Paycom Software’s PAYC third-quarter 2019 non-GAAP earnings per share came in at 70 cents, which surpassed the Zacks Consensus Estimate of 69 cents and also grew 34% year over year.
Further, the company generated revenues of $175 million, surging 31% from the year-earlier period and also outpaced the Zacks Consensus Estimate of $172 million.
Robust new business wins and the company’s high-margin recurring revenue business drove results.
Strong sales growth can be attributed to its employee usage strategy, sales efforts and investments. The first-quarter launch of differentiated product offering, Direct Data Exchange, for all Paycom Software clients is boosting customer additions.
Moreover, the company’s top line received a 31% year-over-year positive impact in recurring revenues, which comprises 98% of the total revenue base.
The better-than-expected earnings coupled with management’s bullish guidance for the full year are expected to buoy investor confidence in the stock.
Notably, shares of Paycom Software have soared 70.8% year to date, substantially outperforming the industry’s growth of 14.5%.
Adjusted gross profit jumped 33.7% from the year-ago period to $148.6 million. The company’s adjusted gross margin expanded 170 basis points (bps) on a year-over-year basis to 85.3%.
As a percentage of revenues, total adjusted sales and marketing expenses, administrative expenses, and research and development expenses increased 30 bps to 26.7%, 80 bps to 53.9% and 180 bps to 10.3%, respectively.
Paycom Software’s adjusted EBITDA rose 35.3% year over year to $66.6 million. Adjusted EBITDA margin of 38% expanded 110 bps year over year.
Paycom Software, Inc. Price, Consensus and EPS Surprise
Paycom Software, Inc. price-consensus-eps-surprise-chart | Paycom Software, Inc. Quote
Balance Sheet & Cash Flow
Paycom Software exited the third quarter with cash and cash equivalents of $108.1 million compared with $94.8 million in the sequential quarter.
The company’s balance sheet comprises long-term debt of $33.1 million compared with $33.5 million sequentially.
Net cash provided by operating activities in the nine months ending Sep 30, 2019 was $176.4 million compared with $145.8 million in the year-ago period.
For fourth-quarter 2019, Paycom Software expects revenues in the range of $188.5-$190.5 million. The mid-point of $189.5 million is higher than the current Zacks Consensus Estimate of $188.68 million.
Adjusted EBITDA is estimated in the band of $72-$74 million.
Paycom Software raised forecasts for the full year. The company envisions revenues within $733-$735 million, up from $728-$730 million predicted earlier. The mid-point of the guided range implies 30% improvement from the year-ago reported figure. The Zacks Consensus Estimate is pegged at $729.46 million.
Adjusted EBITDA is anticipated in the bracket of $311-$313 million, up from the earlier guidance of $306-$308 million.
The company projects adjusted gross margin within 84-85% compared with 83-85% envisioned earlier.
Zacks Rank and Stocks to Consider
Paycom Software currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Benefitfocus BNFT, Five9, Inc. FIVN and NIC EGOV, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Benefitfocus, Five9 and NIC is currently estimated at 20%, 10% and 18%, respectively.
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