Paycom's Q4 Earnings Surpass Expectations, Revenues Rise Y/Y

Core Insights - Paycom Software, Inc. (PAYC) reported better-than-expected fourth-quarter 2025 results, with both earnings and revenues surpassing the Zacks Consensus Estimate [1][11] Financial Performance - Non-GAAP earnings were $2.45 per share, beating the Zacks Consensus Estimate of $2.44, and increased by 5.6% year over year due to higher revenues, operating efficiency, and lower income taxes [1][2] - Revenues reached $544.3 million, exceeding the consensus mark of $542.7 million, and grew by 10.2% year over year, driven by increased sales momentum, international expansion, and AI integration [3][11] - Recurring revenues, which account for 95% of total revenues, improved by 11.2% to $517.1 million, surpassing the estimate of $515.2 million [4][11] - Adjusted gross profits rose by 11.3% to $459.4 million, with an adjusted gross margin expansion of 80 basis points to 84.4% [5][11] - Adjusted EBITDA increased by 9.9% year over year to $236.3 million, although the adjusted EBITDA margin contracted slightly by 10 basis points to 43.4% [5] Cash Flow and Balance Sheet - As of December 31, 2025, Paycom had cash and cash equivalents of $370 million and no debt [6] - In Q4 2025, the company generated operating cash flow of approximately $196.1 million, paid out $20.6 million in dividends, and repurchased $108.8 million of its common stock [7] - For the full year 2025, operating cash flow was $678.9 million, with $84.8 million in dividends paid and $325.5 million in stock buybacks [7] Future Guidance - Paycom initiated its revenue guidance for 2026, forecasting revenues between $2.175 billion and $2.195 billion, with a Zacks Consensus Estimate of $2.23 billion, indicating year-over-year growth of 8.8% [9] - The company projects recurring revenues to grow by 7% year over year and expects revenues from interest on funds held for clients to be $103 million [9] - Adjusted EBITDA for 2026 is expected to be between $950 million and $970 million, translating to an EBITDA margin of approximately 44% at the midpoint [10]