Paycom Software, Inc. Net Income dropped on 20.6% and EBITDA Margin decreased on 8.0 pp from 37.8% to 29.8%
02/10/2021 • About Paycom Software, Inc. (
$PAYC) • By InTwits
Paycom Software, Inc. reported 2020 financial results today. Here are the key drivers of the company's long term financial model:
- Paycom Software, Inc. is a fast growth stock: 2020 revenue growth was 14.1%, 5 year revenue CAGR was 30.2% at 2020 ROIC 28.7%
- Paycom Software, Inc. has high CAPEX intensity: 5 year average CAPEX/Revenue was 12.3%. At the same time it's in pair with industry average of 14.0%
- CAPEX is quite volatile: $59m in 2020, $96m in 2019, $23m in 2018, $66m in 2017, $37m in 2016
- The company has highly profitable business model: ROIC is 28.7%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Paycom Software, Inc.'s Revenue surged on 14.1%. Revenue growth showed acceleration in 20Q4 - it increased 14.2% YoY. Revenue decline was accelerating on average at -6.6 pp per annum in the last 5 years. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 8.0 pp from 37.8% to 29.8% in 2020.
Gross Margin showed almost no change in 2020. Gross Margin stuck to a growing trend at 0.52 pp per annum in the last 5 years. SG&A as a % of Revenue increased on 7.6 pp from 41.6% to 49.2% in 2020.
Net Income margin decreased on 7.4 pp from 24.5% to 17.0% in 2020.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 11.2% in 2020. The company's CAPEX/Revenue decreased on 2.5 pp from 13.7% in 2017 to 11.2% in 2020. Average CAPEX/Revenue for the last three years was 11.5%.
Return on investment
The company operates at high and attractive ROIC (28.7%) and ROE (24.3%). ROIC dropped on 18.8 pp from 47.5% to 28.7% in 2020. ROE dropped on 17.7 pp from 41.9% to 24.3% in 2020. ROIC stuck to a declining trend at -9.7 pp per annum in 2016-2020. ROE declined at -10.3 pp per annum in the last 5 years.
Leverage (Debt)
Debt level is -0.4x Net Debt / EBITDA and 0.2x Debt / EBITDA. Debt decreased on 4.1% while cash surged on 13.5%.
Paycom Software, Inc. has no short term refinancing risk: cash is higher than short term debt (1,196.4%).
Valuation and dividends
Paycom Software, Inc.'s trades at EV/EBITDA 88.7x and P/E 155.7x.
Management team
Chad Richison is a Paycom Software, Inc.'s CEO. Chad Richison has spent 23 years with the company. The company's CFO Craig E Boelte has spent 15 years with the company.
Financial and operational results
FY ended 12/31/2020
Paycom Software, Inc. ($PAYC) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 329.1 | 433.0 | 566.3 | 737.7 | 841.4 | 14.1% |
| Gross Profit | 275.1 | 361.0 | 475.6 | 627.9 | 717.9 | 14.3% |
| SG&A | 144.5 | 191.1 | 240.5 | 306.8 | 413.9 | 34.9% |
| EBITDA | 115.4 | 149.1 | 203.4 | 278.5 | 250.8 | -10.0% |
| EBIT | 101.7 | 129.7 | 173.7 | | | |
| Interest expence | 1.0 | 0.9 | 0.8 | | | |
