Paycom Software, Inc. (PAYC) Earnings & Analysis

Latest quarter

Paycom reported second-quarter revenue of $531.2 million, above the $512.3 million consensus and up from $483.6 million a year earlier. Adjusted earnings per share were $2.78, compared with the $2.28 consensus.

In its filing, Paycom attributed growth in recurring and other revenue to new clients, additional applications and services sold to existing clients, increased product usage and pricing strategies. The company said client attrition, particularly among smaller clients, partly offset those gains. It also said lower interest rates reduced interest earned on client funds, despite an increase in average balances.

Paycom’s gross margin rose to 83.2% from 81.9%, and its operating margin rose to 31.7% from 23.2%. The filing said automation contributed to headcount reductions and lower employee-related expenses; second-quarter operating expenses fell by $3.8 million from a year earlier.

Paycom reported diluted earnings per share of $2.34, up from $1.58, and free cash flow of $190.1 million, compared with $60.8 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

On Paycom’s first-quarter call, CEO Chad Richison said book sales met budget and his expectations for the quarter. He said the sales group had been taken out of the field intermittently for training and expected greater opportunities for book sales as the year progressed.

Richison said the company’s focus on client returns and service helped increase revenue retention in 2025. He also said some clients had returned to Paycom after finding that their new providers’ systems did not deliver the same automation and ease of use.

In the question-and-answer session, Richison said Paycom treated its pricing as proprietary but that the price charged to a client relative to its overall value had not changed meaningfully. He said the company worked through different pricing structures with individual clients, depending on factors such as hiring and turnover.

Richison said automation remained a focus across Paycom’s departments and functions, describing it as important to returns for both clients and the company. He declined to discuss all of its internal uses for competitive reasons, but said there was “not an area of our business that isn’t impacted through our automation strategy.”

CFO Robert Foster said first-quarter revenue and efficiencies from automation contributed to profitability. Richison noted that the company’s forms-filing business could contribute to a higher margin profile in the first quarter.

Discussing investment, Richison said data-center moratoriums existed and that Paycom had opportunities to expand power and purchase certain items. He said the company would have to see how capital expenditure was affected during the year. Foster also said Paycom had replaced its prior credit facility in April with a new $2.125 billion facility.

Guidance

In its August results release, Paycom forecast 2026 revenue of $2.197 billion to $2.212 billion, compared with $2.175 billion to $2.195 billion on its first-quarter call. It expected recurring and other revenue growth of 8% to 9%, versus its earlier 7% to 8% outlook.

Paycom forecast adjusted EBITDA of $1.007 billion to $1.022 billion, compared with its prior range of $950 million to $970 million. It also expected approximately $105 million in interest on funds held for clients, up from its earlier outlook of approximately $103 million.