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 [10][11] - Recurring and other revenue for Q4 was $517 million, an 11% increase year-over-year, and for the full year, it grew 10% to $1.94 billion [10][11] - Adjusted EBITDA margin for Q4 was 43.4%, with full-year adjusted EBITDA growing 14% to $882 million, representing a margin expansion of 180 basis points [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% [13] - Free cash flow for 2025 was $404 million, up 20% year-over-year, with a free cash flow margin of approximately 20% [14] Business Line Data and Key Metrics Changes - The company launched several automated decisioning tools, enhancing its full-solution automation strategy, which contributed to strong revenue retention of 91% in 2025 [6][7] - The automation tools, such as Beti and GONE, significantly reduced payroll processing labor and time spent correcting payroll errors, showcasing the efficiency of the company's offerings [8][9] 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 [16] - The client count grew to approximately 39,200, representing a 4% increase compared to 2024, with a notable increase in revenue from clients with over 1,000 employees [16][17] Company Strategy and Development Direction - The company aims to extend its technological lead and focus on delivering unparalleled value to clients while targeting the remaining 95% of the addressable market [10][18] - The emphasis on full-solution automation and decisioning logic is expected 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 potential despite a conservative revenue guidance for 2026, expecting total revenue growth of 6% to 7% [17][18] - The company is focused on improving client retention and achieving full value for clients through enhanced service and product offerings [45][64] Other Important Information - The company repurchased over 1.7 million shares for a total of $370 million in 2025, with approximately $1.1 billion remaining under its buyback authorization [15] - The board approved a quarterly dividend of $0.375 per share, payable in mid-March [15] Q&A Session Summary Question: Customer retention and guidance growth - Management acknowledged improved customer retention but noted that guidance for growth appears conservative, attributing it to macroeconomic factors and internal sales strategies [20][22] Question: Changes in sales leadership impact - Management indicated that the changes in sales leadership are focused on enhancing the value proposition and training sales personnel on new product enhancements [24][25] Question: Recurring revenue outlook - Management clarified that the guidance methodology remains consistent, with expectations for new logo additions being a significant growth driver [27][29] Question: Client behavior and decision cycles - Management reported no change in client desire to purchase products, emphasizing ongoing training and product automation as key factors [33][34] Question: Usage patterns of IWant - Management noted an 80% increase in usage of the IWant tool, contributing positively to client retention and satisfaction [35][36] Question: AI's impact on productivity - Management highlighted that AI is enhancing internal efficiencies and speeding up processing, positioning the company favorably for future growth [48][49] Question: Retention performance and sales office openings - Management confirmed that retention rates are stable, with plans to expand sales teams and open new offices to capture market opportunities [59][60]

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]

