Paycom Software(PAYC) - 2025 Q1 - Quarterly Results

First Quarter 2025 Financial Results Overview Q1 2025 Headline Performance Paycom reported strong Q1 2025 results, with 6% YoY revenue growth, driven by automation and sales, leading to an increased 2025 outlook First Quarter 2025 Key Financial Highlights | Metric | Amount (millions) | % of Total Revenues | | :----------------------- | :----------- | :------------------ | | Total Revenues | $531 | - | | GAAP Net Income | $139 | 26% | | Non-GAAP Net Income | $158 | - | | Adjusted EBITDA | $253 | 48% | - CEO Chad Richison highlighted strong results driven by a differentiated approach to automation, strong sales execution, and operational efficiency gains, leading to an increased outlook for 2025[2] Detailed Q1 2025 Financial Highlights This section details Paycom's Q1 2025 financial performance versus Q1 2024, covering revenue, profitability, balance sheet, and cash flow Revenue Breakdown Q1 2025 Revenue Performance (YoY Comparison) | Metric | Q1 2025 (millions) | Q1 2024 (millions) | YoY Change | | :-------------------------- | :----------------- | :----------------- | :--------- | | Total Revenues | $530.5 | $499.9 | +6.1% | | Recurring and other revenues | $500.0 | $466.0 | +7.3% | - Recurring and other revenues constituted 94.2% of total revenues in Q1 2025[2] Profitability Metrics Q1 2025 Profitability Metrics (YoY Comparison) | Metric | Q1 2025 (millions) | Q1 2024 (millions) | YoY Change | | :-------------------------- | :----------------- | :----------------- | :--------- | | GAAP Net Income | $139.4 | $247.2 | -43.6% | | GAAP Diluted EPS | $2.48 | $4.37 | -43.2% | | Non-GAAP Net Income | $157.7 | $146.6 | +7.6% | | Non-GAAP Diluted EPS | $2.80 | $2.59 | +8.1% | | Adjusted EBITDA | $253.2 | $229.5 | +10.3% | - GAAP net income in Q1 2024 included a $117.5 million benefit related to the forfeiture of the 2020 CEO performance award, impacting the year-over-year comparison[5] Balance Sheet and Cash Flow Summary Key Balance Sheet and Capital Allocation (as of March 31, 2025) | Metric | Amount (millions) | | :------------------------ | :---------------- | | Cash and Cash Equivalents | $520.8 | | Total Debt | $0 | | Dividends Paid (Q1 2025) | $21.1 | | Shares Repurchased (Q1 2025) | 24,987 shares for $5.2 | Financial Outlook for Full Year 2025 FY 2025 Guidance Paycom provides its FY 2025 financial guidance, projecting growth in total and recurring revenue, client fund interest, and Adjusted EBITDA Full Year 2025 Financial Guidance | Metric | Range | | :-------------------------------- | :------------------------------------ | | Total Revenue | $2.023 billion to $2.038 billion (approx. 8% YoY growth at midpoint) | | Recurring and other revenue growth | Approx. 9% YoY | | Interest on funds held for clients | Approx. $110 million | | Adjusted EBITDA | $843.0 million to $858.0 million (approx. 42% margin at midpoint) | - The company has not reconciled forward-looking adjusted EBITDA ranges to net income due to the inherent uncertainty and variability of certain GAAP-based items[8] Company Information and Financial Disclosures About Paycom Paycom is a leading cloud-based HCM software provider, simplifying HR and payroll with employee-first automation and a single database - Paycom provides comprehensive, cloud-based human capital management software, simplifying HR and payroll for businesses and employees[12] - The company's employee-first technology leverages full-solution automation and a single database to streamline processes and empower employees with direct access to their HR information[12] - Paycom serves businesses of all sizes in the U.S. and internationally[12] Use of Non-GAAP Financial Information This section defines Paycom's non-GAAP financial measures, explaining their role in transparency for management and investors, and outlining their limitations - Non-GAAP financial measures (e.g., adjusted EBITDA, non-GAAP net income, free cash flow) are used to supplement GAAP information, assess core business performance, and facilitate comparisons[9] - Management uses these measures for financial and operational decision-making, believing they offer a more complete understanding of business factors and trends[9] - Non-GAAP measures are not substitutes for GAAP results and may not be comparable to similarly titled measures of other companies[10] Financial