Paycom Software, Inc. PAYC reported better-than-expected third-quarter 2024 results. The online payroll and human resource technology provider reported non-GAAP earnings of $1.67 per share for the third quarter, beating the Zacks Consensus Estimate of $1.62.

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However, the bottom line declined 5.6% year over year as the benefits of higher revenues and lower share count were more than offset by increased operating expenses, interest expenses and income taxes.

Paycom reported revenues of $451.9 million, beating the consensus mark of $446.9 million. The top line climbed 11.2% year over year. The figure was also above the high end of management’s guidance of $444-$449 million. The top line benefited from increased sales momentum, international expansion and artificial intelligence (AI) integration in its products.

The stronger-than-expected third-quarter results are likely to give a boost to PAYC stock, which has lagged behind this year’s broader market rally. Shares of Paycom have plunged 16.7% year to date, underperforming the Zacks Internet - Software industry’s gain of 25.7%.

Paycom Software, Inc. Price, Consensus and EPS Surprise

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

Paycom’s Third Quarter in Detail

Paycom’s Recurring revenues (representing 98.5% of the total revenues) improved 11.6% to $445 million in the third quarter. Our estimate for the company’s Recurring revenues was pegged at $437.3 million.

The company’s revenues from the Implementation and Other segment declined to $6.9 million from $7.5 million in the year-ago quarter and contributed 1.6% to total sales. Our estimate for the segment’s revenues was pegged at $8.5 million.

Adjusted gross profits increased 8% from the year-ago period to $367.5 million. However, the adjusted gross margin contracted 240 basis points (bps) on a year-over-year basis to 81.3%.

Paycom’s adjusted EBITDA increased 3.4% year over year to $171.3 million. The adjusted EBITDA margin contracted 290 bps to 37.9%.

Paycom’s Balance Sheet & Cash Flow

Paycom exited the third quarter with cash and cash equivalents of $325.8 million compared with $346.5 million recorded in the previous quarter. The company had no debt as of Sept. 30, 2024, as it paid off all its long-term debt at the end of 2023.

In the first three quarters of 2024, PAYC generated an operating cash flow of approximately $373.5 million, paid out $63.7 million in dividends and bought back $122.8 million worth of its common stock.