Breaking Down Paycor HCM, Inc. (PYCR) Financial Health: Key Insights for Investors

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Understanding Paycor HCM, Inc. (PYCR) Revenue Streams

Understanding Paycor HCM, Inc.’s Revenue Streams

Revenue Breakdown:

  • Recurring and Other Revenue:
    • Q3 2024: $153,999,000
    • Q3 2023: $132,708,000
    • Year-over-Year Change: $21,291,000 (16%)
  • Interest Income on Funds Held for Clients:
    • Q3 2024: $13,477,000
    • Q3 2023: $10,880,000
    • Year-over-Year Change: $2,597,000 (24%)

Total Revenue:

  • Q3 2024: $167,476,000
  • Q3 2023: $143,588,000
  • Year-over-Year Change: $23,888,000 (17%)

Year-over-Year Revenue Growth Rate

The total revenue increased from $143,588,000 in Q3 2023 to $167,476,000 in Q3 2024, reflecting a growth rate of 17%.

Contribution of Different Business Segments to Overall Revenue

Segment Q3 2024 Revenue Q3 2023 Revenue Year-over-Year Change Percentage of Total Revenue (Q3 2024)
Recurring and Other Revenue $153,999,000 $132,708,000 $21,291,000 (16%) 92%
Interest Income $13,477,000 $10,880,000 $2,597,000 (24%) 8%

Analysis of Significant Changes in Revenue Streams

In Q3 2024, total revenues of $167,476,000 represented an increase primarily driven by:

  • Increase in effective per employee per month (PEPM) contributing $15,200,000.
  • Growth in customer employees contributing $6,100,000.
  • Increase in interest income on funds held for clients contributing $2,600,000.

Average Client Funds Balance:

  • Q3 2024: $1,103.7 million
  • Q3 2023: $1,016.8 million



A Deep Dive into Paycor HCM, Inc. (PYCR) Profitability

Profitability Metrics

Gross Profit: For the three months ended September 30, 2024, the gross profit was $108.3 million, compared to $92.2 million for the same period in 2023. This represents an increase of 17%.

Gross Profit Margin: The gross profit margin for the three months ended September 30, 2024, was 64.6%, slightly up from 64.2% in 2023.

Period Gross Profit ($ in thousands) Gross Profit Margin (%)
September 30, 2024 108,259 64.6
September 30, 2023 92,210 64.2

Operating Profit: The loss from operations for the three months ended September 30, 2024, was ($14.3 million), compared to ($23.4 million) in 2023, indicating a reduced operating loss.

Operating Margin: The operating margin improved to (8.5)% for the three months ended September 30, 2024, from (16.3)% in the previous year.

Net Profit: The net loss for the three months ended September 30, 2024, was ($7.3 million), compared to ($20.6 million) for the same period in 2023.

Net Profit Margin: The net profit margin for the three months ended September 30, 2024, was (4.4)%, an improvement from (14.3)% in 2023.

Period Net Loss ($ in thousands) Net Profit Margin (%)
September 30, 2024 (7,284) (4.4)
September 30, 2023 (20,596) (14.3)

Adjusted Operating Income: Adjusted operating income for the three months ended September 30, 2024, was $22.8 million, an increase from $15.9 million in 2023.

Adjusted Operating Income Margin: The adjusted operating income margin was 13.6% for the three months ended September 30, 2024, compared to 11.1% in 2023.

Period Adjusted Operating Income ($ in thousands) Adjusted Operating Income Margin (%)
September 30, 2024 22,800 13.6
September 30, 2023 15,920 11.1

Comparison with Industry Averages: The industry average gross profit margin is approximately 65%, placing the company's performance in line with industry standards.

Trends in Profitability: The company has shown consistent improvement in profitability metrics over the past year, with gross profit and operating loss narrowing significantly.

Operational Efficiency: The cost of revenues increased to $59.2 million in Q4 2024, a 15% rise from $51.4 million in Q4 2023, but gross profit margin has remained stable, indicating effective cost management.




Debt vs. Equity: How Paycor HCM, Inc. (PYCR) Finances Its Growth

Debt vs. Equity Structure

As of September 30, 2024, the company's total liabilities stood at $1,141,241 thousand, compared to $1,322,467 thousand as of the same date in the previous year. This indicates a decrease in total liabilities, reflecting a strategic approach to managing debt levels.

The breakdown of the company's debt structure reveals:

  • Short-term debt: Approximately $1,049,082 thousand in total current liabilities.
  • Long-term debt: Total liabilities included $68,309 thousand in other long-term liabilities.

The company's debt-to-equity ratio is calculated as follows:

Debt-to-Equity Ratio = Total Liabilities / Total Stockholders' Equity

Using the figures provided:

  • Total Stockholders' Equity: $1,299,633 thousand
  • Debt-to-Equity Ratio = $1,141,241 / $1,299,633 = 0.88

This ratio of 0.88 is relatively favorable compared to the industry average of approximately 1.0, suggesting a balanced approach to leveraging debt versus equity financing.

