Paycor (NASDAQ:PYCR) Q2 Sales Beat Estimates, Provides Optimistic Full Year Guidance

Jabin Bastian /
2022/02/03 4:31 pm EST
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Online payroll and human resource software provider Paycor (NASDAQ:PYCR) reported Q2 FY2022 results that beat analyst expectations, with revenue up 20% year on year to $103 million. Guidance for next quarter's revenue was $117.5 million at the midpoint, 2.77% above the average of analyst estimates. Paycor made a GAAP loss of $25.4 million, down on its loss of $16.8 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) Q2 FY2022 Highlights:

  • Revenue: $103 million vs analyst estimates of $99.5 million (3.56% beat)
  • EPS (non-GAAP): $0.05 vs analyst estimates of $0.03 (45.7% beat)
  • Revenue guidance for Q3 2022 is $117.5 million at the midpoint, above analyst estimates of $114.3 million
  • The company lifted revenue guidance for the full year, from $404 million to $413 million at the midpoint, a 2.22% increase
  • Free cash flow was negative $16.1 million, compared to negative free cash flow of $18.2 million in previous quarter
  • Gross Margin (GAAP): 60.1%, up from 57.1% same quarter last year

“Paycor posted strong second quarter results, demonstrated by 20% revenue growth and robust bookings performance,” 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 moderate over the last year, growing from quarterly revenue of $85.8 million, to $103 million.

Paycor Total Revenue

This quarter, Paycor's quarterly revenue was up a very solid 20% year on year, which is above average for the company. On top of that, revenue increased $10.3 million quarter on quarter, a very strong improvement on the $4.71 million increase in Q1 2022, which shows re-acceleration of growth, and is great to see.

Guidance for the next quarter indicates Paycor is expecting revenue to grow 17.6% year on year to $117.5 million, improving on the 4.13% 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 12.7% 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 60.1% in Q2.

Paycor Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.60 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 Q2 Results

Paycor' revenue guidance for the next quarter looks quite a bit better than what the analysts were expecting. And we were also excited to see that it outperformed analysts' revenue expectations. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is flat on the results and currently trades at $25.07 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.