amount of process to our onboarded revenue any – for the full month of any given quarter. And so, that’s actually onboarded revenue, new business revenue annualized. And so, we had several deals that came in at the top end of our range, I’ve highlighted a few of them on the call. We do have, our officers are starting to mature, and continuing to drive growth in those areas, and I mean, we’ve got a substantial number of sales people that are really hit in record numbers these days. And so, we build out strategic organization to be able to produce these types of results. As far as, how we hidden an inflection report, an inflection point, we made the comment earlier this year, that about ANRR and now we’ve seen it jump. And so, ANNR isn’t something we can necessarily forecast as it is a metric itself that’s established after onboarded revenue.

Okay, and then one more question. On the reference customers that you mentioned but I know that they all sort of size temporarily sizable kind of more in the several thousands, now can you talk a little bit to what – just the in terms of customer base, that’s involved in terms of you moving slightly high up the market and who the competitors are if you kind of – sort of deals coming through? Thank you.

Yes, and so we continue to stay focused on the market we serve, we have been pulled that market on a couple of occasions, more so now than in the past. I did highlight a few of the larger accounts, it is important to note that in any given quarter, we have accounts equal to those sizes, this is just, we’re having more sales people, selling more the upper end of our target, we’re running into more of those clients. Then I also do believe that larger companies maybe overtime, who have experienced, maybe some complications in patching together multiple systems are starting to embrace a single database architecture that has some ease of use. As far as the competitive landscape it is substantially as a same as what we’ve experienced in the past.

Okay, thank you.

Thank you.

Our next question comes from Michael Nemeroff from Credit Suisse. Please go ahead with your question.

Thanks for taking my questions. I’ll echo those congratulations, these results are – the ANRR was kind of staggering, I have to do a double take on that number. Just to building on Raimo’s questions about that growth and the strength in ANRR. Is anything changing with the speed of implementations that is allowing you to get, to get that first month of revenue in from the clients?

No, I would say the speed of our implementation that remains the same. We have put in processes to get better and implementation. So to the extent that there was a little bit of a speed up, it may have a little bit to do with that. But I can’t point to any deal that started later or earlier due to that efficiency.

So another question that were probably going to get asked and I’m sure you were two – should we look at the ANRR growth this quarter as may be a pull forward of some deals that you are expecting to close later or you expecting to implement a little bit later, because it was just – yes, I mean it is more than double, what it was – year-end and last quarter?

No, I mean we’ve really tend to unload the musket every quarter on these deals and so we continue to do that, we don’t have a long drawn out onboarding process as far as someone making a conversion from a competitor to us, that’s something we want to get them set up very quickly and efficiently and – that’s just what we do and so. I wouldn’t say that we pulled forward anything that was due to start later in the year or that anything necessarily pushed, anything out of the ordinary.

You always been have those deals?

Okay, I’m sorry go ahead.

I’m sorry, you always going to have some of those, the push forward or back or whatever. But there wasn’t anything I can point to this, say okay, well – this is the situation this quarter.

So we could see typical seasonality year-over-year and sequentially or year-over-year, let’s say from in Q4.

I’m trying to think through what you’re asking there. Ask that again?

I’m just trying to well – should we continue to think that the Q4 bookings or billings number is should look similar to what we have previously modeled, were not for this aberrantly large Q3 ANNR number?

Well, I – we’re trying to sell as much as we can sell. And we don’t intend on letting up the gas, I mean, it took in our goal as not only a SaaS company in the payroll and HCM space, but also as a sales organization to onboard the most new business revenue onto our platform over any other that are in our industry.

Okay.

And I mean – this quarter, you had some very ADP increased from Q2 to Q3 increased their revenue about, I think it was $20 million, something like that ultimate increased their revenue about $8 million and we’ve increased us almost $6.5 million and so that remains our goal and so I don’t know what’s going to happen next quarter. But what is true is our reps are out there, they’re doing their job and we’re going to be continuing to drive for those results.

