While the global pandemic is definitely hurting some companies, it is also helping cloud-based companies grow significantly. One such player is Paycom (NYSE: PAYC) which is seeing an increase in demand for single-database solutions. But while Paycom may be confident of its capabilities, global conditions are making investors look at the stock with some caution.

Paycom’s Financials

Paycom’s first-quarter revenues grew 21% over the year to $242.37 million, ahead of the Street’s forecast of $199.94 million. Net income grew from $47.28 million last year to $63.02 million. On an adjusted basis, net income was $77.93 million or $1.33 per share compared with $1.19 per share reported a year ago. The market was looking for an EPS of $1.27.

Recurring revenues of $238.5 million grew 21% over the year and accounted for 98% of the quarter’s revenues.

Paycom’s client base has been impacted by the pandemic and given the uncertainty with their customer’s situation, Paycom refrained from providing an outlook for both the current quarter and the fiscal year. Analysts expected Paycom to end the second quarter with revenues of $202.78 million and EPS of $0.87 and end the year with revenues of $879.69 million and EPS of $4.06.

Paycom’s COVID Concerns

Paycom noted that COVID-19’s impact was seen the most in March when it registered declining revenues from its client base. But since then, it is seeing a strong addition of new clients. The company believes that the pandemic has revealed gaps that existed in organizations due to the presence of disparate systems. Organizations are looking for single database solutions that are offered by Paycom.

Paycom is confident of its offerings being able to meet the emerging requirements of global work from home workforce. But analysts are taking that confidence with a pinch of salt. Growing unemployment rates will continue to put pressure on revenues from existing customers. With recovery timelines remaining uncertain, payroll pressures will impact Paycom’s revenues. Paycom admitted that growing furlough and workforce reduction actions taken by its customers will impact the revenues, but it did not provide detailed statistics on this impact.

Paycom believes it can overcome these concerns by continuing to provide product upgrades. The current conditions are putting pressure on delivering efficient human capital management solutions. More employees and managers are accessing these systems, and both the HR function and employees are doing less paperwork and manual input than earlier. It is seeing strong usage patterns of its products. Direct Data Exchange (DDX) numbers continue to improve as companies move to a single solution and shift to a full employee usage strategy.

Paycom estimates that its HR solution helps companies save an estimated $4.51 per HR task or data entry while delivering higher efficiency and overall employee satisfaction. To continue to improve its HR-focused solutions, earlier this year, it launched Manager on-the-Go, a tool built into its existing mobile app to allow leaders get 24/7 access to manager tools such as managing approvals and data flows. Within the first 12 weeks of its launch, Manager on-the-Go has become one of the most rapidly adopted employee self-service product.

Paycom’s stock is trading at $322.66 with a market capitalization of $18.5 billion. It touched a 52-week high of $342 earlier this month. The stock hit a 52-week low of $163.42 in March this year.

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