A month has gone by since the last earnings report for Paycom Software (PAYC) . Shares have added about 5.9% in that time frame, outperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is Paycom due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.How Have Estimates Been Moving Since Then?It turns ou ...

Paycom Software (PAYC) 2025 Conference Summary Company Overview - Paycom is a rapidly growing SaaS provider specializing in payroll and Human Capital Management (HCM) solutions for companies with around 60,000 employees, achieving growth primarily through organic means and maintaining some of the best margins in the industry [1][2] Key Points and Arguments Market Position and Competitors - Paycom currently serves approximately 36,000 clients, significantly smaller than its two largest competitors, which together have 1,700,000 clients [7] - Despite the competitive landscape, Paycom has not observed any negative impacts from political or macroeconomic factors on its demand [8] Product Development and Automation - The company is focusing on automation for both clients and internal processes, which is expected to influence spending patterns positively [10] - Paycom has evolved its product offerings from payroll to a comprehensive system that includes time and labor management, benefits, and learning management, all integrated into a single platform [12] - The future of the industry is anticipated to be command-driven, allowing users to interact with the system through voice commands rather than navigating screens [14][22] Client Satisfaction and Retention - Paycom has seen improvements in client satisfaction scores, attributed to a focus on reducing payroll issues and enhancing the overall user experience [38] - The company aims to increase client retention rates, which had previously dipped, by ensuring clients achieve a greater return on investment (ROI) from their systems [42] Sales Strategy and Growth Potential - Paycom has restructured its sales training to focus on basics and role-playing, which has positively impacted sales productivity [48] - The company has the potential to expand its sales teams significantly, with estimates suggesting over 100 teams could be feasible based on market prospects [56] - Paycom's sales trajectory has stabilized after a period of decline, with aspirations to grow sales further by capturing a larger share of the market [51] Financial Performance and Capital Expenditures - The company has completed significant infrastructure investments, including a new data center, and is focusing on product development, particularly in AI [71] - While free cash flow conversion relative to EBITDA is a focus, specific guidance on future percentages has not been provided [73] Additional Important Insights - Paycom's approach to client engagement has shifted to prioritize client needs over internal priorities, recognizing the importance of client satisfaction in driving retention [36] - The company is actively working to win back former clients by addressing their previous concerns and demonstrating the value of its offerings [45] - Paycom's automation efforts are expected to enhance both client and internal efficiencies, potentially leading to improved margins over time [62][69] This summary encapsulates the key discussions and insights from the Paycom Software conference, highlighting the company's strategic direction, market positioning, and focus on client satisfaction and automation.

Core Insights - Paycom Software (PAYC) shares have increased by 26.3% over the past month, outperforming the Zacks Computer and Technology sector's growth of 22.6% and the S&P 500 index's rise of 15.3% [1] - The recent rally is attributed to broader market optimism, particularly due to progress in U.S.-China trade negotiations and better-than-expected first-quarter 2025 results, with revenues and non-GAAP EPS increasing by 6.1% and 8% respectively [2][3] Performance Drivers - PAYC's strong first-quarter performance is driven by automation, effective sales execution, and operational efficiency, leading to wider margins and sustained growth [3] - The Beti platform has significantly reduced payroll labor requirements by 90% and error correction time by 85%, enhancing client retention and satisfaction [4] - The GONE automation solution has shown up to 800% return on investment, improving onboarding efficiency and client productivity [6] Client Satisfaction and Retention - Paycom has seen a 16-point year-over-year increase in its Net Promoter Score, indicating enhanced customer satisfaction due to successful client-focused initiatives [7] - The return of former customers, such as a 500-employee healthcare firm, highlights the effectiveness of Beti's automation architecture and measurable ROI [5] Financial Outlook - Paycom has raised its 2025 revenue guidance to $2.023-$2.038 billion, suggesting an 8% year-over-year growth at the mid-point, with the Zacks Consensus Estimate at $2.03 billion [9] - The consensus estimate for 2025 earnings is $8.91 per share, reflecting a 2.2% increase over the past 30 days and indicating year-over-year growth of 8.53% [10] Conclusion - Paycom's accelerating growth, product innovation, and expanding margins position the company for long-term potential, with strong client retention and ROI-driven adoption suggesting further growth opportunities [11]

Core Viewpoint - The content emphasizes the importance of conducting personal due diligence and consulting competent advisors before making any financial decisions, particularly in the context of investments and trading activities [1]. Group 1 - The website provides general news, publications, and personal analysis intended for educational and research purposes [1]. - It explicitly states that the information does not constitute any recommendation or advice for investment actions [1]. - Users are advised to perform their own research and consider their financial situation before making decisions [1]. Group 2 - The website includes information about complex financial instruments such as cryptocurrencies and contracts for difference (CFDs), which carry a high risk of losing money [1]. - It encourages users to understand how these instruments work and the associated risks before investing [1].

