12281

Paycor (NASDAQ:PYCR) Reports Strong Q4, Guides For 19.4% Growth Next Year


Jabin Bastian /
2022/08/23 4:20 pm EDT
Add to Watchlist

Online payroll and human resource software provider Paycor (NASDAQ:PYCR) reported Q4 FY2022 results beating Wall St's expectations, with revenue up 26.1% year on year to $110.9 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $113 million at the midpoint, 4.18% above what analysts were expecting. Paycor made a GAAP loss of $23.8 million, improving on its loss of $26.2 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) Q4 FY2022 Highlights:

  • Revenue: $110.9 million vs analyst estimates of $103.4 million (7.26% beat)
  • EPS (non-GAAP): $0.04 vs analyst estimates of $0.02 ($0.02 beat)
  • Revenue guidance for Q1 2023 is $113 million at the midpoint, above analyst estimates of $108.4 million
  • Management's revenue guidance for upcoming financial year 2023 is $513 million at the midpoint, beating analyst estimates by 4.67% and predicting 19.4% growth (vs 21.5% in FY2022)
  • Free cash flow of $4.46 million, down 79.1% from previous quarter
  • Gross Margin (GAAP): 63.6%, up from 52.3% same quarter last year

“We completed our first year as a public company with accelerated revenue growth of 26% for the quarter and 22% for the year,” 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 $88 million, to $110.9 million.

Paycor Total Revenue

This quarter, Paycor's quarterly revenue was once again up a very solid 26.1% year on year. But the revenue actually decreased by $11.6 million in Q4, compared to $19.5 million increase in Q3 2022. However, Paycor's sales do seem to have a seasonal pattern to them, and since management is guiding for revenue to rebound in the coming quarter we wouldn't be too concerned.

Guidance for the next quarter indicates Paycor is expecting revenue to grow 21.8% year on year to $113 million, improving on the 17.2% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $513 million at the midpoint, growing 19.4% compared to 21.5% increase in FY2022.

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.

Profitability

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 63.6% in Q4.

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 it has dropped significantly from the previous quarter, which is probably the opposite of what shareholders would like it to do.

Key Takeaways from Paycor's Q4 Results

With a market capitalization of $5.34 billion Paycor is among smaller companies, but its more than $133 million in cash and the fact it is operating close to free cash flow break-even put it in a robust financial position to invest in growth.

We were impressed by the very optimistic revenue outlook Paycor provided for the rest of the year. And we were also excited to see that it outperformed Wall St’s revenue expectations. Zooming out, we think this impressive quarter should have shareholders feeling very positive. The company is up 3% on the results and currently trades at $31.85 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.