Just one for Craig, on the ANRR growth, given how strong it’s been or it’s going to be regardless of what you put up in Q4. The delta on the next year’s revenue is as pretty slight from the ANRR growth, the previous year and in fact this year it’s accelerated. Just want to – given where consensus is which is relatively low compared to what is probably possible for you to do in 2016. Could you give us any indication of where you’d like estimates to shakeout for growth in 2016 without giving specific guidance?

No. As we’re looking to 2016, what we’ve done in the past is given 2016 guidance in the fourth quarter as we’re reporting fourth quarter results. And as Chad, mentioned I mean we set up you know to be a growth organization and I feel good about our sales organization and kind of how they’re set up to do that for the rest of the year.

Okay. Thanks guys. Well done.

Thank you.

Our next question comes from Mark Murphy from JPMorgan. Please go ahead with your question.

Hi, this is actually Albert Chi on for Mark. Congratulations on a great quarter, if you guys, really impressed results. But I just want to dig a little bit deeper into the strength this past quarter. Are you seeing a big tailwind from ACA compliance and if though, are you able to quantify that for us. And secondly, do you think that next quarter there would be – even greater sort of scramble towards year-end or do you think customers are mostly gotten reduction in a row for this quarter. Thanks.

I think customers are continuously interested in the ACA offering, I think it’s going to continue to be a popular topic, definitely through first quarter of next year as companies move from implementing into actually having to submit the forms. And so I see that happening, as far as ACA, I mean ACA is one of the many products that we sell here, it’s not a metric that I want to give out on a continual basis. But what I will say is that of the $159 million in revenue we’ve done so far this year, less than $791,000, – $790,000 was done in ACA. So again, of our total revenue ACA at this point represents a smaller portion and again, I don’t see it being anymore significant in the future than other products that we’ve brought to market underneath the same platform.

Okay, that’s helpful. Thanks.

Our next question comes from John DiFucci from Jefferies. Please go ahead with your question.

Thank you. Hey, Chad and Craig, I sort of have a follow-up to some of the questions here on ANRR, because we are all looking at this, and some companies have done pretty well this quarter, so that’s a great and this is actually sort of at the high end of that range, way at the high end. So when we look at, I’m going to go back to Mike’s question, was asking about seasonality, because this quarter, ANRR was off to, post difficult for the highest growth quarter from last year. So it was most people would look at it, as we did as the most difficult comp you have, relative to last year. Can you put up the number there, I think is, maybe shocking or at least certainly very impressive? I’m curious, is there something in the third quarter, maybe that’s changing in your business, were you seeing more seasonality here, or is it just everything seems to be clicking along and so we all know you have a very disciplined sales process and that build out that appears to be we working here. What are – it does sound like you’re selling some larger deals on average. Maybe if there’s anything you can quantify for us and you gave some examples, which is like just even percentage growth in those ASP or average seat size or number of seats anything like that you can give us to – and we can, it’s obviously the business is working here, and working very well, but anything more you can give us that help us quantify as we move forward?

Well, I mean I can’t tell you that, I mean the number of sales reps we have that are going to reach over $1 million in new business sales has continued to increase, as I think back a couple of years ago, the largest person to sell, the largest amount someone may have sold may have been 750 and now we have so many people that sell over a million, I think, back to two or three years ago in the largest office sold, $3 million, $3.5 million and now we have offices that could do over $8 million in a year. And again, that’s accelerated from $6 million the previous year, and so what’s happening, is that our – the sales reps that we hire, that we bring in here go through our program, go through our training, and then they come out and several of them are extremely successful. Most of them are successful. And so that’s really what it’s happening, we’ve strategically on purpose build the sales organization to be able to deliver results, we have a very good product for them to sell and those two things coupled together has produced the results we have this quarter. I cannot point to anything in third quarter, that’s significantly well, I mean anything at all really that has driven the new business that’s been brought on. I do think the fact that we do have an ACA product that we’re talking about it, that were onboarding companies as we’re out closing new business. I do think that’s a conversation starter, but most of the business – again most of the businesses that we have brought on again July through September. But those conversations were being had before July and so it’s something we had in our bag for a while.

