Core Insights - Paycom Software reported strong fourth-quarter earnings, with revenue reaching $493.8 million, surpassing both management guidance and analyst consensus [2][3] - Adjusted EPS for Q4 was $2.32, significantly higher than the projected $1.97, reflecting a 20% year-over-year increase [3][8] - Despite revenue growth, client count growth remained flat, with a modest 2% increase in total clients to 37,543 [7] Financial Performance - Revenue for Q4 2024 was $493.8 million, a 13.6% increase from $434.6 million in Q4 2023 [3] - Adjusted EBITDA reached $214.9 million, exceeding internal guidance and showing a 22% increase from $176.6 million in the previous year [3][6] - Adjusted net income rose by 18% year-over-year to $130.1 million [3][8] Business Overview - Paycom provides an all-in-one cloud-based human capital management (HCM) solution, integrating various HR processes into a single platform [4] - The company focuses on innovation, recently launching products like Beti to simplify payroll processes [4][6] - Paycom's market strategy includes targeting larger enterprises and expanding into new cities, supported by high client retention rates [5][7] Market Presence and Client Dynamics - New sales offices were opened in Los Angeles, Raleigh, and Providence, enhancing market presence [7] - The company achieved a 90% annual revenue retention rate, indicating strong customer satisfaction [7] Future Outlook - Management projects revenue growth of 8% to 9% for 2025, estimating revenues between $2.015 billion and $2.035 billion [10][11] - Adjusted EBITDA is expected to be in the range of $820 million to $840 million, indicating a strong profitability trajectory [11] - The company plans to enhance automation and expand market penetration capabilities, with a focus on R&D for advanced HR solutions [12]

Financial Performance - Full Year Revenues reached $1,883 million, an increase of 11% year-over-year[1] - Fourth Quarter Revenues were $494 million, up 14% year-over-year[1] - GAAP Net Income for the Full Year was $502 million, or $8.92 per diluted share, compared to $340.8 million, or $5.88 per diluted share last year[6] - Adjusted EBITDA for the Full Year was $775 million, representing 41% of total revenues[1] - Total revenues for the year ended December 31, 2024, increased to $1,883.2 million, up 11.2% from $1,693.7 million in 2023[26] - Net income for the year ended December 31, 2024, reached $502.0 million, representing a 47.2% increase compared to $340.8 million in 2023[26] - Net income for Q4 2024 was $113.6 million, up 39% from $81.8 million in Q4 2023, with a full-year net income of $502.0 million compared to $340.8 million in 2023[32] - Adjusted EBITDA for Q4 2024 reached $214.9 million, a 21.7% increase from $176.6 million in Q4 2023, with a full-year adjusted EBITDA of $775.4 million, up from $719.3 million[32] - Total revenues for Q4 2024 were $493.8 million, representing a 13.5% increase from $434.6 million in Q4 2023, with full-year revenues of $1,883.2 million compared to $1,693.7 million in 2023[33] Client and Revenue Metrics - Total client count as of December 31, 2024, was 37,543, a 2% increase from the prior year[10] - Annual revenue retention rate for 2024 was 90%, consistent with the prior year[10] - Expected Total Revenue for 2025 is projected to be between $2.015 billion and $2.035 billion, approximately 8% growth at the midpoint[12] - Recurring and other revenue growth for 2025 is anticipated to be approximately 9% year-over-year[12] Cash and Assets - Cash and Cash Equivalents as of December 31, 2024, were $402 million, up from $294 million as of December 31, 2023[5] - Cash and cash equivalents at the end of 2024 were $402.0 million, up from $294.0 million at the end of 2023, reflecting a 36.8% increase[30] - Total assets grew to $5,859.9 million as of December 31, 2024, compared to $4,197.5 million in 2023, marking a 39.6% increase[24] - Net cash provided by operating activities for the year ended December 31, 2024, was $533.9 million, compared to $485.0 million in 2023, an increase of 10.1%[28] Expenses and Liabilities - Research and development expenses for the year ended December 31, 2024, were $242.6 million, up from $199.0 million in 2023, reflecting a 21.8% increase[26] - The company’s total liabilities increased to $4,284.0 million in 2024 from $2,894.5 million in 2023, a rise of 48.0%[24] - Total administrative expenses for Q4 2024 were $261.7 million, up from $253.2 million in Q4 2023, with adjusted total administrative expenses as a percentage of revenues at 48.9% compared to 51.0% in Q4 2023[33] Earnings and Margins - Earnings per share (diluted) for the year ended December 31, 2024, were $8.92, compared to $5.88 in 2023, an increase of 51.8%[26] - Basic earnings per share for Q4 2024 was $2.03, an increase from $1.43 in Q4 2023, with full-year earnings per share of $8.93 compared to $5.91 in 2023[32] - The net income margin improved to 23.0% in Q4 2024 from 18.8% in Q4 2023, while the adjusted EBITDA margin increased to 43.5% from 40.6%[32] - The company reported a gross margin of 83.1% in Q4 2024, slightly up from 82.8% in Q4 2023, with an adjusted gross margin of 83.6% compared to 83.3%[33] Research and Development - Adjusted research and development expenses for the year ended December 31, 2024, were $216.3 million, up 22.4% from $176.7 million in 2023[34] - Total research and development costs as a percentage of revenues increased to 19.6% for the year ended December 31, 2024, from 17.5% in 2023[34] - Capitalized research and development costs for the year ended December 31, 2024, were $125.7 million, an increase of 30.0% from $96.7 million in 2023[34] - Total research and development expenses for the three months ended December 31, 2024, were $66.7 million, compared to $55.3 million in the same period of 2023, representing a 20.3% increase[34]