Financial Performance - Full Year Revenues reached $2,052 million, a 9% increase year-over-year[1] - Full Year GAAP Net Income was $453 million, representing 22% of total revenues, or $8.08 per diluted share[1] - Full Year Non-GAAP Net Income was $519 million, or $9.24 per diluted share, up from $462 million the previous year[7] - Fourth Quarter Total Revenues were $544.3 million, a 10.2% increase from $493.8 million in the same period last year[3] - Recurring and other revenues for the full year were $1,938.7 million, a 10.3% increase year-over-year, constituting 94.5% of total revenues[6] - Total revenues for the year ended December 31, 2025, increased to $2,051.7 million, up 8.9% from $1,883.2 million in 2024[24] - Net income for the year ended December 31, 2025, was $453.4 million, a decrease of 9.7% compared to $502.0 million in 2024[24] - Total revenues for 2025 were $2,051.7 million, reflecting a growth of 8.9% from $1,883.2 million in 2024[31] Cash Flow and Assets - Cash flows from operating activities for the year ended December 31, 2025, were $678.9 million, an increase from $533.9 million in 2024[26] - Total current assets rose to $5,838.8 million as of December 31, 2025, compared to $4,304.8 million in 2024, reflecting a growth of 35.6%[22] - Total assets increased to $7,598.7 million as of December 31, 2025, up from $5,859.9 million in 2024, representing a growth of 29.6%[22] - Total liabilities increased to $5,867.2 million as of December 31, 2025, compared to $4,284.0 million in 2024, marking a rise of 37.1%[22] - The company’s cash, cash equivalents, and restricted cash at the end of the period were $5,132.5 million, up from $4,042.8 million in 2024, reflecting an increase of 27%[26] - Total cash, cash equivalents, and restricted cash at the end of 2025 reached $5,132.5 million, up from $4,042.8 million in 2024, representing a 27% increase[28] Expenses and Profitability - Adjusted EBITDA for the full year was $882 million, up from $775 million the previous year[7] - Adjusted EBITDA for 2025 was $882.3 million, an increase of 13.8% from $775.4 million in 2024, with an adjusted EBITDA margin of 43.0%[30] - Gross margin for 2025 was 83.2%, compared to 82.2% in 2024, indicating a slight improvement in profitability[31] - Sales and marketing expenses for 2025 totaled $482.8 million, an increase of 11.1% from $434.4 million in 2024[31] - Adjusted total administrative expenses for 2025 were $1,036.0 million, up from $950.7 million in 2024, indicating a rise of 9%[31] - Research and development expenses for the year ended December 31, 2025, were $283.4 million, an increase from $242.6 million in 2024, indicating a growth of 16.8%[24] - Research and development expenses for the year ended December 31, 2025, were $283.4 million, up 17% from $242.6 million in 2024[32] - Total research and development costs for the year ended December 31, 2025, amounted to $436.3 million, a 18.5% increase from $368.3 million in 2024[32] - Non-cash stock-based compensation expense for the year ended December 31, 2025, totaled $118.7 million, compared to a negative $22.9 million in 2024[34] Earnings Per Share - Earnings per share (diluted) for the year ended December 31, 2025, were $8.08, down from $8.92 in 2024[24] - Basic earnings per share for 2025 was $8.13, down from $8.93 in 2024, reflecting a decrease of 9%[30] Future Projections - Financial guidance for 2026 projects total revenue between $2.175 billion and $2.195 billion, indicating a growth of 6% to 7%[11] - Annual revenue retention rate improved to 91% in 2025, compared to 90% in 2024[9] - Client count increased to approximately 20,300, representing a 5% growth year-over-year[9] Innovations - Paycom launched its AI solution, IWant™, enhancing user experience and accessibility[10]

Core Viewpoint - Paycom Software, Inc. is a leading provider of cloud-based human capital management solutions, focusing on small to mid-sized companies in the U.S. [1] Group 1: Stock Performance and Analyst Sentiment - The consensus price target for Paycom's stock has decreased from $216.54 last year to $183 last month, indicating a more conservative outlook from analysts [2] - Analyst Daniel Jester from BMO Capital has set a higher price target of $368, suggesting a positive outlook for the company's future [2] - Paycom's stock recently saw a 4.4% increase in price, with trading volume exceeding the average, yet it is considered undervalued with a forward P/E ratio of 19 compared to competitors [4][6] Group 2: Earnings Expectations - Paycom is preparing to announce its Q4 earnings, with expectations of steady growth in both earnings per share (EPS) and revenue, driven by AI-powered products and strong recurring revenue streams [3][6] - Despite the anticipated growth, the current trend in earnings estimate revisions suggests limited potential for further price increases in the near term [3] Group 3: Challenges and Future Outlook - Recent underperformance is attributed to negative sentiment surrounding artificial intelligence, a decelerating U.S. labor market, and revenue challenges linked to its BETI rollout [5] - There is potential for revenue growth to pick up again in 2026, with Q4 2025 results and new guidance possibly acting as a catalyst for a positive reevaluation of the stock [5]

Paycom Software, Inc. (NYSE:PAYC) is included in our list of the 14 oversold value stocks to invest in right now. Guggenheim Bullish on Paycom Software (PAYC) Despite Weak Share Price Performance On February 3, 2026, Paycom Software, Inc. (NYSE:PAYC) traded at its 52-week low of $124.08, down significantly from its 52-week high of $267.76. Currently trading at $131.41, the stock is just 7% above its 52-week low. Amid weak investor momentum, Paycom Software, Inc. (NYSE:PAYC) received Guggenheim’s attenti ...