Thanks and it’s like – would it be safe for us to be thinking a little bit differently perhaps. So I think we used to think okay, you sign on, you open these new offices, you want it sort of a wash not much production, year two you get some production, after year three – and year three you start to think of in that mature offices but you just went through some numbers $8 million, $6 million, up from $6 million from some offices. That term mature office sound like it sort of a misnomer, we shouldn’t really be thinking in that way, we should – that have sort of implies relative stagnation at a high level, but it sounds like that’s interesting more out of those – those people as they continue to improve and as you expand your offering. Is that?

You’re correct, you’re correct. You should not be setting a limit on what a mature office can sell in any given year.

Okay, okay great. Thanks a lot and congrats guys.

Thank you.

Thank you.

And our next question comes from Brendan Barnicle from Pacific Crest Securities. Please go ahead with your question.

Thanks for taking my question. This is [indiscernible] for Brendan. To follow-up on your comments on ACA’s year-to-date impact on revenue. Can you maybe give more color on the impact of ACA and ANNR or wins in the quarter?

Well, it’s hard to say exactly how much ACA would have impacted any given win, I mean I’m sure we did get business because someone looked at our ACA offering or maybe someone else wasn’t able to convert it to theirs. But again most of the business that we’re having converted in July, many of those discussions were already taken place earlier in the year, I think we came out with our full service ACA offering earlier this summer, maybe. So it’s just really hard to point to that, again ACA is a part of our overall system, there’s definitely no one that came onto our software just to use ACA. And so, it’s the total value proposition that we deliver, that does include ACA and whether or not those same companies would have come on without using our time and attendance or talent management or HR software pieces would have also been a question. And so, it’s really hard to quantify exactly why customer chooses to use us, if you want to point out any one very specific piece of software functionality. But, I definitely think it’s a door opener and it’s a conversation starter. But again, most of our competitors have an offering, I mean, it would be very rare, this late in a year, to be talking into a competitive situation where we are competing against someone that also doesn’t have some type of offering for ACA as we sit here in third and fourth quarter of 2015.

Okay, thank you.

You bet.

Our next question comes from Brad Reback from Stifel. Please go ahead with your question.

Great, thanks so much. So Chad, did you think about the strength of the business right now, does it change how you think about new office – the rate of new office openings in 2016?

No, I think we have a strategy for the offices we open and we have a certain focus on how and when we open up an office, it’s really has to do with a personnel development, it is true that the more offices we have, the more opportunities for relo, we have for current managers, as well as the more backfill strength we have as well. We’re focused on both continuing to grow our footprint as well as expanding our footprint in current geographies and I don’t see that that changing into 2016.

Great, thanks very much.

All right, thank you.

Our next question comes from Corey Greendale from First Analysis. Please go ahead with your question.

Hey, good afternoon and congratulations on a very nice quarter. Couple of quick things, are stalling up on the ACA point, and some other is that – we’ve heard some other is that they expect it to be higher cost associated with getting clients ready for ACA, do you expect any of that in Q4, going into the new year?

Yes, I mean, there is definitely a push to move data into the system, I think to the extent there is higher a cost on REN [ph] it’s really the education act of the sale, and working with the client to make sure that that data is in, and it’s being measured correctly. I don’t know that we can point necessarily to say, it’s going to impact our numbers significantly as far as cost – is associated with cost, Craig, I’ll let you expand on that. But I mean I can’t put if anything…

Not like that…

Yes, there is no third-party software that we’re buying or anything outside of it. So really the cost would be labor related to the people we have right now, maybe providing some additional service to clients that are doing this for the first time and then to some extent clients are just finding their data and they are having the full data from multiple systems, maybe some they’ve tracked, maybe some they haven’t tracked to the extent they should have. And convert that into the system and so I would say there is going to be some cost associated with that. But no more cost and what would be associated with looking at someone’s talent management system or the software system or time and labor management or talent acquisition. And there is a cost that we incur to servicing clients, we do definitely report that. And so I don’t see this being an additional cost item necessarily. No more stuff in anything else, the revenue – any revenue that’s achieved through that product once it’s really starts building, I think will make out for that.

