Paycom Software(US:PAYC)2024-10-30 20:10markdown [Financial Highlights](index=1&type=section&id=Financial%20Highlights) Paycom reported solid third-quarter 2024 results with total revenues of $451.9 million, an 11.2% increase year-over-year While GAAP Net Income saw a slight decrease to $73.3 million, Adjusted EBITDA grew to $171.3 million The company continued its capital return program, paying $21.0 million in dividends and repurchasing $44.0 million of common stock Q3 2024 Key Financial Metrics | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $451.9M | $406.3M | +11.2% | | GAAP Net Income | $73.3M | $75.2M | -2.5% | | GAAP Diluted EPS | $1.31 | $1.30 | +0.8% | | Adjusted EBITDA | $171.3M | $165.6M | +3.4% | | Non-GAAP Net Income | $93.4M | $102.4M | -8.8% | | Non-GAAP Diluted EPS | $1.67 | $1.77 | -5.6% | - Recurring revenues constituted **98.5%** of total revenues, growing **11.6%** from the prior year period to **$445.0 million**[2](index=2&type=chunk) - The company maintained a strong balance sheet with **$325.8 million** in cash and cash equivalents and **zero total debt** as of September 30, 2024[2](index=2&type=chunk) - During the third quarter, Paycom returned capital to shareholders by paying **$21.0 million** in cash dividends and repurchasing **303,245 shares** for **$44.0 million**[2](index=2&type=chunk) [Financial Outlook](index=1&type=section&id=Financial%20Outlook) Paycom provided its financial guidance for the fourth quarter and the full fiscal year ending December 31, 2024 The company anticipates total revenues for the full year to be in the range of $1.866 billion to $1.873 billion, with Adjusted EBITDA expected between $745 million and $752 million Q4 and Full Year 2024 Financial Guidance | Period | Metric | Guidance Range | | :--- | :--- | :--- | | **Q4 2024** | Total Revenues | $477M - $484M | | | Adjusted EBITDA | $184.5M - $191.5M | | **Full Year 2024** | Total Revenues | $1.866B - $1.873B | | | Adjusted EBITDA | $745M - $752M | - The company has not reconciled forward-looking Adjusted EBITDA to net income due to the uncertainty and potential variability of items such as depreciation, amortization, taxes, and stock-based compensation[4](index=4&type=chunk) [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) The unaudited consolidated financial statements detail Paycom's financial position and performance The balance sheet shows a decrease in total assets primarily due to a reduction in funds held for clients The income statement reflects revenue growth but also increased operating expenses The cash flow statement indicates positive cash from operations, offset by significant cash used in financing activities, including share repurchases and dividends [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of September 30, 2024, Paycom's balance sheet showed total assets of $3.49 billion, a decrease from $4.20 billion at year-end 2023 This change was primarily driven by a decrease in 'Funds held for clients' and the corresponding 'Client funds obligation' Cash and cash equivalents increased to $325.8 million, and the company remained debt-free Selected Balance Sheet Data (in thousands) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $325,757 | $294,025 | | Total current assets | $1,977,905 | $2,813,426 | | Total assets | $3,492,530 | $4,197,539 | | Client funds obligation | $1,439,648 | $2,328,076 | | Total liabilities | $2,027,878 | $2,894,503 | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) For the third quarter of 2024, Paycom generated total revenues of $451.9 million, up from $406.3 million in the same period last year Operating income increased to $104.9 million from $96.9 million However, a higher provision for income taxes led to a slight decrease in GAAP Net Income to $73.3 million, compared to $75.2 million in Q3 2023 Q3 Income Statement Highlights (in thousands) | Metric | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Total Revenues | $451,934 | $406,303 | | Total Operating Expenses | $347,060 | $309,402 | | Operating Income | $104,874 | $96,901 | | Net Income | $73,278 | $75,219 | | Diluted EPS | $1.31 | $1.30 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2024, net cash provided by operating activities was $373.5 million Investing activities provided $33.5 million, primarily from proceeds from investments held for clients Financing activities used $1.09 billion, largely due to a net decrease in client funds obligation ($888.4 million), common stock repurchases ($122.8 million), and dividend payments ($63.7 million) - Key cash flow movements for the first nine months of 2024 include: - Net cash from operating activities: **$373.5 million** - Net cash provided by investing activities: **$33.5 million** - Net cash used in financing activities: **$(1,089.3) million**[11](index=11&type=chunk) - Major uses of cash in financing activities for the nine-month period were stock repurchases (**$122.8 million**) and dividends paid (**$63.7 million**)[11](index=11&type=chunk) [Reconciliations of GAAP to Non-GAAP Financial Measures](index=9&type=section&id=Reconciliations%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) Paycom provides reconciliations for several non-GAAP financial measures, including Adjusted EBITDA and Non-GAAP Net Income, to their most directly comparable GAAP measures These adjustments primarily exclude non-cash stock-based compensation expense, depreciation, amortization, and taxes For Q3 2024, Net Income of $73.3 million was reconciled to an Adjusted EBITDA of $171.3 million and a Non-GAAP Net Income of $93.4 million Q3 2024 Net Income to Adjusted EBITDA Reconciliation (in thousands) | Line Item | Amount | | :--- | :--- | | Net income | $73,278 | | Interest expense | $789 | | Provision for income taxes | $35,036 | | Depreciation and amortization | $38,076 | | Non-cash stock-based compensation | $24,156 | | **Adjusted EBITDA** | **$171,335** | Q3 2024 Net Income to Non-GAAP Net Income Reconciliation (in thousands) | Line Item | Amount | | :--- | :--- | | Net income | $73,278 | | Non-cash stock-based compensation | $24,156 | | Income tax effect on adjustments | $(4,016) | | **Non-GAAP net income** | **$93,418** | - The company's Adjusted EBITDA margin was **37.9%** for Q3 2024, compared to **40.8%** in Q3 2023 The Gross Margin was **80.5%** in Q3 2024, down from **83.0%** in the prior year period[13](index=13&type=chunk)[17](index=17&type=chunk) [Other Information](index=2&type=section&id=Other%20Information) This section includes important disclosures regarding the company's use of non-GAAP financial measures, forward-looking statements, and general company information Paycom explains that non-GAAP metrics are used by management to assess core business performance and provide investors with greater transparency The forward-looking statements section outlines potential risks and uncertainties that could affect future results - Paycom uses non-GAAP financial measures like adjusted EBITDA and non-GAAP net income to supplement GAAP results, believing they provide greater transparency into core business operations and facilitate comparisons with peer companies[5](index=5&type=chunk) - The report contains forward-looking statements regarding business strategy, future operating results, and growth plans, which are based on currently available information and are subject to business and economic risks[8](index=8&type=chunk) - Paycom positions itself as a provider of easy-to-use HR and payroll technology, highlighting its industry-first solution, Beti®, which allows employees to do their own payroll[7](index=7&type=chunk)