U.S. Markets open in 5 mins

Paycom (PAYC) Q4 Earnings Top Estimates, '19 View Upbeat

Zacks Equity Research

Paycom Software’s PAYC fourth-quarter 2018 non-GAAP earnings per share came in at 61 cents per share, which surpassed the Zacks Consensus Estimate of 56 cents. Adjusted earnings per share in the year-ago period were 90 cents.

Paycom Software generated revenues of $150.3 million, surging 32% from the year-earlier period and also outpaced the Zacks Consensus Estimate of $144 million, driven by new business wins. Robust adoption of enhanced HCM software solutions across industries and geographies is a key catalyst.

Moreover, revenues were positively by a 32% year-over-year increase in recurring revenues, which comprised around 98% of total revenues.

The better-than-expected earnings coupled with a bullish guidance by the management for the first quarter of 2019 and full year are expected to buoy investor confidence in the stock.

Notably, shares of Paycom have soared 81.3% in the past year, substantially outperforming the industry’s growth of 17.4%.




Adjusted gross profit jumped 32.5% from the year-ago period to $126.7 million. The company’s adjusted gross margin expanded 50 basis points (bps) on a year-over-year basis to 84.3%.

As a percentage of revenues, total adjusted administration expenses, sales and marketing expenses plus research and development expenses of 52.1%, 27% and 8.3%, respectively, expanded 580 bps, 180 bps and 210 bps, each.

Paycom Software’s adjusted EBITDA rose 18.7% year over year to $57.5 million.

Balance Sheet & Cash Flow

Paycom Software exited the fourth quarter with cash and cash equivalents of $45.7 million compared with $85 million in the sequential quarter.

The company’s balance sheet comprises long-term debt of $34.4 million compared with $34.8 million sequentially.

Net cash provided by operating activities in the reported quarter was $39 million.

The company repurchased more than 500,000 shares in the quarter under review.

Paycom Software, Inc. Price, Consensus and EPS Surprise

Paycom Software, Inc. Price, Consensus and EPS Surprise | Paycom Software, Inc. Quote

Full-Year Highlights

Paycom Software reported 2018 non-GAAP earnings of $2.67 per share, up from $2.35 in the prior-year quarter. Revenues ascended 31% year over year to $566.3 million.

In 2018, Paycom Software’s recurring revenues contribute to 98% of its total revenues, which summed $557.3 million. Implementation and other revenues accounted for the remaining 2% of total revenues and came in at $9.08 million.

The company increased its annual client retention rate to 92% after posting the same at 91% over the last six consecutive years.

Paycom Software generated $184.8 million of cash from operating activities in 2018, up from $130.6 million generated in 2017.

During 2018, the company repurchased nearly 1 million shares including more than 900,000 shares purchased in the open market.


For first-quarter 2019, Paycom Software expects revenues in the range of $194-$196 million, higher than the current Zacks Consensus Estimate of $191.5 million.

Adjusted EBITDA is expected to be in the band of $97-$99 million.

Paycom Software provided forecasts for the full year. The company envisions revenues within $710-$712 million, which is again above the current Zacks Consensus Estimate of $696.3 million.

Adjusted EBITDA is estimated in the bracket of $288-$290 million.

The company predicts adjusted gross margin within 83-85%.

Zacks Rank and Other Stocks to Consider

Paycom Software currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the broader technology sector are Twitter, Inc. TWTR, MeetMe, Inc. MEET and Verint Systems Inc. VRNT, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Twitter, MeetME and Verint is projected at 22%, 20% and 10%, respectively.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>

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
Paycom Software, Inc. (PAYC) : Free Stock Analysis Report
Verint Systems Inc. (VRNT) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research