Paycom's (NYSE:PAYC) Q4 Sales Top Estimates, Guidance for 2024 In Line With Expectations

Radek Strnad /
2024/02/07 4:18 pm EST

Online payroll and human resource software provider Paycom (NYSE:PAYC) reported Q4 FY2023 results topping analysts' expectations, with revenue up 17.3% year on year to $434.6 million. On the other hand, the company expects next quarter's revenue to be around $495.5 million, slightly below analysts' estimates. It made a non-GAAP profit of $1.93 per share, improving from its profit of $1.73 per share in the same quarter last year.

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Paycom (PAYC) Q4 FY2023 Highlights:

  • Revenue: $434.6 million vs analyst estimates of $422.3 million (2.9% beat)
  • EPS (non-GAAP): $1.93 vs analyst estimates of $1.78 (8.5% beat)
  • Revenue Guidance for Q1 2024 is $495.5 million at the midpoint, below analyst estimates of $499.6 million
  • Management's revenue guidance for the upcoming financial year 2024 is $1.87 billion at the midpoint, in line with analyst expectations and implying 10.6% growth (vs 23.3% in FY2023)
  • Free Cash Flow of $77.59 million, up 67.5% from the previous quarter
  • Gross Margin (GAAP): 82.8%, down from 87.2% in the same quarter last year
  • Market Capitalization: $11.41 billion

"I am proud of the way we closed 2023 with better-than-expected results, capping a year of outstanding product innovation and employee engagement," said Paycom's founder, Co-CEO and Chairman, Chad Richison.

Founded in 1998 as one of the first online payroll companies, Paycom (NYSE:PAYC) provides software for small and medium-sized businesses (SMBs) to manage their payroll and HR needs in one place.

HR Software

Modern HR software has two powerful benefits: cost savings and ease of use. For cost savings, businesses large and small much prefer the flexibility of cloud-based, web-browser-delivered software paid for on a subscription basis rather than the hassle and complexity of purchasing and managing on-premise enterprise software. On the usability side, the consumerization of business software creates seamless experiences whereby multiple standalone processes like payroll processing and compliance are aggregated into a single, easy-to-use platform.

Sales Growth

As you can see below, Paycom's revenue growth has been strong over the last two years, growing from $285 million in Q4 FY2021 to $434.6 million this quarter.

Paycom Total Revenue

This quarter, Paycom's quarterly revenue was once again up 17.3% year on year. We can see that Paycom's revenue increased by $28.29 million quarter on quarter, which is a solid improvement from the $5.16 million increase in Q3 2023. Shareholders should applaud the re-acceleration of growth.

Next quarter's guidance suggests that Paycom is expecting revenue to grow 9.7% year on year to $495.5 million, slowing down from the 27.8% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $1.87 billion at the midpoint, growing 10.6% year on year compared to the 23.2% increase in FY2023.

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Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Paycom's free cash flow came in at $77.59 million in Q4, down 11.6% year on year.

Paycom Free Cash Flow

Paycom has generated $292.5 million in free cash flow over the last 12 months, a solid 17.1% of revenue. This strong FCF margin stems from its asset-lite business model, giving it optionality and plenty of cash to reinvest in its business.

Key Takeaways from Paycom's Q4 Results

It was good to see Paycom beat analysts' revenue expectations this quarter. That 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 revenue guidance for next quarter missed Wall Street's estimates. Overall, this was a mixed quarter for Paycom. The company is down 4.5% on the results and currently trades at $190 per share.

Paycom may not have had the best quarter, but does that 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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