Paycom Software(US:PAYC)2019-10-30 00:51Financial Data and Key Metrics Changes - Q3 2019 revenue was approximately $175 million, representing a growth of 31% year-over-year [11][22] - Adjusted EBITDA for Q3 was $66.6 million, with a margin expansion of roughly 1 percentage point to 38% [12][25] - GAAP net income for Q3 was $39.2 million, or $0.67 per diluted share, compared to $28.8 million, or $0.49 per diluted share in the prior year [26] - Non-GAAP net income for Q3 was $41.1 million, or $0.70 per diluted share, compared to $30.6 million, or $0.52 per diluted share in the prior year [28] Business Line Data and Key Metrics Changes - Recurring revenue for Q3 was $171.4 million, representing 98% of total revenues and growing 31% from the prior year [23] - Total adjusted gross profit for Q3 was $149.4 million, with an adjusted gross margin of 85.3% [23] Market Data and Key Metrics Changes - The company is seeing strong demand across the market, with a strong guide heading into Q4 [115] - Prospective clients are taking notice of the Direct Data Exchange (DDX), leading to increased leads from larger businesses [17][20] Company Strategy and Development Direction - The company is focused on employee usage as a fundamental aspect of the human capital management (HCM) industry, aiming to enhance employee engagement and productivity [13][14] - Innovations like DDX and Ask Here are designed to improve the employee-employer experience and drive sales growth [20][19] - The company is expanding its market presence and has opened new offices, including in New Orleans, to cover more of the total addressable market (TAM) [72] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's product strategy and high-performance culture, positioning it well for long-term growth [21] - The company is raising its full-year revenue growth guidance to approximately 30% year-over-year at the midpoint of the range [12][32] - Management noted that despite headwinds from interest rate reductions, the company continues to perform well [46][47] Other Important Information - The company ended the quarter with cash and cash equivalents of $108.1 million and total debt of $33.1 million [29] - The average daily balance of funds held on behalf of clients was approximately $1.1 billion [29] Q&A Session Summary Question: Can you expand on the impact of DDX on market positioning? - Management noted that DDX is attracting leads from larger clients, with one client achieving a DDX score of about 99% and making significant data changes [36] Question: What are the drivers behind the higher EBITDA margins? - Management indicated that increased efficiencies in general and administrative expenses and continued investment in R&D and sales and marketing are contributing to margin improvements [38] Question: What percentage of new clients are mandating employee usage? - Management stated that while they cannot provide an exact percentage, they are seeing increased DDX scores from new clients compared to previous quarters [44] Question: How is the competitive landscape evolving? - Management confirmed that win rates remain stable and that the usual competitors continue to be the primary focus [77] Question: What is the strategy for new product developments? - Management emphasized a focus on compliance, product enhancement, and innovation, with a commitment to not disclose products until they are ready for market [54] Question: How is the adoption of Ask Here progressing? - Management reported that about half of clients have enabled Ask Here, with positive initial feedback and expectations for increased adoption [96] Question: How does the company view cash deployment? - Management indicated that the priority is to invest in growth and R&D, with a buyback plan also in place [107]