Valens Credit Weekly Insights - 2024 02 27
Paycom (PAYC) has seen growth slow recently as its new Beti offering cannibalizes its legacy business, spooking the market. However, Beti's cannibalization is starting to slow down, and importantly its revolutionary offerings in the payroll processing space set up Paycom to take share the market is not pricing in. With management aligned with investors to deliver on this strategy, and confident about their execution, investors are set-up for positive surprises going forward.Paycom has spent much of its existence as a strong, but also-ran, payroll processing firm, focusing on small and midsized companies, as opposed to breaking into the larger business opportunities in the space. Two years ago, it launched a new AI powered tool called Beti to change that, helping it save customers significant time and money. In the short-term that has hurt the company's revenue as it's shrunk its core business, it sets it up to be able to offer a better offering than its peers going forward though. And that means it could take market share in a way investors aren't realizing.
Paycom's management is aligned to focus on re-accelerating growth after the Beti transition is finished, and to make sure that growth is profitable while retaining customers. All that, and management's material stake in the business, shows management is aligned with investors.
Management confidence in the Q4 earnings call about new client growth suggests its Beti offering is helping it see market share gains accelerate
Paycom Software is a provider of cloud-based human capital management (HCM) solution delivered as Software-as- a-Service. The company provides functionality and data analytics that businesses need to manage the complete employment lifecycle, from recruitment to retirement. The company's solution requires virtually no customization and is based on a core system of record maintained in a single database for various HCM functions, including talent acquisition, time and labor management, payroll, talent management and human resources management applications. The company's solution was developed in-house and is based on a single platform, there is no need to integrate, update or access various databases.
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