Hey, great. Craig, as, this is going to be your last one.
Yeah.
Sorry, I need to give you the first question. So when you joined Paycom, like, back many, many years ago, did you ever thought it would be this big of a company?
No, I did not. I think when I joined, our revenue was $3 million, something like that.
Wow.
You know, to be at, you know, 1.8, whatever, I mean, it's far surpassed anything I ever dreamed of, so.
Yeah, that's amazing. It's been amazing.
It's been amazing.
I mean, it.
It has been amazing.
Yeah.
It has been amazing.
We're going to miss you, yeah, and Chad, for you, like, the world at the moment, like, there's so much change in there, like, and you know, it feels like when you reported your Q3 results, like, since then, like, a lot of things kind of had, you know, the election, et cetera. How did it play out for you? Like, you know, we read in the newspaper, like, SMB sentiment all-time high, like, it's coming up, et cetera. Like, how does it play out for you? What are you seeing there from your perspective?
Yeah, I mean, we'll see. I don't know that the election result itself will have an impact on us one way or another, so we'll just kind of see. You know, I started this company in 1998, so I've been through several, and, you know, everyone kind of comes with their own, change, whether it's to taxes, labor law, or what have you, but we'll just kind of see, but I think for us, you know, it's incumbent upon us to continue to work our plans, continue to help prospects and clients out there automate toward a full solution, and, you know, that's what we're focused on. We only have 5% of the market.
Yeah.
So, you know, if we're not able, if we're not doing that, that's really about us, not about the rest of the environment.
Like, I mean, because you've been in this business for, or in this market for so long, is there, like, how are fluctuations from, like, sentiment getting better, et cetera, like, in previous cycles? Was there, is it just whoever executes better, or is there? Do you see those kind of changes?
I think system automation's pretty important right now.
Just because of how much work the back office even wants to do these days. I would say that, you know, I started the company 26 years ago, and if you went back to then at someone that's buying our product so they could do more with it, today people are really buying the product so it can do more for them without them having to interact with it as much. And so many of these things can be fully automated from a task perspective. Should be fully automated. And that's really what we're driving toward now.
Yeah. Okay. I mean, it's funny, like, I was on the Oracle call on Monday. It was like I was asking, like, who's doing back office, but it was the same message. Well, actually, people are paying a lot more attention to it again, so.
So, okay. That's interesting. Yeah. And then, if you think the story for you last year was all about Beti. And a lot of investors were asking me, it's like, why is Chad so determined? You know, like, because there's, you know, for you, it also kind of created some things that you needed to consider, like trade-offs, et cetera. Like, can you maybe just frame it for us, like, you know, one more time? Like, why, why do you think Beti is so important for your industry?
Yeah. So, well, I mean, Beti just is the right way to do it. I mean, it impacts the employee in a big way.
Yeah.
It impacts the business in a big, a big way, you know? With Beti, an employee knows exactly what their check's going to be. They can make changes before payrolls actually run. You know, many businesses actually have a makeup payroll within, the way they process payroll to correct mistakes. And so, you know, Beti actually allows employees to correct mistakes before they become actual issues for the employee. And so it's the right way to do something.
It creates a lot of automation on the side of the client, makes it easier for the client. But I've also said that, you know, Paycom is one solution. Beti's a product within that solution.
We also have many other products that our clients utilize to automate, such as GONE, which now automates all paid time off requests. I actually rolled it out here last year.
Yeah.
At that time, we had noticed that 50% of all paid time off requests, so someone's requesting vacation or what have you, it's approved after they've already been paid. 50%'s approved after they've been paid. Nonproductive time represents about 10% of an organization, of an organization's labor cost, and it's being unmanaged. You know, GONE fully automates that. As we look into the future, that's what we're moving towards: full solution automation. I mean, it'd be my goal that the system would just work for you without you even having to log into it. If we set it up. You know, that's where we're going, and that's important. I think that's going to have a positive impact on the industry as well as the clients who utilize it.
