Paycor (NASDAQ:PYCR) Beats Q4 Sales Targets But Stock Drops

Radek Strnad /
2023/08/16 4:21 pm EDT

Online payroll and human resource software provider Paycor (NASDAQ:PYCR) reported Q4 FY2023 results topping analysts' expectations, with revenue up 26.2% year on year to $140 million. However, next quarter's revenue guidance of $139 million was less impressive, coming in 2.48% below analysts' estimates. Paycor made a GAAP loss of $29.4 million, down from its loss of $23.8 million in the same quarter last year.

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Paycor (PYCR) Q4 FY2023 Highlights:

  • Revenue: $140 million vs analyst estimates of $136.5 million (2.59% beat)
  • EPS (non-GAAP): $0.08 vs analyst estimates of $0.06 (30.9% beat)
  • Revenue Guidance for Q1 2024 is $139 million at the midpoint, below analyst estimates of $142.5 million
  • Management's revenue guidance for the upcoming financial year 2024 is $647 million at the midpoint, missing analyst estimates by 0.2% and implying 17.1% growth (vs 28.6% in FY2023)
  • Free Cash Flow of $30 million, down 12.4% from the previous quarter
  • Gross Margin (GAAP): 65.4%, up from 63.7% in the same quarter last year

“Paycor delivered strong revenue growth of 26% for the quarter and 29% for the year, driven by continued robust demand for our open, modern HCM solution,” 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 strong over the last two years, growing from $88 million in Q4 FY2021 to $140 million this quarter.

Paycor Total Revenue

This quarter, Paycor's quarterly revenue was once again up a very solid 26.2% year on year. However, the company's revenue actually decreased by $21.4 million in Q4 compared to the $28.6 million increase in Q3 2023. This situation is worth monitoring as Paycor's sales have historically followed a seasonal pattern but management is guiding for a further revenue drop in the next quarter.

Next quarter's guidance suggests that Paycor is expecting revenue to grow 17.5% year on year to $139 million, slowing down from the 27.6% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $647 million at the midpoint, growing 17.1% year on year compared to the 28.7% increase in FY2023.

While most things went back to how they were before the pandemic, a few consumer habits fundamentally changed. One founder-led company is benefiting massively from this shift and is set to beat the market for years to come. The business has grown astonishingly fast, with 40%+ free cash flow margins, and its fundamentals are undoubtedly best-in-class. Still, its total addressable market is so big that the company has room to grow many times in size. 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's left after paying for servers, licenses, technical support, and other necessary running expenses, was 65.4% in Q4.

Paycor Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.65 left to spend on developing new products, sales and marketing, and general administrative overhead. Paycor's gross margin is poor for a SaaS business and it's dropped significantly since the previous quarter. This is probably the exact opposite of what shareholders would like to see.

Key Takeaways from Paycor's Q4 Results

Sporting a market capitalization of $4.05 billion, Paycor is among smaller companies, but its more than $95.2 million in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.

It was good to see Paycor beat analysts' revenue and adjusted operating profit expectations this quarter. That really stood out as a positive in these results. On the other hand, its revenue guidance for next year suggests a significant slowdown in demand and its revenue guidance for next quarter also missed Wall Street's estimates. Additionally, next quarter's adjusted operating profit guide was also below expectations. Overall, this was a mixed quarter for Paycor, with the outlook weighing on shares. The company is down 8.18% on the results and currently trades at $21 per share.

Paycor may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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