Paycom Software(US:PAYC)2023-02-08 02:02Financial Data and Key Metrics Changes - The company reported fourth quarter revenue of approximately $371 million, up 30% year-over-year, bringing full year 2022 revenue to $1.375 billion, also up 30% year-over-year [2][28] - Fourth quarter adjusted EBITDA was $164 million, representing an adjusted EBITDA margin of 44%, with full year adjusted EBITDA at $580 million, representing an adjusted EBITDA margin of 42% [2][45] - GAAP net income for the fourth quarter was $80 million or $1.38 per diluted share, compared to $48.7 million or $0.84 per diluted share in the prior year [12][30] Business Line Data and Key Metrics Changes - The fastest-growing revenue segment came from clients with more than 2,000 employees, with revenue from this segment up 60% year-over-year [11][58] - Recurring revenue for the fourth quarter was $364 million, representing 98% of total revenues and growing 30% from the prior year [66] - Total adjusted gross profit for the fourth quarter was $312.5 million, with an adjusted gross margin of 84.3% [44] Market Data and Key Metrics Changes - The company ended 2022 with approximately 36,600 clients, representing an 8% growth compared to 2021 [66] - The total number of employee records increased by 14% year-over-year in 2022 to 6.5 million [66] Company Strategy and Development Direction - The company plans to continue investing in talent, marketing, innovation, customer service, and geographic expansion to meet strong demand [4] - The focus remains on employee experience and client ROI, with expectations for rapid profitable growth in 2023 [24][27] - The company is positioned to benefit from the trend of larger organizations simplifying their HCM needs, with only about 5% of the total addressable market currently penetrated [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the momentum heading into 2023, with guidance for total revenues in the range of $1.7 billion to $1.702 billion, representing approximately 24% year-over-year growth [47] - The company anticipates adjusted EBITDA in the range of $700 million to $702 million for 2023, with an adjusted EBITDA margin of approximately 41% [47] - Management noted that the marketing strategy has been effective, driving high-quality demo leads and improving operating leverage [40] Other Important Information - The company repurchased approximately 365,000 shares for nearly $100 million in 2022, with $1.1 billion remaining in the buyback program [46][81] - The average daily balance of funds held on behalf of clients was approximately $2.1 billion in the fourth quarter of 2022 [31] Q&A Session Summary Question: What is the outlook for end demand given market nervousness? - Management indicated that they continue to see strong demand and that renewals came in at 93% [33] Question: Did the company buy back any stock in the quarter? - Management confirmed that no stock was bought back in the quarter, but $100 million was repurchased for the full year [81] Question: How is the company addressing the growth from existing clients versus new clients? - Management stated that growth is primarily driven by new logo adds, with a healthy upsell to current clients [17][60] Question: What is the expected impact of W2 revenue in Q1? - Management expects normalization in trends for W2 revenue due to improved hiring patterns [61] Question: How does the company view the retention rate among smaller clients? - Management noted that smaller clients are experiencing more churn, but retention remains strong at 93% overall [72][90] Question: What is the company's strategy regarding upmarket opportunities? - Management indicated a strategic focus on larger clients, with continued investments to support this shift [134]