Paycor (NASDAQ:PYCR) Posts Better-Than-Expected Sales In Q3, Provides Optimistic Full Year Guidance

Radek Strnad /
2022/05/05 4:38 pm EDT
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Online payroll and human resource software provider Paycor (NASDAQ:PYCR) reported Q3 FY2022 results that beat analyst expectations, with revenue up 22.7% year on year to $122.5 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $103.5 million at the midpoint, 3.09% above what analysts were expecting. Paycor made a GAAP loss of $16.6 million, down on its loss of $12 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) Q3 FY2022 Highlights:

  • Revenue: $122.5 million vs analyst estimates of $117.6 million (4.21% beat)
  • EPS (non-GAAP): $0.11 vs analyst estimates of $0.09 (19.5% beat)
  • Revenue guidance for Q4 2022 is $103.5 million at the midpoint, above analyst estimates of $100.3 million
  • Free cash flow of $21.4 million, up from negative free cash flow of $16.1 million in previous quarter
  • Gross Margin (GAAP): 66.4%, up from 58.7% same quarter last year

“Paycor delivered impressive revenue growth of 23% year-over-year, fueled by continued strong client growth,” 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 year, growing from quarterly revenue of $99.8 million, to $122.5 million.

Paycor Total Revenue

This quarter, Paycor's quarterly revenue was once again up a very solid 22.7% year on year. On top of that, revenue increased $19.5 million quarter on quarter, a very strong improvement on the $10.3 million increase in Q2 2022, which shows re-acceleration of growth, and is great to see.

Guidance for the next quarter indicates Paycor is expecting revenue to grow 17.5% year on year to $103.5 million, slowing down from the 19.9% 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 13.7% over the next twelve months.

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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 66.4% in Q3.

Paycor Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.66 left to spend on developing new products, marketing & sales and the general administrative overhead. While it improved significantly from the previous quarter this would still be considered a low gross margin for a SaaS company and we would like to see the improvements continue.

Key Takeaways from Paycor's Q3 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on Paycor’s balance sheet, but we note that with a market capitalization of $4.73 billion and more than $134 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We enjoyed the positive outlook Paycor provided for the next quarter’s revenue. And we were also excited to see that it outperformed Wall St’s revenue expectations. Overall, we think this was a strong quarter, that should leave many shareholders feeling positive. The company is flat on the results and currently trades at $26.36 per share.

Should you invest in Paycor 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.

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