Presentation Changes Paycom implemented financial presentation changes, disaggregating interest on client funds from recurring revenue and adopting dollar amounts in millions - For the year ended December 31, 2024, revenue presentation changed to disaggregate interest on funds held for clients and combine recurring and other revenues[13] - In the fourth quarter of 2024, the company adopted the presentation of dollar amounts in millions, except for per share amounts[14] Forward-Looking Statements This disclosure highlights forward-looking statements, based on current information and subject to business and economic risks that could cause actual results to differ materially - Forward-looking statements refer to estimated or anticipated results, non-historical facts, or future events, including business strategy, operating results, and growth plans[15] - These statements are based on currently available information and are subject to business and economic risks, with actual results potentially differing materially[15] - The company does not undertake any obligation to update or revise forward-looking statements, except as required by law[15] Conference Call Information Details are provided for accessing the conference call to discuss Paycom's financial results, including dial-in numbers and webcast availability - A conference call to discuss financial results was scheduled for May 7, 2025, at 5:00 p.m. Eastern time[11] - Access details include domestic and international dial-in numbers and an access code (423347)[11] - A live webcast and replay are available on the Investor Relations page of Paycom's website[11] Unaudited Consolidated Financial Statements Consolidated Balance Sheets The unaudited consolidated balance sheets present Paycom's financial position as of March 31, 2025, and December 31, 2024, detailing assets, liabilities, and equity Unaudited Consolidated Balance Sheets (in millions) | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Total Assets | $4,572.6 | $5,859.9 | | Total Liabilities | $2,855.4 | $4,284.0 | | Total Stockholders' Equity | $1,717.2 | $1,575.9 | | Cash and cash equivalents | $520.8 | $402.0 | | Funds held for clients | $2,241.2 | $3,665.5 | | Client funds obligation | $2,239.7 | $3,665.7 | Consolidated Statements of Comprehensive Income This statement details Paycom's revenues, operating expenses, and net income for the three months ended March 31, 2025, and 2024, including comprehensive earnings Unaudited Consolidated Statements of Comprehensive Income (in millions, except per share amounts) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total revenues | $530.5 | $499.9 | | Recurring and other | $500.0 | $466.0 | | Interest on funds held for clients | $30.5 | $33.9 | | Total operating expenses | $345.4 | $214.1 | | Operating income | $185.1 | $285.8 | | Net income | $139.4 | $247.2 | | Earnings per share, diluted | $2.48 | $4.37 | Consolidated Statements of Cash Flows The unaudited consolidated statements of cash flows detail cash from operating, investing, and financing activities for Q1 2025 and 2024, including a cash and cash equivalents reconciliation Unaudited Consolidated Statements of Cash Flows (in millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $182.5 | $148.6 | | Net cash (used in) provided by investing activities | $(379.9) | $42.3 | | Net cash (used in) provided by financing activities | $(1,452.3) | $376.1 | | Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period | $2,393.1 | $2,989.8 | Reconciliations of GAAP to Non-GAAP Financial Measures Net Income to Adjusted EBITDA Reconciliation This section reconciles GAAP net income to Adjusted EBITDA for Q1 2025 and Q1 2024, detailing adjustments for interest, taxes, depreciation, amortization, and non-cash stock-based compensation Net Income to Adjusted EBITDA Reconciliation (in millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $139.4 | $247.2 | | Interest expense | $0.8 | $0.8 | | Provision for income taxes | $50.9 | $42.8 | | Depreciation and amortization | $39.9 | $32.5 | | Non-cash stock-based compensation expense | $22.2 | $(93.8) | | Adjusted EBITDA | $253.2 | $229.5 | | Adjusted EBITDA margin | 47.7% | 45.9% | Net Income to Non-GAAP Net Income Reconciliation This reconciliation details adjustments from GAAP net income to non-GAAP net income and per-share amounts, primarily by adding