Here’s our initial take on Paycom Software’s (PAYC 1.81%) fourth-quarter financial report.
Key Metrics
Metric
Q4 2023
Q4 2024
Change
vs. Expectations
Total revenue
$434.6 million
$493.8 million
+14%
Beat
Adjusted earnings per share
$1.93
$2.32
+20%
Beat
Total client count
36,820
37,543
+2%
n/a
Recurring revenue
$406.1 million
$464.8 million
+14%
n/a
Paying Off for Paycom
Paycom Software’s fourth-quarter financial report showed incremental progress in the human capital management software specialist’s efforts to mount a turnaround. Revenue growth of 14% for the quarter helped Paycom close 2024 with 11% annual sales gains. Similarly, an impressive finish to 2024 on the profit front was responsible for Paycom seeing adjusted profit rise 3% for the full year. Gains in client counts and stored data were small but maintained some upward momentum.
Founder/CEO Chad Richison was pleased that the company’s strategic plan resulted in better results than expected to end 2024. The leader remains convinced that maximizing the level of automation in its software will be the key to its long-term success, and Richison recommitted Paycom to further investments in innovation and automation going forward.
Paycom did offer some views for 2025, and they suggested a further slowdown in growth. Revenue of between $2.015 billion and $2.035 billion would represent roughly 8% sales gains this year, with a roughly 9% increase in recurring revenue. Similarly, adjusted EBITDA of $820 million to $840 million would be about 6% to 8% higher than the final figure of $775.4 million for 2024.
Immediate Market Reaction
Paycom’s guidance was a bit below expectations, but the better numbers from the fourth quarter were enough to limit losses. The stock fell less than half a percent in the first hour of trading in the after-hours session late Wednesday afternoon.
Yet one sign of disappointment came from the stock’s volatility immediately after the release. Shares initially soared as much as 7%, only to fall by a similar percentage before recovering to roughly unchanged. That seems to indicate considerable uncertainty about Paycom’s future and whether the latest results are positive or negative.
What to Watch
Paycom routinely highlights its innovative automation, such as the award that its GONE software for handling employee requests for time off won recently. Paycom estimates that GONE generates a return on investment of more than 800% over a three-year period, largely from time that HR professionals save by not having to do automatable tasks.
There’s plenty of opportunity across nearly every industry for automation and technology to improve productivity. Paycom is looking for those potential gains, and investors hope that it will deliver them in a way that will benefit the company as well as its clients.
Helpful Resources
If you have done or seen any research on Paycom that would be of interest to Fool members, please share it in the comment section below!
Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Paycom Software. The Motley Fool has a disclosure policy.
GIPHY App Key not set. Please check settings