Paycom Software, Inc. Q4 FY2025 earnings call

• Executed well against 2025 plan, achieving double-digit recurring revenue growth and near-record adjusted EBITDA margins. - Advanced full solution automation strategy with the launch of automated decisioning tools like Betty and Gone. - Client revenue retention rate increased to 91% in 2025, with a record number of clients returning. - AI solution IWant drives significant ROI, with Forrester analysis showing over 400% ROI for organizations using it. - Continues to invest in sales and marketing, focuses on world-class service, and streamlines processes while expanding sales capacity. - Repurchased over 1.7 million shares of common stock in 2025, paid dividends, and ended the year with a strong balance sheet (no debt, cash and cash equivalents $370 million).

In the fourth quarter of 2025, total revenue was $544 million, up 10% year-over-year, with recurring and other revenue at $517 million, up 11% year-over-year. For the full year 2025, total revenue reached $2.05 billion, ahead of the initial outlook, and recurring and other revenue grew 10% year-over-year to $1.94 billion. Adjusted EBITDA margin in Q4 2025 was 43.4% ($236 million), and full year 2025 adjusted EBITDA was $882 million, up 14% year-over-year with a margin of 43%. GAAP net income in Q4 2025 was $114 million ($2.07 per diluted share), and full year 2025 GAAP net income was $453 million ($8.08 per diluted share). Non-GAAP net income in Q4 2025 was $135 million ($2.45 per diluted share), and full year 2025 non-GAAP net income was $519 million. Operating cash flow increased 27% in 2025. The client count grew to approximately 39,200 clients in 2025, up 4% from 2024, with revenue from clients over 1,000 employees growing faster than total revenue.

• For fiscal 2026, total revenue is expected to be between $2.175 billion and $2.195 billion, representing 6%-7% year-over-year growth. - Full year recurring and other revenue is expected to be up 7%-8% year-over-year. - Full year adjusted EBITDA is expected in the range of $950 million to $970 million, with an adjusted EBITDA margin of approximately 44% at the midpoint. - Interest on funds held for clients is expected to be approximately $103 million, based on the consensus assumption of 2 rate cuts in 2026.

Q: Raimo Lenschow asked about positivity on the product side and the guidance slowdown.

A: Chad Richison responded on automation, sales focus, and inflection opportunities.

Q: Samad Samana asked about guidance methodology and upside nodes.

A: Chad Richison discussed guidance range and focus on go-to-market.

Q: Mark Marcon asked about field observations and sales leadership change.

A: Chad Richison said no reluctance seen, salespeople trained on new product.

Q: Jason Celino asked about new customer adds and incremental initiatives.

A: Chad Richison talked about sales offices and go-to-market.

Q: Patrick O'Neill asked about AI improving productivity and balancing bottom line.

A: Chad Richison discussed AI benefits and speed of development.

Q: Daniel Jester asked about IWant tools and CapEx/FCF in 2026.

A: Chad Richison talked about IWant usage and Robert Foster on CapEx.

Q: Jared Levine asked about January retention and sales office openings.

A: Chad Richison on retention and sales team expansion.

Q: Kevin McVeigh asked about Gen AI impact and API monetization.

A: Chad Richison on client behavior and API potential.

Q: Bhavin Shah asked about reconciling growth with guidance.

A: Chad Richison on guide consistency and inflection opportunities.

Q: Jacob Cody Smith asked about upmarket sales and API monetization.

A: Chad Richison on upmarket automation and easy evaluation.

Q: Joshua Reilly asked about CRR performance and competitive landscape.

A: Chad Richison on CRR and win rates.

Q: Sitikantha Panigrahi asked about ADP's retention and AI impact.

A: Chad Richison on no impact and diversification.

Q: Allan Verkhovski asked about margins and head count.

A: Chad Richison on restructuring and employee count.