back non-cash stock-based compensation and adjusting for its tax effect Net Income to Non-GAAP Net Income Reconciliation (in millions, except per share amounts) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $139.4 | $247.2 | | Non-cash stock-based compensation expense | $22.2 | $(93.8) | | Income tax effect on non-GAAP adjustments | $(3.9) | $(6.8) | | Non-GAAP net income | $157.7 | $146.6 | | Non-GAAP net income per share, diluted | $2.80 | $2.59 | Adjusted Gross Profit and Margin This section presents the calculation of adjusted gross profit and adjusted gross margin by adding back non-cash stock-based compensation expense to total gross profit Adjusted Gross Profit and Margin (in millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total gross profit | $445.9 | $421.2 | | Plus: Non-cash stock-based compensation expense | $3.0 | $3.0 | | Total adjusted gross profit | $448.9 | $424.2 | | Adjusted gross margin | 84.6% | 84.9% | Adjusted Sales and Marketing Expenses This reconciliation shows adjusted sales and marketing expenses by excluding non-cash stock-based compensation expense from the GAAP figures Adjusted Sales and Marketing Expenses (in millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Sales and marketing expenses | $110.9 | $115.5 | | Less: Non-cash stock-based compensation expense | $(5.9) | $(5.5) | | Adjusted sales and marketing expenses | $105.0 | $110.0 | | Adjusted sales and marketing expenses as a % of revenues | 19.8% | 22.0% | Adjusted Total Administrative Expenses This section reconciles GAAP total administrative expenses to adjusted total administrative expenses by removing non-cash stock-based compensation expense Adjusted Total Administrative Expenses (in millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total administrative expenses | $260.8 | $135.4 | | Less: Non-cash stock-based compensation expense | $(19.2) | $96.8 | | Adjusted total administrative expenses | $241.6 | $232.2 | | Adjusted total administrative expenses as a % of revenues | 45.5% | 46.5% | Adjusted Research and Development Expenses This reconciliation shows adjusted research and development expenses by excluding non-cash stock-based compensation expense from the GAAP figures Adjusted Research and Development Expenses (in millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Research and development expenses | $62.3 | $50.5 | | Less: Non-cash stock-based compensation expense | $(6.9) | $(5.4) | | Adjusted research and development expenses | $55.4 | $45.1 | | Adjusted research and development expenses as a % of revenues | 10.4% | 9.0% | Total and Adjusted Research and Development Costs This section provides a reconciliation of total research and development costs, including capitalized costs, to adjusted total R&D costs by removing non-cash stock-based compensation Total and Adjusted Research and Development Costs (in millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total research and development costs | $96.0 | $80.4 | | Less: Capitalized non-cash stock-based compensation | $(5.3) | $(3.6) | | Less: Non-cash stock-based compensation expense | $(6.9) | $(5.4) | | Adjusted total research and development costs | $83.8 | $71.4 | | Adjusted total research and development costs as a % of revenues | 15.8% | 14.3% | Free Cash Flow and Free Cash Flow Margin This section calculates free cash flow by subtracting capital expenditures from net cash provided by operating activities and derives the free cash flow margin Free Cash Flow and Free Cash Flow Margin (in millions) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $182.5 | $148.6 | | Purchases of property and equipment | $(37.7) | $(47.7) | | Purchases of intangible assets | $0.0 | $0.0 | | Free cash flow | $144.8 | $100.9 | | Free cash flow margin | 27.3% | 20.2% | Components of Non-Cash Stock-Based Compensation Expense This section provides a detailed breakdown of the total non-cash stock-based compensation expense, categorized by its allocation across various operating expense lines Components of Non-Cash Stock-Based Compensation Expense (in millions) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Operating expenses | $3.0 | $3.0 | | Sales and marketing | $5.9 | $5.5 | | Research and development | $6.9 | $5.4 | | General and administrative | $6.4 | $(107.6) | | Total non-cash stock-based compensation expense | $22.2 | $(93.8) |