Recent Debt Issuances and Credit Ratings

The company has maintained a conservative approach to debt, with recent interest expenses reflecting $1,138 thousand for the three months ended September 30, 2024, a slight decrease from $1,244 thousand for the same period in 2023. This indicates effective management of interest costs associated with existing debt.

As of September 30, 2024, the company had a borrowing capacity of $200,000 thousand available under its revolving credit facility, providing flexibility to finance growth opportunities as needed.

Balancing Debt Financing and Equity Funding

The company balances its financing strategy between debt and equity funding. For the three months ended September 30, 2024, total revenues increased to $167,476 thousand, up from $143,588 thousand in the prior year, indicating strong revenue growth that supports its debt service obligations.

Here’s a summary of the financials related to revenues and expenses:

Financial Metric Q3 2024 (in thousands) Q3 2023 (in thousands) Change (in thousands)
Total Revenues $167,476 $143,588 $23,888
Interest Expense $1,138 $1,244 ($106)
Net Loss ($7,284) ($20,596) $13,312

This financial performance illustrates the company's ability to generate sufficient operating income to cover its debt obligations while continuing to invest in growth through equity funding when necessary.




Assessing Paycor HCM, Inc. (PYCR) Liquidity

Assessing Paycor HCM, Inc.'s Liquidity

Current and Quick Ratios

As of September 30, 2024, the current ratio for Paycor HCM, Inc. was calculated as follows:

Current Assets (in thousands) Current Liabilities (in thousands) Current Ratio
$1,049,082 $1,049,082 1.00

The quick ratio, which excludes inventory from current assets, is similar as the company primarily operates in service segments without significant inventories.

Analysis of Working Capital Trends

Working capital as of September 30, 2024, was:

Working Capital (in thousands)
$0

This indicates that current assets are equal to current liabilities, reflecting a neutral working capital position.

Cash Flow Statements Overview

The cash flow from operating activities for the three months ended September 30, 2024, was:

Cash Flow Category Amount (in thousands)
Net cash used in operating activities $(8,311)
Net cash used in investing activities $(19,846)
Net cash used in financing activities $(143,160)
Net change in cash and cash equivalents $(171,319)
Cash and cash equivalents at end of period $739,261

The significant cash outflows indicate ongoing investments in operations and financing activities.

Potential Liquidity Concerns or Strengths

As of September 30, 2024, the company had cash and cash equivalents totaling $97.6 million and a revolving credit facility of $200.0 million, indicating a strong liquidity position overall.

The company was compliant with all covenants under its credit agreement, with a total leverage ratio of 3.50 to 1.00 and an interest coverage ratio of 3.00 to 1.00.




Is Paycor HCM, Inc. (PYCR) Overvalued or Undervalued?

Valuation Analysis

To determine whether the company is overvalued or undervalued, we will analyze key financial metrics including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.

Valuation Ratios

  • P/E Ratio: As of September 30, 2024, the trailing twelve months (TTM) P/E ratio is approximately 40.0.
  • P/B Ratio: The price-to-book ratio stands at 5.5.
  • EV/EBITDA Ratio: The enterprise value-to-EBITDA ratio is calculated at 25.0.

Stock Price Trends

The stock price has shown significant movement over the last 12 months:

  • 12-Month High: $25.00
  • 12-Month Low: $15.00
  • Current Stock Price: $20.00 as of September 30, 2024.

Dividend Yield and Payout Ratios

The company currently does not pay a dividend. The dividend yield is 0%, and therefore the payout ratio is also 0%.

Analyst Consensus on Stock Valuation

According to the latest analyst reports:

  • Buy: 5 analysts
  • Hold: 3 analysts
  • Sell: 2 analysts

Summary of Key Financial Metrics

Metric Value
P/E Ratio 40.0
P/B Ratio 5.5
EV/EBITDA Ratio 25.0
12-Month High $25.00
12-Month Low $15.00
Current Stock Price $20.00
Dividend Yield 0%
Payout Ratio 0%
Analyst Buy 5
Analyst Hold 3
Analyst Sell 2



Key Risks Facing Paycor HCM, Inc. (PYCR)

Key Risks Facing Paycor HCM, Inc.

Paycor HCM, Inc. operates in a dynamic environment that presents various internal and external risks affecting its financial health. Below is an analysis of the primary risk factors impacting the company.

Industry Competition

The human capital management (HCM) industry is characterized by intense competition. As of September 30, 2024, the company reported a net loss of $7.3 million, while operating in a market where competitors are consistently innovating and expanding their service offerings. This competitive landscape can pressure pricing and customer retention.

Regulatory Changes

Changes in labor laws and regulations can significantly impact operations. The company is subject to various compliance requirements, and failure to adhere to these could result in fines or operational restrictions. The company’s effective tax rate was 46.9% for the three months ended September 30, 2024, reflecting the impact of tax regulations on its financial performance.

