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Paycom (PAYC) Q4 Earnings and Revenues Surpass Estimates

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Paycom Software’s (PAYC - Free Report) fourth-quarter 2019 non-GAAP earnings per share came in at 86 cents, which surpassed the Zacks Consensus Estimate of 77 cents and also grew 41% year over year.

Further, the company generated revenues of $193 million, which increased 29% from the year-earlier period and also outpaced the Zacks Consensus Estimate of $191 million.

Robust new business wins and the company’s high-margin recurring revenue business drove results.

The company is benefiting from its differentiated employee strategy, measurement capabilities and comprehensive product offering.

Paycom’s differentiated product offering, Direct Data Exchange, for all Paycom Software clients is boosting customer addition. Further, the latest launch of Ask Here and Manager on-the-Go, both focusing on greater employee usage and efficiency, is a tailwind.

Moreover, the company’s top line received a 30% year-over-year positive impact in recurring revenues of $724.4 million, which comprises 98% of the total revenue base.

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 jumped 36.7% from the year-ago period to $165 million. The company’s adjusted gross margin expanded 100 basis points (bps) on a year-over-year basis to 85.3%.

Paycom Software’s adjusted EBITDA rose 36.7% year over year to $78.6 million. Adjusted EBITDA margin of 40.6% expanded 240 bps year over year.

Balance Sheet & Cash Flow

Paycom Software exited the fourth quarter with cash and cash equivalents of $133.7 million compared with $108.1 million in the sequential quarter.

The company’s balance sheet comprises long-term debt of $32.6 million compared with $33.1million sequentially.

Cash from operations was $47.8 million for the fourth quarter.

2019 Highlights

Paycom reported revenues of $737.7 million, representing growth of 30% year over year driven by new business wins.

Recurring revenues of $724.4 million grew 30% from the prior year, and constituted 98% of total revenues.

Paycom increased its annual revenue retention rate to 93%, up from 92% in 2018 and 91% for each of the preceding six years.

As of Dec 31, 2019, the company’s headcount stood at 3,765 employees.

Guidance

For first-quarter 2020, Paycom Software expects revenues in the range of $240-$242 million. The mid-point of $241 million is lower than the current Zacks Consensus Estimate of $247.4 million.

Adjusted EBITDA is estimated in the band of $113-$115 million.

Paycom Software raised forecasts for the full year. The company envisions revenues within $911-$913 million, up from $733-$735 million predicted earlier. The mid-point of the current guided range implies 24% improvement from the year-ago reported figure. The Zacks Consensus Estimate is pegged at $905.36 million.

Adjusted EBITDA is anticipated in the bracket of $384-$386 million, up from the earlier guidance of $311-$313 million.

Adjusted gross margin range is expected to remain at 85% to 86%.

Zacks Rank and Stocks to Consider

Paycom Software currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Perficient (PRFT - Free Report) , Applied Materials (AMAT - Free Report) and ManTech International Corporation (MANT - Free Report) , each flaunting 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 Perficient, Applied Materials and ManTech is currently pegged at 11.75%, 8.2% and 8%, respectively.

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