Company Overview - Paycom is recognized as one of the top revenue growers in the Software as a Service (SaaS) and Human Capital Management (HCM) industry [1] - The company has achieved a compounded annual sales growth rate exceeding 20% over the past five years [1] - Paycom has maintained an EBITDA margin of over 20% during this period [1] Market Performance - Recently, shares of Paycom experienced a significant decline [1]

Financial Performance - Total revenues for Q1 2025 were $530.5 million, a 6.1% increase from $499.9 million in Q1 2024[122] - Recurring and other revenues increased by 7.3% to $500.0 million in Q1 2025, compared to $466.0 million in Q1 2024[122] - Net income for Q1 2025 was $139.4 million, down 43.6% from $247.2 million in Q1 2024[122] - Operating income decreased by 35.2% to $185.1 million in Q1 2025, compared to $285.8 million in Q1 2024[122] - Adjusted EBITDA for the same period increased to $253.2 million from $229.5 million year-over-year[160] - Non-GAAP net income for the three months ended March 31, 2025, was $157.7 million, compared to $146.6 million in 2024[160] - Basic earnings per share decreased to $2.49 from $4.37 year-over-year[161] Expenses - Research and development expenses rose by 23.4% to $62.3 million in Q1 2025, up from $50.5 million in Q1 2024[122] - Total administrative expenses increased by 92.6% to $260.8 million in Q1 2025, compared to $135.4 million in Q1 2024[122] - Operating expenses increased by $2.6 million in Q1 2025, driven by a $1.2 million rise in banking-related fees and a $3.3 million increase in depreciation and amortization expenses[125][132] - Research and development expenses rose by $11.8 million in Q1 2025, with total R&D costs reaching $96.0 million, a 19% increase from $80.4 million in Q1 2024[127][129] - General and administrative expenses surged by $114.1 million in Q1 2025, primarily due to a $117.5 million reversal of stock-based compensation expense[130] Cash Flow - Cash provided by operating activities increased by 23% to $182.5 million in Q1 2025, compared to $148.6 million in Q1 2024[151] - The company reported a significant decline in cash used in investing activities, totaling $(379.9) million in Q1 2025, compared to $42.3 million in Q1 2024, marking a 998% decrease[151] - Financing activities resulted in a cash outflow of $(1,452.3) million in Q1 2025, a 486% increase in cash used compared to $376.1 million in Q1 2024[151] - Cash used in investing activities increased by $342.2 million due to higher purchases of investments from client funds, partially offset by a $10.0 million decrease in property and equipment purchases[153] - Cash used in financing activities rose by $1,826.4 million, primarily due to changes related to client funds obligations[154] Tax and Dividends - The effective income tax rate increased to 26.8% in Q1 2025 from 14.8% in Q1 2024, primarily due to tax benefits related to stock award forfeiture[135] - A quarterly cash dividend of $0.375 per share was declared in May 2025, with total cash dividends paid amounting to $21.0 million in Q1 2025[144] Market Strategy - The company plans to open additional sales offices to expand market presence[115] - The average client size has grown significantly, with a focus on organizations with 50 to 10,000 or more employees[117] - The company expects to increase recurring revenues through the development of new applications and improved existing applications[113] Interest and Investments - Interest on funds held for clients decreased by 10.0% to $30.5 million in Q1 2025, down from $33.9 million in Q1 2024[122] - Interest earned on funds held for clients decreased to $4.7 million in Q1 2025 from $4.3 million in Q1 2024, despite an increase in average daily balances from $2.6 billion to $2.9 billion[124][134] - A hypothetical 100 basis points increase in interest rates would result in an approximately $24.9 million increase in interest earned on client funds over the next 12 months[164] - An immediate increase in interest rates of 100 basis points would lead to a $2.9 million reduction in the market value of available-for-sale securities[165] - The company does not enter into investments for trading or speculative purposes, focusing instead on capital preservation and liquidity needs[162]

