Outstanding report, but you should correct some information.
Specifically:
ADP and Paychex seem to be the most entrenched incumbents in this space. For companies as large as they are, only sales to large organizations really “move the needle”. Paycom focuses instead on the small- to medium-sized business (SMB) space. This allows Paycom to grow without undue irritation to their most powerful competitors.
Paychex focuses on serving smaller companies. In fact they got their start by servicing that niche left open by ADP. Paychex originally focused on businesses with 1 to 50 employees, and that still is their biggest segment. But later they also added MMS (Major Market Services) to target businesses with 50-2000 employees.
ADP eventually added products for smaller and smaller companies, and although they focus on the larger ones, they offer products at all size ranges.
It is my understanding that Paycom targets middle size businesses, in the roughly 1000 to 10,000 size, although they will certainly go smaller and larger if possible. Indeed, in their latest annual report they highlight a client win who has 8,000 employees. I don’t believe their product is cost effective for small companies.
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Hi scoopshot.
Thanks for the correction; you’re not the only one who’s taken me to task for that assumption. I’m chagrined, and I will definitely have read more about ADP, PAYC, and PAYX before the next PAYC earnings comes out.
Paycom’s target market is smaller than your understanding, though. In recent earnings calls, they’ve disclosed a target of 50-2000 employees. During the earnings conference call prepared remarks, CEO Richison seems to always highlight three new customers, typically in diverse industries and typically above 2,000 employees, some as large as 8,000.
I know I have more reading to do. When I say things like “Please forgive me this time if my analysis is on the shallow side. I’m still learning about Paycom, and I hope my analysis of this company will become more insightful and incisive with time.”, I mean it; I’m not sandbagging.
When I see factually incorrect statements on the message boards, I do try to correct them. I want to make sure readers get the facts. I try to be factually accurate, and I appreciate it when other correct me should I fall short.
Thanks and best wishes,
TMFDatabaseBob (long: ADP, PAYC, PAYX)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth
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