Paycom Software(PAYC) - 2019 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q1 2019 was approximately $200 million, representing a growth of 30% compared to the prior year period [9][17] - Adjusted EBITDA for the quarter was $103 million, reflecting a 52% margin [9][19] - GAAP net income for Q1 2019 was $47.3 million, or $0.81 per diluted share, compared to $41.2 million, or $0.70 per diluted share in the prior year [20] - Non-GAAP net income for Q1 2019 was $69.3 million, or $1.19 per diluted share, compared to $55.8 million, or $0.95 per diluted share in the prior year [21] - Cash and cash equivalents at the end of the quarter were $91.3 million, with total debt of $34 million [23] Business Line Data and Key Metrics Changes - Recurring revenue was $196.9 million for Q1 2019, representing 98% of total revenues and growing 30% from the prior year [17] - Total adjusted gross profit for Q1 was $173.5 million, with an adjusted gross margin of 87% [18] - Adjusted sales and marketing expenses for Q1 2019 were $37.1 million, compared to $30.4 million in the prior year [18] Market Data and Key Metrics Changes - The average daily balance of funds held on behalf of clients was approximately $1.2 billion in Q1 2019 [23] - The company anticipates total revenues for Q2 2019 in the range of $162.5 million to $164.5 million, representing a growth rate of approximately 47% at the midpoint [24] Company Strategy and Development Direction - The company is focused on expanding its sales organization and opening new offices to drive revenue growth [14][36] - The introduction of the direct data exchange is seen as a significant enhancement to the software offering, aimed at improving efficiency in data collection processes [11][30] - The company is committed to a strategy that emphasizes employee usage of its Human Capital Management (HCM) technology, which is believed to enhance engagement and retention [10][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong start to 2019 and raised guidance for the full year, anticipating total revenues of $718 million to $720 million [9][25] - The management highlighted the importance of employee engagement in driving ROI and competitive advantage in the HCM industry [10][32] - There is an expectation of continued strong performance and growth opportunities as the company leverages its innovative solutions [16][59] Other Important Information - The company broke ground on a new Operations Center in Grapevine, Texas, which is expected to create 1,000 jobs [13] - The company has repurchased more than 3.5 million shares at an average price of $79.56 since initiating its repurchase program [22] Q&A Session Summary Question: How will the direct data exchange be utilized in the sales process? - The direct data exchange acts as a health check for the system, showing clients how their data collection processes are performing and driving ROI [29] Question: What are the key initiatives in R&D? - The focus is on supporting the employee usage strategy, which is essential for attracting and retaining talent in the industry [31] Question: What are the plans for sales investments? - The company plans to mature existing offices and open new ones in under-penetrated cities to drive growth [36] Question: How is the company performing with upmarket customers? - The company continues to see strong client additions in the upper end of the market, with a focus on making it easier for clients to buy [38] Question: What insights can be shared about marketing campaigns? - Marketing efforts have shifted to target employee users, enhancing engagement and driving value for clients [40] Question: What are the implications of increased employee usage on gross margin? - Increased usage leads to greater proficiency, potentially allowing for additional capacity on the service side without additional costs [51] Question: How does the company view inefficiencies in HCM usage? - The company aims to eliminate inefficiencies by empowering employees to manage their own data, which enhances overall productivity [66][68] Question: What is the hiring plan for this year? - There have been no changes to the hiring goals despite the strong performance in Q1 [76]