Paycom Software (NYSE:PAYC) executives highlighted continued progress in automation and improved client retention while outlining a more modest growth outlook for 2026 during the company’s fourth-quarter and year-end 2025 earnings call.
Management emphasizes automation strategy and improved retention
CEO and President Chad Richison said the company executed against its 2025 plan by focusing on “full-solution automation,” client ROI achievement, and “world-class service.” Richison said Paycom’s annual revenue retention rate increased to 91% in 2025, up from 90% in 2024, and noted a “record number” of clients returning to the Paycom platform.
On IWant, Richison cited a Forrester analysis of a composite organization with more than 500 employees, saying the study found an ROI of over 400% tied to productivity gains. During the Q&A, he said IWant usage was up 80% in January compared with the fourth quarter and added that IWant contributed to retention improvement in 2025.
Fourth-quarter and full-year 2025 results
CFO Bob (Paycom did not provide his last name in the transcript) reported fourth-quarter revenue of $544 million, up 10% year-over-year, with recurring and other revenue of $517 million, up 11%.
For full-year 2025, the company reported total revenue of $2.05 billion, with recurring and other revenue up 10% year-over-year to $1.94 billion. Profitability remained strong, with adjusted EBITDA margin of 43.4% in the fourth quarter (adjusted EBITDA of $236 million) and full-year adjusted EBITDA of $882 million, up 14% year-over-year, representing a 180 basis point margin expansion to 43%.
On a GAAP basis, Paycom reported:
- Q4 GAAP net income: $114 million, or $2.07 per diluted share (55 million shares)
- Full-year GAAP net income: $453 million, or $8.08 per diluted share (56 million shares)
Non-GAAP net income was $135 million in Q4 (or $2.45 per diluted share), and $519 million for the year (or $9.24 per diluted share), according to management.
Cash flow, capital spending, and shareholder returns
Operating cash flow increased 27% in 2025 to $679 million, representing a 33% margin and a 470 basis point improvement over the prior year. Capital expenditures totaled $275 million (about 13% of revenue), compared with $197 million in 2024 (about 10% of revenue). Bob said the company invested about $100 million to expand its data center footprint and capabilities to support automation and AI initiatives.
Free cash flow, defined as operating cash flow less CapEx, was $404 million, up 20% year-over-year, with free cash flow margin expanding 180 basis points to about 20%.
Paycom also returned capital to shareholders through repurchases and dividends. In 2025, the company repurchased over 1.7 million shares for $370 million and paid about $85 million in cash dividends. Management said about $1.1 billion remained under its buyback authorization as of Dec. 31, 2025, and the board approved the next quarterly dividend of $0.375 per share, payable in mid-March.
Paycom ended 2025 with cash and cash equivalents of $370 million and zero debt, management said.
Client metrics and upmarket momentum
Client count grew to approximately 39,200 at the end of 2025, up 4% year-over-year. On a parent company grouping basis, Paycom ended the year with about 20,300 clients, up 5%. Total employee records stored in the system increased 5% year-over-year to 7.4 million.
Management said revenue growth was broad-based and noted continued upmarket success, adding that revenue from clients with more than 1,000 employees grew faster than total revenue.
2026 outlook: slower growth but continued margin strength
For fiscal 2026, management guided total revenue to a range of $2.175 billion to $2.195 billion, representing 6% to 7% year-over-year growth. Recurring and other revenues are expected to grow 7% to 8%. Adjusted EBITDA is expected to be $950 million to $970 million, implying an adjusted EBITDA margin of about 44% at the midpoint.
The total revenue outlook includes interest on funds held for clients of about $103 million, based on a consensus assumption of two rate cuts in 2026, management said. Average daily balance on funds held for clients was approximately $2.8 billion in the fourth quarter, up 11% year-over-year.
During Q&A, analysts repeatedly pressed management to reconcile product momentum and improving retention with slower guided growth. Richison said the company’s opportunity remains tied to improving sales execution and “plating” full-solution automation in a way prospects can digest. He also said the company has been training salespeople over the last three months on product enhancements released since November. Management said it was not seeing reluctance among prospects to make changes in the marketplace.
Richison said “new logo adds” represent the biggest growth opportunity, noting Paycom’s outside sales organization is focused on new customer acquisition. He also said the company expanded its sales teams to 10 from eight, adding about 100 salespeople in the field, and is hiring as many salespeople as it can.
On retention assumptions for guidance and the impact of share repurchases, management said it does not disclose retention embedded in the outlook and does not include buybacks in guidance, describing repurchases as opportunistic.
Asked about layoffs and headcount, management said Paycom announced a restructuring last year and ended 2025 with about 5,800 employees, adding it would not discuss internal employment trends or strategies beyond what will be in the company’s Form 10-K.
About Paycom Software (NYSE:PAYC)
Paycom Software, Inc (NYSE: PAYC) is a cloud-based human capital management (HCM) software provider that delivers an end-to-end solution for human resources, payroll, talent acquisition, time and labor management, and talent management. Its single-database platform enables organizations to process payroll, track time, administer benefits, and manage recruiting and employee development through a unified system. Paycom’s software is designed to streamline administrative tasks, improve data accuracy, and provide real-time reporting and analytics to support strategic HR decisions.
The company’s core offerings include payroll processing with built-in tax compliance, employee self-service functionality, automated time tracking, and customizable talent acquisition tools that allow employers to create and post job requisitions, screen candidates, and conduct onboarding electronically.