Core Viewpoint - Paycom Software, Inc. is expected to report strong fourth-quarter results driven by growth in recurring revenues and AI-driven product innovations, despite potential headwinds from macroeconomic factors. Financial Performance - Anticipated fourth-quarter revenues are projected to be between $477 million and $484 million, with a consensus estimate of $481.1 million, reflecting a year-over-year increase of approximately 10.7% from $434.6 million [2] - The consensus estimate for earnings per share is $1.99, indicating a year-over-year increase of 3.1% [2] - Adjusted EBITDA is expected to range from $184.5 million to $191.5 million, suggesting an adjusted EBITDA margin of approximately 39.1% at the midpoint [3] Growth Drivers - Solid growth in recurring revenues is anticipated, driven by new client acquisitions and AI-driven product innovations [4] - The strategic push into AI-driven automation is expected to enhance the efficiency and attractiveness of Paycom's platform, contributing to a projected recurring revenue of $472.9 million, a 10.7% year-over-year increase [5] - Improvements in the Beti and GONE solutions are likely to increase client engagement and retention by simplifying payroll management and time-off requests [6] Challenges - Growth may be impacted by headcount reductions across Paycom's client base due to a weaker macroeconomic environment, which could affect transaction volumes and demand for payroll services [7] - Geopolitical tensions and economic uncertainty are expected to lead potential clients to delay or scale back investments in HR software, creating near-term revenue headwinds [7] Earnings Prediction - Current analysis does not predict a definitive earnings beat for Paycom, as it holds a Zacks Rank 4 (Sell) and an Earnings ESP of 0.00% [8]

Core Insights - The article discusses the author's background in analytics and accounting, highlighting over 10 years of experience in the investment arena, starting as an analyst and progressing to a management role [1]. Group 1 - The author holds a master's degree in Analytics from Northwestern University and a bachelor's degree in Accounting [1]. - The author has a personal interest in dividend investing and aims to share insights with the Seeking Alpha community [1].

Core Insights - Paycom Software (NYSE: PAYC) was previously experiencing a market decline, down by -15% over the two months leading up to January 2024, indicating a period of market skepticism towards the company [1] Group 1 - Paycom Software specializes in online payroll and HR software solutions [1]

Paycom Software (PAYC) shares have gained 21.7% in the past six months, outperforming the Zacks Computer Technology sector, Zacks Internet Software industry and the S&P 500’s return of 9.7%, 14.3% and 11.3%, respectively. Paycom’s outperformance reflects investors’ confidence in its innovative product line and back-to-back quarters of strong financial performance.Paycom’s revenues are driven by new client additions and a continued focus on cross-selling to existing clients. Its differentiated employee strat ...

Paycom Software, Inc. (NYSE: PAYC ) recently reported its Q3 earnings that were met very well by the investing community. I wanted to go over some of its numbers and give some comments on the company’sMSc in Finance. Long-term horizon investor mostly with 5-10 year horizon. I like to keep investing simple. I believe a portfolio should consist of a mix of growth, value, and dividend-paying stocks but usually end up looking for value more than anything. I also sell options from time to time.Analyst’s Disclosu ...

The company posted strong earnings for the third quarter.Shares of Paycom Software (PAYC 0.39%) jumped 25.5% in October, according to data from S&P Global Market Intelligence. The web-based HR and payroll management provider accelerated revenue growth in the third quarter as it continues to automate workloads for back-office functions. After collapsing earlier this summer, Paycom shares have shot up over 45% in recent months as investors get enthusiastic about the long-term software winner again.Here's why ...

Key TakeawaysShares of payroll and HR software provider Paycom Software surged 21% on Thursday, posting the biggest gain in the S&P 500.Paycom exceeded third-quarter sales and profit estimates as the strong labor market boosted demand for the company's workforce management services.With Thursday's gain, Paycom shares moved back into positive territory for 2024. Paycom Software (PAYC) shares skyrocketed 21% on Thursday, posting the top daily performance in the S&P 500, after the payroll and human resources s ...

