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Paycom's (PAYC) Q2 Earnings In Line, Revenues Climb Y/Y

Paycom Software PAYC recently reported mixed results for second-quarter 2020, wherein earnings came in line with the Zacks Consensus Estimate but revenues missed the same.

The company generated revenues of $181.6 million, which increased 7% from the year-earlier period but fell short of the consensus mark of $182.3 million. Paycom Software’s quarterly non-GAAP earnings per share of 62 cents came in line with the Zacks Consensus Estimate. However, the bottom-line figure dropped 17.3% year on year.

The company’s overall performance was mainly impacted by payment deferrals by clients, headcount reductions at client offices and elevated operating expenses.

Paycom Software, Inc. Price, Consensus and EPS Surprise Paycom Software, Inc. Price, Consensus and EPS Surprise

Paycom Software, Inc. price-consensus-eps-surprise-chart | Paycom Software, Inc. Quote

Margins

Adjusted gross profit increased 6.5% from the year-ago period to $153.8 million. However, adjusted gross margin contracted 60 basis points (bps) on a year-over-year basis to 84.7%.

Paycom Software’s adjusted EBITDA fell 11.8% year over year to $61.2 million. Moreover, adjusted EBITDA margin shrunk 730 bps to 33.7%.

Balance Sheet & Cash Flow

Paycom Software exited the June-end quarter with cash and cash equivalents of $113.5 million compared with the $181.8 million recorded in the prior quarter.

The company’s balance sheet comprises long-term debt of $31.8 million compared with the previous quarter’s $32.2 million.

Cash from operations was $107.5 million in the first half of 2020 and the company repurchased approximately $52 million worth of its common stock.

Guidance

For the third quarter, Paycom Software estimates revenues between $191 million and $193 million. The Zacks Consensus Estimate is pegged at $188.6 million.

Management projects adjusted EBITDA in the range of $56 million to $58 million.

Zacks Rank and Key Picks

Currently, Paycom carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector include Benefitfocus BNFT, Cogent Communications Holdings CCOI and Synaptics SYNA, all carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth rate for Benefitfocus, Cogent and Synaptics is currently pegged at 30%, 10.6%, and 10%, respectively.

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