It has been about a month since the last earnings report for Paycom Software, Inc. (PAYC - Free Report) . Shares have added about 4.8% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Paycom Software Q2 Earnings & Revenues Beat Estimates
Paycom Software reported better-than-expected second-quarter 2017 results.
The company’s non-GAAP earnings came in at $0.26 per share, which beat the Zacks Consensus Estimate of $0.20. Also, reported earnings increased from $0.21 earned in the year-ago quarter.
Paycom Software reported revenues of $98.2 million, which increased 32.9% from the year-ago quarter. Revenues also beat the Zacks Consensus Estimate of $96 million. The year-over-over increase was driven by the addition of new clients, new business wins and product development initiatives.
Moreover, revenues were impacted positively by 33% increase in recurring revenues and approximately 35% increase in implementation and other revenues on a year-over-year basis.
The company’s adjusted gross margin decreased 100 basis points (bps) on a year-over-year basis to 83%, primarily due to higher cost of sale.
Paycom Software’s adjusted EBITDA increased 22.9% year over year to $27 .8 million. Adjusted operating margins during the quarter came in 23.3% as compared with 26.1% reported in the year-ago quarter. As a percentage of revenues, total administration expenses increased to 59.7% during the quarter from 58.3% reported in the year-ago period.
Non-GAAP net income came in at $15.2 million compared with $12.4 million reported in the year-ago quarter.
Balance Sheet & Cash Flow
Paycom Software exited the second quarter with cash and cash equivalents of $68.1 million compared with $92.9 million in the previous quarter. Receivables were $1.8 million, flat quarter over quarter.
Paycom Software’s balance sheet comprises long-term debt of $33.5 million compared with $30.4 million reported in the previous quarter. The company reported cash flow from operations of $55.3 million during six months ended Jun 30, 2017.
During the quarter, the company repurchased approximately 460k shares as part of previously extended $50 million share repurchase program.
For third-quarter fiscal 2017, Paycom Software expects revenues in a range of $99–$101 million. Adjusted EBITDA is expected to be approximately in a range of $21–$23 million.
Paycom Software updated fiscal 2017 guidance. The company now anticipates revenues in a range of $429.5–$431.5 million (previously $426–$428 million). Adjusted EBITDA is now expected to be approximately in a range of $122.5–$124.5million (previously $117–$119 million).
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.
At this time, the stock has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for growth and momentum investors.
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.