Paycom Software Inc Overview
Paycom is a founder-led, Oklahoma City–headquartered provider of cloud-based human capital management software delivered as SaaS on a single, internally built database. It sells one integrated product — payroll, talent acquisition, talent management, HR management and time-and-labour — priced on a per-employee, per-month basis, exclusively through a captive, geographically organised outside sales force, and services every client through a named specialist. Its structural differentiator is architectural: one database, no acquired code, no integration layer, and consequently no data-reconciliation problem. Its strategic differentiator is employee-first automation — Beti (employees run their own payroll), GONE (automated time-off decisioning) and IWant (a command-driven AI engine hosted on Paycom's own infrastructure). With roughly 20,300 parent-company client groups, 7.4 million employee records and less than 5% of its stated addressable market penetrated, Paycom is a high-margin, debt-light compounder whose growth has decelerated from 30% to single digits while margins and free cash flow have inflected sharply upward.
The trajectory is nonetheless unambiguous and material: headcount peaked at 7,306 at the end of FY2024 and fell by 1,536 people, or 21.0%, during FY2025 — a reduction achieved, per management's own framing on the Q2 2026 call, through automation of internal processes rather than a publicly announced restructuring programme. Revenue per employee consequently rose from approximately $196,000 in FY2021 to approximately $356,000 in FY2025, an 81% improvement over four years, and is the single clearest quantitative expression of the company's "full-solution automation" thesis applied to itself.
The company's own description (latest Form 10-K, FY2025)
Paycom describes itself as "a leading provider of a comprehensive, cloud-based HCM solution delivered as Software-as-a-Service," providing "functionality and data analytics that businesses need to manage the complete employment lifecycle, from recruitment to retirement." The solution "requires virtually no customization and is based on a core system of record maintained in a single database for all HCM functions, including payroll, talent acquisition, talent management, human resources management and time and labor management applications." The company adds that because the solution "was developed in-house and is based on a single platform, there is no need for our clients to integrate, update or access multiple databases, which are common issues with competitor offerings that use multiple third-party systems."
The FY2025 "About Paycom" boilerplate emphasises a different framing from prior years, centring AI: Paycom "simplifies business and employees' lives through automated, command-driven HR and payroll technology that revolutionizes data access," with "its industry-first AI engine, IWant," providing "instant and accurate access to employee data without having to navigate or learn the software."
Independent characterisation
Paycom is best understood not as a software company that happens to do payroll but as a regulated money-movement utility wrapped in a high-margin subscription software business, distributed by an unusually disciplined direct sales machine. Three separate engines drive the P&L, and conflating them obscures the investment case.
Engine one — the subscription core. Recurring and other revenue was $1,938.7 million in FY2025, 94.5% of total revenue. Pricing is per employee per month (PEPM), scaled by headcount and by the number of applications deployed. This is the classic land-and-expand SaaS motion, but executed with an important twist: because every application sits on one database, incremental modules carry near-zero integration cost to the client and near-zero marginal delivery cost to Paycom. Adjusted gross margin of 83.9% in FY2025 reflects that.
Engine two — the float. Paycom holds client payroll and tax funds between collection and disbursement. Funds held for clients stood at $5,137.0 million at 31 December 2025 and the average daily balance was approximately $2.9 billion in Q2 2026. Interest earned on this float is reported as a separate revenue line — $124.9 million in FY2024 and $113.0 million in FY2025, guided to approximately $105 million for FY2026. This is a pure rate-sensitive annuity with essentially no cost of goods, and it is the reason total revenue growth (9.0% in FY2025) has lagged recurring revenue growth (10.3%) as short rates eased. Since 2024 this float has been held through Paycom Client Trust, a grantor trust whose sole trustee is Paycom National Trust Bank, N.A., a national trust bank chartered by the Office of the Comptroller of the Currency — a materially under-appreciated structural asset that gives Paycom direct fiduciary control of client funds rather than dependence on a partner bank.
Engine three — ancillary transaction and compliance services. Enhanced Background Checks (a Fair Credit Reporting Act–regulated business in which management claimed on the Q2 2026 call to be "one of the largest pre-employment service companies in the U.S."), the Vault Visa Payroll Card issued by The Bancorp Bank, Everyday daily-pay, Paycom Pay cheque issuance, COBRA administration, tax credits and garnishment administration. These are bundled into the PEPM economics and not separately disclosed, but they broaden the compliance moat and are the layer most exposed to regulatory change.