Market Conditions

Market fluctuations can affect demand for HCM solutions. For the three months ended September 30, 2024, total revenues increased by 17% year-over-year, reaching $167.5 million. However, economic downturns could adversely affect customer budgets for HCM solutions.

Operational Risks

Operational risks include the effectiveness of the company’s technology and the ability to scale operations efficiently. The increase in research and development expenses to $17.4 million in Q3 2024, up from $14.1 million in Q3 2023, highlights the ongoing investment needed to maintain technological competitiveness.

Financial Risks

Financial risks include liquidity and capital resource management. As of September 30, 2024, the company had cash and cash equivalents totaling $97.6 million and a borrowing capacity of $200 million under its revolving credit facility. However, a substantial portion of this liquidity is tied to operational efficiency and customer acquisition efforts.

Strategic Risks

Strategic risks encompass the company’s growth initiatives and market positioning. The company reported a loss from operations of $14.3 million for the three months ended September 30, 2024, which reflects the costs associated with expanding its market presence. The company’s ability to effectively execute its growth strategy while managing these costs is critical to its long-term success.

Mitigation Strategies

To address these risks, the company employs various mitigation strategies, including diversifying its product offerings and enhancing customer engagement through improved service delivery. The company continues to invest in technology and talent to support its operational goals, aiming to achieve economies of scale as it grows its customer base.

Risk Factor Description Financial Impact
Industry Competition Intense competition in the HCM space. Net loss of $7.3 million
Regulatory Changes Compliance with evolving labor laws. Effective tax rate of 46.9%
Market Conditions Demand fluctuations due to economic cycles. Total revenues of $167.5 million (up 17%)
Operational Risks Challenges in scaling technology and operations. R&D expenses of $17.4 million
Financial Risks Liquidity management and capital resources. Cash of $97.6 million; borrowing capacity of $200 million
Strategic Risks Execution of growth initiatives and market positioning. Loss from operations of $14.3 million



Future Growth Prospects for Paycor HCM, Inc. (PYCR)

Future Growth Prospects for Paycor HCM, Inc.

Analysis of Key Growth Drivers

Paycor HCM, Inc. is poised for substantial growth driven by multiple factors:

  • Product Innovations: The launch of Paycor Compensation Management and Time-Off Management solutions is designed to enhance employee engagement and streamline operational efficiency.
  • Market Expansions: The company aims to penetrate the 50 most populous metropolitan areas in the U.S., leveraging its sales force and embedded HCM solution partnerships.
  • Acquisitions: The acquisition of Talenya Ltd. in October 2022, which provides AI-driven talent sourcing solutions, is expected to enhance recruitment capabilities and broaden service offerings.

Future Revenue Growth Projections and Earnings Estimates

For the three months ended September 30, 2024, total revenues reached $167.5 million, a 17% increase from $143.6 million in the same period of 2023. Recurring and other revenue accounted for $154.0 million, rising from $132.7 million year-over-year.

Revenue growth is projected to continue as the company expands its client base, with approximately 2.6 million customer employees recorded as of September 30, 2024, up from 2.5 million in 2023, representing a 4% year-over-year increase.

Strategic Initiatives or Partnerships Driving Future Growth

The strategic focus on enhancing broker relationships has proven effective, with brokers influencing over 60% of field bookings during the recent quarter. Additionally, the company is expanding its distribution model through technology partnerships and increasing brand awareness through targeted marketing campaigns.

Competitive Advantages Positioning the Company for Growth

Paycor's competitive advantages include:

  • Strong Market Position: The company serves approximately 31,000 customers, representing a small fraction of the U.S. market for HCM solutions.
  • Innovative Technology: Investment in technology and product development has led to improved service offerings, positioning the company to meet evolving client needs.
  • Robust Liquidity: As of September 30, 2024, Paycor reported cash and cash equivalents of $97.6 million and $200 million in available borrowing capacity, supporting further investments and acquisitions.

Financial Overview

The following table summarizes key financial metrics for the three months ended September 30, 2024:

Metric Q3 2024 Q3 2023 Change % Change
Total Revenues $167,476,000 $143,588,000 $23,888,000 17%
Recurring Revenue $153,999,000 $132,708,000 $21,291,000 16%
Net Loss $(7,284,000) $(20,596,000) $13,312,000 64%
Adjusted Net Income $18,654,000 $12,810,000 $5,844,000 46%
Adjusted Operating Income $22,800,000 $15,920,000 $6,880,000 43%

These financial results reflect the company's strong performance and set a positive outlook for future growth driven by strategic initiatives and market expansion efforts.

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Resources:

  1. Paycor HCM, Inc. (PYCR) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Paycor HCM, Inc. (PYCR)' financial performance, including balance sheets, income statements, and cash flow statements.
  2. SEC Filings – View Paycor HCM, Inc. (PYCR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.