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Why Is Paycom (PAYC) Down 2% Since Last Earnings Report?
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It has been about a month since the last earnings report for Paycom Software (PAYC - Free Report) . Shares have lost about 2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Paycom due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Paycom reported stronger-than-expected second-quarter 2023 results. The online payroll and human resource technology provider reported non-GAAP earnings of $1.62 per share in the second quarter, beating the Zacks Consensus Estimate of $1.60. The bottom line improved 28.6% from the $1.26 per share reported in the year-ago quarter.
In the second quarter of 2023, Paycom reported revenues of $401.1 million, beating the consensus mark of $398.2 million and improving 26.6% year over year. This year-over-year upside was primarily driven by strong demand, new business wins and the adoption of recent new product offerings.
Quarter in Detail
Paycom’s Recurring revenues (representing 98.4% of the total revenues) improved 26.6% to $394.5 million in the second quarter. Our estimates for the company’s Recurring revenues were pegged at $391.7 million.
The company’s revenues from the Implementation and Other segment improved to $6.6 million from $5.4 million in the year-ago quarter and contributed 1.6% to total sales. Our estimate for the division’s revenues was pegged at $6.6 million.
Adjusted gross profits climbed 25.1% from the year-ago period to $333.7 million. However, the adjusted gross margin contracted 100 basis points (bps) on a year-over-year basis to 83.2%.
Paycom’s adjusted EBITDA increased 30.9% year over year to $156.6 million. The adjusted EBITDA margin expanded 130 bps to 39%.
Balance Sheet & Cash Flow
Paycom exited the second quarter with cash and cash equivalents of $536.5 million compared with the $505.6 million recorded in the previous quarter. The company’s balance sheet comprised net long-term debt of $29 million, which remained flat sequentially.
In the second quarter of 2023, PAYC generated operating cash flow of approximately $106 million and paid out $21.7 million in dividends. During the first six months of 2023, the company generated operating cash flow of approximately $252 million.
The dividend paid during the second quarter was Paycom’s inaugural cash dividend payout. Concurrent with its first-quarter 2023 financial result announcement in May 2023, Paycom revealed that its board of directors approved a cash dividend, marking the company’s first-ever dividend policy. PAYC intends to pay out a quarterly cash dividend of 37.5 cents per share or $1.50 per share annually.
Raised FY23 Guidance
Buoyed by a better-than-expected second-quarter performance, Paycom raised guidance for the full-year 2023. The company now projects revenues between $1.715 billion and $1.717 billion, up from the earlier range of $1.713-$1.715 billion. The forecast range for adjusted EBITDA was raised to $722-$724 million from the $717-$719 million band anticipated previously.
For the third quarter of 2023, Paycom forecasts revenues and adjusted EBITDA in the ranges of $410-$412 million and $156-$158 million, respectively.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Paycom has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Paycom has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Paycom (PAYC) Down 2% Since Last Earnings Report?
It has been about a month since the last earnings report for Paycom Software (PAYC - Free Report) . Shares have lost about 2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Paycom due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Paycom Beats Q2 Earnings Estimates, Raises FY23 View
Paycom reported stronger-than-expected second-quarter 2023 results. The online payroll and human resource technology provider reported non-GAAP earnings of $1.62 per share in the second quarter, beating the Zacks Consensus Estimate of $1.60. The bottom line improved 28.6% from the $1.26 per share reported in the year-ago quarter.
In the second quarter of 2023, Paycom reported revenues of $401.1 million, beating the consensus mark of $398.2 million and improving 26.6% year over year. This year-over-year upside was primarily driven by strong demand, new business wins and the adoption of recent new product offerings.
Quarter in Detail
Paycom’s Recurring revenues (representing 98.4% of the total revenues) improved 26.6% to $394.5 million in the second quarter. Our estimates for the company’s Recurring revenues were pegged at $391.7 million.
The company’s revenues from the Implementation and Other segment improved to $6.6 million from $5.4 million in the year-ago quarter and contributed 1.6% to total sales. Our estimate for the division’s revenues was pegged at $6.6 million.
Adjusted gross profits climbed 25.1% from the year-ago period to $333.7 million. However, the adjusted gross margin contracted 100 basis points (bps) on a year-over-year basis to 83.2%.
Paycom’s adjusted EBITDA increased 30.9% year over year to $156.6 million. The adjusted EBITDA margin expanded 130 bps to 39%.
Balance Sheet & Cash Flow
Paycom exited the second quarter with cash and cash equivalents of $536.5 million compared with the $505.6 million recorded in the previous quarter. The company’s balance sheet comprised net long-term debt of $29 million, which remained flat sequentially.
In the second quarter of 2023, PAYC generated operating cash flow of approximately $106 million and paid out $21.7 million in dividends. During the first six months of 2023, the company generated operating cash flow of approximately $252 million.
The dividend paid during the second quarter was Paycom’s inaugural cash dividend payout. Concurrent with its first-quarter 2023 financial result announcement in May 2023, Paycom revealed that its board of directors approved a cash dividend, marking the company’s first-ever dividend policy. PAYC intends to pay out a quarterly cash dividend of 37.5 cents per share or $1.50 per share annually.
Raised FY23 Guidance
Buoyed by a better-than-expected second-quarter performance, Paycom raised guidance for the full-year 2023. The company now projects revenues between $1.715 billion and $1.717 billion, up from the earlier range of $1.713-$1.715 billion. The forecast range for adjusted EBITDA was raised to $722-$724 million from the $717-$719 million band anticipated previously.
For the third quarter of 2023, Paycom forecasts revenues and adjusted EBITDA in the ranges of $410-$412 million and $156-$158 million, respectively.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Paycom has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Paycom has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.