| Tax | 30.6 | 4.2 | 37.6 | | | |
| Net Income | 70.4 | 123.5 | 137.1 | 180.6 | 143.5 | -20.6% |
| Stock Based Compensation | 20.7 | 36.1 | 36.6 | | | |
Balance Sheet
|
|---|
| Cash | 60.2 | 46.1 | 45.7 | 133.7 | 151.7 | 13.5% |
| Accounts Receivable | 1.3 | 1.6 | 3.4 | | | |
| Inventory | 0.7 | 1.0 | 0.8 | | | |
| Accounts Payable | 3.7 | 6.5 | 6.3 | | | |
| Short Term Debt | 1.1 | 0.9 | 1.8 | 12.1 | 12.7 | 5.0% |
| Long Term Debt | 28.7 | 34.4 | 32.6 | 49.3 | 46.1 | -6.4% |
Cash flow
|
|---|
| Capex | 43.8 | 59.4 | 59.9 | 92.9 | 94.1 | 1.3% |
Ratios
|
|---|
| Revenue growth | 46.5% | 31.6% | 30.8% | 30.3% | 14.1% | |
| EBITDA growth | 163.1% | 29.2% | 36.4% | 37.0% | -10.0% | |
|
|---|
| Gross Margin | 83.6% | 83.4% | 84.0% | 85.1% | 85.3% | 0.2% |
| EBITDA Margin | 35.1% | 34.4% | 35.9% | 37.8% | 29.8% | -8.0% |
| EBIT Margin | 30.9% | 30.0% | 30.7% | | |
| SG&A, % of revenue | 43.9% | 44.1% | 42.5% | 41.6% | 49.2% | 7.6% |
| SBC, % of revenue | 6.3% | 8.3% | 6.5% | | |
| Net Income Margin | 21.4% | 28.5% | 24.2% | 24.5% | 17.0% | -7.4% |
| CAPEX, % of revenue | 13.3% | 13.7% | 10.6% | 12.6% | 11.2% | -1.4% |
|
|---|
| ROIC | 75.4% | 51.1% | 47.5% | 47.5% | 28.7% | -18.8% |
| ROE | 65.6% | 62.1% | 44.5% | 41.9% | 24.3% | -17.7% |
| Net Debt/EBITDA | -0.3x | -0.1x | -0.1x | -0.3x | -0.4x | -0.1x |
| Interest expence / Average debt | 3.5% | 2.8% | 2.2% | | | |
People
|
|---|
| Insider ownership | 17.4% | 17.4% | 17.4% | | | |
| Employees | 2,075 | 2,548 | 3,050 | | | |
| Revenue/Employee, th. $ | 159 | 170 | 186 | | | |
Paycom Software, Inc. ($PAYC) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 242 | 182 | 197 | 221 | | 21.2% | 7.2% | 12.3% | 14.2% |
| EBITDA | 101 | 40 | 48 | 51 | | 36.7% | -39.6% | -25.4% | -32.2% |
| Net Income | 63 | 29 | 27 | 24 | | 33.3% | -41.4% | -29.8% | -46.3% |
Balance Sheet
|
|---|
| Cash | 182 | 114 | 156 | 152 | | 99.1% | 19.7% | 44.6% | 13.5% |
| Short Term Debt | 2 | 2 | 2 | 13 | | -83.1% | -84.0% | -84.4% | 5.0% |
| Long Term Debt | 30 | 30 | 30 | 46 | | -37.1% | -39.3% | -39.1% | -6.4% |
Ratios
|
|---|
| Gross Margin | 87.6% | 83.7% | 84.3% | 85.1% | | 2.3% | -1.4% | -0.6% | -0.1% |
| EBITDA Margin | 41.9% | 21.8% | 24.3% | 22.9% | | 4.7% | -16.9% | -12.3% | -15.7% |
| Net Income Margin | 26.0% | 15.7% | 14.0% | 11.0% | | 2.4% | -13.1% | -8.4% | -12.4% |
Peers in Application Software
Below we provide Paycom Software, Inc. benchmarking against other companies in Application Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | - | -0.2% | -95.9% | 34.9% | 355,942.4% |
| AudioEye, Inc. ($AEYE) | - | 175.5% | 106.6% | 90.2% | 90.2% |
| Cloudera, Inc. ($CLDR) | - | 57.2% | 42.6% | 28.9% | 65.5% |
| Integrated Ventures Inc ($INTV) | - | - | - | -8.9% | 62.7% |
| Smartsheet Inc. ($SMAR) | - | 64.3% | 66.1% | 59.7% | 52.4% |
| |
|---|
