PAYC 2nd Qtr

A previous board favorite and a Wall Street darling reported this afternoon and it does what it does every quarter for many years, “beat-and-raise”. Paycom Software is not cheap by any stretch, but it’s the little engine that’s always giving. My initial purchase started at $32 in 2015, and I have been trading some with my last purchase yesterday with the meltdown. I am up over 600% with my initial purchase, and glad I keep a 3% all along.
The growth rate is around 30+%, way lower than our fast growers, but Wall Street loves it perhaps because it’s profitable. This is one example where a steady 30% profitable growth is very good.

2017    120	98	101	114	433
2018	153	129	133	150	566	
2019	200	169
Growth Rate
2017	33	33	31	30
2018	29	31	32	32
2019	30	31

Gross Margin: 85%

Sub Revenue: 99%

AH: $12.38 (5.42%)



Lego, I too have owned PAYC about the same amount of time as you have. Been a good investment and I really like this company because of their focus on ROI for the customer. A few notes that are relatively major changes for PAYC.

  1. They are developing an inside sales force which has got to be less expensive than their current brick and mortar approach with face to face meetings. (outside sales go “out” and meet customers. Inside sales reach out by phone/email/internet). Historically PAYC has built out offices around the country and then did sales face to face.

  2. They did a price increase which is the first i know of since I’ve followed them which to me says they are feeling confident in their product since they certainly are already very profitable and have an incredible EBITDA margin in the 30-40% range.

  3. They are guiding for an absolutely incredible increase of EBITDA margin to 42% for the year which implies a large back half improvement. I’d guess we can attribute that to points 1 and 2 above.

  4. They are starting to focus on existing business development (i.e. Expand) So far they have been very focused on just lands.

  5. The majority of their revenue increase came from landing new customers so I don’t think they are anywhere near being done acquiring customers.

Overall great quarter. I’m happy to continue to hold this one.



Paycom is evidence that our expensive companies with 50+% sales growth may still command a premium price when the growth slows to 30%. Making the big assumption that they are making good profits by then.
I have owned PAYC longer than any of my stocks. The company concentrates on mid size companies but now appears to be successfully expanding to larger customers. Human Resources has a huge TAM, every company has employees.Importantly it is one of the earlier SaaS companies, a good omen for this business model.