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Paycom (PAYC) Beats Q4 Earnings & Revenue Estimates

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Paycom Software (PAYC - Free Report) reported better-than-anticipated fourth-quarter 2020 results on Wednesday. The online payroll and human resource technology provider’s adjusted earnings of 84 cents per share beat the Zacks Consensus Estimate of 81 cents but declined 2.3% year over year.

Revenues

The company generated revenues of $220.9 million, which increased 14.2% from the year-earlier period as well as surpassed the consensus mark of $213.9 million. This year-over-year increase was mainly driven by new client additions, which offset the negative impact of interest-rate cuts and lower headcounts at client offices.

In its earnings conference call, Paycom noted that lower headcounts at its pre-pandemic client offices resulted in $1.9-$2million weekly recurring revenue loss during the quarter. Moreover, the 150-basis-point interest-rate cut in March 2020 led to an additional weekly recurring revenue loss of $350,000.

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

Paycom Software, Inc. price-consensus-eps-surprise-chart | Paycom Software, Inc. Quote

Margins

Adjusted gross profit increased 14.5% from the year-ago period to $188.9 million. Further, adjusted gross margin expanded 20 basis points (bps) on a year-on-year basis to 85.5%.

Paycom Software’s adjusted EBITDA increased 7.2% year on year to $84.2 million. However, adjusted EBITDA margin shrunk 250 bps to 38.1%.

Balance Sheet & Cash Flow

Paycom Software exited 2020 with cash and cash equivalents of $151.7 million compared with the $133.7 million recorded in the prior year.

The company’s balance sheet comprises net long-term debt of $29.1 million compared with the previous year’s $30.9 million.

Cash from operations was $227.2 million in 2020, and the firm repurchased approximately $52 million worth of its common stock.

Guidance

For the first quarter, Paycom Software estimates revenues to lie between $270 million and $272 million. The Zacks Consensus Estimate is pegged at $268.6 million.

Management projects adjusted EBITDA in the range of $126 million to $128 million.

For 2021, the company forecasts revenues and adjusted EBITDA in the band of $1.009-$1.011 billion and $396-$398 million, respectively.

Zacks Rank and Key Picks

Paycom currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Shopify (SHOP - Free Report) , Zoom Video Communications (ZM - Free Report) and Apple (AAPL - Free Report) , all flaunting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Shopify, Zoom and Apple is currently pegged at 32.5%, 25% and 11.5%, respectively.

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