Paycor HCM Reports 13% Revenue Growth and Plans Merger with Paychex

Paycor HCM, Inc. reported its financial results for the second quarter of fiscal year 2025, revealing total revenues of $180.4 million for the three months ended December 31, 2024, a 13% increase from $159.5 million in the same period last year. The growth was primarily driven by a 14% rise in recurring and other revenue, which reached $167.4 million, up from $147.2 million. Interest income on funds held for clients also saw a modest increase, totaling $13.1 million compared to $12.3 million in the prior year. Despite the revenue growth, the company recorded a net loss of $2.0 million, an improvement from a net loss of $26.2 million in the same quarter of the previous year.

In terms of operational performance, Paycor's customer base expanded to approximately 31,300 clients, up from 30,700 a year earlier, with the number of customer employees increasing to about 2.7 million, reflecting a 3.8% growth. The company attributed its revenue increase to a rise in effective per-employee-per-month (PEPM) revenue and the addition of customer employees. The total cash and cash equivalents at the end of the reporting period stood at $114.6 million, with funds held for clients amounting to $1.3 billion, up from $1.1 billion at the end of the previous fiscal year.

Paycor also highlighted strategic developments, including the launch of several new products aimed at enhancing its human capital management offerings. Notable introductions included Paycor Compensation Management, an AI-powered HR assistant, and an Integration Platform designed to facilitate data connectivity for clients lacking in-house IT support. These innovations are part of Paycor's ongoing efforts to improve product penetration and customer engagement, which are critical for driving future revenue growth.

The company’s operating expenses for the quarter decreased to $117.1 million from $130.6 million a year ago, primarily due to a significant reduction in general and administrative expenses, which fell by 31% to $38.6 million. This decline was largely attributed to lower intangible amortization costs. Research and development expenses increased by 10% to $18.4 million, reflecting Paycor's commitment to enhancing its product offerings. The company continues to invest in its workforce, with a focus on expanding its sales and marketing capabilities to capture a larger share of the mid-market HCM sector.

Looking ahead, Paycor has entered into a merger agreement with Paychex, Inc., which is expected to be completed in the first half of 2025. Under the terms of the agreement, Paycor will become a wholly owned subsidiary of Paychex, with shareholders receiving $22.50 per share in cash. The merger is anticipated to provide additional resources and capabilities to accelerate Paycor's growth strategy. However, the completion of the merger is subject to customary closing conditions, and the company has acknowledged potential risks associated with the merger process.