You know, if you talk to your clients or while you're speccing it out and getting feedback from the clients, like, in theory, it seems like a no-brainer. Like, so how's adoption, like, then, from that perspective?
It's going very well. I mean, when you look at new clients onboarded, they've all had Beti. They're doing very well. You know, I mean, we've had clients. I mean, when you're in business 26 years, you've got clients in varying degrees of usage.
Of your system and our priority isn't necessarily their priority.
Yeah.
And so I do think that there's ways that you have to interact with them to get them to see the value as well as support them until they're ready.
It's like, how, if you think about it, if you're an existing client, like, how much of it is step-up worth it or, or change worth it to go to Beti? Like.
It's really the change management they have to do within their organization. That's often, Beti's not really a difficult lift from a product perspective.
Yeah.
It's more that you feed the data. Throughout the history of time, data and payroll's fed after the pay period ends. With Beti, you start your payroll transaction at the pay period beginning, and by the time the pay period ends, it's done. So it's a shift for businesses to have to, the way they feed data into the system.
Yeah.
But once they shift to that, it saves them days of processing. So, you know, again, there's got to be enough incentive or value that a client sees to be able to make that shift. We've been very successful in getting clients to make that shift. And again, we're supporting those clients that haven't yet.
And then, so from your perspective, like, if you think the last year and a little bit before we sold get them over, now you're like, you have some struggles left, but is that, I mean, you will continue to kind of help them on their journey, but like, that's kind of no longer the focus where you're kind of pretty much done.
It's very important for us to help every client, no matter how they're utilizing our system, to get to the full client value achievement.
Yeah.
Meaning that they're actually achieving the ROI that was in our promise to them when we actually went out and onboarded them in the beginning.
Yeah.
And so I wouldn't say I've given up on that, but I would say that the process that we go through to help clients see that and actually get them into that area, you know, has changed a little bit for us over time, and it's become more powerful, I guess, if you will.
Yeah, and then, like, I mean, I remember, so last year you had, like, your customer success team kind of helped a little bit do more. Is that still something you do, or like, did you ref, are you going to refocus them again?
Our CRRs are very valuable to us. They're a very highly skilled group. That is the group that was going back out, continues to go back out to help clients utilize Beti. Again, current clients, new clients that come on.
Yeah.
They're going through a different process. But current clients, that group's done that. That group's been, you know, have had some acceleration maybe as you kind of look at the back half of this year versus the first half. But, you know, we're doing the right things for the right reasons right now.
I mean, we've been in business for 26 years. It does matter to us what the future looks like and how people are going to be utilizing software. That's what we're focused on.
Do you see the, in theory, what you should have if Beti kind of works, and you see you have a lot of clients on it now, you should see, like, happier employees and happier kind of customers because there's, you know, less reruns, and people get paid more correctly. Do you see that in your kind of renewal rate with clients? Like, is that something that, or do you expect it to see in renewal rate with clients?
Yeah. Clients that are using our product correctly, even if one of our competitors go in there and lowball them or something like that.
Yeah.
And, you know, if a client does leave, we get them back in a pretty short order because Beti's impacting their employees. And the full solution impacts employees, you know?
Yeah.
You want to make it easy for employees to get paid, easy for them to enroll in benefits, easy for them to do their expenses, easy for their time off, and so, you know, when you're looking at the entire package that we deliver at Paycom, it is impacting both the back office, HR, payroll, accounting, as well as recruiting, what have you, on the back office, as well as those employees that utilize it.
Yeah. Okay. I want to shift gears a little bit and, like, talk a little bit more about the industry. If you think about it, like, how do you think about industry growth that you're selling in? And, and the reason why I'm asking is, like, if you look at the growth rates for pretty much everyone kind of came down, and, and everyone is kind of struggling now with that cycle. Is that kind of getting more competitive? How do you, how do you think about, like, the industry in itself and then, like, the, the last couple of years?