Core Viewpoint - Paycom Software, Inc. reported better-than-expected first-quarter 2025 results, leading to a 2.1% increase in shares during extended trading [1] Financial Performance - Non-GAAP earnings were $2.80 per share, exceeding the Zacks Consensus Estimate of $2.60, with an 8% year-over-year increase driven by higher revenues, operating efficiency, and lower share counts [2] - Revenues reached $530.5 million, surpassing the consensus mark of $525.6 million, reflecting a 6.1% year-over-year growth attributed to increased sales momentum, international expansion, and AI integration [2] - Recurring revenues, which constitute 94% of total revenues, improved by 7.3% to $500 million, slightly below the estimate of $500.7 million [3] - Revenues from the Implementation and Other segment decreased to $30.5 million from $33.9 million year-over-year, contributing 6% to total sales, with an estimate of $26 million for the segment [3] Profitability Metrics - Adjusted gross profits increased by 5.8% year-over-year to $445.9 million, while the adjusted gross margin contracted by 30 basis points to 84.6% [4] - Adjusted EBITDA rose by 10.3% year-over-year to $253.2 million, with the adjusted EBITDA margin improving from 45.9% to 47.7% [4] Balance Sheet and Cash Flow - As of March 31, 2025, Paycom had cash and cash equivalents of $520.8 million, up from $402 million in the previous quarter, and no debt [5] - The company generated an operating cash flow of approximately $182.5 million, paid out $21.1 million in dividends, and repurchased $5.2 million of its common stock [5] Guidance Update - Following the strong first-quarter performance, Paycom raised its 2025 revenue guidance to a range of $2.023-$2.038 billion, up from the previous range of $2.015-$2.035 billion, with the Zacks Consensus Estimate at $2.03 billion [7] - The company projects recurring revenues to grow by 9% year-over-year and anticipates generating $110 million from interest on funds held for clients in 2025 [7] - Adjusted EBITDA for 2025 is now expected to be between $843 million and $858 million, compared to the earlier forecast of $820 million to $840 million [8]

Core Insights - Paycom Software (PAYC) reported quarterly earnings of $2.80 per share, exceeding the Zacks Consensus Estimate of $2.60 per share, and showing an increase from $2.59 per share a year ago, resulting in an earnings surprise of 7.69% [1] - The company achieved revenues of $530.5 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 0.92% and up from $499.88 million year-over-year [2] - Paycom has consistently outperformed consensus EPS and revenue estimates over the last four quarters [2] Earnings Outlook - The sustainability of Paycom's stock price movement will largely depend on management's commentary during the earnings call and future earnings expectations [3][4] - The current consensus EPS estimate for the upcoming quarter is $1.79 on revenues of $473.32 million, and for the current fiscal year, it is $8.72 on revenues of $2.03 billion [7] Industry Context - The Internet - Software industry, to which Paycom belongs, is currently ranked in the top 37% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Paycom's stock performance [5][6]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $531 million, a 6% increase year-over-year, with recurring and other revenue reaching $500 million, up 7% year-over-year [12][16] - GAAP net income was $139 million, or $2.48 per diluted share, while non-GAAP net income was $158 million, or $2.80 per diluted share [13] - Adjusted EBITDA for the quarter was $253 million, a 10% increase year-over-year, representing a 48% margin, which is a 180 basis point increase from the prior year [13][14] - Cash and cash equivalents at the end of Q1 2025 were $521 million, with no debt [14] Business Line Data and Key Metrics Changes - The automation solutions, such as "Gone" and "Betty," are driving significant ROI for clients, with "Gone" delivering up to 800% ROI [6][7] - Sales in Q1 2025 saw a meaningful increase in book sales and the number of units sold compared to the same period last year [9][10] - The company successfully onboarded a 2,500-employee restaurant group, showcasing the effectiveness of its integrated software solutions [10] Market Data and Key Metrics Changes - The average daily balance on funds held for clients was approximately $2.9 billion in Q1 2025 [14] - Interest on funds held for clients declined 10% year-over-year to approximately $31 million due to rate cuts in 2024 [12] Company Strategy and Development Direction - The company is focused on full solution automation and enhancing client ROI through product innovations and automation initiatives [6][17] - Paycom aims to expand its