Paycom Software (NYSE:PAYC) appears to have mastered the expectations game. In its third-quarter earnings report delivered on Halloween, the payroll and human capital management (HCM) software provider once again beat its own guidance as well as analyst estimates, and raised its full-year guidance for the third consecutive quarter. The company also announced a new potential revenue driver while seeing a nice jump in margins, making the future look as bright as ever for Paycom's continued growth.

Revenue, margin, and profits were all up nicely

The company continues to prioritize its top-line expansion, with a long-term target of 30% annual revenue growth. Propelled by new business wins, Paycom's quarterly revenue grew much more quickly than its operating expenses in the latest quarter, fueling large increases in the company's margin and bottom-line numbers. Adjusted EBITDA came in at $30.7 millionhttps://finance.yahoo.com/news/paycom-software-inc-reports-third-200500173.html, far above Paycom's guidance of $21 million to $23 million, as the company benefited from efficiencies in sales and marketing that helped moderate those expenses, and also capitalized a higher percentage of its R&D expenses than it typically does.

Metric

Q3 2017

Q3 2016

Year-Over-Year Change

Revenue

$101.3 million

$77.3 million

31%

Adjusted EBITDA

$30.7 million

$18.2 million

69%

Adjusted EBITDA margin

30.3%

23.5%

6.8 percentage points

Non-GAAP net income

$17.0 million

$9.0 million

89%

Data source: Paycom Software.

Paycom's guidance now calls for full-year 2017 revenue growth of approximately 31% and adjusted EBITDA growth of roughly 40%.

Turning to margins, Paycom initially expected its adjusted EBITDA margin to clock in at roughly 27% this year due to increased investments in its salesforce and R&D operations. But after three excellent quarters, the company's latest guidance now implies a 2017 adjusted EBITDA margin of 31% or so -- putting Paycom on track to achieve its long-term margin target of 30% to 33% for the first time on a full-year basis.

A laptop, tablet, and a phone showing various Paycom Software screens on an office desk

Image source: Paycom Software.

Paycom CEO Chad Richison noted that with two of its sales offices in Florida, and another five in Texas, hurricanes Harvey and Irma did cause some disruptions -- including office evacuations -- that affected the third quarter, as well as projections for Q4. While the company didn't get into specifics, it said these impacts are already included in the company's forward guidance, and should not affect any 2018 results.

Innovating for future growth

On its earnings call, Paycom announced it was getting into the content creation business, having released 10 employee education courses for the company's Learning Management System (LMS) module. With these courses, employers can offer training on topics like workplace violence, discrimination prevention, and hiring practices. Paycom is betting that creating valuable content like this will help drive additional adoption of its LMS module.

Paycom also released a mileage-tracker capability for its mobile app. This feature will track miles traveled for business purposes and automatically calculate mileage reimbursement. The company says this will help employers save money, as it removes the possibility of employees inflating or rounding up their mileage numbers in expense reports.

Richison sounded upbeat about the large market opportunity in front of Paycom as technology helps drive usage of HCM solutions at the employee level (transcript from Thomson Reuters):

Well, I think what surprises me ... is that people are still using -- businesses, are still using HCM in the old way. I mean, there's new technology available, there's new devices available. A perfect example of that is our mileage tracker. ... It will even tell you the best way to get to a location. It tracks the specific drive you take. And again, that's reported right back into the system. ... And so that's something that wouldn't have been available in the past, and today it is. And that's something that employees have access to.

And we expect that to drive adoption and usage of not just employee self-service but, specifically, that expense management module. And the same goes for LMS training. And so I think that, for me, is what I notice most about it, it's confirming that there is still a huge opportunity to shift the way businesses use HCM products and, specifically, their employees.

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I expect more of the same from this overachiever

Despite these solid results, Paycom's stock has sold off a bit, with shares falling about 6% the day after earnings were released. Given the growth expectations already baked into the stock -- shares are now trading at a forward P/E of around 62 -- that's not too surprising. And even after the decline, the stock is basically trading where it was about three weeks ago. I continue to believe Paycom's steady outperformance makes it a good candidate for buying on dips. Can Paycom go four-for-four in 2017 and top estimates again next quarter? I wouldn't bet against it.

Andy Gould owns shares of Paycom Software. The Motley Fool owns shares of and recommends Paycom Software. The Motley Fool has a disclosure policy.