Yeah. I would separate us out a little bit.
Yeah.
I do believe that, you know, there are things that we've faced that are unique to us that had to do more with our, innovation and excitement about innovation, and I think there's some things that we worked through on that, you know, as we, look to the rest of the industry. I think you've seen maybe a little bit of a slowdown in growth. It's still the same players that you've really always had.
Yeah.
Interest rate makes an impact on that as well, you know, as it continues to, or has continued to, moderate and now reverse a little bit.
Yeah. Yeah.
You know, and even for us, I mean, as we look into next year, which we would expect to provide more disclosures around interest rates and even break that out, you know, we wouldn't expect to have a growth rate, ex-interest, next year dissimilar to this year. And I do think there'll be a point of inflection at some point, as we're moving through our, you know, our both our client base as well as our sales organizations continuing to do very well in sales.
Did I? Is that Craig's last project? Like, did you bring it up?
But yeah, as part of the segment reporting, I mean, we'll have more disclosures probably around the amount of,
Yeah.
float revenue we have earned.
Yeah.
Exactly.
Okay. No, that's interesting. And then, so from your perspective, like, it doesn't feel like the market is slowing down or like, you know, like, or the opportunity set has kind of changed compared to where you were a few years ago?
I do not know of any meaningful players that we compete against that are any different than what we competed against in 1998. They're all the same players for us, and so, and I do think you've got a bigger market, and so, again, we've only got 5% of it. I believe, when someone utilizes our system fully, that it's very difficult from any competitor, even integrating with multiple other businesses, to be able to exact the same result that we do for a business, and we're accelerating. I mean, we're in a innovation at Paycom for our industry and the clients. When you look into the future, businesses will use these products differently. You'll navigate it differently.
I mean, it'll be command-driven. You won't go in and navigate it and go to this form and that form. And so those are the things that we're focused on. Those are the things that we're delivering to the industry. And it's been able to do complex things very easily.
Yeah.
That's kind of how we were created.
Yeah.
That's how we continue today.
I mean, like, we, you know, you understand where we are coming from because everyone's trying to look at the numbers and stuff.
Like, maybe one different way to think about it or, like, to answer is, like, if you think about your sales guys that are out there selling, like, how is that, you know, like, you talked in the past a little bit about, like, okay, making President's Club or, like, you know, or, who, you know, what's the ACV that, or, like, what's the revenue guy is selling? Like, what are you seeing in terms of that evolution of your sales guys being able to sell?
Sales is having a very good year this year.
And our, we're very happy with that group. We're selling more units. Our revenue, our sales revenue that they're selling is also increasing, so new business revenue.
Yeah.
We've been very happy with that group. I've always felt like we've had the best sales organization. We've refocused on certain training initiatives that we have. You know, it's been going very well.
So then if you think about it, so new sales is good, like, and it does feel like client retention is getting better now that we've kind of through this stuff. So from that perspective, it doesn't look like there's better times ahead.
Yeah. Well, I definitely feel like there's better times ahead, and I wouldn't say, you know, what we've had in the past was bad. It was just unique to us.
Yeah.
We did have a shift, and the shift was important. You know, it's important for clients to get the full value achievement of what they do. We have not updated on retention, but all the moves that we are making is to create a more satisfied client that is achieving the full value of the software that we've sold them.
Yeah.
You know, and you still do have some Beti cannibalization, if you will, that's out there where we're not having as many rerun payrolls or tax problems or what have you. We're able to. I like to call it bad revenue. I mean, it's revenue, but, you know, the only way we get to it, someone had to mess something up.
Yeah.
So if you focus on prevention, that's going to have a little bit of an impact. And then, you know, next year and kind of as we've already experienced with the lower interest rates, that creates a little bit of a headwind.
And then, with all the Beti news, we kind of forgot a little bit to talk a bit about your kind of move upmarket international. Can you update us on that one? Like, what's the journey there?
