Paycom Software (NYSE:PAYC) Q4 2025 Earnings call February 11, 2026 05:00 PM ET Company ParticipantsBhavin Shah - Director of Software Equity ResearchBob Foster - CFOChad Richison - CEO and PresidentDaniel Jester - Managing Director of Software ResearchJacob Smith - VP of Software Equity ResearchJames Samford - Head of Investor RelationsKevin McVeigh - Managing DirectorPatrick O'Neill - Equity Research AssociateRaimo Lenschow - Managing DirectorSamad Samana - Managing DirectorSiti Panigrahi - Managing Direc ...

Financial Data and Key Metrics Changes - Total revenue for Q4 2025 was $544 million, up 10% year-over-year, while full-year revenue reached $2.05 billion, exceeding initial expectations with a 10% growth in recurring and other revenue to $1.94 billion [10][11] - Adjusted EBITDA margin for Q4 was 43.4%, with full-year adjusted EBITDA growing 14% year-over-year to $882 million, representing a margin expansion of 180 basis points to 43% [11][12] - GAAP net income for Q4 was $114 million, or $2.07 per diluted share, while full-year GAAP net income was $453 million, or $8.08 per diluted share [11][12] - Operating cash flow increased 27% year-over-year to $679 million, with a margin of 33%, up 470 basis points [13] - Free cash flow for 2025 was $404 million, up 20% year-over-year, with a free cash flow margin expanding to approximately 20% [14] Business Line Data and Key Metrics Changes - The company achieved a record revenue retention rate of 91% in 2025, up from 90% in 2024, attributed to investments in automation and service [17] - The average daily balance on funds held for clients was approximately $2.8 billion in Q4 2025, up 11% year-over-year [16] - Client count grew to approximately 39,200, representing a 4% increase compared to 2024, with significant growth in clients over 1,000 employees [16] Market Data and Key Metrics Changes - The company maintains approximately 5% of the total addressable market, indicating substantial growth opportunities ahead [7][18] - The company is focused on expanding its market share and enhancing its technological lead in automation solutions [10][18] Company Strategy and Development Direction - The company is committed to full solution automation and enhancing client ROI through innovative products like IWant, Beti, and GONE [6][8] - The strategy includes a focus on new logo acquisition and expanding sales capacity, particularly in larger client segments [31][76] - The company plans to continue investing in technology and automation to drive long-term sustainable growth [10][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory despite a conservative revenue guidance for 2026, expecting total revenue growth of 6% to 7% [17][18] - The management noted that client demand remains strong, with no observed reluctance from prospects to adopt their products [34] - The company anticipates stabilization in the employment environment, which is crucial for its business model [40] Other Important Information - The company repurchased over 1.7 million shares for $370 million in 2025, with a remaining buyback authorization of approximately $1.1 billion [15] - The board approved a quarterly dividend of $0.375 per share, payable in mid-March [15] Q&A Session Summary Question: Can you reconcile the positive product developments with the guidance that suggests a slowdown? - Management acknowledged the positive client retention and product automation but indicated that sales opportunities remain a focus area for improvement [20][22] Question: Will changes in sales leadership lead to significant go-to-market changes? - Management indicated that the focus is on effectively communicating the value of full solution automation to clients, with ongoing training for sales personnel [24][25] Question: What are the expectations for recurring revenue growth compared to last year? - Management guided for 6%-7% total revenue growth, with a focus on sales and client service to drive retention and satisfaction [27][29] Question: Are there any changes in client behavior or decision-making processes? - Management reported no changes in client willingness to purchase, emphasizing the importance of effective training and communication of product value [34] Question: How is AI impacting internal productivity and efficiencies? - Management highlighted that AI is enhancing processing speed and overall productivity, allowing for quicker development and integration of new solutions [49][50] Question: What is the outlook for new sales office openings? - Management confirmed plans to expand sales teams and open new offices, aiming to capture more market opportunities [60][61] Question: How is the competitive landscape affecting win rates and pricing? - Management remains optimistic about win rates, citing product differentiation and improved sales processes as key factors [86]

