Paycom Shares Tumble as Popularity of Its Automated System Eats Into Other Revenue Sources

Key Takeaways

  • Paycom missed profit and sales estimates, and its guidance was also short of forecasts, as customers switched to an automated payroll system that ate into other sources of revenue.
  • The company’s current quarter, full-year, and 2024 sales outlooks were all lower than expected.
  • Shares lost more than a third of their value following the report, tumbling to their lowest level since 2019.

Paycom Software (PAYC) shares cratered after the payroll and human resources services provider posted worse-than-expected results and slashed its outlook, blaming a shift to an automated system that ate into other sources of revenue.

Paycom reported third quarter fiscal 2023 earnings per share (EPS) of $1.30, with revenue rising 21.6% year-over-year to $406.3 million. Both were short of estimates.

CFO Craig Boelte noted that many of Paycom’s clients have switched to the company’s Beti automated payroll system, and that has “eliminated certain billable items, which is cannibalizing a portion of our services and unscheduled revenues.”

The company expects current quarter revenue in a range of $400 million to $425 million, and full-year revenue of $1.679 billion to $1.684 billion. Analysts had been looking for about $452 million for the current quarter and $1.72 billion for the year. Paycom projected 2024 sales growth of 10% to 12%, also below expectations.

Paycom shares lost more than a third of their value following the news, and they traded at their lowest level since early 2019. Shares of payroll providers Automatic Data Processing (ADP) and Paychex (PAYX) also lost ground.


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