Paycor's (NASDAQ:PYCR) Q3 Sales Top Estimates, Gross Margin Improves

Jabin Bastian /
2023/05/10 4:23 pm EDT

Online payroll and human resource software provider Paycor (NASDAQ:PYCR) beat analyst expectations in Q3 FY2023 quarter, with revenue up 31.7% year on year to $161.5 million. The company expects that next quarter's revenue would be around $136 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. Paycor made a GAAP loss of $7.34 million, improving on its loss of $16.7 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 FY2023 Highlights:

  • Revenue: $161.5 million vs analyst estimates of $156.1 million (3.45% beat)
  • EPS (non-GAAP): $0.18 vs analyst estimates of $0.15 (18.6% beat)
  • Revenue guidance for Q4 2023 is $136 million at the midpoint, roughly in line with what analysts were expecting
  • Free cash flow of $22.3 million, up from $3.31 million in previous quarter
  • Gross Margin (GAAP): 69.5%, up from 66.4% same quarter last year

“Paycor posted robust 32% revenue growth year-over-year, reflecting continued strong demand for our innovative HCM suite and consistent execution of our go to market strategy as we expand nationally,” 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 quarterly revenue of $99.8 million in Q3 FY2021, to $161.5 million.

Paycor Total Revenue

This was a standout quarter for Paycor, with the quarterly revenue up 31.7% year on year, which is above the trend for the company. On top of that, revenue increased $28.6 million quarter on quarter, a very strong improvement on the $14.6 million increase in Q2 2023, and a sign of re-acceleration of growth.

Guidance for the next quarter indicates Paycor is expecting revenue to grow 22.5% year on year to $136 million, slowing down from the 26.1% 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 18% 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 69.5% in Q3.

Paycor Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.69 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

With a market capitalization of $3.97 billion Paycor is among smaller companies, but its more than $82.9 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

Paycor reported a "beat and raise" quarter where revenue and operating profit both beat and the company raised full year guidance both those metrics as well. We were impressed by the strong improvements in Paycor’s gross margin this quarter. And we were also glad to see good revenue growth. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is flat on the results and currently trades at $22.75 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.