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HR Software Stocks Q1 Earnings Review: Paylocity (NASDAQ:PCTY) Shines


Adam Hejl /
2022/07/21 4:31 am EDT
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The end of an earnings season can be a great time to assess how companies are handling the current business environment and discover new stocks. Let’s have a look at how Paylocity (NASDAQ:PCTY) and the rest of the HR software stocks fared in Q1.

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 Q1; on average, revenues beat analyst consensus estimates by 2.82%, while on average next quarter revenue guidance was 1.31% above consensus. There has been a stampede out of high valuation technology stocks, but HR software stocks held their ground better than others, with the share price up 0.39% since earnings, on average.

Best Q1: Paylocity (NASDAQ:PCTY)

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 $245.9 million, up 32.2% year on year, beating analyst expectations by 1.79%. It was a very strong quarter for the company, with a significant improvement in gross margin and a solid top line growth.

“The momentum from our record setting selling season continued throughout the third quarter, with strong sales execution across our target market. Third quarter revenue growth was 32%, marking our third straight quarter with more than 30% revenue growth as our differentiated value proposition of providing the most modern software in the industry continues to resonate in the marketplace. In April we announced the release of Community Plus, which introduces new collaboration functionality, including one-to-one and one-to-many chat, the ability to create, edit, and share files, and the automated addition of employees to team groups as they join the company,” said Steve Beauchamp, Co-Chief Executive Officer of Paylocity.

Paylocity Total Revenue

Paylocity pulled off the fastest revenue growth of the whole group. The stock is up 3.9% since the results and currently trades at $196.44.

Is now the time to buy Paylocity? Access our full analysis of the earnings results here, it's free.

Paycom Software (NYSE:PAYC)

Founded in 1998 as one of the first online payroll companies. Today, Paycom (NYSE:PAYC) provides software for small and medium-sized businesses (SMBs) to manage their payroll and HR needs in one place.

Paycom Software reported revenues of $353.5 million, up 29.8% year on year, beating analyst expectations by 3%. It was a strong quarter for the company, with a significant improvement in gross margin and a very optimistic guidance for the next quarter.

Paycom Software Total Revenue

The stock is up 12.7% since the results and currently trades at $325.91.

Is now the time to buy Paycom Software? Access our full analysis of the earnings results here, it's free.

Weakest Q1: 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 $293.3 million, up 25% year on year, beating analyst expectations by 1.33%. 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 175 customers to a total of 5,609. The stock is down 9.37% since the results and currently trades at $55.12.

Read our full analysis of Ceridian's results here.

Paycor (NASDAQ:PYCR)

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 $122.5 million, up 22.7% year on year, beating analyst expectations by 4.21%. It was a strong quarter for the company, with a very optimistic guidance for the next quarter.

Paycor scored the strongest analyst estimates beat and highest full year guidance raise among the peers. The stock is up 0.98% since the results and currently trades at $26.70.

Read our full, actionable report on Paycor here, it's free.

Paychex (NASDAQ:PAYX)

One of the oldest payroll service providers, Paychex provides payroll and human resource (HR) solutions.

Paychex reported revenues of $1.14 billion, up 11.1% year on year, beating analyst expectations by 3.34%. It was a weak quarter for the company, with a decline in gross margin and a slow revenue growth.

Paychex had the slowest revenue growth among the peers. The stock is up 0.4% since the results and currently trades at $120.30.

Read our full, actionable report on Paychex here, it's free.

The author has no position in any of the stocks mentioned