Paycom Software(PAYC) - 2025 Q2 - Quarterly Results

Executive Summary & Outlook This section provides an overview of Paycom's strong Q2 2025 financial performance, CEO strategic insights, and updated full-year 2025 financial guidance Second Quarter 2025 Financial Highlights Paycom Software, Inc. reported strong financial results for Q2 2025, with total revenues increasing by 10.5% year-over-year to $483.6 million Q2 2025 Key Financial Highlights (YoY Comparison) | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | YoY Change (%) | | :-------------------------------- | :------------------ | :------------------ | :------------- | | Total Revenues | $483.6 | $437.5 | 10.5% | | Recurring and other revenues | $455.1 | $405.5 | 12.2% | | GAAP Net Income | $89.5 | $68.0 | 31.6% | | GAAP Diluted EPS | $1.58 | $1.20 | 31.7% | | Non-GAAP Net Income | $116.6 | $91.8 | 27.0% | | Non-GAAP Diluted EPS | $2.06 | $1.62 | 27.2% | | Adjusted EBITDA | $198.3 | $159.7 | 24.2% | Balance Sheet Highlights (as of June 30, 2025) | Metric | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | | :----------------------- | :----------------------- | :---------------------- | | Cash and Cash Equivalents | $532.2 | $402.0 | | Total Debt | $0 | $0 | - During Q2 2025, Paycom paid $21.8 million in cash dividends and repurchased 127,717 shares of common stock for $32.6 million[5] CEO Commentary and Strategic Focus CEO Chad Richison highlighted strong Q2 results, robust new client additions, and the benefits clients are receiving from Paycom's automated solution - Paycom delivered very strong results, leading to raised growth and margin targets for 2025[2] - The sales team achieved robust new logo additions, and clients are benefiting from the most automated solution on the market[2] - Paycom introduced 'IWant,' the industry's first command-driven AI engine, aiming to extend product leadership and enhance AI and automation[2] Financial Outlook for Full Year 2025 Paycom has raised its financial guidance for the full year ending December 31, 2025, projecting total revenues between $2.045 billion and $2.055 billion Full Year 2025 Financial Guidance | Metric | Guidance Range (Millions) | Midpoint Growth (YoY) | | :-------------------------------- | :------------------------ | :-------------------- | | Total Revenue | $2,045 - $2,055 | ~9% | | Recurring and other revenue growth | N/A | ~10% | | Interest on funds held for clients | ~$113.0 | N/A | | Adjusted EBITDA | $872.0 - $882.0 | N/A | | Adjusted EBITDA Margin | N/A | ~43% | - The company has not reconciled forward-looking adjusted EBITDA ranges and adjusted EBITDA margin to net income due to the unavailability of applicable information for future periods without unreasonable effort[8][9] Company Overview This section introduces Paycom's cloud-based HCM software, details recent financial reporting changes, and includes a forward-looking statements disclaimer About Paycom Paycom Software, Inc. is a leading provider of comprehensive, cloud-based human capital management (HCM) software - Paycom simplifies business and employees' lives through automated, command-driven HR and payroll technology[13] - The company's employee-first technology utilizes AI and full-solution automation to streamline processes and drive efficiencies in a single database[13] - Paycom's industry-first AI engine, 'IWant,' offers instant and accurate access to employee data without requiring navigation or software learning[13] Financial Reporting Notes Paycom made two key changes to its financial presentation: disaggregating interest on funds held for clients from recurring and other revenues and adopting the presentation of dollar amounts in millions - For the year ended December 31, 2024, Paycom changed the presentation of revenues to disaggregate interest on funds held for clients and combine recurring and other revenues[14] - In Q4 2024, the company adopted the presentation of dollar amounts in millions, except for per share amounts, which may cause immaterial differences in prior period amounts due to rounding[15] Forward-Looking Statements Disclaimer This section clarifies that certain statements in the press release and related teleconference call are forward-looking, based on current information and subject to business and economic risks - Forward-looking statements refer to estimated or anticipated results, non-historical facts, or future events, including business strategy, operating results, cash flows, and market trends[16] - These statements are based on currently available information and are subject to business and economic risks, meaning actual results could differ materially[16] - Paycom does not undertake any obligation to update or revise forward-looking statements unless required by law[16] Consolidated Financial Statements This section presents Paycom's consolidated balance sheets, statements of comprehensive income, and statements of cash flows for recent periods Consolidated Balance Sheets As of June 30, 2025, Paycom's total assets decreased to $4,031.2 million from $5,859.9 million at December 31, 2024, primarily driven by a significant reduction in funds held for clients Consolidated Balance Sheet Highlights (Millions) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Cash and cash equivalents | $532.2 | $402.0 | | Funds held for clients | $1,616.9 | $3,665.5 | | Total current assets | $2,402.7 | $4,304.8 | | Total assets | $4,031.2 | $5,859.9 | | Client funds obligation | $1,616.9 | $3,665.7 | | Total current liabilities | $1,849.2 | $3,906.8 | | Total liabilities | $2,229.3 | $4,284.0 | | Total stockholders' equity | $1,801.9 | $1,575.9 | Consolidated Statements of Comprehensive Income For the three months ended June 30, 2025, total revenues increased by 10.5% to $483.6 million, primarily driven by a 12.2% increase in recurring and other revenues Q2 2025 Consolidated Statements of