international presence, particularly in Europe, following its authorization as a payment institution from the Central Bank of Ireland [45][59] - The company continues to invest in AI and R&D to improve operational efficiencies and client service [14][17] Management's Comments on Operating Environment and Future Outlook - Management noted that there has been no significant impact from macroeconomic pressures such as tariffs, and they continue to monitor the situation [21][73] - The company raised its full-year revenue guidance to between $2.023 billion and $2.038 billion, expecting an 8% year-over-year increase at the midpoint [16] - Management expressed confidence in the company's strong momentum and ability to deliver better results throughout 2025 [11][17] Other Important Information - The company paid approximately $21 million in cash dividends during Q1 2025 and has $1.47 billion remaining under its stock repurchase plan [15] - Paycom was recognized as one of America's best large employers by Forbes and ranked as one of the most trustworthy companies in America by Newsweek [10] Q&A Session Summary Question: Impact of tariffs and volatility on business - Management indicated limited direct exposure to tariffs and is monitoring the situation closely [21][22] Question: Examples of efficiency gains impacting EBITDA - Management highlighted automation in expense management and reduced service tickets as key areas of efficiency gains [23] Question: Status of new offices and their ramp-up - New offices are expected to mature in about 24 months, but the company is better prepared for quicker ramp-up due to prior experience [27] Question: Sales process improvements - Management noted enhancements in sales training and processes leading to increased sales and new client acquisitions [31] Question: Free cash flow dynamics and mid-market opportunity - Management reported strong traction in the mid-market segment and emphasized ongoing improvements in free cash flow [38][40] Question: International expansion and payment institution authorization - The authorization allows for better operations in Europe, with a focus on U.S.-based companies with international operations [45][59] Question: Gross retention trends - Management reported positive indicators for retention, including increased client satisfaction and utilization of products [63] Question: Competitor pricing strategies - Management noted no significant changes in competitor pricing or discounting strategies [69] Question: Demand trends amid macro pressures - Management stated that they have not seen any negative impact from macro pressures in April [73] Question: Changes in hiring plans due to AI efficiencies - Management confirmed that while hiring plans have been adjusted, they remain focused on maintaining a high-touch service model [78]

[First Quarter 2025 Financial Results Overview](index=1&type=section&id=first-quarter-2025-financial-results-overview) [Q1 2025 Headline Performance](index=1&type=section&id=q1-2025-headline-performance) Paycom reported strong Q1 2025 results, with 6% YoY revenue growth, driven by automation and sales, leading to an increased 2025 outlook First Quarter 2025 Key Financial Highlights | Metric | Amount (millions) | % of Total Revenues | | :----------------------- | :----------- | :------------------ | | Total Revenues | $531 | - | | GAAP Net Income | $139 | 26% | | Non-GAAP Net Income | $158 | - | | Adjusted EBITDA | $253 | 48% | - CEO Chad Richison highlighted strong results driven by a differentiated approach to automation, strong sales execution, and operational efficiency gains, leading to an increased outlook for 2025[2](index=2&type=chunk) [Detailed Q1 2025 Financial Highlights](index=1&type=section&id=detailed-q1-2025-financial-highlights) This section details Paycom's Q1 2025 financial performance versus Q1 2024, covering revenue, profitability, balance sheet, and cash flow [Revenue Breakdown](index=1&type=section&id=revenue-breakdown) Q1 2025 Revenue Performance (YoY Comparison) | Metric | Q1 2025 (millions) | Q1 2024 (millions) | YoY Change | | :-------------------------- | :----------------- | :----------------- | :--------- | | Total Revenues | $530.5 | $499.9 | +6.1% | | Recurring and other revenues | $500.0 | $466.0 | +7.3% | - Recurring and other revenues constituted **94.2% of total revenues** in Q1 2025[2](index=2&type=chunk) [Profitability Metrics](index=1&type=section&id=profitability-metrics) Q1 2025 Profitability Metrics (YoY Comparison) | Metric | Q1 2025 (millions) | Q1 2024 (millions) | YoY Change | | :-------------------------- | :----------------- | :----------------- | :--------- | | GAAP Net Income | $139.4 | $247.2 | -43.6% | | GAAP Diluted EPS | $2.48 | $4.37 | -43.2% | | Non-GAAP Net Income | $157.7 | $146.6 | +7.6% | | Non-GAAP Diluted EPS | $2.80 | $2.59 | +8.1% | | Adjusted EBITDA | $253.2 | $229.5 | +10.3% | - GAAP net income in Q1 2024 included a **$117.5 million benefit** related to the forfeiture of the 2020 CEO performance award, impacting the year-over-year comparison[5](index=5&type=chunk) [Balance Sheet and Cash Flow Summary](index=1&type=section&id=balance-sheet-and-cash-flow-summary) Key Balance Sheet and Capital Allocation (as of March 31, 2025) | Metric | Amount (millions) | | :------------------------ | :---------------- | | Cash and Cash Equivalents | $520.8 | | Total Debt | $0 | | Dividends Paid (Q1 2025) | $21.1 | | Shares Repurchased (Q1 2025) | 24,987 shares for $5.2 | [Financial Outlook for Full Year 2025](index=1&type=section&id=financial-outlook-for-full-year-2025) [FY 2025 Guidance](index=1&type=section&id=fy-2025-guidance) Paycom provides its FY 2025 financial guidance, projecting growth in total and recurring revenue, client fund interest, and Adjusted EBITDA Full Year 2025 Financial Guidance | Metric | Range | | :-------------------------------- | :------------------------------------ | | Total Revenue | **$2.023 billion to $2.038 billion** (approx. 8% YoY growth at midpoint) | | Recurring and other revenue growth | Approx. **9% YoY** | | Interest on funds held for clients | Approx. **$110 million** | | Adjusted EBITDA | **$843.0 million to $858.0 million** (approx. 42% margin at midpoint) | - The company has not reconciled forward-looking adjusted EBITDA ranges to net income due to the inherent uncertainty and variability of certain GAAP-based items[8](index=8&type=chunk) [Company Information and Financial Disclosures](index=2&type=section&id=company-information-and-financial-disclosures) [About Paycom](index=3&type=section&id=about-paycom) Paycom is a leading cloud-based HCM software provider, simplifying HR and payroll with employee-first automation and a single database - Paycom provides comprehensive, cloud-based human capital management software, simplifying HR and payroll for businesses and employees[12](index=12&type=chunk) - The company's employee-first technology leverages full-solution automation and a single database to streamline processes and empower employees with direct access to their HR information[12](index=12&type=chunk) - Paycom serves businesses of all sizes in the U.S. and internationally[12](index=12&type=chunk) [Use of Non-GAAP Financial Information](index=2&type=section&id=use-of-non-gaap-financial-information) This section defines Paycom's non-GAAP financial measures, explaining their role in transparency for management and investors, and outlining their limitations - Non-GAAP financial measures (e.g., adjusted EBITDA, non-GAAP net income, free cash flow) are used to supplement GAAP information, assess core business performance, and facilitate comparisons[9](index=9&type=chunk) - Management uses these measures for financial and operational decision-making, believing they offer a more complete understanding of business factors and trends[9](index=9&type=chunk) - Non-GAAP measures are not substitutes for GAAP results and may not be comparable to similarly titled measures of other companies[10](index=10&type=chunk) [Financial Presentation Changes](index=3&type=section&id=financial-presentation-changes) Paycom implemented financial presentation changes, disaggregating interest on client funds from recurring revenue and adopting dollar amounts in millions - For the year ended December 31, 2024, revenue presentation changed to disaggregate interest on funds held for clients and combine recurring and other revenues[13](index=13&type=chunk) - In the fourth quarter of 2024, the company adopted the presentation of dollar amounts in millions, except for per share amounts[14](index=14&type=chunk) [Forward-Looking Statements](index=3&type=section&id=forward-looking-statements) This disclosure highlights forward-looking statements, based on current information and subject to business and economic risks that could cause actual results to differ materially - Forward-looking statements refer to estimated or anticipated results, non-historical facts, or future events, including business strategy, operating results, and growth