PAYC
IndustrialsPaycom
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Financials
XBRL · SEC EDGAR2012–2025(14yr)| Metric | FY 2012 | FY 2013 | FY 2014 | FY 2015 | FY 2016 | FY 2017 | FY 2018 | FY 2019 | FY 2020 | FY 2021 | FY 2022 | FY 2023 | FY 2024 | FY 2025Latest | YoY |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | $76.8M | $107.6M | $150.9M | $224.7M | $329.1M | $433.0M | $566.3M | $737.7M | $841.4M | $1.1B | $1.4B | $1.7B | $1.9B | $2.1B | +8.9% |
| Gross Profit | $60.5M | $86.7M | $123.6M | $189.2M | $275.1M | $361.0M | $475.6M | $627.9M | $717.9M | $893.6M | $1.2B | $1.4B | $1.5B | $1.7B | +10.2% |
| Gross Margin | 78.7% | 80.6% | 81.9% | 84.2% | 83.6% | 83.4% | 84.0% | 85.1% | 85.3% | 84.7% | 84.5% | 83.7% | 82.2% | 83.2% | +0.9pp |
| Operating Income | — | $9.5M | $15.7M | $34.4M | $58.0M | $78.6M | $173.7M | $226.2M | $186.1M | $253.6M | $378.7M | $451.3M | $634.3M | $567.2M | -10.6% |
| Operating Margin | — | 8.8% | 10.4% | 15.3% | 17.6% | 18.2% | 30.7% | 30.7% | 22.1% | 24.0% | 27.5% | 26.6% | 33.7% | 27.6% | -6.0pp |
| Net Income | -$403.0K | $601.0K | $5.7M | $20.9M | $43.8M | $66.8M | $137.1M | $180.6M | $143.5M | $196.0M | $281.4M | $340.8M | $502.0M | $453.4M | -9.7% |
| Net Margin | -0.5% | 0.6% | 3.8% | 9.3% | 13.3% | 15.4% | 24.2% | 24.5% | 17.0% | 18.6% | 20.5% | 20.1% | 26.7% | 22.1% | -4.6pp |
| Free Cash Flow | — | — | — | — | $55.0M | $70.8M | $124.9M | $131.3M | $133.1M | $198.7M | $232.4M | $292.4M | $341.0M | $408.0M | +19.6% |
| FCF Margin | — | — | — | — | 16.7% | 16.3% | 22.1% | 17.8% | 15.8% | 18.8% | 16.9% | 17.3% | 18.1% | 19.9% | +1.8pp |
| EPS (Diluted) | $-0.01 | $0.01 | $0.11 | $0.36 | $0.74 | $1.13 | $2.34 | $3.09 | $2.46 | $3.37 | $4.84 | $5.88 | $8.92 | $8.08 | -9.4% |
1. THE BIG PICTURE
Paycom is betting its future on "full solution automation" through tools like Beti and IWant to lock in clients and maintain premium margins in a maturing human capital management (HCM) market. While its 82.3% gross margin leads almost all peers, a projected deceleration in revenue growth—from 10.2% in late 2025 to a guided 6% to 7% for 2026—suggests Paycom is finding it harder to take share from larger incumbents.
2. WHERE THE RISKS HIT HARDEST
Paycom’s Single-Database Architecture is threatened by Network Infrastructure Reliability because its entire value proposition relies on three redundant data centers in Oklahoma, Texas, and Arizona; any disruption there would not just halt service but potentially cause permanent data loss for its 20,300 clients (10-K Item 1, 8-K). Furthermore, the Personalized Service Model is a vulnerability in an Intense Market Competition environment, as competitors offering lower-priced or bundled services may offset the perceived value of a dedicated specialist, pressuring Paycom’s ability to attract new clients (10-K Item 1A).
3. WHAT THE NUMBERS SAY TOGETHER
Paycom’s financials reveal a company with elite efficiency but lagging cash conversion. Its 82.3% gross margin is the second-highest among peers, yet it converts just 16.8% of revenue into free cash flow—the lowest in the group (XBRL). This gap suggests that while the Oklahoma and Texas-based R&DR&DResearch & Development — spending on creating new products or technologies strategy keeps development costs low, other operational or capital requirements are weighing on cash generation.
