Why Paycom Software Inc (NYSE: PAYC) stock is going gangbusters today

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Paycom Software Inc (NYSE: PAYC) stock surged over 12.4% on 29th April, 2020 (As of 11:55 am GMT-4 ·; Source: Google finance) after the company posted better than expected results for the first quarter of FY 20. The company has reported the Non-GAAP net income for the first quarter of 2020 of $77.9 million or $1.33 per diluted share based on approximately 58 million shares compared to $69.3 million or $1.19 per diluted share based on approximately 58 million shares in the prior year period. The company expects the fully diluted shares outstanding will be about 58 million shares in the second quarter of 2020. Since the company had increased the buyback on March 12, 2020, the company has repurchased over 260,000 shares. Today Paycom has repurchased nearly four million shares since 2016.

The company has ended the quarter with cash and cash equivalents of $182 million and total debt of $32 million. This debt represents a financing of construction at the corporate headquarters. the company has generated cash from operations of $82 million for the first quarter on the back of the strong revenue performance and the profitability of the business model. The average daily balance of funds held on behalf of clients was about $1.4 billion in the first quarter of 2020.

PAYC in the first quarter of FY 20 has reported the adjusted earnings per share of $1.33, beating the analysts’ estimates for the adjusted earnings per share of $1.26, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 21 percent to $242.37 million in the first quarter of FY 20, beating the analysts’ estimates for revenue by 1.95%. The revenue growth is due to strong new business wins and robust recurring revenues. Within total revenues, the recurring revenue was $238.5 million for the first quarter of 2020, which represents 98% of total revenues for the quarter and also growing 21% from the comparable prior year period. During the month of March, the company had started to see the increase in unemployment across the country, reflected in the client base, a trend that continued into April. The company posted the total adjusted gross profit for the first quarter of $213.5 million, representing a record adjusted gross margin of 88.1%, expanded by 130 basis points compared to the prior year period. Adjusted EBITDA had increased to $117.9 million in the first quarter of 2020 or 48.7% of total revenues compared to $103.3 million in the first quarter of 2019 or 51.7% of total revenues.

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