Not long ago, remote work was a disruptive new phenomenon of the modern working world; today, it’s a standard component of nearly every industry, and the traditional office space has been transported to anywhere in the world with access to a laptop and an internet connection. With the outbreak of the Covid-19 pandemic, the already trending remote work movement has accelerated sharply, subsequently altering the conversation around productivity best practices, team structures, workplace culture, and business models. Behind all of this is the robust and growing industry of online tools, technology, and infrastructure that powers the evolution of remote workforces across sectors.
Several players report triple digit growth driven by demand for infrastructure tools amidst the pandemic:
Deel reported in August 2020 that it has recorded a 200% growth in its customer base and a 600% increase in revenue since the start of the pandemic.
Happeo reported that its platform recorded 280% year-over-year (YoY) growth in Q1 2020, with average daily messages sent on the platform increasing to 2.5 million from 500,000.
Winningtemp claims its usage grew 300% during the first three weeks of Covid-19 related lockdowns.
Driven by pandemic tailwinds, industry players, especially in the EoR/PEOs space receive significant financial backing:
Hibob raised USD 70 million in a Series B funding in December 2020.
ActivTrak raised USD 50 million in a Series B funding in November 2020.
Papaya Global raised USD 40 million in Series B funding in September 2020.
Remote raised USD 35 million in Series A funding in November 2020.
Gtmhub raised USD 30 million in a Series B funding in December 2020.
Deel raised USD 30 million in Series B funding in September 2020.
Winningtemp raised USD 18 million in Series B funding in October 2020.
A majority of the incumbents feature in the integrated HRM, payroll, and benefits as well as the integrated performance and engagement segments. This includes large players such as Workday, SAP, Paycom, and Paylocity. With a handful of startups in the growth stage, Microsoft is the only incumbent in the intranet segment. The pure play payroll and benefits segment is occupied by CloudPay and Clune Technology Group and mostly includes early-stage disruptors.
Many disruptors in the integrated HRM, payroll, and benefits segment are quite mature and, therefore, a large contingent is in the growth stage. The integrated performance and engagement segment features the largest group of seed-stage companies, as the use of cloud-based employee engagement and performance software has received increased attention since the Covid-19 pandemic. Meanwhile, the EOR/PEO segment has the smallest number of startups that are primarily in the growth stage offering contingent workforce management solutions.
Companies in the Integrated HRM, payroll, and benefits segment account for most of the funding in the space. Established companies such as Gusto and Zenefits lead the segment in funding among private players with USD 691 and USD 584 million, respectively. Meanwhile, the integrated performance and engagement segment accounts for the majority of startups. Culture Amp and Personio lead the segment in terms of funding among private companies. Other notable players include EOR/PEO service providers Deel and Remote who raised around USD 400 million in funding between 2020 and 2021. Intranet platforms funding is led by Staffbase and LumApps.
Paycor is a Software-as-a-Service (SaaS) and human capital management firm offering small and medium-sized enterprises (SMEs) with talent management, payroll, and HR solutions. It's HR solutions include time and attendance management, scheduling, and employee experience surveys. The talent management offering includes recruiting and onboarding software, while payroll and benefits features include tax processing and documentation, payments and benefits administration. In July 2021, Paycor raised USD 425.5 million in an initial public offering on the Nasdaq.
The company operates a subscription-based business model with paid plans starting at USD 99 per month per user. As of April 2021, the company serves more than 40,000 SMEs.
In FY2021, Paycor reported a GAAP loss per share of USD 0.66, coming in below analyst consensus expectations for a loss per share of USD 0.59. FY2021 revenue rose 7.6% year-over-year (YoY) to USD 352.8 million edging out analyst estimates for revenue of USD 350.7 million. The annual revenue was driven by a 43% YoY increase in total bookings which amounted to USD 115.1 million. Adjusted operating income rose marginally (+3.7%) YoY to USD 47.9 million, while adjusted net income amounted to USD 33.5 million (-4.4% YoY).
In Q1 FY2022, Paycor upgraded its full-year revenue guidance to between USD 402-406 million (implying a projected YoY revenue growth of 26.6%-27.8% in FY2022) from the USD 396-400 million guidance provided in the previous quarter.
Integrated HRM, Payroll, and Benefits Platforms:
Integrated Performance and Engagement Platforms:
The incumbent players in this space are well-established companies that have been providing human capital management (HCM) solutions for decades. All incumbents have a strong track record of establishing fully-fledged offerings. They also offer a diverse range of solutions, with a variety of customizable packages that cater to businesses of all sizes. All incumbents offer a cloud-based solution similar to those that up-and-coming startups offer.
The industry has seen consolidation, with a few large players making key acquisitions, both to solidify and diversify existing business segments as well as to support in-house solutions. Companies such as Automatic Data Processing (ADP), SAP, and Workday have made key acquisitions to strengthen their offerings, with a particular focus on workforce analytics, which has been identified as a new trend in HCM services. Workday has been particularly aggressive in its strategy, acquiring three companies that offer analytics in 2018.
Another focus has been on acquiring companies that cater to small and medium-sized enterprises (SMEs). Paychex, for instance, has deployed strong acquisition-driven strategies relative to other players in this area. Conversely, although mergers and acquisitions (M&A) activity is relatively mute from the likes of Oracle, they have developed relevant, comprehensive in-house solutions over time. Similarly, Microsoft entered the enterprise intranet space with the launch of “Viva” developed in-house in 2021.
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