The revenue trajectory shows a structural slowdown: the 8.9% TTMTTMTrailing Twelve Months — the most recent full year of financial data, updated on a rolling basis each quarter growth rate is expected to fall to a range of 6% to 7% in 2026 (8-K). With short interest at 10.6% of the float, market sentiment remains skeptical of management's "long runway" narrative, despite Paycom reaching 20,300 clients.
4. IS IT WORTH IT AT THIS PRICE?
At 11.6x Forward P/EP/EPrice-to-Earnings ratio — share price divided by annual earnings per share; how much investors pay per dollar of profit. Higher P/E = higher growth expectations, the market is pricing in a mere 0.3% long-term growth rate (CAPM analysis). This represents a 39% discount to the peer median of 19.1x, making Paycom appear attractively valued given it still grew revenues by 10.2% in the most recent quarter (8-K).
The discount is likely a reaction to the 16.8% FCFFCFFree Cash Flow — cash left after paying for operations and capital investments; what the company can actually spend, save, or return to shareholders margin, which trails peers like Verisk (38.3%) and Paychex (33.1%). However, if Paycom achieves even a GDP-paced 2.5% growth rate, the sensitivity analysis suggests a justified multiple of 15.5x (CAPM analysis). The current price is only "right" if Paycom's growth effectively stalls permanently, which contradicts management’s claim of owning less than 5% of its total addressable market.
5. WHAT WOULD CHANGE THIS VIEW?
- Constructive if free cash flow margin expands toward the 30% range seen by mature peers like Paychex, signaling that the in-house R&DR&DResearch & Development — spending on creating new products or technologies model is finally yielding cash efficiency.
- Cautious if the 2026 revenue growth falls below the 6% floor, indicating that the 24-month maturity cycle for new sales offices is failing to offset client losses from acquisitions or competition.
6. BOTTOM LINE
Structural Advantage: A proprietary single-database architecture that enables industry-first automation tools like Beti to drive high switching costs and 91% client retention.
Bottom Line: Paycom is a high-margin operator being priced for near-zero growth, offering a significant margin of safety for investors who believe its automation tools can sustain mid-single-digit expansion.
1. Top 5 Material Risks
- Cybersecurity and Data Privacy: Paycom collects and stores sensitive personal, financial, and payroll data. Cyber-attacks, including AI-enhanced threats, could lead to unauthorized access or destruction of data, resulting in significant liabilities, regulatory fines, and loss of client trust.
- Network Infrastructure Reliability: Paycom serves all clients from redundant data centers in Oklahoma, Texas, and Arizona. Any failure or disruption—whether from human error, natural disasters, or cyber-attacks—could lead to service downtime, permanent data loss, and significant claims from clients, particularly regarding the timely delivery of funds.
- Technological Innovation and AI: Paycom must continuously innovate to remain competitive. Failure to successfully develop and deploy enhancements, including AI-powered tools, or to respond to disruptive technologies, could render Paycom’s applications obsolete and increase operating costs.
- Intense Market Competition: The HCM software market is highly fragmented and competitive. Competitors, including Automatic Data Processing, Inc., Workday, Inc., and others, may offer lower prices, superior product bundles, or better integration capabilities, which could force Paycom to lower prices or increase spending to retain clients.
- Client Retention and Revenue Growth: Paycom’s revenue depends on clients continuing to use its applications and purchasing additional ones. Factors such as client satisfaction, reduced hiring by clients, or the cancellation of agreements (which clients may do with 30 days' notice) directly impact Paycom’s annual revenue retention rate.
2. Company-Specific Risks
- Key Executive Dependence: Paycom’s success is tied to the leadership of founder and CEO Chad Richison; the loss of his services or other key executives could disrupt operations.
- Office-Centric Model: Paycom maintains an office-centric operational model, which may hinder its ability to attract and retain top talent in the technology industry compared to competitors offering more flexible remote or hybrid work arrangements.
