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Online payroll and human resource software provider Paycor (NASDAQ:PYCR) reported Q2 CY2024 results exceeding Wall Street analysts’ expectations, with revenue up 17.7% year on year to $164.8 million. On the other hand, the company expects next quarter’s revenue to be around $162 million, slightly below analysts’ estimates. It made a non-GAAP profit of $0.11 per share, improving from its profit of $0.08 per share in the same quarter last year.
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Paycor (PYCR) Q2 CY2024 Highlights:
- Revenue: $164.8 million vs analyst estimates of $161.1 million (2.3% beat)
- Adjusted Operating Income: $25.01 million vs analyst estimates of $21.56 million (16% beat)
- EPS (non-GAAP): $0.11 vs analyst estimates of $0.09 (18.4% beat)
- Management’s revenue guidance for the upcoming financial year 2025 is $725.5 million at the midpoint, missing analyst estimates by 1.5% and implying 10.8% growth (vs 18.7% in FY2024)
- Gross Margin (GAAP): 64.8%, in line with the same quarter last year
- Market Capitalization: $2.19 billion
Found in 1990 in Cincinnati, Ohio, Paycor (NASDAQ: PYCR) provides software for small businesses to manage their payroll and HR needs in one place.
HR SoftwareModern HR software has two powerful benefits: cost savings and ease of use. For cost savings, businesses large and small much prefer the flexibility of cloud-based, web-browser-delivered software paid for on a subscription basis rather than the hassle and complexity of purchasing and managing on-premise enterprise software. On the usability side, the consumerization of business software creates seamless experiences whereby multiple standalone processes like payroll processing and compliance are aggregated into a single, easy-to-use platform.
Sales GrowthAs you can see below, Paycor’s 22.9% annualized revenue growth over the last three years has been decent, and its sales came in at $164.8 million this quarter.
This quarter, Paycor’s quarterly revenue was once again up 17.7% year on year. However, the company’s revenue actually decreased by $22.22 million in Q2 compared to the $27.48 million increase in Q1 CY2024. This situation is worth monitoring as Paycor’s sales have historically followed a seasonal pattern but management is guiding for a further revenue drop in the next quarter.
Next quarter’s guidance suggests that Paycor is expecting revenue to grow 12.8% year on year to $162 million, slowing down from the 21.4% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $725.5 million at the midpoint, growing 10.8% year on year compared to the 18.5% increase in FY2024.
Gross Margin & Pricing PowerSoftware is eating the world. It’s one of our favorite business models because once you develop the product, it usually doesn’t cost much to provide it as an ongoing service.
These costs include servers, licenses, and certain personnel, and leverage on them can decide the winners in competitive markets because they determine how much can be invested into new products, sales, and talent.
Paycor’s gross margin is worse than the broader software industry, giving it less room to hire new engineering and sales talent that can expand its products and services. As you can see below, it averaged a 65.9% gross margin over the last year. Said differently, Paycor had to pay a chunky $34.08 to its service providers for every $100 in revenue.
Paycor’s gross profit margin came in at 64.8% this quarter, which is in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 24 months, suggesting its input costs have been stable and it isn’t under pressure to lower prices.
Key Takeaways from Paycor’s Q2 Results It was good to see Paycor beat analysts’ revenue expectations this quarter. Adjusted operating income also beat and by a large amount and showed an impressive year-on-year margin increase. This signals profitable growth on Paycor's part. On the other hand, its full-year revenue guidance was below expectations, but the market seemed to focus on the positives. The stock traded up 6.7% to $13.50 immediately following the results.