Yeah. I mean, we're continuing to go upmarket. You know, we're having success there. I will tell you that, with our new sales staff that we've been bringing in and with our new training, we have focused them until they can get seven or eight sales in the mid-market. We're now not allowing them to go upmarket, which is producing more mid-market units for us than what we had in the prior year.
Yeah.
From the mid-market.
Can you remind us, like, how do you define those? What is a mid-market versus upmarket for you?
I mean, I would say in the 50-500 market, it's going to be more our mid-market.
Yeah. Yeah. Yeah.
Around that.
Yeah.
It's going to be more upmarket.
And then, do you see a change in the industry a little bit on the upmarket side? Because I remember, and we're going back, I'm aging myself here as well, like, we're going back to, like, when you IPOed. And I remember we talked with clients back at the time, and they were, when you talked with, like, a 10,000, you know, employee customer, they were like, "No, no, no. Paycom is, like, service. I want to do it myself. I want to own the software and do all the little hundred tweaks." But I think the world has changed a little bit. Like, what do you see on that upmarket side of people appreciating the, the full value that you're providing there?
Yeah. I mean, well, it makes it harder to sell sometimes.
Yeah.
But easier for them to see the value. But sometimes, you know, when you're replacing 18 products upmarket, I mean, it's a big meal to eat.
At once and so, you know, but we've also made a lot of enhancements and innovations to our software that make it even easier for people as well as, you know, the back office upmarket. They have a low tolerance for complexity. I think everybody has a low tolerance for complexity in regards to software these days because software has gotten easier and I just can't say when I look and look at the upmarket software that people are using and integrating and then rolling out to their employees. It's still pretty complex. I definitely think there's opportunity for us to continue to capture share as we go upmarket as well as continuing to be focused in the mid-market as well.
And then, how do you make sure that you don't end up with elephant hunting, you know, because that happens often, like, "Oh, I go after this kind of 20,000 seater and I'm not selling in the meantime." You know, good luck.
Well, I mean, part of what we did is for new reps now, once they come out of training, we've eliminated their ability to go do that because that's exactly what someone did. But I don't think you can eliminate it all the way. I mean, you know, we do have weekly quotas. That helps. You know, I mean, you go elephant hunting, you know, you might be on a deal for six months. So, I do think that helps. But, you're going to have that in any good sales organization with reps that have had success upmarket. They tend to continue to like to stay there.
Yeah. And then, more on the national side now, like, how's your thinking about new offices? Remember a few years ago, we were like, everyone was super obsessed about, like, "Oh, how many offices are we going to open?" I think we kind of all learned that's kind of like a silly question. But, like, if the world is getting better, does that mean your willingness to kind of do more on the office side is kind of increasing? Or how do you think about that? How should you think about that?
Yeah. And so our office openings and how we increase our sales reps is by taking a current sales manager that's successful. We relocate them to a new territory where they have zero reps, and then they build it from there. And then we backfill the office that they left with the sales rep who's ready to be a manager. And whether or not we open up offices or not is really just dependent upon the strength of that process. How many managers do we have ready to relocate? How many sales reps do we have ready to become manager? I will say that right now, at this point in our business, we're more prepared to open up offices than what we were two years ago just because of that big strength. And so, you know, we'll see.
We've only opened up one office ever in the fourth quarter, so it's not typically.
The top four.
It's not usually what we would do. But, you know, as we move into next year, we're going to have opportunities there.
Is part of this, like, I heard it from other guys that attrition was actually lower, like, because like in bad times, like, people wanted to stay with the company that were successful, so they didn't move around. Does that help you to increase, like, you know, the guys that are ready, you have more of them available now because there was less attrition? Or is that me dreaming a dream?
I mean, our sales attrition's based off of performance.
Yeah.
And so, you know, if you're performing, you're staying. And if you're not, you know, you might not be. Maybe that's having some impact, but I would say it's more, you know, increased performance around sales reps and success builds confidence, which has been continuing to do the job.
