The end of the earnings season is always a good time to take a step back and see who shined (and who not so much). Let’s take a look at how hr software stocks fared in Q4, starting with Paylocity (NASDAQ:PCTY).
Modern HR software has two powerful benefits: cost savings and ease of use. For cost savings, businesses large and small much prefer the flexibility of cloud-based, web-browser-delivered software paid for on a subscription basis rather than the hassle and complexity of purchasing and managing on-premise enterprise software. On the usability side, the consumerization of business software creates seamless experiences whereby multiple standalone processes like payroll processing and compliance are aggregated into a single, easy-to-use platform.
The 6 hr software stocks we track reported a mixed Q4. As a group, revenues beat analysts’ consensus estimates by 1.5% while next quarter’s revenue guidance was 4% below.
While some hr software stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 3.6% since the latest earnings results.
Best Q4: Paylocity (NASDAQ:PCTY)
Founded by payroll software veteran Steve Sarowitz in 1997, Paylocity (NASDAQ:PCTY) is a provider of payroll and HR software for small and medium-sized enterprises.
Paylocity reported revenues of $377 million, up 15.5% year on year. This print exceeded analysts’ expectations by 2.7%. Overall, it was a strong quarter for the company with a solid beat of analysts’ EBITDA estimates.
“The momentum we saw in Q1 continued into the second quarter of fiscal 25, resulting in very strong results, solid selling season performance, and increased revenue and profitability guidance for fiscal 25. Second quarter recurring & other revenue growth was 17%, primarily driven by strong sales and operational execution, continued product differentiation, and a stable macroeconomic environment. Our sustained investment in R&D continues to drive differentiation and expanded average revenue per client, with the recent launch of Benefits Decision Support and Headcount Planning increasing our max PEPY to $600, achieving the target we set in August 2023. I would also like to thank all of our Paylocity teams as they support our clients through our busiest time of year,” said Toby Williams, President and Chief Executive Officer of Paylocity.
Paylocity Total Revenue
Paylocity pulled off the biggest analyst estimates beat and highest full-year guidance raise of the whole group. Investor expectations, however, were likely higher than Wall Street’s published projections, leaving some wishing for even better results (analysts’ consensus estimates are those published by big banks and advisory firms, not the investors who make buy and sell decisions). The stock is down 10.4% since reporting and currently trades at $189.82.
Founded in 1998 as one of the first online payroll companies, Paycom (NYSE:PAYC) provides software for small and medium-sized businesses (SMBs) to manage their payroll and HR needs in one place.
Paycom reported revenues of $493.8 million, up 13.6% year on year, outperforming analysts’ expectations by 2.6%. The business had a strong quarter with a solid beat of analysts’ EBITDA estimates.
Paycom Total Revenue
The market seems happy with the results as the stock is up 9.9% since reporting. It currently trades at $227.45.
Founded in 1992 as Ceridian, an outsourced payroll processor and transformed after the 2012 acquisition of Dayforce, Dayforce (NYSE:DAY) is a provider of cloud based payroll and HR software targeted at mid-sized businesses.
Dayforce reported revenues of $465.2 million, up 16.4% year on year, exceeding analysts’ expectations by 2%. Still, it was a weaker quarter as it posted full-year guidance of slowing revenue growth and revenue guidance for next quarter missing analysts’ expectations significantly.
Dayforce delivered the weakest full-year guidance update in the group. As expected, the stock is down 20.5% since the results and currently trades at $57.04.
One of the oldest service providers in the industry, Paychex (NASDAQ:PAYX) offers its customers payroll and HR software solutions.
Paychex reported revenues of $1.51 billion, up 4.8% year on year. This print was in line with analysts’ expectations. However, it was a mixed quarter as it underperformed in some other aspects of the business.
Paychex had the slowest revenue growth among its peers. The stock is flat since reporting and currently trades at $144.73.
Founded in 1990 in Cincinnati, Ohio, Paycor (NASDAQ: PYCR) provides software for small businesses to manage their payroll and HR needs in one place.
Paycor reported revenues of $180.4 million, up 13.1% year on year. This result beat analysts’ expectations by 1.9%. More broadly, it was a slower quarter as it recorded a significant miss of analysts’ EBITDA estimates.
The stock is up 1.6% since reporting and currently trades at $22.49.
The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty for 2025.
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