Financial Data and Key Metrics Changes - Total revenue for Q4 2025 was $544 million, representing a 10% increase year-over-year, while full-year revenue reached $2.05 billion, exceeding initial expectations with a 10% growth in recurring and other revenue to $1.94 billion [9][10] - Adjusted EBITDA margin for Q4 was 43.4%, with full-year adjusted EBITDA growing 14% year-over-year to $882 million, reflecting a 180 basis point margin expansion to 43% [10][11] - GAAP net income for Q4 was $114 million, or $2.07 per diluted share, while full-year GAAP net income was $453 million, or $8.08 per diluted share [10][11] - Operating cash flow increased by 27% year-over-year to $679 million, with a free cash flow of $404 million, up 20% year-over-year [11][12] Business Line Data and Key Metrics Changes - The company achieved a record revenue retention rate of 91% in 2025, up from 90% in 2024, attributed to investments in automation and service quality [16] - The client count grew to approximately 39,200, a 4% increase compared to 2024, with significant success in acquiring larger clients [15][16] Market Data and Key Metrics Changes - The average daily balance on funds held for clients was approximately $2.8 billion in Q4 2025, up 11% year-over-year [14] - The company continues to capture opportunities in the market, holding less than 5% of the total addressable market, indicating substantial growth potential [5][17] Company Strategy and Development Direction - The company is focused on full solution automation, enhancing client ROI, and providing world-class service, which has led to strong revenue retention and client satisfaction [4][5] - Future strategies include extending technological leadership and targeting the remaining 95% of the addressable market, with a commitment to innovation and automation [9][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory despite a conservative revenue guidance for 2026, expecting total revenue growth of 6% to 7% [16][17] - The company is not seeing any reluctance from clients to purchase products, indicating a stable demand environment [34] Other Important Information - The company repurchased over 1.7 million shares in 2025, totaling $370 million, and has approximately $1.1 billion remaining under its buyback authorization [12][13] - The board approved a quarterly dividend of $0.375 per share, payable in mid-March [13] Q&A Session Summary Question: How to reconcile positive product developments with guidance suggesting a slowdown? - Management acknowledged the positive client retention and product automation but noted that sales opportunities remain a focus for improvement [19][20] Question: Will changes in sales leadership lead to significant go-to-market changes? - Management indicated that the focus is on enhancing the value proposition and training sales staff on new product enhancements [22][24] Question: What are the expectations for recurring revenue growth and guidance methodology? - Management clarified that the guidance reflects current visibility and is consistent with previous years, with a focus on new client acquisitions [26][28] Question: Are there any changes in client behavior or decision-making processes? - Management reported no changes in client willingness to buy, emphasizing ongoing training and product automation [34] Question: How is AI impacting internal productivity and efficiencies? - Management highlighted that AI is enhancing processing speed and overall productivity, allowing for rapid development and integration of new features [48][50] Question: What is the strategy for improving retention rates? - Management emphasized the importance of delivering world-class service and ensuring clients achieve full value from the product [44][45] Question: How is the competitive landscape affecting win rates and pricing? - Management remains optimistic about win rates, citing product differentiation and improved sales processes [86][87]

Key Takeaways The Zacks Consensus Estimate for PAYC's Q4 EPS is pegged at $2.44, up 5.2% Y/Y.PAYC's Q4 results may reflect gains from Beti, GONE, IWant and rising recurring revenues tied to AI adoption.Paycom's growth could be tempered by macro uncertainty, layoffs, and slower hiring, affecting payroll demand.Paycom Software, Inc. (PAYC) is set to report fourth-quarter 2025 results on Feb. 11, after market close.The Zacks Consensus Estimate for fourth-quarter earnings is pinned at $2.44 per share, indicatin ...