Revenue model mix
A presentation change must be flagged. For FY2024 the company disaggregated interest on funds held for clients as a separate revenue caption and folded "implementation and other" into "recurring and other." Prior periods were reclassified in the FY2024 10-K but the FY2021–FY2023 earnings releases used the old captions, which is why the table above shows zeros in the pre-2024 columns for the new lines rather than restated splits. Total revenue is unaffected in every year. Analysts comparing 2023 and 2024 recurring revenue growth without adjusting for this will materially misread the trend.
There is no licence revenue and no perpetual-licence legacy. There is no meaningful professional-services revenue: implementation is performed in-house and largely bundled. There is no channel or reseller revenue — distribution is 100% direct.
Value chain position and customers
Paycom sits between the employer and the tax authorities, the banking system, benefits carriers and the employee. It is simultaneously a system of record, a payment processor, a regulated fiduciary and a compliance filer. Target client size is 50 to 10,000-plus employees, with emerging-markets representatives covering businesses under 65 employees and a deliberate strategic push upmarket — management noted in the 2026 proxy that revenue from clients with more than 1,000 employees grew faster than overall revenue in 2025. Client concentration is negligible; approximately 39,200 clients on a taxpayer-identification-number basis and approximately 20,300 on a parent-company-grouping basis at 31 December 2025.
End markets served are industry-agnostic. Management stated on the Q2 2026 call that value delivery does not vary materially "regardless of the client size, industry, or location." Geographic end-market exposure is overwhelmingly United States, with clients in Canada, Mexico, the United Kingdom and Ireland.
Operating metrics
FY2021 and FY2022 client counts are derived from the disclosed year-over-year growth rates in the following year's release and are marked accordingly; FY2021 employee records stored is derived from the FY2022 disclosure of 14.0% growth. Retention rates for FY2021 and FY2022 are shown on the restated methodology disclosed in the FY2023 release. Source conflict flagged: the FY2022 earnings release reported an annual revenue retention rate of 93% for FY2022; the FY2023 release restated FY2022 to 91% under a revised methodology that accelerates the point at which a client is deemed lost and excludes interest on client funds. Both figures are company-reported; the 91% figure is the current basis and the one used above.
Strategy
Stated strategy — verbatim themes from the FY2025 Form 10-K
The 10-K sets out the growth strategy under five headings, reproduced here as themes:
- Penetrate existing markets. "We believe a significant market opportunity exists to penetrate markets where we currently have existing sales offices." Each office is typically staffed with one outside sales team of a sales manager plus six to ten sales professionals. Paycom has an office in 41 of the 50 largest U.S. MSAs but only seven of those are served by multiple outside sales teams.
- Enlarge existing client relationships. "We believe a significant growth opportunity exists in selling additional applications to our current clients." Global HCM specifically creates "the opportunity to capture additional revenue from existing clients with international employees."
- Expand into new markets. Opening sales offices in metropolitan areas with no current sales teams, typically by relocating a proven sales manager who recruits a new team. "It typically takes a new sales office 24 months to reach maturity."
- Target large clients. "We believe larger employers, such as organizations with greater than 1,000 employees, represent a substantial opportunity to increase our revenues per client, with limited incremental cost to us."
- Maintain leadership in innovation. "We are incorporating and leveraging AI and automation across our full solution." Development is performed exclusively in-house.
The CEO's 2026 proxy letter frames the same strategy around three words: full-solution automation, client ROI achievement and world-class service. Richison's formulation on the Q4 2025 call was blunter: "With less than 5% of our total addressable market, we still have a long runway ahead of us."
Strategic initiatives announced in the last 24 months
Management's medium-term financial targets and guidance
Paycom does not publish formal multi-year targets. It historically referenced a "Rule of 65" and "Rule of 72" (revenue growth plus adjusted EBITDA margin) in 2022–2023 commentary; those framings have been retired from current disclosure. On the FY2026 raised guidance, the equivalent figure is approximately 53.5 — growth having fallen faster than margin has risen.
Products & Services
Paycom sells one solution. The applications below are modules within it, all on one database, all delivered through one web interface and one mobile app. Management stated on the Q2 2026 call that Asset Management, launched in July 2026, is "the 45th product we have developed, hosted, distributed, and serviced over our nearly 28 years in business." Pricing across the entire portfolio is determined by employee headcount and the number of applications utilised — a PEPM model that management describes as "proprietary to us" but following "industry norms." No per-module list pricing is publicly disclosed for any product below.
