Paycom (PAYC) Q4 Earnings and Revenues Surpass Estimates
Paycom Software PAYC ended 2023 on a strong note by delivering solid fourth-quarter results, wherein both the top and bottom lines surpassed the Zacks Consensus Estimate and improved year over year.
The online payroll and human resource technology provider reported non-GAAP earnings of $1.93 per share in the fourth quarter, beating the Zacks Consensus Estimate of $1.78. The bottom line improved 11.56% from $1.73 per share reported in the year-ago quarter.
In the fourth quarter of 2023, Paycom reported revenues of $434.6 million, beating the consensus mark of $422.6 million. The top line improved 19.4% year over year. The top-line figure also surpassed management’s previous guidance of $420-$425 million, primarily driven by new logo wins, partially offset by a dip in cross-selling to the existing clients.
Paycom Software, Inc. Price, Consensus and EPS Surprise
Paycom Software, Inc. price-consensus-eps-surprise-chart | Paycom Software, Inc. Quote
Quarter in Detail
Paycom’s Recurring revenues (representing 98.3% of the total revenues) improved 17.4% to $427.3 million in the fourth quarter. Our estimate for the company’s Recurring revenues was pegged at $414.8 million.
The company’s revenues from the Implementation and Other segment improved to $7.3 million from $6.6 million in the year-ago quarter and contributed 1.7% to total sales. Our estimate for the division’s revenues was pegged at $7.7 million.
Adjusted gross profits climbed 15.8% from the year-ago period to $362 million. However, the adjusted gross margin contracted 100 basis points (bps) on a year-over-year basis to 83.3%.
Paycom’s adjusted EBITDA increased 7.7% year over year to $176.6 million. The adjusted EBITDA margin contracted 360 bps to 40.6%.
Balance Sheet & Cash Flow
Paycom exited the fourth quarter with cash and cash equivalents of $294 million compared with $484 million recorded in the previous quarter. In the fourth quarter, the company had no long-term debt, representing a decrease from the net long-term debt of $29 million in the previous quarter.
In the fourth quarter of 2023, PAYC generated an operating cash flow of approximately $134.5 million, paid out $21.5 million in dividends and bought back $212.9 million worth of its common stock. In 2023, the company generated an operating cash flow of approximately $485 million. During the year, it bought back shares worth $286.6 million and paid $64.8 million in dividend.
The company has $800 million remaining under its buyback authorization as of Dec 31, 2023. Paycom’s board has approved its upcoming quarterly dividend of 37.5 cents per share, payable in March 2024.
Guidance
For the first quarter of 2024, Paycom forecasts revenues in the range of $494-$497 million and expects adjusted EBITDA between $218 million and $222 million.
For 2024, PAYC forecasts revenues in the band of $1.860-$1.885 billion and expects adjusted EBITDA in the range of $720-$730 million.
Zacks Rank and Stocks to Consider
Currently, Paycom carries a Zacks Rank #3 (Hold). Shares of PAYC have plunged 38% in the past year.
Some better-ranked stocks from the broader technology sector are BlackLine BL, Arista Networks ANET and Dell Technologies DELL. While BlackLine and Arista Networks sport a Zacks Rank #1 (Strong Buy) each, DELL carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BlackLine’s fourth-quarter 2023 earnings has been revised by a penny northward to 55 cents per share in the past 30 days. Shares of BL have lost 18.9% in the past year.
The Zacks Consensus Estimate for Arista’s fourth-quarter 2023 earnings has been revised by a penny northward to $1.70 per share in the past 90 days. Shares of ANET have rallied 95.7% in the past year.
The Zacks Consensus Estimate for DELL fourth-quarter 2024 earnings per share has been revised northward to $1.73 in the past 30 days. Shares of DELL have surged 100.1% in the past year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Dell Technologies Inc. (DELL) : Free Stock Analysis Report
Arista Networks, Inc. (ANET) : Free Stock Analysis Report
Paycom Software, Inc. (PAYC) : Free Stock Analysis Report
BlackLine (BL) : Free Stock Analysis Report