Comprehensive Income (YoY Comparison, Millions) | Metric | Q2 2025 | Q2 2024 | YoY Change (%) | | :-------------------------------- | :------ | :------ | :------------- | | Total revenues | $483.6 | $437.5 | 10.5% | | Recurring and other | $455.1 | $405.5 | 12.2% | | Interest on funds held for clients | $28.5 | $32.0 | -10.9% | | Total operating expenses | $371.3 | $342.4 | 8.4% | | Operating income | $112.3 | $95.1 | 18.1% | | Net income | $89.5 | $68.0 | 31.6% | | Diluted EPS | $1.58 | $1.20 | 31.7% | YTD June 30, 2025 Consolidated Statements of Comprehensive Income (YoY Comparison, Millions) | Metric | YTD 2025 | YTD 2024 | YoY Change (%) | | :-------------------------------- | :------- | :------- | :------------- | | Total revenues | $1,014.1 | $937.4 | 8.2% | | Recurring and other | $955.1 | $871.6 | 9.6% | | Interest on funds held for clients | $59.0 | $65.8 | -10.3% | | Total operating expenses | $716.6 | $556.4 | 28.8% | | Operating income | $297.5 | $381.0 | -21.9% | | Net income | $228.9 | $315.2 | -27.4% | | Diluted EPS | $4.06 | $5.57 | -27.1% | Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities increased to $305.0 million, while net cash used in investing and financing activities significantly increased YTD June 30, 2025 Consolidated Statements of Cash Flows (YoY Comparison, Millions) | Metric | YTD 2025 | YTD 2024 | YoY Change (%) | | :-------------------------------- | :------- | :------- | :------------- | | Net cash provided by operating activities | $305.0 | $280.7 | 8.7% | | Net cash (used in) provided by investing activities | $(565.2) | $71.7 | -889.3% | | Net cash used in financing activities | $(2,129.5) | $(160.4) | 1227.6% | | (Decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents | $(2,389.7) | $192.0 | -1344.6% | | Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period | $1,653.1 | $2,614.7 | -36.8% | - Purchases of investments from funds held for clients amounted to $465.8 million in YTD 2025, compared to no such purchases in YTD 2024[22] - The net change in client funds obligation resulted in a cash outflow of $2,048.8 million in YTD 2025, a significant increase from $24.9 million in YTD 2024[22] Non-GAAP Financial Measures This section explains the use of non-GAAP financial measures, provides GAAP to non-GAAP reconciliations, and details stock-based compensation expenses Use of Non-GAAP Financial Information Paycom presents various non-GAAP financial measures, including Adjusted EBITDA, Non-GAAP Net Income, and Free Cash Flow, to supplement GAAP information - Non-GAAP measures like Adjusted EBITDA, non-GAAP net income, and free cash flow are used to supplement GAAP financial information[10] - Management utilizes these measures to review core business operations, for planning, and to provide investors with greater transparency and facilitate comparisons[10] - Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for GAAP data[11] GAAP to Non-GAAP Reconciliations Paycom provides detailed reconciliations from GAAP to various non-GAAP financial measures for both the three and six months ended June 30, 2025 and 2024 Net Income to Adjusted EBITDA Reconciliation (Millions) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :------ | :------ | :------- | :------- | | Net income | $89.5 | $68.0 | $228.9 | $315.2 | | Non-cash stock-based compensation expense | $38.4 | $24.1 | $60.6 | $(69.7) | | Adjusted EBITDA | $198.3 | $159.7 | $451.6 | $389.2 | | Adjusted EBITDA margin | 41.0% | 36.5% | 44.5% | 41.5% | Net Income to Non-GAAP Net Income Reconciliation (Millions) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :------ | :------ | :------- | :------- | | Net income | $89.5 | $68.0 | $228.9 | $315.2 | | Non-cash stock-based compensation expense | $38.4 | $24.1 | $60.6 | $(69.7) | | Income tax effect on non-GAAP adjustments | $(11.3) | $(0.3) | $(15.2) | $(7.0) | | Non-GAAP net income | $116.6 | $91.8 | $274.3 | $238.5 | | Non-GAAP net income per share, diluted | $2.06 | $1.62 | $4.87 | $4.22 | Free Cash Flow and Margin (Millions) | Metric | YTD 2025 | YTD 2024 | | :-------------------------------- | :------- | :------- | | Net cash provided by operating activities | $305.0 | $280.7 | | Purchases of property and equipment | $(99.4) | $(93.3) | | Free cash flow | $205.6 | $187.4 | | Free cash flow margin | 20.3% | 20.0% | Components of Non-Cash Stock-Based Compensation Expense Non-cash stock-based compensation expense for Q2 2025 totaled $38.4 million, an increase from $24.1 million in Q2 2024 Non-Cash Stock-Based Compensation Expense (Millions) | Category | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :------ | :------ | :------- | :------- | | Operating expenses | $6.2 | $4.2 | $9.4 | $7.2 | | Sales and marketing | $6.6 | $4.8 | $12.5 | $10.3 | | Research and development | $12.6 | $7.8 | $19.5 | $13.1 | | General and administrative | $13.0 | $7.4 | $19.2 | $(100.3) | | Total non-cash stock-based compensation expense | $38.4 | $24.1 | $60.6 | $(69.7) | Additional Information This section provides details for the financial results conference call and investor relations contact information Conference Call Details Paycom hosted a conference call on August 6, 2025, at 5:00 p.m. Eastern time to discuss its financial results - A conference call was held on August 6, 2025, at 5:00 p.m. Eastern time to discuss financial results[12] - Dial-in access codes were provided for domestic (833-470-1428) and international (404-975-4839) participants, with an access code of 103375[12] - A live webcast and replay of the conference call are available on Paycom's Investor Relations website at investors.paycom.com[12] Contact Information Investor relations inquiries for Paycom Software, Inc. can be directed to James Samford via phone at 800-580-4505 or email at investors@paycom.com - Investor Relations Contact: James Samford[31] - Phone: 800-580-4505[31] - Email: investors@paycom.com[31]