plans[15](index=15&type=chunk) - These statements are based on currently available information and are subject to business and economic risks, with actual results potentially differing materially[15](index=15&type=chunk) - The company does not undertake any obligation to update or revise forward-looking statements, except as required by law[15](index=15&type=chunk) [Conference Call Information](index=2&type=section&id=conference-call-information) Details are provided for accessing the conference call to discuss Paycom's financial results, including dial-in numbers and webcast availability - A conference call to discuss financial results was scheduled for May 7, 2025, at 5:00 p.m. Eastern time[11](index=11&type=chunk) - Access details include domestic and international dial-in numbers and an access code (423347)[11](index=11&type=chunk) - A live webcast and replay are available on the Investor Relations page of Paycom's website[11](index=11&type=chunk) [Unaudited Consolidated Financial Statements](index=4&type=section&id=unaudited-consolidated-financial-statements) [Consolidated Balance Sheets](index=4&type=section&id=consolidated-balance-sheets) The unaudited consolidated balance sheets present Paycom's financial position as of March 31, 2025, and December 31, 2024, detailing assets, liabilities, and equity Unaudited Consolidated Balance Sheets (in millions) | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Total Assets | $4,572.6 | $5,859.9 | | Total Liabilities | $2,855.4 | $4,284.0 | | Total Stockholders' Equity | $1,717.2 | $1,575.9 | | Cash and cash equivalents | $520.8 | $402.0 | | Funds held for clients | $2,241.2 | $3,665.5 | | Client funds obligation | $2,239.7 | $3,665.7 | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=consolidated-statements-of-comprehensive-income) This statement details Paycom's revenues, operating expenses, and net income for the three months ended March 31, 2025, and 2024, including comprehensive earnings Unaudited Consolidated Statements of Comprehensive Income (in millions, except per share amounts) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total revenues | $530.5 | $499.9 | | Recurring and other | $500.0 | $466.0 | | Interest on funds held for clients | $30.5 | $33.9 | | Total operating expenses | $345.4 | $214.1 | | Operating income | $185.1 | $285.8 | | Net income | $139.4 | $247.2 | | Earnings per share, diluted | $2.48 | $4.37 | [Consolidated Statements of Cash Flows](index=6&type=section&id=consolidated-statements-of-cash-flows) The unaudited consolidated statements of cash flows detail cash from operating, investing, and financing activities for Q1 2025 and 2024, including a cash and cash equivalents reconciliation Unaudited Consolidated Statements of Cash Flows (in millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $182.5 | $148.6 | | Net cash (used in) provided by investing activities | $(379.9) | $42.3 | | Net cash (used in) provided by financing activities | $(1,452.3) | $376.1 | | Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period | $2,393.1 | $2,989.8 | [Reconciliations of GAAP to Non-GAAP Financial Measures](index=8&type=section&id=reconciliations-of-gaap-to-non-gaap-financial-measures) [Net Income to Adjusted EBITDA Reconciliation](index=8&type=section&id=net-income-to-adjusted-ebitda-reconciliation) This section reconciles GAAP net income to Adjusted EBITDA for Q1 2025 and Q1 2024, detailing adjustments for interest, taxes, depreciation, amortization, and non-cash stock-based compensation Net Income to Adjusted EBITDA Reconciliation (in millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $139.4 | $247.2 | | Interest expense | $0.8 | $0.8 | | Provision for income taxes | $50.9 | $42.8 | | Depreciation and amortization | $39.9 | $32.5 | | Non-cash stock-based compensation expense | $22.2 | $(93.8) | | Adjusted EBITDA | $253.2 | $229.5 | | Adjusted EBITDA margin | 47.7% | 45.9% | [Net Income to Non-GAAP Net Income Reconciliation](index=8&type=section&id=net-income-to-non-gaap-net-income-reconciliation) This reconciliation details adjustments from GAAP net income to non-GAAP net income and per-share amounts, primarily by adding back non-cash stock-based compensation and adjusting for its tax effect Net Income to Non-GAAP Net Income Reconciliation (in millions, except per share amounts) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $139.4 | $247.2 | | Non-cash stock-based compensation expense | $22.2 | $(93.8) | | Income tax effect on non-GAAP adjustments | $(3.9) | $(6.8) | | Non-GAAP net income | $157.7 | $146.6 | | Non-GAAP net income per share, diluted | $2.80 | $2.59 | [Adjusted Gross Profit and Margin](index=9&type=section&id=adjusted-gross-profit-and-margin) This section presents the calculation of adjusted gross profit and adjusted gross margin by adding back non-cash stock-based compensation expense to total gross profit Adjusted Gross Profit and Margin (in millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total gross profit | $445.9 | $421.2 | | Plus: Non-cash stock-based compensation expense | $3.0 | $3.0 | | Total adjusted gross profit | $448.9 | $424.2 | | Adjusted gross margin | 84.6% | 84.9% | [Adjusted Sales and Marketing Expenses](index=9&type=section&id=adjusted-sales-and-marketing-expenses) This reconciliation shows adjusted sales and marketing expenses by excluding non-cash stock-based compensation expense from the GAAP figures Adjusted Sales and Marketing Expenses (in millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Sales and marketing expenses | $110.9 | $115.5 | | Less: Non-cash stock-based compensation expense | $(5.9) | $(5.5) | | Adjusted sales and marketing expenses | $105.0 | $110.0 | | Adjusted sales and marketing expenses as a % of revenues | 19.8% | 22.0% | [Adjusted Total Administrative Expenses](index=9&type=section&id=adjusted-total-administrative-expenses) This section reconciles GAAP total administrative expenses to adjusted total administrative expenses by removing non-cash stock-based compensation expense Adjusted Total Administrative Expenses (in millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total administrative expenses | $260.8 | $135.4 | | Less: Non-cash stock-based compensation expense | $(19.2) | $96.8 | | Adjusted total administrative expenses | $241.6 | $232.2 | | Adjusted total administrative expenses as a % of revenues | 45.5% | 46.5% | [Adjusted Research and Development Expenses](index=9&type=section&id=adjusted-research-and-development-expenses) This reconciliation shows adjusted research and development expenses by excluding non-cash stock-based compensation expense from the GAAP figures Adjusted Research and Development Expenses (in millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Research and development expenses | $62.3 | $50.5 | | Less: Non-cash stock-based compensation expense | $(6.9) | $(5.4) | | Adjusted research and development expenses | $55.4 | $45.1 | | Adjusted research and development expenses as a % of revenues | 10.4% | 9.0% | [Total and Adjusted Research and Development Costs](index=10&type=section&id=total-and-adjusted-research-and-development-costs) This section provides a reconciliation of total research and development costs, including capitalized costs, to adjusted total R&D costs by removing non-cash stock-based compensation Total and Adjusted Research and Development Costs (in millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total research and development costs | $96.0 | $80.4 | | Less: Capitalized non-cash stock-based compensation | $(5.3) | $(3.6) | | Less: Non-cash stock-based compensation expense | $(6.9) | $(5.4) | | Adjusted total research and development costs | $83.8 | $71.4 | | Adjusted total research and development costs as a % of revenues | 15.8% | 14.3% | [Free Cash Flow and Free Cash Flow Margin](index=10&type=section&id=free-cash-flow-and-free-cash-flow-margin) This section calculates free cash flow by subtracting capital expenditures from net cash provided by operating activities and derives the free cash flow margin Free Cash Flow and Free Cash Flow Margin (in millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $182.5 | $148.6 | | Purchases of property and equipment | $(37.7) | $(47.7) | | Purchases of intangible assets | $0.0 | $0.0 | | Free cash flow | $144.8 | $100.9 | | Free cash flow margin | 27.3% | 20.2% | [Components of Non-Cash Stock-Based Compensation Expense](index=11&type=section&id=components-of-non-cash-stock-based-compensation-expense) This section provides a detailed breakdown of the total non-cash stock-based compensation expense, categorized by its allocation across various operating expense lines Components of Non-Cash Stock-Based Compensation Expense (in millions) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Operating expenses | $3.0 | $3.0 | | Sales and marketing | $5.9 | $5.5 | | Research and development | $6.9 | $5.4 | | General and administrative | $6.4 | $(107.6) | | Total non-cash stock-based compensation expense | $22.2 | $(93.8) |