Investors can learn a lot about an industry’s health by looking at financial results from component companies. By reviewing the financial results of industry peers, small-cap to large-cap, investors can gain a full sense of the overall growth and whether the industry’s gains are being felt by peers across the board. Verifying that benefits are being realized across the broad market cap spectrum typically shows that the overall industry is in great shape and most likely will continue to face a favorable outlook.
One industry currently showing those characteristics is human capital management (HCM) service providers. HCM services help businesses and enterprises small to large manage their workforce and improve efficiencies in recruiting, training, performance management, compensation, benefits, regulatory reporting, and more.
With the third quarter earnings season essentially complete, investors can sift through corporate financial results of small-, mid-and large-cap HCM providers that point to a healthy overall industry. Let’s take a deeper look into some of those HCM industry results:
Automatic Data Processing
At a market cap of over $125 billion, Automatic Data Processing, Inc. (NASDAQ: ADP) is the “big dog” large-cap of the HCM industry. During the company’s fiscal first quarter of 2025, ADP reported a total revenue of $4.8 billion or 7% year-over-year growth. The company’s net earnings jumped 11% to $956 million and its adjusted EBIT climbed 13% to $1.2 billion.
Management commented that its fiscal first-quarter results benefited from bookings growth, strong client revenue retention, and growing client fund interest revenue. In addition, ADP announced the acquisition of WorkForce Software, a leading workforce management company, and also unveiled a new global HCM platform, ADP Lyric HCM.
Paychex
Paychex, Inc. (NASDAQ: PAYX) is another large-cap HCM provider with a market cap of just under $53 billion. During Paychex’s fiscal first quarter of 2025, the company reported total revenue of $1.3 billion representing 3% y/y growth. Net income grew 2% y/y to $427.4 million and EBITDA expanded 1% y/y to $585.8 million.
Paychex President and CEO John Gibson said the quarter results were impacted by the expiration of the ERTC program last year, as well as one less payroll processing day. However, the company continues to see strong demand, particularly from SMB clients. Furthermore, the company unveiled several new products (Paychex Flex Engage, Flex Perks, Recruiting Copilot) that are AI-driven solutions to help provide further efficiencies to its client base.
Paycom Software
Heading more into the mid-cap range, Paycom Software, Inc. (NYSE: PAYC) is an Oklahoma City-based HCM provider with a market cap of $13.3 billion. During the third quarter of 2024, Paycom reported total revenue of $451.9 million or 11.2% y/y growth. Recurring revenues expanded to $445 million or 11.6% y/y. Adjusted EBITDA was reported at $171.3 million compared to $165.6 million for the same period last year.
The company continues to see strong client demand and said it estimates FY 2024 total revenues to come in a range between $1.866 billion to $1.873 billion. Adjusted EBITDA was given a range between $745 million to $752 million for the full year.
Paylocity
Paylocity Holding Corp. (NASDAQ: PCTY) is just a little smaller in size compared to Paycom with a market cap of $11.96 billion. For the company’s recent fiscal first quarter 2025 financial results, Paylocity reported total revenue of $363 million, up 14% y/y. Recurring revenue also grew 14% y/y to $333.1 million. Adjusted EBITDA came in at $129 million compared to $104.9 million for the same period last year.
As a result of strong growth in the fiscal first quarter, management issued fiscal full-year 2025 guidance which calls for total revenue in a range between $1.535 billion to $1.550 billion. This range represents an approximate y/y growth outlook of 10%. Recurring revenue is estimated between $1.427 billion to $1.442 billion, approximately 12% y/y growth. Adjusted EBITDA is estimated to be in a range between $530 million to $540 million.
Paycor
Paycor HCM, Inc. (NASDAQ: PYCR) is on the higher end of the small-cap range with a current market cap of 3.16 billion. The Cincinnati-based HCM provider reported a total revenue of $167.5 million during its fiscal first quarter 2025 financial results, which represents 17% growth y/y. Recurring revenues expanded 16% y/y to $154 million. On the bottom line, Paycor reported an adjusted net income of $18.7 million, up from $12.8 million for the same period last year.
From an outlook perspective, management estimated revenue to come between $726 million to $733 million, which would represent 12% y/y growth on the high-end. Adjusted operating income is estimated to be in a range between $127 million to $130 million.
Asure Software
In the micro-to-small-cap range, Asure Software (NASDAQ: ASUR) has a current market cap of $241 million. During the company’s third quarter 2024 period, Asure reported revenue (excluding ERTC) of $29.2 million, which was up 20% y/y. Recurring revenue came in at $28.6 million, also up 20% y/y, and accounted for 98% of total revenues. Asure’s adjusted EBITDA came in at $5.4 million for the period.
The Austin-based HCM provider saw a robust surge in new bookings by 141% y/y and backlog growth of 250% y/y. This comes as management continues to see strong demand for its products, particularly its Payroll Tax Management solution. Furthermore, the company is currently testing a beta version of its new AI agent chatbot and preparing to launch its new financial services product, AsurePay, sometime in November 2024.
Looking ahead to the full year 2024, Asure’s management estimates revenue to come between $119 million to $121 million, which represents growth of around 20% y/y. Adjusted EBITDA margins are estimated between 18% and 19%. Full-year 2025 estimates growth will continue on the top and bottom line: total revenue between $134 million and $138 million on an adjusted EBITDA margin between 23% and 24%.
HCM Q3 2024 Financial Results: Summary and Key Takeaways
Across the board, HCM service providers reported strong financial results for the recent calendar third quarter of 2024 period. Small-to-large, the industry’s health and growth have been beneficial to companies across the market-cap spectrum. All companies mentioned discussed upbeat outlooks and strong demand from their business and enterprise customers.
This tells investors that the HCM industry continues to be in a very bright spot. SMBs to large businesses and enterprises continue to demand HCM solutions to help manage their workforces. This is a trend that is not likely to end anytime soon, especially when considering the outlooks provided by the companies above. For HCM investors, these results are a welcoming sign and a confirmation of the industry’s strong outlook.
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