Paycom Software, Inc. (NYSE: PAYC) Securities Fraud Class Action Lawsuit

Paycom investors may receive additional information about the case by clicking the link "Submit Your Information" above.  If you are a member of the class described below, you may no later than January 9, 2024 move the Court to serve as lead plaintiff of the class, if you so choose.

A class action lawsuit has been filed on behalf of those who purchased or acquired Paycom Software, Inc. (“Paycom”) (NYSE: PAYC) securities between February 9, 2022 and November 1, 2023, both dates inclusive (the “Class Period”). 

Case Background:
In July 2021, prior to the beginning of the Class Period, Paycom officially rolled out a new application called “Beti,” which stands for Better Employee Transaction Interface, as an enhancement to the company’s then existing payroll offerings.  According to Paycom at that time, Beti “further automates and streamlines the payroll process by empowering employees to do their own payroll, increasing efficiencies and reducing errors,” adding that “[e]mployees already manage all other components of their paychecks, including timecards, expenses, PTO requests and benefits; now they have the convenience within Paycom to process their own payroll, too.”   Also, according to Paycom at that time, “Beti puts the payroll responsibility into the hands of employees, eliminating what used to be a multistep, imperfect and time-consuming process for HR and payroll staff members.”  What Paycom did not disclose at the time was that its revenue stream then relied heavily upon those very inefficiencies, especially charging fees for making additional payroll runs when mistakes were made in payroll departments.  Thus, as the company continued its rollout of Beti, more and more of the fees the company had previously been deriving for fixing one-off payroll errors would be eliminated, causing its own revenues and profit margins to decline.

The complaints allege that, throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the company’s business and operations.  Specifically, Defendants misrepresented and/or failed to disclose that: (1) Paycom had been relying upon a significant, but undisclosed, amount of one-off payroll correction fees to fuel its past outsized revenue growth; (2) increased adoption of Beti by Paycom’s payroll customers was cannibalizing the fees the company had previously been charging to correct common payroll mistakes and to provide related services; (3) the increased Beti adoption was decreasing Paycom’s gross profit margins; and (4) as a result of the foregoing, Defendants’ statements about Paycom’s business, operations, and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times.

On October 31, 2023, Paycom shocked the market when it reported its Q3 2023 financial results. In its results, Paycom disclosed disappointing Q3 revenues, revenues guidance for Q4 2023, and an initial 2024 outlook for 10% to 12% revenue growth. Paycom’s reported financial results fell significantly below consensus estimates. On an earnings call held that same day discussing the results, Paycom’s CEO and CFO disclosed that the company’s Beti product was cannibalizing a portion of Paycom’s services and revenues, which led the company to miss its expected revenues for the Q3 2023.  Likewise, the cannibalization of services and revenues caused Paycom to lower its projected fiscal 2023 revenues. 

Following this news, the price of Paycom shares declined by $94.28, or approximately 38.49%, from $244.97 per share to $150.69 on November 1, 2023.

A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member’s claim is typical of the claims of other class members, and that the class member will adequately represent the class. Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. Filling out the online form above or communicating with any counsel is not necessary to participate or share in any recovery achieved in this case.  Any member of the purported class may move the court to serve as a lead plaintiff through counsel of his/her choice, or may choose to do nothing and remain an inactive class member.

If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact Kessler Topaz Meltzer & Check, LLP:  Jonathan Naji, Esq. (484) 270-1453 or via e-mail at info@ktmc.com.  If you would like additional information about the suit, please click on the link "Submit Your Information" above and fill out the form as promptly as possible.