Revenue and Growth - Revenue growth rate and annual revenue retention rate declined in 2023 and remained under pressure throughout 2024[63] - Recurring revenues increased to $445.0 million for the three months ended September 30, 2024, up 11.6% from $398.7 million in the same period in 2023[65] - Total revenues for the nine months ended September 30, 2024, were $1,389.3 million, a 10.3% increase from $1,259.1 million in the same period in 2023[65] - Adjusted EBITDA for Q3 2024 was $171.3 million, compared to $165.6 million in Q3 2023[91] - Net income for Q3 2024 was $73.3 million, compared to $75.2 million in Q3 2023[91] - Earnings per share (diluted) for Q3 2024 was $1.31, compared to $1.30 in Q3 2023[94] - Non-GAAP net income per share (diluted) for Q3 2024 was $1.67, compared to $1.77 in Q3 2023[94] Client and Market Expansion - The company expanded its target client size range to include organizations with more than 10,000 employees in 2023[63] - The company's Global HCM solution and expansion into international markets are expected to attract larger companies with global presence[63] - The company plans to open additional sales offices to further expand market presence[61] - The company's revenue is primarily generated through its sales force and client relations representatives[61] Financial Operations and Cash Flow - The company collects funds from clients in advance, typically disbursed within 1 to 30 days, with some funds held for up to 120 days[63] - The company's average funds held for clients balance and interest earned are expected to increase with new applications and client base expansion[63] - The average daily balance of funds held for clients was $2.4 billion for the nine months ended September 30, 2024, up from $2.2 billion in the same period in 2023[65] - Interest earned on corporate funds decreased to $4.2 million for the three months ended September 30, 2024, compared to $6.5 million in the same period in 2023[75] - Net cash provided by operating activities increased by 7% to $373.513 million for the nine months ended September 30, 2024, compared to $350.569 million in the same period in 2023[83] - Cash provided by investing activities increased by 125% to $33.538 million for the nine months ended September 30, 2024, compared to a negative $135.642 million in the same period in 2023[83] - Cash used in financing activities increased by 149% to $1.089 billion for the nine months ended September 30, 2024, compared to $437.693 million in the same period in 2023[83] - Corporate cash and cash equivalents as of September 30, 2024, totaled $325.8 million[96] - Funds held for clients cash and cash equivalents as of September 30, 2024, totaled $1.4 billion[96] Expenses and Costs - Operating expenses increased by $15.2 million for the three months ended September 30, 2024, primarily due to an $8.9 million increase in employee-related expenses[66] - Research and development expenses increased by $11.2 million for the three months ended September 30, 2024, driven by higher employee-related costs[68] - Capitalized portion of research and development costs increased by 26% to $33.4 million for the three months ended September 30, 2024, compared to $26.6 million in 2023[69] - General and administrative expenses decreased by $1.2 million for the three months ended September 30, 2024, due to a reduction in employee-related expenses[71] - Non-cash stock-based compensation expense decreased by 27% to $24.2 million for the three months ended September 30, 2024, compared to $33.2 million in 2023[72] - Depreciation and amortization expense increased due to the development of additional technology and the corporate headquarters expansion placed into service in April 2024[73] - Interest expense increased for the three and nine months ended September 30, 2024, due to the timing of the corporate headquarters expansion project[74] - Interest expense for Q3 2024 was $789,000, compared to $222,000 in Q3 2023[91] - Depreciation and amortization for Q3 2024 was $38.1 million, compared to $28.9 million in Q3 2023[91] - Non-cash stock-based compensation expense for Q3 2024 was $24.2 million, compared to $33.2 million in Q3 2023[91] Tax and Financial Commitments - The effective income tax rate for the nine months ended September 30, 2024, was 21.9%, down from 28.1% in the same period in 2023, primarily due to a tax benefit related to the forfeiture of the 2020 CEO Performance Award[76] - The company maintains a $1.0 billion senior secured revolving credit facility, with no outstanding borrowings as of September 30, 2024[77] - The stock repurchase plan was increased to $1.5 billion, with $1.49 billion available for repurchases as of September 30, 2024[78] - Quarterly cash dividends of $0.375 per share were declared, with total cash dividends paid amounting to $20.956 million for the quarter ended September 30, 2024[79][80] - The company repurchased 892,669 shares of common stock at an average cost of $153.70 per share during the nine months ended September 30, 2024[78] - The company committed to annual payments escalating from $4.0 million in 2021 to $6.1 million in 2035 for the naming rights to the Oklahoma City arena[82] Technology and Product Impact - The company's revenue is seasonal, with higher recurring revenues in the first and fourth quarters due to payroll tax filings and unscheduled payroll runs[63] - The company's Beti technology has reduced billable corrections and unscheduled payroll runs, impacting revenue[63] - The company's payroll application is the foundation of its solution, with all clients required to utilize it to access other applications[63]