Paycom stock slips after Q2 earnings beat, but Q3 guidance disappoints

Ralf Hahn

Paycom Software (NYSE:PAYC) stock fell 5.6% in Tuesday after-hours trading after it indicated Q3 revenue and adjusted EBITDA could fall below the Wall Street consensus.

Q3 revenue is expected to be $410M-$412M vs. $412.0M consensus with adjusted EBITDA of $156M-$158M, vs. Visible Alpha consensus of $156.7M.

The payment technology company now expects 2023 revenue of $1.715B-$1.717B compared with its previous range of $1.713B-$1.715B and consensus of $1.71B. Full-year adjusted EBITDA guidance goes to $722M-$724M from $717M-$719M, vs. Visible Alpha estimate of $718.1M.

Q2 adjusted EPS of $1.62, vs. $1.60 consensus, fell from $2.46 in the prior quarter and rose from $1.26 in the year-ago period.

Revenue of $401.1M, vs. average analyst estimate of $398.3M, climbed from $291.2M in Q1 and from $316.9M in Q2 2022.

Adjusted EBITDA of $156.6M, topping the Visible Alpha consensus of $153.3M, declined from $220.5M in the prior quarter and increased from $119.6M a year ago. Adjusted EBITDA margin slid to 39.0% from 48.8% in Q1 and climbed from 37.7% in Q2 2022.

Conference call at 5:00 PM ET.

More on Paycom

• Paycom Software: Earnings Preview; Valuation Nearing Target
• Paycom: Initiated A Dividend, Plus Strong FCF
• Paycom, Chipotle highlight Goldman's Rule of 10 stock screens
• Paycom Software initiated at Outperform at William Blair on bright outlook
• Seeking Alpha’s Quant Rating on Paycom
• Earnings data for Paycom
• Dividend scorecard for Paycom

Comments

[BuyCheap]

I am 99.99999% confidence this stock will be $600 by 2025....

[Nstone384]

@Buy_stock_goes_lower I’m long as well but a $600 price tag is way beyond my expectations

[ding dong]

If we have recession and people lose jobs it will be very bad for the company. Cutting guidance, what does that say to you?

[BuyCheap]

@ding dong Maybe you are right... It can go down to $200. But don't sell it when it goes it down.

[Druncle Joe]

Seems like an over-reaction. Very sticky recurring revenue business model and still growing well above the market organically. Highly profitable and plenty of Free Cash Flow. The only thing I can see is it looks like they are building cash potentially in preparation of doing a bif acquisition. Might be worth picking up some PCTY just in case

[monster94]

How on earth this has traded at a 20B market cap with less than 500m in profit is baffling

[Nstone384]

@monster94 First: it is quarterly revenue. Second: the company is low in debt and still a strong grower. Currently people are going crazy on companies who are not even making money and who are high in debt… in my opinion the valuation is not cheap but ok for such a high performing company.

[monster94]

@Nstone384 Firstly I do mean profit. As the net profit is around 400M. Revenue growth is good, but it does not justify such a massive premium. If you think it’s a good investment, the dip is here!

[Nstone384]

@monster94 I added more to my position so yes, I got my dip.

[jeffk100]

another swath of chasers properly burned.

[Senopta]

Solid. The more it drops, the more I buy. It is the future dividend growth stock :-)

[Nstone384]

@Senopta same here. I bought an entry position in May and the stock price ran away. Today was the day to buy again. Still thinking about buying even more but the price most likely won‘t run like it did. in June and July

[rammbler65]

Looks like a modest beat with in line guidance

[jravens1313]

@rammbler65 Exactly. I guess the hope was potential upside with raised guidance. That idea is out the window.

[James Melvin]

Consistent 20+% grower. Buy and hold compounder at its best in a boring industry

[Confoundedinterest]

Hoping for a drop back into the $200’s, would love to add further.

[vernonjackson]

@Confoundedinterest sames

[mcbokonon]

Guidance was closer to being in-line than anything. Good quarter, long term winner, might take a little breather.