Core Insights - Paycom Software, Inc. (PAYC) reported a total revenue increase of 10.5% year over year to $483.6 million for Q2 2025, exceeding the Zacks Consensus Estimate of $472 million, primarily driven by a 12.2% rise in recurring revenues [1][9] Revenue Breakdown - Recurring revenues reached $455.1 million, accounting for 94% of total sales, and surpassed the model estimate of $445.5 million, largely due to the growing adoption of automation tools, Beti and GONE [2][9] Product Insights - Beti, a payroll management tool, has seen strong adoption, contributing to client satisfaction and retention, with some former clients returning due to its effectiveness [3][9] - GONE automates time-off requests and vacation tracking, enhancing operational efficiency and accuracy, which supports the increase in recurring revenues as more clients utilize these features [4][9] Future Outlook - Management anticipates that Beti and GONE will continue to be significant contributors to recurring revenue growth in the latter half of 2025, alongside the recent introduction of the new AI tool, IWant [5]

Core Insights - Paycom Software, Inc. is expected to report second-quarter 2025 results on August 6, with earnings estimated at $1.78 per share, reflecting a year-over-year increase of 9.9% [1] - The consensus estimate for second-quarter revenues is approximately $472 million, indicating a rise of 7.9% from the previous year's sales of $437.5 million [2] Revenue and Earnings Expectations - Paycom's earnings have consistently beaten the Zacks Consensus Estimate in the last four quarters, with an average surprise of 7.5% [2] - Recurring revenues are projected to be $445.5 million, showing a 9.9% year-over-year increase, driven by new client acquisitions and AI-driven product innovations [4] Factors Influencing Q2 Results - Sustained growth in recurring revenues is anticipated due to new client acquisitions and advancements in AI-driven product offerings [3] - The integration of AI-enhanced payroll and HR tools is expected to improve operational efficiency and attract more businesses [4] Product Innovations and Client Engagement - Paycom's focus on improving its Beti and GONE solutions is likely to enhance client engagement and retention, with Beti reducing payroll processing effort by up to 90% and GONE delivering up to 800% ROI [5] - The strategic push into AI-driven automation is expected to expand the customer base and strengthen competitive positioning [4] Economic Environment Impact - Despite strong product innovation, Paycom's growth may be affected by a weaker macroeconomic environment, including layoffs and hiring slowdowns in various industries [6] - Geopolitical tensions and economic uncertainty are anticipated to create near-term revenue headwinds [6] Earnings Prediction - The model predicts an earnings beat for Paycom, supported by a positive Earnings ESP, although the current Zacks Rank is 4 (Sell) [7]

Core Viewpoint - Paycom Software, Inc. is expected to report first-quarter 2025 results on May 7, with earnings estimated at $2.60 per share, reflecting a slight year-over-year increase of 0.4% [1]. Financial Estimates - The Zacks Consensus Estimate for Paycom's first-quarter revenues is $525.6 million, indicating a year-over-year increase of approximately 5.2% from $499.9 million [2]. - Paycom's recurring revenues are estimated at $500.7 million, representing a 7.5% year-over-year increase, highlighting the effectiveness of its subscription-based model [3]. Growth Drivers - The anticipated growth in Paycom's first-quarter results is attributed to solid recurring revenue growth driven by new client acquisitions and AI-driven product innovations [2]. - The strategic focus on AI-driven automation has expanded Paycom's customer base, enhancing the efficiency and attractiveness of its payroll and HR tools [3]. - Improvements in the Beti and GONE solutions are expected to increase client engagement and retention by providing a seamless employee experience [4]. Challenges - Despite strong product innovation, Paycom's growth may be hindered by headcount reductions among its clients due to a weaker macroeconomic environment, which could affect transaction volumes and demand for payroll services [5]. - Geopolitical tensions and economic uncertainty are likely to cause potential clients to delay or reduce investments in HR software, creating near-term revenue challenges [5]. Earnings Prediction - The current model does not predict a definitive earnings beat for Paycom, as it has an Earnings ESP of 0.00% despite holding a Zacks Rank 1 (Strong Buy) [6].