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Paycom (PAYC) Q3 Earnings & Revenues Top Estimates, Up Y/Y

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Paycom Software (PAYC - Free Report) reported third-quarter 2021 results on Tuesday.  This online payroll and human resource technology provider’s adjusted earnings of 92 cents per share beat the Zacks Consensus Estimate by a penny and jumped 31.4% year over year.

Quarter in Detail

The company generated revenues of $256.2 million, which increased 30.4% from the year-earlier period and surpassed the consensus mark of $250.4 million as well. This year-over-year upswing was mainly driven by the new client additions and continued focus on cross selling to the existing clients.

The adjusted gross profit climbed 28.8% from the year-ago period to $214.8 million. However, the adjusted gross margin contracted 110 basis points (bps) on a year-on-year basis to 83.8%, mainly on the workforce returning to offices as well as aggressive hiring.

Paycom Software’s adjusted EBITDA increased 32.9% year on year to $89.7 million. However, the adjusted EBITDA margin shrunk 210 bps to 35.9% chiefly due to a lower gross margin and increased investments in sales & marketing and research & development.

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

Balance Sheet & Cash Flow

Paycom Software exited the third quarter with cash and cash equivalents of $230.9 million compared with the $202.4 million recorded in the previous quarter.

The company’s balance sheet comprises net long-term debt of $27.8 million compared with the previous quarter’s $28.3 million.

Cash from operations was $83.2 million in the quarter. During the first-half of 2021, it generated an operating cash flow of $229.6 million.

Guidance

Buoyed by the better-than-expected third-quarter performance, Paycom Software raised its revenue and adjusted EBITDA outlook for full-year 2021. The company now forecasts 2021 revenues between $1.045 billion and $1.047 billion, up from the previous range of $1.036-$1.038 billion. The adjusted EBITDA projection has now been revised upward to $413-$415 million from the $410-$412 million anticipated earlier.

For the fourth quarter, Paycom Software estimates revenues to lie between $274.5 million and $276.5 million. Management projects an adjusted EBITDA of $103-$105 million.

Zacks Rank & Stocks to Consider

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

Better-ranked stocks in the broader technology sector include Applied Materials (AMAT - Free Report) , Advanced Micro Devices (AMD - Free Report) and Perficient (PRFT - Free Report) , all carrying a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth rate for Applied Materials, Advanced Micro Devices and Perficient is currently pegged at 19.4%, 44.6% and 18%, respectively.