| Median (92 companies) | 12.0% | 14.8% | 15.1% | 19.4% | 14.7% |
|---|
| Paycom Software, Inc. ($PAYC) | - | 31.6% | 30.8% | 30.3% | 14.1% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Aware, Inc. ($AWRE) | 90.3% | 94.6% | 92.3% | 89.7% | 92.8% |
| Alteryx, Inc. ($AYX) | 81.3% | 83.4% | 91.0% | 90.6% | 91.1% |
| Autodesk, Inc. ($ADSK) | 85.2% | 83.2% | 85.2% | 88.9% | 90.1% |
| Smith Micro Software, Inc. ($SMSI) | 73.2% | 77.9% | 83.5% | 90.9% | 89.9% |
| Cadence Design Systems, Inc. ($CDNS) | 85.9% | 87.8% | 87.9% | 88.6% | 88.6% |
| |
|---|
| Median (89 companies) | 63.8% | 64.4% | 65.3% | 67.9% | 69.4% |
|---|
| Paycom Software, Inc. ($PAYC) | 83.6% | 83.4% | 84.0% | 85.1% | 85.3% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -1,837.2% | -1,118.0% | -40,379.4% | -23,127.1% | 52.2% |
| j2 Global, Inc. ($JCOM) | 41.7% | 36.5% | 35.7% | 38.6% | 40.5% |
| Intelligent Systems Corporation ($INS) | -5.4% | -12.8% | 33.6% | 43.6% | 40.4% |
| Adobe Inc. ($ADBE) | 31.2% | 34.2% | 35.3% | 35.8% | 39.7% |
| SS&C Technologies Holdings, Inc. ($SSNC) | 34.9% | 37.9% | 27.7% | 38.2% | 38.3% |
| |
|---|
| Median (89 companies) | -5.3% | -4.2% | -3.3% | 2.7% | 6.8% |
|---|
| Paycom Software, Inc. ($PAYC) | 35.1% | 34.4% | 35.9% | 37.8% | 29.8% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| MicroStrategy Incorporated ($MSTR) | 0.5% | 0.8% | 1.4% | 2.1% | 234.8% |
| Integrated Ventures Inc ($INTV) | - | - | 199.9% | 15.2% | 27.2% |
| Intelligent Systems Corporation ($INS) | 3.8% | 9.7% | 4.3% | 4.9% | 19.2% |
| LivePerson, Inc. ($LPSN) | 5.5% | 7.9% | 8.8% | 16.3% | 11.4% |
| PROS Holdings, Inc. ($PRO) | 4.7% | 0.8% | 0.7% | 2.1% | 11.3% |
| |
|---|
| Median (87 companies) | 2.9% | 2.3% | 2.4% | 2.9% | 2.5% |
|---|
| Paycom Software, Inc. ($PAYC) | 13.3% | 13.7% | 10.6% | 12.6% | 11.2% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -210.9% | -256.8% | -416.3% | -247.2% | 137.3% |
| Manhattan Associates, Inc. ($MANH) | 99.3% | 102.5% | 80.9% | 71.7% | 53.4% |
| Citrix Systems, Inc. ($CTXS) | 16.1% | 16.7% | 25.2% | 29.8% | 33.5% |
| Sonic Foundry, Inc. ($SOFO) | -18.1% | -50.6% | -786.4% | - | 31.3% |
| Adobe Inc. ($ADBE) | 15.9% | 21.3% | 23.3% | 22.9% | 26.9% |
| |
|---|
| Median (92 companies) | -9.8% | -11.8% | -10.6% | -4.5% | -2.2% |
|---|
| Paycom Software, Inc. ($PAYC) | 75.4% | 51.1% | 47.5% | 47.5% | 28.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Dropbox, Inc. ($DBX) | - | -3.8x | - | 2.4x | 1,341.0x |
| Avaya Holdings Corp. ($AVYA) | - | - | 7.4x | - | 77.9x |
| Alteryx, Inc. ($AYX) | - | - | 2.5x | 6.1x | 32.2x |
| Five9, Inc. ($FIVN) | -6.7x | -8.6x | 7.3x | 5.3x | 17.6x |
| Synchronoss Technologies, Inc. ($SNCR) | - | - | - | - | 11.6x |
| |
|---|
| Median (53 companies) | -0.9x | -0.9x | -0.7x | 0.4x | 0.3x |
|---|
| Paycom Software, Inc. ($PAYC) | -0.3x | -0.1x | -0.1x | -0.3x | -0.4x |