Core Insights - Paycom Software, Inc. (PAYC) is expected to report its fourth-quarter 2025 results on February 11, with earnings estimated at $2.44 per share, reflecting a year-over-year increase of 5.2% [1][8] - The revenue estimate for the fourth quarter is approximately $542.7 million, indicating a rise of 9.9% from $493.8 million in the same quarter last year [2][8] Group 1: Performance Drivers - Paycom's fourth-quarter performance is anticipated to benefit from an expanding client base, driven by enhancements in its product portfolio and a high-margin recurring revenue model, with recurring revenues estimated at $515.2 million, suggesting a year-over-year growth of 10.8% [3] - The company has focused on improving its Beti and GONE solutions, which streamline payroll management and time-off requests, significantly reducing administrative burdens and improving efficiency for clients [4] - The introduction of the IWant AI tool is expected to enhance user interaction and increase usage among non-daily users, contributing positively to the quarter's performance [5] Group 2: Challenges - Despite strong product innovation, Paycom's growth may be hindered by a challenging macroeconomic environment, including geopolitical tensions and economic uncertainty, which could negatively impact revenue [6][8] - Layoffs and hiring slowdowns across various industries are likely to affect transaction volumes and overall demand for payroll services, posing additional challenges to the company's performance [6][8] Group 3: Earnings Expectations - The current Earnings ESP for Paycom is 0.00%, and it holds a Zacks Rank of 3, indicating a neutral outlook for an earnings beat this quarter [7] - The anticipated gains from product innovations like Beti, GONE, and IWant, along with rising recurring revenues linked to AI adoption, are expected to be reflected in the fourth-quarter results [8]

Company Overview - Paycom Software (PAYC) shares increased by 4.4% to $129.84 in the last trading session, following a period of 20.6% loss over the past four weeks, indicating a significant rebound in stock performance [1] - The company specializes in human-resources and payroll software, with a focus on AI-led products that enhance customer experience and operational efficiency [2] Financial Performance - Paycom is expected to report quarterly earnings of $2.44 per share, reflecting a year-over-year increase of 5.2%, with revenues projected at $542.71 million, a 9.9% rise from the previous year [3] - The consensus EPS estimate has been revised down by 0.9% over the last 30 days, which may indicate potential challenges in maintaining stock price appreciation [4] Market Position - Paycom's recent stock performance is contrasted with other companies in the same industry, such as Pinterest (PINS), which saw a 4.3% decline in its stock price and a 23.3% loss over the past month [4] - Both Paycom and Pinterest currently hold a Zacks Rank of 3 (Hold), suggesting a neutral outlook in the market [4][5]

Core Thesis - Paycom Software, Inc. presents a compelling investment case focused on margin expansion rather than just revenue growth, driven by its unique business model that enhances profitability over time [2][6]. Company Overview - Paycom Software, Inc. offers a cloud-based human capital management (HCM) solution as software-as-a-service for small to mid-sized companies in the U.S. [2]. Business Model and Dynamics - The company's employee self-service payroll system, Beti, allows employees to handle routine payroll corrections and HR tasks, leading to reduced support costs and stable or increasing pricing [3]. - As customers become more familiar with Paycom's workflows, the company experiences a decline in servicing costs and an increase in gross margins from approximately 70-75% at initial adoption to 80-85% for mature customers [3]. - Beti also raises switching costs for customers, as transitioning to a new vendor involves significant data migration and retraining, which can outweigh implementation costs [4]. Competitive Advantage - Paycom captures a growing share of industry profits despite overall cost reductions in payroll and HR services, benefiting from a "deflationary profit pool" [5]. - The company's model is particularly effective in the mid-market segment, where customer sophistication enhances margins and retention [6]. Market Performance - Paycom's stock price has decreased by about 40.73% since previous coverage due to valuation compression and payroll revenue pressure, but the current analysis emphasizes margin expansion and reverse operating leverage as key strengths [8].

Core Insights - Paycom Software, Inc. announced findings from a Nucleus Research study that emphasizes the significant value organizations gain from using Paycom's full-solution automation [1] Group 1: Benefits of Paycom's Automation - Organizations reported primary benefits including avoided costs and increased productivity due to enhanced data visibility [1] - The retirement of outdated systems was highlighted as a key factor contributing to these benefits [1]