Paycom Software (NYSE:PAYC) reported its latest outstanding quarter in August. Investors cheered the results, which included record revenue and adjusted EBITDA, helping propel the stock to recent all-time highs. With the fiscal year now half over, let's take a look at how 2017 is playing out for the payroll and workforce management software provider compared to previous years.

A person using the Paycom mobile app

Image source: Paycom Software. 

Revenue growth is slowing, but still mighty impressive

Paycom's revenue growth is a sight to behold, rising from $76.8 million in 2012 to $329.1 million in 2016. How many companies have you seen grow revenue at rates north of 40% for four consecutive years?

Chart showing Paycom's revenue and growth rates from 2012 through 2017 (guidance)

Data source: Company Financials. Chart by the author.

As the company continues to scale up, that rate of growth will invariably moderate. And 2017 has a tough act to follow. Fiscal years 2015 and 2016 both received a good-sized revenue boost from a surge of new clients seeking compliance with the Affordable Care Act.

Even with that tailwind gone, 2017 revenue growth looks like it will still manage to clear the company's long-term target of 30%. The company's most recent guidance is for full-year revenue of $429.5 million to $431.5 million, representing 30.8% growth at the midpoint. And there's plenty of growth still on the horizon. Paycom continues to aggressively open sales offices, marching steadily toward an annual sales capacity of somewhere between $730 million and $1 billion.

The margin trend is rock solid

Adjusted EBITDA margin measures a company's operating profitability as a percentage of its revenue. As the company has grown, its adjusted EBITDA margin has increased substantially, from 16.7% in 2012 to 28.7% in 2016.

Chart showing Paycom's adjusted EBITDA margin from 2012 through 2017 (guidance)

Data source: Company Financials. Chart by author.

In an attempt to maximize its top-line growth, Paycom announced earlier this year that it was making large investments in research and development, marketing, and its sales team. As a result, the company initially expected these increased expenses would cause adjusted EBITDA margin to fall to around 27% in 2017.

Instead, after two blowout quarters to start the year, the company's latest guidance for adjusted EBITDA and revenue implies a full-year adjusted EBITDA margin of 28.7% -- which would be a repeat of last year's record performance. Additionally, the company believes it can eventually raise its margin even higher -- to a range of 30% to 33%.

Adjusted EBITDA growth is returning to earth

While the trend line for Paycom's adjusted EBITDA growth may look disappointing on the surface, the story here is similar to revenue growth. This measure of top-line earnings grew dramatically from $12.8 million in 2012 to $94.5 million in 2016. Those increases of 78% in 2015 and 96.5% in 2016 made a return to more moderate growth this year all but inevitable, particularly in light of Paycom's aforementioned 2017 investments in R&D and other areas. That said, the company has blown away its initial 2017 adjusted EBITDA guidance of around 21% growth, with its latest guidance reflecting a more robust growth of 30.7% at the midpoint.

Chart showing Paycom's adjusted EBITDA and growth rates from 2012 through 2017 (guidance)

Data source: Company financials. Chart by author.

Paycom has been on a roll for years now, with growth numbers that -- even as they begin to slow -- would make most companies envious. After blowing past analyst estimates and raising guidance each of the last two-quarters, 2017 is already shaping up to be another banner year for this expectations-smashing company that continues to fly under the radar of most investors.

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