Wrapping up Q2 earnings, we look at the numbers and key takeaways for the HR software stocks, including Paylocity (NASDAQ:PCTY) and its peers.
Modern HR software has two powerful benefits: cost savings and ease of use. For cost savings, businesses large and small much prefer the flexibility of cloud-based, web-browser-delivered software paid for on a subscription basis rather than the hassle and complexity of purchasing and managing on-premise enterprise software. On the usability side, the consumerization of business software creates seamless experiences whereby multiple standalone processes like payroll processing and compliance are aggregated into a single, easy-to-use platform.
The 6 HR software stocks we track reported a slower Q2. As a group, revenues beat analysts’ consensus estimates by 0.7% while next quarter’s revenue guidance was 2.1% below.
Inflation progressed towards the Fed's 2% goal recently, leading the central bank to reduce its policy rate by 50bps (half a percent or 0.5%) in September 2024. This is the first cut in four years. While CPI (inflation) readings have been supportive as of late, employment measures bordered on worrisome. The markets will be assessing whether this rate cut (and more potential ones in 2024 and 2025) are ideal timing to support the economy or a bit too late for a macro that has already cooled too much.
Paylocity (NASDAQ:PCTY)
Founded by payroll software veteran Steve Sarowitz in 1997, Paylocity (NASDAQ:PCTY) is a provider of payroll and HR software for small and medium-sized enterprises.
Paylocity reported revenues of $357.3 million, up 15.8% year on year. This print exceeded analysts’ expectations by 2.1%. Despite the top-line beat, it was still a softer quarter for the company with management forecasting growth to slow and underwhelming revenue guidance for the next quarter.
“Our position as the most modern HCM provider drove strong financial results in fiscal 24, as we ended the year with 19% total revenue growth, 17% recurring & other revenue growth, and a significant increase in profitability. Our financial performance in fiscal 24 was supported by 8% year-over-year client growth to 39,050 clients, and 8% growth in average revenue per client – while also focusing on efficiency and productivity across our organization.” said Toby Williams, President and Co-Chief Executive Officer of Paylocity.
Paylocity delivered the weakest full-year guidance update of the whole group. Interestingly, the stock is up 8.4% since reporting and currently trades at $160.76.
Read our full report on Paylocity here, it’s free.
Best Q2: Paychex (NASDAQ:PAYX)
One of the oldest service providers in the industry, Paychex (NASDAQ:PAYX) offers its customers payroll and HR software solutions.
Paychex reported revenues of $1.30 billion, up 5.3% year on year, in line with analysts’ expectations. The business performed better than its peers, but overall it was a mixed quarter with a decline in its gross margin.
The market seems happy with the results as the stock is up 6.5% since reporting. It currently trades at $132.98.
Is now the time to buy Paychex? Access our full analysis of the earnings results here, it’s free.
Asure (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 reported revenues of $28.04 million, down 7.8% year on year, falling short of analysts’ expectations by 2%. It was a softer quarter as it posted a decline in its gross margin and full-year revenue guidance missing analysts’ expectations.
Asure delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 13.3% since the results and currently trades at $8.66.
Read our full analysis of Asure’s results here.
Paycom (NYSE:PAYC)
Founded in 1998 as one of the first online payroll companies, Paycom (NYSE:PAYC) provides software for small and medium-sized businesses (SMBs) to manage their payroll and HR needs in one place.
Paycom reported revenues of $437.5 million, up 9.1% year on year. This print was in line with analysts’ expectations. However, it was a softer quarter as it logged a decline in its gross margin and full-year revenue guidance missing analysts’ expectations.
The stock is up 3.3% since reporting and currently trades at $172.20.
Read our full, actionable report on Paycom here, it’s free.
Dayforce (NYSE:DAY)
Founded in 1992 as Ceridian, an outsourced payroll processor and transformed after the 2012 acquisition of Dayforce, Dayforce (NYSE:DAY) is a provider of cloud based payroll and HR software targeted at mid-sized businesses.
Dayforce reported revenues of $423.3 million, up 15.7% year on year. This result topped analysts’ expectations by 1.4%. Taking a step back, it was a softer quarter as it recorded a decline in its gross margin and decelerating customer growth.
Dayforce scored the highest full-year guidance raise among its peers. The company added 82 customers to reach a total of 6,657. The stock is up 10.2% since reporting and currently trades at $59.18.
Read our full, actionable report on Dayforce here, it’s free.
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