Yahoo Finance Paycor HCM Inc (PYCR) (Q3 2024) Earnings Call Transcript Highlights: Robust Growth Amidst ...
Revenue: $187 million, up 16% year-over-year.
Recurring Revenue Growth: 20% year-over-year excluding foreign filings.
Adjusted Operating Margin: Expanded by 130 basis points over the prior year.
PEPM (Per Employee Per Month): Increased to $53, up 20% year-over-year.
Employee Growth: 9% increase over the prior year.
Adjusted Gross Profit Margin: 80%, decreased by 30 basis points from the previous year.
Sales and Marketing Expense: $50 million, 26.7% of revenue.
R&D Expense: $25 million, 13% of revenue.
G&A Expense: $20 million, 10.8% of revenue.
Adjusted Operating Income: Increased more than 28% to $48 million.
Free Cash Flow: $28 million, 15% margin.
Interest Income: $15 million from average client funds of approximately $1.3 billion.
Q4 Revenue Guidance: Expected between $160 million and $162 million.
Full Year Revenue Guidance: Expected between $650 million and $652 million.
Full Year Adjusted Operating Income Guidance: Expected between $108 million and $109 million.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Revenue growth of 16% year-over-year, with recurring revenue growing by 20% excluding foreign filings.
Adjusted operating margins expanded by 130 basis points over the prior year.
Successful market penetration in larger SMB and enterprise segments with robust talent solutions.
Introduction of new product innovations like Core Space and Paycor Skills, enhancing the ATM suite.
Recognition as a top workplace and positive feedback at the inaugural Customer Conference, Paycor CONNECT+.
Negative Points
Year-end form filing revenues were lower than anticipated, representing a 3-point revenue growth headwind.
ERTC claim processing slowed significantly, impacting revenue growth by another 3 points.
Embedded HCM deals have long cycle times and the new partners signed are smaller in scope, impacting immediate revenue contributions.
Same-store sales growth continued slowing, contributing less than 0.5 point of revenue growth in the quarter.
Sales headcount growth is planned to moderate, which may impact the pace of market expansion.
Q & A Highlights
Q: Kevin Kumar from Goldman Sachs asked about the impact of embedded HCM deals on the guidance and the pipeline for these deals. A: Adam Brooks Ante, CFO of Paycor HCM, Inc., clarified that embedded HCM is not significantly impacting the guidance as the deals are large and take time to materialize. He mentioned that while some deals were signed this quarter, they are on the smaller side, which is expected as the program ramps up.
Q: Bhavin Shah from Deutsche Bank inquired about the rationale behind Paycor's revised sales coverage expansion and headcount growth targets. A: Raul Villar, CEO of Paycor HCM, Inc., explained that the company faced elevated churn due to structural issues within the organization, which led to a decision not to force hiring in the fourth quarter. He emphasized that the issue has been addressed, and the company expects to resume hiring at a rate of 15% to 20% in the future.
Q: Brad Reback from Stifel asked about the changes made to address sales force churn and their early success. A: Raul Villar discussed reverting to a previous organizational structure to reduce churn and improve retention. He noted that this change has already resulted in better retention after one month, although he cautioned that one month does not establish a trend.
Q: Scott Berg from Needham & Co. questioned the impact of various headwinds on the fourth-quarter guidance and how these might influence investment decisions for the next fiscal year. A: Adam Brooks Ante, CFO, highlighted that the guidance reflects lower expected revenue from ERTC and form filings, with a cautious outlook on macroeconomic factors potentially affecting same-store sales growth.
Q: Daniel Jester from BMO Capital Markets asked about customer feedback from Paycor's user conference and the most anticipated improvements. A: Raul Villar shared that customers are particularly excited about interoperability and the ability to integrate Paycor's system with other tools. He also noted the importance of customer success teams in helping clients optimize the use of Paycor's expanding product suite.
Q: Arti Vula from JPMorgan Chase & Co. inquired about the impact of same-store sales across different market segments. A: Adam Brooks Ante explained that same-store sales growth pressures are more distinct by industry rather than size, with certain sectors like food and beverage and manufacturing experiencing more significant slowdowns.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