Okay, that’s helpful and I appreciate you’re showing that $790,000 number. Is that based on what your pricing is that a meaningful number to extrapolate far more because that number be meaningfully higher in next year just based on kind of the forms and other things being initiated?

Yes. I mean, I gave that number to show kind of where we’re at in the process. I don’t see ACA and that’s one thing that I don’t – I don’t want to get into ACA, I mean I think we talked – we talking a lot about ACA and we have so many other products that also have a lot of traction and have revenue opportunities associated with them as well. Yes. I would say as we move into next year, as we continue to onboard more clients especially as they’re becomes a Q1 forms filing side to this. You’re going to see ACA revenue increased, I just want to increase at a rate larger than some of our other items, I mean I don’t know. But you definitely will see it go up from 791.

Okay. And – sorry, go ahead.

Well I just say it again 791 is an annualized, is a year-to-date number.

Yes. I understand, and just one quick one on the Q4 guidance. If you look at where the ANRR number was in Q3 and kind of really impressive. I realized the math have been quite worth – if you take one quarter of that and added to where your revenue was this quarter, looks like the revenue guidance for Q4 is pretty conservative, like I put it under methodology that exactly sound. But directionally, can you just comment on that?

Some of the ANRR would have been, would have already rolled into the Q3 numbers as well, so as Chad mentioned those are clients that are already billing in on the system. The Q4 guidance from that end, we feel good about that, the one thing to mention is, the Q4 is a tough comp from last year. So, we got at the Q4 and the calendar as well.

Great, I’ll turn it over. Thank you.

Thanks.

Our next question comes from David Hynes from Canaccord. Please go ahead with your question.

Hey, thanks. Chad, at the timing of your IPO, I think we talked about, the approximate bookings and mix like 5% was coming from 2000 plus employee organizations. Is there any way you can update that metric, give us a sense of how that’s growing?

You know, I don’t have that information on me. And it would be, I mean, it’s not something I could comment right now, without having those numbers. I mean, I do think that we are selling more at the top end of our range, I mean, if you draw on the line at 2,000 how many did we sell at 1,900 to 1,700 and how many if we sold from 2,100 to 4,000. I know we’ve sold more, but we’ve also sold more in both of those ranges. And so, it would be hard for me to really at this point, you know draw any percentage for now.

Yes, okay. And then help us think about kind of that the cadence of new office openings, the past two years, they’ve been – since live in Q1, they’ve been pretty consolidated, I mean, do you think 2016 kind of fall at the similar pattern or could they be shrinkable throughout the year, how are you thinking about growth on that front?

With that we are very focused on development of the personnel that actually relos, again to remind everybody the way we open up a new territory which you might be a new geography or it could be more geography in a current territory. As we take a current manager, that’s established with us, we relocate them to a new geography. And then we backfill them with up and coming sales manager, currently a sales rep and wants to lead. And so, again, the more offices opportunity – and more offices that we have and more managers we have, the more people we have that we are able to relocate. And really that – what we make our decision on, we make our decision based on where we at as a company, who do we have that’s ready to go, who do we have that’s ready to backfill, because the fact is, I mean with a number of city and geography we’re in right now, there is just a lot more opportunity out there than what we have people ready to relo at this time. And so we will continue to update that, again we do announce those openings after they’ve happened, and I wouldn’t draw any line in the sand on exactly when we would have another office opening whether that’s early late in the middle or consistently throughout next year. Those are decisions that will be making as we continue on in subsequent quarters.

Okay, understood. Thanks for the color.

Ladies and gentlemen, at this time we reached the end of our question-and-answer session. I would like to turn the conference call back over to Chad Richison for any closing remarks.

All right, thanks again to everyone joining us for the call. As a quick note, we will be presenting at the Credit Suisse Annual Technology Conference in Scottsdale on December 1, and at the Barclays Global TMT Conference in San Francisco on December 8. I’ll look forward to meeting with some of you at these events and in the coming months. So thank you, all. Bye.

Ladies and gentlemen that does conclude today’s conference call. We do thank you for attending. You may now disconnect your telephone lines.