Third Quarter Revenue of $77.3 million, up 40% from comparable prior year period
Third Quarter GAAP Net Income of $6.2 million, up 61% from comparable prior year period, or $0.10 per diluted share
Third Quarter Adjusted EBITDA of $18.2 million, up 68% from comparable prior year period
Third Quarter non-GAAP Net Income of $9.0 million, or $0.15 per diluted share
That a beat on the top and bottom line.
Bear
Bear,
I see PAYC is down 5.5% in after hours trading which doesn’t line up with fantastic results. Any comments on why? I do see a distinct downward trend in earning the past few quarters (sequentially), which is not exactly inspiring though I have not looked at the reason.
David
I do see a distinct downward trend in earning the past few quarters
Hi David, You must be talking about net earnings being up only 91% this quarter.
Saul
Saul: Hi David, You must be talking about net earnings being up only 91% this quarter
Hah! Yes, exactly!
Compared to last year, looks great. Last 2 quarters are each down sequentially. Not saying it is bad, just an observation. Seeing a big after hours price drop on a good earnings release has my devil’s advocate side working overtime looking at potential problems.
David
This is why the stock is being punished:
The company has guided to a slowdown of its ANRR, or annualized net recurring revenue,
http://www.investors.com/news/technology/paycom-software-ear…
Wow, just checked the pre-market indicator. PAYC down 14% going in. This is a brutal market.
I had a bad feeling about all the huge reactions to earnings recently so sold half yesterday. Wanted to keep half just in case there was good news, as there has been from some cloud companies. Yahoo claims they beat earnings and revs estimates, but the transcript must have been terrible, though I have not had time to read it.
I was up 20%, so my remaining 50% is back to break even so I am up 10% overall. I am thinking I would rather have that cash right now.
If Trump wins there will be a huge overreaction and that will provide opportunities for better prices. If Hillary wins, the market will chill and there will be opportunities for “safer” prices. Either way I don’t mind having the extra cash for next Wednesday and beyond. Not like the economy is going gang-busters. Companies are throwing around bags of money at CapEx right now.
Pete
Well I added some at market at the opening. Filled at $41.75. We’ll have to see how it goes. (Right now, 10 minutes later, it says $44.50).
Saul
You must be talking about net earnings being up only 91% this quarter.
Compared to last year, looks great. Last 2 quarters are each down sequentially. Not saying it is bad, just an observation. Seeing a big after hours price drop on a good earnings release has my devil’s advocate side working overtime looking at potential problems.
Hi David,
Last year first three quarters were: 12, 10, 8
This year first three quarters were: 33, 21, 15
Looks totally seasonal to me (but I’ve been wrong plenty of times). Last year’s first three quarters added up to 30 cents. This year they came to 68 cents, up well over 100%. What can I say…?
I think they are down on what is perceived as weak guidance.
Saul
Remember 98% of revenue is recurring. That gives enormous security.
I saw that dip down below 42 just as I woke up this morning. But waking up I was too slow to take advantage of quite so amazing a price. Note to self: If I know a good stock is going to open at an amazing price on an earnings overreaction, set an alarm.
Still … I can’t argue with the price I got. This seems like a massive overreaction by the market.
Bear,
I see PAYC is down 5.5% in after hours trading which doesn’t line up with fantastic results. Any comments on why? I do see a distinct downward trend in earning the past few quarters (sequentially), which is not exactly inspiring though I have not looked at the reason.
David
Here’s a TMF article that addresses this: http://www.fool.com/investing/2016/11/02/is-this-why-paycom-…
I think it’s interesting to compare PAYC to other companies with similar business models.
Rev Growth numbers are very rough, but here’s how I look at it:
Company Rev Growth P/S Ratio
SHOP 90% 10.4
PAYC 45% 8.2
HUBS 50% 7.6
VEEV 35% 11.6
Based on this, VEEV looks incredibly expensive comparatively (the main reason I sold my shares). PAYC looks like a relative steal, especially if you believe it will continue to grow at a 40-50% pace. HUBS looks even cheaper, but they don’t have earnings yet, so that’s a complicating factor. But in my opinion, SHOP looks cheaper still with that insane growth rate. (Obviously there are judgement calls to make.)
But all these P/S ratios are high. PAYC grew revenue at 40% this quarter instead of 50% like last quarter. If you believe that will come down to 30% next quarter, and then 20%, etc, then selling is the right thing to do. I think there is a lot of that kind of fear baked in today. But let’s consider whether or not is is reasonable. First we have to remember that almost all their revenue is recurring, as opposed to a SKX or INFN or TWTR or something. Take SKX for example. It was actually quite prudent to think they would not keep growing at 30% like they did in 2014 and 2015…and I think I can explain why:
Every quarter, a company like SKX has to find a whole new group of people who need to buy a pair of shoes. Even if people like them enough to buy them again and again, most people don’t buy shoes on schedule exactly every three months. In other words, none of their revenue is recurring. But for companies with a subscription model, each and every quarter they get all the recurring revenue from the previous quarter, PLUS any new sales. They’d literally have to have 0 sales to not grow.
I bring all this up because revenue growth is so crucial for growth companies. Look what happened to TWTR, SKX, INFN, etc when growth slowed. To whom much is given, much is expected, and TWTR’s PS of about 5 will be PAYC’s fate as well if growth slows to 20%. My position is simply that that isn’t going to happen. And if they grow at 45% or 50% next quarter, you can bet that the stock will shoot up. I don’t know that that is likely either, but I think with a middle road, they will acheive great appreciation in time. Time will tell.
This is how I see it. Interested to know if anyone agrees or disagrees.
Bear
I’m intending to top up with PAYC when markets open, forget about the election. This was one of the most insane market movements I can recall for a long while!
A
Is the movement so insane, when we have a growth stock with a PE of 40+ which is seemingly lose some momentum? At such a high valuation, some volatility is to be expected especially after such a run up