Paycom Software, Inc. PAYC reported better-than-expected fourth-quarter 2024 results. The online payroll and human resource technology provider reported non-GAAP earnings of $2.32 per share, which beat the Zacks Consensus Estimate of $1.99. Moreover, the bottom line soared 20.2% year over year, mainly driven by higher revenues, operating efficiency and lower share counts.

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Paycom reported revenues of $493.8 million, which beat the consensus mark of $481.1 million. The top line climbed 13.6% year over year. The figure was also above the high end of management’s guidance of $477-$484 million. The top line benefited from increased sales momentum, international expansion and artificial intelligence (AI) integration in its products.

Paycom’s Q4 Results in Detail

Recurring revenues (representing 94% of the total revenues) improved 14.5% to $464.8 million in the fourth quarter. Our estimate for the metric was pegged at $472.9 million.

Paycom Software, Inc. Price, Consensus and EPS Surprise

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

Revenues from the Implementation and Other segment increased to $29 million from $28.5 million in the year-ago quarter and contributed 6% to total sales. Our estimate for the segment’s revenues was pegged at $7.3 million.

Adjusted gross profits increased 14% from the year-ago period to $412.6 million. Moreover, the adjusted gross margin expanded 30 basis points (bps) on a year-over-year basis to 83.6%.

Adjusted EBITDA increased 21.7% year over year to $214.9 million. The adjusted EBITDA margin improved from 40.6% to 43.5%.

Paycom’s Full-Year 2024 Performance in Brief

The company's full-year revenues increased 11.2% year over year to $1.88 billion, which beat the Zacks Consensus Estimate of $1.87 billion. Recurring revenues rose 10.9% to $1.76 billion, while revenues from Interest on funds held for clients increased 15.6% to $124.9 million. Our model estimates for recurring and interest on-funds revenues were pegged at $1.84 billion and $29.4 million, respectively.

Adjusted gross margin and adjusted EBITDA margin contracted 130 basis points each to 83% and 41.2%, respectively. Its adjusted EPS for 2024 increased 5.9% to $8.21 and surpassed the consensus mark of $7.87.

Paycom’s Balance Sheet & Cash Flow

Paycom exited the fourth quarter with cash and cash equivalents of $402 million compared with $325.8 million recorded in the previous quarter. The company had no debt as of Dec. 31, 2024, as it paid off all its long-term debt at the end of 2023.

In 2024, PAYC generated an operating cash flow of approximately $533.9 million, paid out $84.8 million in dividends and bought back $145 million worth of its common stock.

The company had $1.48 billion remaining under its buyback authorization as of Dec. 31, 2024. Paycom’s board has approved its upcoming quarterly dividend of 37.5 cents per share, payable in the middle of March 2025.

Paycom Initiates 2025 Guidance

For 2025, PAYC forecasts revenues in the band of $2.015-$2.035 billion, while the Zacks Consensus Estimate is pegged at $2.05 billion. The company projects recurring revenues to grow 9% year over year and generate $110 million from interest on funds held for clients in 2025.

Paycom expects its 2025 adjusted EBITDA to be between $820 million and $840 million, translating to an EBITDA margin of approximately 41% at the mid-point.

Paycom’s Zacks Rank and Stocks to Consider

Currently, Paycom carries a Zacks Rank #3 (Hold).

Atlassian TEAM, Planet Labs PBC PL and Fortinet FTNT are some better-ranked stocks that investors may consider in the broader Zacks Computer and Technology sector. TEAM, PL and FTNT carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Atlassian's shares have soared 47.5% over the past year. The Zacks Consensus Estimate for TEAM’s fiscal 2025 earnings is pegged at $3.45 per share, indicating a 17.8% year-over-year increase.

Planet Labs PBC shares have surged 170.3% in the past year. The Zacks Consensus Estimate for fiscal 2025 bottom line is pinned at a loss of 15 cents per share. In fiscal 2024, the company had reported a loss of 50 cents per share.

Fortinet's shares have gained 51.9% over the past year. The Zacks Consensus Estimate for FTNT’s full-year 2025 earnings is pegged at $2.43 per share, suggesting a year-over-year increase of 2.5%.

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