Yeah. Okay. That's it, and do you still remember, like, a few years ago, we talked about, like, the number ZIP codes you kind of still can cover? Have you reforged that opportunity set or are we still kind of in the same boat?
Same. Yeah. We haven't changed anything. We did change things up in our sales training for our new people coming in because again, the type of focus that we were focused on. But nothing in regards to territory or.
Yeah.
How we go to market, or steps of the sale, or any of that.
We talked upmarket, like, what's the story on the international side?
We're doing well internationally. We do have four countries that we developed native. And so we're actually running the payroll ourselves. We do have a very strong.
Can you, Canada? U.K.?
Yeah. Canada, Mexico, U.K., and Ireland.
Oh, in Ireland. Okay. Yeah. Yeah.
Mm-hmm, which Ireland kind of gets into the rest of Europe, but then we also have our Global HCM product, and that's a product that, regardless of what country you're in, you can actually utilize that product. I believe it's in 16 different languages right now.
Yeah.
That's Global HCM separate from payroll. So sometimes people will run something in our Global HCM, and then they will send it to an in-country partner, if you will.
Yeah. Yeah.
That utilize but in four of the countries, we actually run the payroll ourselves.
Yeah. Okay. And is that more, if you think about it, do you think that's more helping as you sign bigger U.S. companies that have because they will have more international? So that's the starting point, or do you think more about getting, like, an international customer? Like, how do you think about the go-to-market motion there? Or the.
Excuse me. It's definitely for U.S.-based right now for U.S.-based companies that have locations elsewhere.
Yeah.
That's not to say, I mean, we have demand in Canada. I mean, we have people calling us wanting to. It's not to say that we wouldn't have an office in Canada at some point that just sells Canadian payroll. But for now, it's really for U.S. businesses that have locations elsewhere. And, you know, you're going to have businesses that have, large companies usually are going to have an international presence. But I also think you see that in the mid-market as well. And it's just important to be able to check those boxes.
And then, how do you think about? I mean, you have solutions for four countries. How do you do the sales there? Do you have, like, a sales team in the country or? And then, do you remember you've been very disciplined in terms of, like, how much of a ZIP code a sales territory is allowed to kind of sell into? Like, how do you do it internationally then? Now, do you? Can you do the whole country or do you start, like, small? Like, how do you do that?
Our contact is usually in the U.S. in these, or at least our point of sales contacts in the U.S.
Yeah.
They may have a partner in one of these other companies that we talk with, but we do not have sales reps in these other countries.
Yeah. Is that, would that be, that's further down the line if even?
Yeah. I mean, that opportunity exists. I mean, you know, we have 5% of the U.S. TAM right now.
Yeah, so you have, like, a little.
yeah.
Yeah. Okay. Perfect. Yeah. Makes sense. And then, if you think about, and I kind of have no answer. I'm going to ask it anyway. If you look about the your industry, there was always a tendency to kind of think like, "Okay, well, I want to do something else." So I do buy a company in an adjacent area. So Paylocity just did that, on a kind of adjacency or ADP just would do stuff. With greater size for you guys, is that does that come up with you or, like, you know, we've been doing it for 26 years now. I'm an organic guy. Like, how do you think about that?
You know, I think those are things that are oftentimes presented, to me. Craig knows that.
Yeah.
He oftentimes presents them.
You're giving up. Yeah.
You know, I think it's, up to now, we've wanted to impact the client experience through a single database. I think that, I'm not saying never because I just wouldn't say that. But I think it would, for us, it would be, have to really be a unique opportunity. I don't think we would do it in like our competitors where you're buying and deploying those products. For us, we're heavy into the software development and a single database and point of usage. And we're moving to full system automation. I mean, if we're integrating with eight other products, I do not know how you get to full solution automation. So that's what we're focused on. So kind of leave it at that.
Yeah. And then I almost feel kind of, it almost feels weird that I've been waiting for so long, but Gen AI, or AI. Like, if you think about it, like in your space, how do you think about that in for what you guys want to do?
