Paycor (NASDAQ:PYCR) Beats Expectations in Strong Q1 But Stock Drops

Radek Strnad /
2022/11/02 4:31 pm EDT

Online payroll and human resource software provider Paycor (NASDAQ:PYCR) reported Q1 FY2023 results that beat analyst expectations, with revenue up 27.5% year on year to $118.3 million. Guidance for next quarter's revenue was $127 million at the midpoint, 2.51% above the average of analyst estimates. Paycor made a GAAP loss of $29 million, improving on its loss of $42 million, in the same quarter last year.

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

Paycor (PYCR) Q1 FY2023 Highlights:

  • Revenue: $118.3 million vs analyst estimates of $113.2 million (4.42% beat)
  • EPS (non-GAAP): $0.05 vs analyst estimates of $0.03 ($0.02 beat)
  • Revenue guidance for Q2 2023 is $127 million at the midpoint, above analyst estimates of $123.8 million
  • The company lifted revenue guidance for the full year, from $513 million to $531 million at the midpoint, a 3.5% increase
  • Free cash flow was negative $33.5 million, down from positive free cash flow of $12.5 million in previous quarter
  • Gross Margin (GAAP): 63.4%, up from 50.8% same quarter last year

“Paycor posted robust revenue growth of 28% year-over-year, driven by strong new client growth, cross-sales, and continued PEPM expansion,” said Raul Villar, Jr., Chief Executive Officer of Paycor.

Found in 1990 in Cincinnati, Ohio Paycor (NASDAQ: PYCR), provides software for small businesses to manage their payroll and HR needs in one place.

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.

Sales Growth

As you can see below, Paycor's revenue growth has been solid over the last two years, growing from quarterly revenue of $79 million in Q1 FY2021, to $118.3 million.

Paycor Total Revenue

This quarter, Paycor's quarterly revenue was once again up a very solid 27.5% year on year. On top of that, revenue increased $7.31 million quarter on quarter, a strong improvement on the $11.6 million decrease in Q4 2022, and a sign of acceleration of growth, which is very nice to see indeed.

Guidance for the next quarter indicates Paycor is expecting revenue to grow 23.2% year on year to $127 million, improving on the 20% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 17.5% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.


What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Paycor's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 63.4% in Q1.

Paycor Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.63 left to spend on developing new products, marketing & sales and the general administrative overhead. This would be considered a low gross margin for a SaaS company and we would like to see it start improving.

Key Takeaways from Paycor's Q1 Results

With a market capitalization of $5.13 billion Paycor is among smaller companies, but its more than $98.1 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We enjoyed Paycor's revenue forecast for the full year. And we were also excited to see that it outperformed Wall St’s revenue expectations this quarter. Overall, we think this was a really good quarter, that should leave shareholders feeling very positive. But the market is volatile following another interest rate hike and the company is down 5.03% on the results and currently trades at $26.2 per share.

Paycor may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.