Paycom Software, Inc., (NYSE: PAYC) commonly known as Paycom, is a leading American provider of online payroll and human resource technology. The company is headquartered in Oklahoma City, Oklahoma, and maintains a network of offices across the United States.
Paycom holds the distinction of being one of the pioneers in offering fully online payroll solutions. It has received recognition from esteemed publications such as Fortune and Forbes for its remarkable growth as a publicly traded company on a global scale.
In 2022, Fast Company acknowledged Paycom as one of the World’s Most Innovative Enterprise Companies.
Founded in 1998 by Chad Richison, who had prior experience in the payroll processing industry, Paycom initially operated as an online payroll service provider for businesses. Over time, it expanded its offerings to encompass a range of services, including human resource management, starting in 2001.
On April 15, 2014, Paycom marked a significant milestone by commencing trading on the New York Stock Exchange under the ticker symbol PAYC.
In 2011, Paycom relocated its headquarters to a new 90,000 square-foot office building while retaining its Oklahoma City base.
During the same year, the company introduced additional services such as E-Verify, onboarding, expense management, and document storage. In 2014, Paycom expanded its corporate facilities by adding a 90,000-square-foot extension to its headquarters, effectively doubling its office space.
Paycom Software Shares Plummet After Downbeat Revenue Forecast
Ahead of Wednesday’s trading session, Paycom Software witnessed a substantial decline in its stock value, shedding more than one-third of its worth. This drop followed the company’s announcement of a lackluster revenue forecast for the fourth quarter, reflecting persistent economic uncertainty.
In premarket trading, the stock was last seen at $157.75, marking a 35.6% decrease and potentially opening at its lowest levels since early 2019 if current levels are maintained. This decline is projected to erase more than $5 billion from the company’s market capitalization.
Post-market closure on Tuesday, Paycom Software revealed its expectations for fourth-quarter revenue to fall within the range of $420 million to $425 million. This projection fell short of analysts’ average estimate, which stood at $452.3 million, as per LSEG data.
In response to the situation, brokerage firm TD Cowen issued a note stating, “With higher uncertainty and lower visibility, we do not have a basis to recommend shares,” while also warning that trading in the stock might remain within a narrow range as investors seek more information regarding a potential recovery.
Paycom’s competitor, Ceridian HCM Holdings, also experienced a 4% decline in premarket trading.
PAYC Q3 Earnings Beat Estimates
Paycom Software (PAYC) has released its third-quarter fiscal 2023 results, which showed a mixed performance. The company surpassed the Zacks Consensus Estimate for non-GAAP earnings per share but fell short in terms of revenues.
In the third quarter, this provider of online payroll and human resource technology reported non-GAAP earnings of $1.77 per share, surpassing the Zacks Consensus Estimate of $1.62. This marks a notable 39.4% improvement from the $1.27 per share reported in the same period of the previous year.
However, in the third quarter of 2023, Paycom’s revenues amounted to $406.3 million, missing the consensus estimate of $411 million. Despite the miss, the top line exhibited a year-over-year growth of 21.6%. The revenue figure also fell short of the company’s earlier guidance of $410 million to $412 million, primarily due to weaker-than-anticipated service revenues and unscheduled payroll runs.
The majority of Paycom’s revenues, representing 98.1% of the total, came from recurring sources and amounted to $398.8 million in the third quarter, marking a 21.5% increase. This figure aligned closely with our estimates, which were set at $404 million.
Revenues from the Implementation and Other segment improved to $7.5 million, up from $6 million in the same quarter the previous year, contributing 1.9% to the total sales. Our estimates for this division’s revenues were set at $6.9 million.
Adjusted gross profits saw a 21.3% rise from the previous year to reach $340.2 million. However, the adjusted gross margin contracted by 20 basis points (bps) when compared to the same period last year, settling at 83.7%.
Paycom’s adjusted EBITDA grew by 23.7% year over year, reaching $165.6 million, and the adjusted EBITDA margin expanded by 310 bps to reach 40.8%.
As of the end of the third quarter, Paycom held cash and cash equivalents amounting to $484 million, compared to $536.5 million in the previous quarter. The company’s balance sheet showed net long-term debt of $29 million, which remained unchanged from the previous quarter.
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