Paycom Software(US:PAYC)2021-02-11 02:43Financial Data and Key Metrics Changes - Paycom reported Q4 2020 revenue of $221 million, a 14% increase compared to Q4 2019, and full-year revenue of $841 million, also up 14% year-over-year [10][22]. - Adjusted EBITDA for Q4 2020 was $84.2 million, representing 38.1% of total revenues, compared to 40.6% in Q4 2019 [27]. - The company maintained an annual revenue retention rate of 93% despite pandemic-related challenges [10]. Business Line Data and Key Metrics Changes - Recurring revenue for Q4 2020 was $216.7 million, accounting for 98% of total revenues, and grew 14% year-over-year [24]. - The total adjusted gross profit for Q4 was $188.9 million, with an adjusted gross margin of 85.5%, up 20 basis points from the prior year [24]. - Adjusted total administrative expenses for Q4 were $119.1 million, compared to $98.6 million in Q4 2019 [25]. Market Data and Key Metrics Changes - Paycom ended 2020 with approximately 31,000 clients, a growth rate of 17% compared to 2019 [23]. - The company has a market share of roughly 5% in a large and expanding Human Capital Management (HCM) Total Addressable Market (TAM) [12]. Company Strategy and Development Direction - Paycom aims to reach $1 billion in revenue in 2021, driven by the digital transformation in the HCM industry and a shift towards self-service solutions [8][9]. - The company plans to continue aggressive marketing investments to fuel future revenue growth [12][25]. - Paycom is focusing on expanding its product offerings, including the rollout of the Better Employee Transaction Interface (BETI) for payroll automation [15][96]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that Q1 2021 will be the last quarter impacted by the pandemic, with expectations for strong fundamental growth thereafter [35]. - The company remains focused on providing world-class service, developing new technologies, and increasing the number of new clients [20][21]. - Management noted that the pandemic revealed the strengths of their solutions compared to disparate systems in the market [19]. Other Important Information - Paycom's headcount increased by 12% year-over-year to approximately 4,200 employees, with a continued focus on hiring high-quality talent [17]. - The company repurchased approximately 433,000 shares for about $115 million in 2020, with $135 million remaining in its buyback program [31]. Q&A Session Summary Question: How does the company view linearity in Q2, Q3, and Q4? - Management indicated that guidance for Q2 through Q4 is consistent with historical guidance and does not include any assumptions about recovery in the back half of the year [40][41]. Question: What insights were gained from the inside sales model during the pandemic? - Management noted that the inside sales model was already in place and has proven effective, leading to efficiencies that will be maintained moving forward [44]. Question: How did the mix of new customers look in 2020? - The company added more customers in 2020 than in 2019, with success in both small and larger business segments [46][50]. Question: What is the outlook for retention rates in 2021? - Management expressed optimism about retention rates but does not provide specific guidance on this metric [86]. Question: Can you quantify the impact of fewer W-2s in Q1? - Management estimated a headwind of $6 million to $7 million in Q1 due to fewer forms filed as a result of reduced employee counts in affected industries [81][84].