- Acquisition Integration: Paycom has no experience in acquiring other businesses; future acquisitions could divert management attention, result in impairment charges for goodwill, or fail to integrate successfully.
- Background Check Regulation: Paycom’s "Enhanced Background Checks" application is subject to complex laws like the FCRA and "ban the box" legislation, which limit the information Paycom can report and increase compliance costs.
3. Regulatory/Legal Risks
- AI Governance: The EU AI Act, which began taking effect in 2024, imposes a risk-based framework on Paycom’s use of AI, potentially requiring costly compliance measures and limiting the use of automated decision-making tools.
- Money Transmitter Licensing: While Paycom’s use of the Paycom National Trust Bank exempts it from certain state money transmitter regulations, any regulatory determination that Paycom is operating as an unlicensed money services business could lead to civil and criminal penalties.
- Anti-Money Laundering (AML): Paycom is subject to the Bank Secrecy Act (BSA); any failure to maintain adequate AML programs or violations by employees could result in fines and damage to its reputation.
- Exclusive Forum Provision: Paycom’s certificate of incorporation mandates that the Court of Chancery of the State of Delaware is the exclusive forum for most legal disputes, which may limit stockholders' ability to choose a preferred judicial venue.
4. Financial Impact Map
Cybersecurity Breach → Operating Expenses → Significant liabilities, legal defense costs, and potential regulatory fines. Network Infrastructure Failure → Revenues → Potential loss of clients, issuance of refunds, and inability to attract new business. Technological Obsolescence → Research and Development Expenses → Increased investment required to develop or license new AI-powered tools to remain competitive. Pricing Pressure from Competition → Operating Margins → Reduced margins or losses if Paycom is forced to lower prices to maintain market acceptance. Client Headcount Reduction → Recurring Revenues → Direct negative impact on revenue, as Paycom charges clients on a per-employee basis.
Recent Filings
| Form | Filed | Period |
|---|---|---|
| 10-K | Feb 2026 | Dec 2025 |
| 8-K | Feb 2026 | — |
| 10-Q | Nov 2025 | Sep 2025 |
| 14A | Apr 2025 | — |
AI-extracted key facts from press releases and SEC filings. Significance 1–10.
Paycom maintains $200M buyback authorization amid analyst price target reductions
- ▸$200 million available for share buybacks to offset industry sell-off pressure
- ▸$1.45 billion in total share repurchases completed since July 2024
- ▸Cantor Fitzgerald reduced price target to $135, maintained Neutral rating
- ▸Guggenheim reduced price target to $180, citing 7-8% FY26 revenue growth forecast
- ▸Projected Q1 fiscal 2026 cash flow from operations estimated at $190 million
Paycom Increases Buyback Authorization by $200M; Total Remaining Capacity $2.56B
- ▸Increased equity buyback plan by $200M, total remaining authorization $2.558B
- ▸Completed $1.1B in share repurchases between Jan 1 and March 5, 2026
- ▸FY2026 revenue guidance $2.175B–$2.195B
- ▸Reclassified from S&P 500 to S&P 600 Small Cap index
- ▸Launched new Career and Succession Planning tool for talent management
Paycom Software expands credit facility to $1.46B to increase liquidity and growth flexibility
- ▸Expanded credit facility to $1.46B to support future growth initiatives
- ▸Provides capital flexibility for potential acquisitions or product investments
- ▸Avoids immediate reliance on equity markets for capital needs
- ▸Net income $453.4M with 22.1% profit margin
- ▸Trading at $125.71, approximately 59.6% below estimated fair value
Paycom Q4 revenue $544.3M +10.2% YoY, EPS $2.45 beats estimates
- ▸Q4 revenue $544.3M, +10.2% YoY, beating $542.7M estimate
- ▸Non-GAAP EPS $2.45, beating $2.44 consensus estimate
- ▸Recurring revenue $517.1M, +11.2% YoY, representing 95% of total sales
- ▸Adjusted EBITDA $236.3M, +9.9% YoY, with 43.4% margin
- ▸Q4 capital allocation: $20.6M in dividends and $108.8M in share buybacks