We're using it.
I mean, we're using it both internally. We use it when we develop software, and a lot of our software has different components of it. When you think of a assembly line or what have you, you would expect AI to be a part of, and you take a full product goes through an assembly, and there's a parts of assembly within a product. You're going to have parts of that that are AI. Our industry doesn't really have a tolerance, if you will, for AI confusion.
Yeah.
It's got to be 100% accurate. And so there's some areas that it's harder for us to use it in, than others. But even internally right now, about 25% of all of our service, is being handled through AI. That wasn't the case a year ago.
Yeah. Yeah.
There's areas of our business that we're automating. You know, we're having interest rates go down. That does impact our margin. But we're also having automations in the back office. And that same type of automation we're bringing to the back office of our clients. And so.
Yeah.
That's kind of the world we're in right now. You know, do you want to make 20 decisions today and tell us how to configure this and we can automate everything in one specific product? Or do you want to make 2,000 decisions every single day because you did not automate, and so we have the opportunities now that we didn't have before.
Yeah. And then, like, let's—how do you think about pricing and packaging there? And, like, you've always been more conservative because, you know, it's part of, like, what I'm offering, so I should give it to you. You know, there's obviously other vendors not in your space that are very like, "Oh yeah, here's AI. Just pay for it and it's not, you know, it works later." How do you think about, like, the kind of monetization of this? Or, like, how does it feed into your offering?
Greater automation produces more ROI.
For sure.
Probably relieves certain headcount.
Yeah.
Within organizations, definitely, eliminates certain exposure and liabilities to what comes with doing something wrong. I mean, most of the things we do in our industry, there's a big penalty if you get the tax wrong or you're paying someone wrong. Or they were supposed to enroll in benefits today, but they did not. Now they have a health concern and they don't have coverage. And so, there's a lot that we do. And it has to really be perfect. I've kind of said in our industry, 99.9% accuracy gets you an F. You know, it's either correct or it's wrong. You know, and we're also in a business that's high risk and low reward. I mean, if you do it right, so what? People expect it to get paid. They expect it to have the right overtime. They expect it to get their benefit.
And so, it's very important that anything we deploy gets to that 100%. And then so because of that, you have to be a little careful about what you do. But I believe AI and how we utilize it's really two things. It comes down to your source of truth and what you ask it to do. If you do not have the right source of truth or if you ask it to do the wrong thing, you've got nothing.
Yeah.
If you get both of those two correctly, though, there's a lot you can do with it. So it is a thing. It is already impacting our industry and definitely will impact it into the future even more.
and then the last question I wanted to have is, like, Craig retiring now, but you had also other changes on the team, and how do you, how should we think about it? Because I have a lot of investors saying, like, "What's going on here?" Like, to me, they're like very independent of each other, but like, you know, if you get that question, like, how do you answer that?
Just from the changes within our organization?
Yeah.
I mean, I've had, we've been in business 26 years. I'm on my third Chief Sales Officer, Jeff York, still with us. I talk to him constantly. I've had two CIOs, Brad's with us, you know.
Yeah.
Our Chief Operating Officer, we've had some changes there. But, you know, Randy's been with us for 23 years doing a good job. And Craig's been our only CFO. So I know there's been some changes this year. But, you know, I believe there's a lot of stabilization. We have very deep benches. And, you know, gas in the tank and institutional knowledge is very important. Craig's, he's just not going to get paid. I'm still going to call him. You know.
Yeah.
But, you know, and that's what a successful career should look like for people.
Yeah.
I mean, you come when a company's $3 million in revenue, you get it to a point that you're at right now, and if you get the opportunity to go do the things for yourself, great. I mean, I think that's a celebration that all the company has.
Yeah.
And, you know, he'll be followed up with someone strong as well.
Yeah. Perfect.
Yeah.
Okay. That's a good closing statement as well.
All right.
Thank you. All the best.
Thank you.
Thank you.