Looking back on HR software stocks' Q3 earnings, we examine this quarters’ best and worst performers, including Paychex (NASDAQ:PAYX) and its peers.
HR software benefits from dual trends around costs savings and ease of use. First is the SaaS-ification of businesses, large and small, who much prefer the flexibility of cloud-based, web-browser delivered software paid for on a subscription basis than the hassle and expense of purchasing and managing on-premise enterprise software. Second is the consumerization of business software, whereby multiple standalone processes like payroll processing and compliance are aggregated into a single, easy to use platforms.
The 6 HR software stocks we track reported a decent Q3; on average, revenues beat analyst consensus estimates by 3.29%, while on average next quarter revenue guidance was 5.13% above consensus. There has been a stampede out of high valuation technology stocks and HR software stocks have not been spared, with share price down 27% since earnings, on average.
One of the oldest payroll service providers, Paychex provides payroll and human resource (HR) solutions.
Paychex reported revenues of $1.1 billion, up 12.6% year on year, beating analyst expectations by 4.61%. It was a solid quarter for the company, with a decent beat of analyst estimates but a slower revenue growth.
Martin Mucci, Chairman and Chief Executive Officer, commented, “We posted strong financial results for the second quarter of fiscal 2022, with growth of 13% in total revenue and 21% in diluted earnings per share. Results were driven by growth in employees within our client base and continued strong sales growth and client retention.
Paychex scored the strongest analyst estimates beat of the whole group. The stock is down 1.6% since the results and currently trades at $124.41.
Best Q3: Asure Software (NASDAQ:ASUR)
Created from the merger of two small workforce management companies in 2007, Asure (NASDAQ:ASUR) provides cloud based payroll and HR software for small and medium-sized businesses (SMBs).
Asure Software reported revenues of $17.9 million, up 12.2% year on year, beating analyst expectations by 4.24%. It was a very strong quarter for the company, with a very optimistic guidance for the next quarter and a full year guidance beating analysts' expectations.
Asure Software achieved the highest full year guidance raise but had the slowest revenue growth among its peers. The stock is down 23.5% since the results and currently trades at $7.42.
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Weakest Q3: Ceridian (NYSE:CDAY)
Founded in 1992 as an outsourced payroll processor and transformed after the 2012 acquisition of Dayforce, Ceridian (NYSE:CDAY) is a provider of cloud based payroll and HR software targeted at mid-sized businesses.
Ceridian reported revenues of $257.2 million, up 25.8% year on year, beating analyst expectations by 1.19%. It was a slower quarter for the company, with a decline in gross margin and decelerating customer growth.
Ceridian had the weakest performance against analyst estimates and weakest full year guidance update in the group. The company added 63 customers to a total of 5,227. The stock is down 35.4% since the results and currently trades at $82.83.
Found in 1990 in Cincinnati, Ohio Paycor (NASDAQ: PYCR), provides software for small businesses to manage their payroll and HR needs in one place.
Paycor reported revenues of $92.7 million, up 17.2% year on year, beating analyst expectations by 2.93%. It was a decent quarter for the company, with a strong sales guidance for the next quarter.
The stock is down 29.8% since the results and currently trades at $24.26.
Founded by payroll software veteran Steve Sarowitz in 1997, Paylocity (NASDAQ:PCTY) is a provider of payroll and human resources software for small and medium-sized enterprises.
Paylocity reported revenues of $181.6 million, up 33.8% year on year, beating analyst expectations by 4.43%. It was a strong quarter for the company, with a full year guidance beating analysts' expectations.
Paylocity delivered the fastest revenue growth among the peers. The stock is down 32.5% since the results and currently trades at $195.99.
The author has no position in any of the stocks mentioned