Cross-cutting platform layer
IWant — The industry-first command-driven AI engine, launched 2025. Allows any user to access and act on employee data by typing or speaking a natural-language request, without navigating or learning the software. Hosted on Paycom's own infrastructure using a licensed third-party large language model deployed on the internal network. Target user: all user types, from frontline employee to HR administrator. Management reports it is "the predominant way that new employees experience our system" and that usage rose 33% between Q4 2025 and Q1 2026. Award-winning per company disclosure.
Project Arc — Released Q2 2026. Not a module but a system-wide platform release, the largest in company history, delivering per-user customisation of the interface, plus substantial scalability, performance and functionality improvements. A client with over 10,000 employees reported a 4x system performance increase.
Global HCM — Launched 2023 and expanded since. Makes a number of HCM applications available in 15 languages and dialects, accessible to users in more than 190 countries. Native payroll processing is available in Canada, Mexico, the United Kingdom and Ireland, with management stating intent to add further countries. Target customer: U.S.-headquartered organisations with international employees, and large domestic clients with global presence.
Mobile app / Employee Self-Service — Available in 15 languages, with fingerprint and facial recognition. Distributed via Google Play and the App Store.
Manager on-the-Go — Manager-side functionality inside the same mobile app, with seamless toggling to Employee Self-Service. Approvals for time off, expenses and schedules; application review; response to employee inquiries via Ask Here.
Payroll applications
Talent acquisition applications
Talent management applications
HR management applications
Time and labour management applications
Pricing model summary: disclosed only at the structural level — "Pricing is determined based on employee headcount and the number of applications utilized." No list prices, discount schedules, contract minimums or term commitments are publicly disclosed. Many client agreements are cancellable on 30 days' written notice for any or no reason, per the 10-K risk factors — a meaningful and under-discussed contractual feature for a business valued on recurring-revenue durability.
Product Portfolio
| Product | Description and key capabilities | Target customer | Launch / status |
|---|---|---|---|
Beti (Better Employee Transaction Interface) | Industry-first employee-driven payroll. Employees access, view, manage, troubleshoot and approve their own paycheque before payroll submission. Forrester found Beti reduced payroll processing labour by approximately 90%. | All client sizes; flagship offering | Launched 6 July 2021 |
Payroll and Payroll Tax Management | Foundation of the solution. Auto-updates with employee data changes; batch editing; effective dating; delegation and automation of payroll functions. Tax service handles deposits, regulatory correspondence, amendments, penalty and interest disputes, and filing submission. | All | Core since 1998 |
Vault Visa Payroll Card | Pay card issued by The Bancorp Bank, N.A., Member FDIC, under Visa licence. Compatible with Apple Pay, Google Pay and Samsung Pay. Access to pay up to two days earlier in certain circumstances. Reduces cheque fraud and paper-based payroll. | Employers with unbanked or underbanked workforces | Ongoing |
Everyday | Daily payroll — employees receive daily wages on the Vault card at no cost to the employee. Fully automated: calculates and withholds taxes, benefits and deductions first to protect against overpayment. | Hourly-heavy employers competing on hiring and retention | Launched 2023 |
Paycom Pay | Issues cheques to client employees that clear from a Paycom bank account, removing reconciliation burden and reducing general-ledger transaction volume. | Clients with residual cheque payroll | Ongoing |
Client Action Center | Dashboard consolidating banking and tax information; mobile views of wires and tax accounts; direct access to specialists. | Payroll administrators | Recent |
Expense Management | Eliminates paper reimbursement. Receipt photo upload with automatic parsing; mileage tracker; rules-based reimbursement parameters; virtual approvals flowing to payroll; automatic GL allocation; audit-ready reporting. | All, with CFO-office relevance | Ongoing |
Garnishment Administration | Handles communications with garnishment payees and agencies; calculates and tracks payments; mitigates penalty and lawsuit risk. | All | Ongoing |
GL Concierge | Payroll general-ledger control and transparency: intuitive reporting, enriched audit trails, customisable file layouts, real-time alerts, mapped GL reports for import into accounting packages. | Finance and accounting departments | Ongoing |
| Product | Description and key capabilities | Target customer | Launch / status |
|---|---|---|---|
Applicant Tracking | Moves candidates through application and onboarding without re-keying. Talent pool with real-time candidate, recruiter and manager retrieval. Automatic posting to client website, career sites and job boards. Career-site analytics identifying highest-ROI job boards. Automated candidate job alerts and up-front availability capture. | All | Ongoing |
Enhanced Background Checks | Screening of prospective and current employees. Service or package selection per individual: education, employment, driving history, criminal history, drug and health screening. Regulated under the Fair Credit Reporting Act and state background reporting laws. Management characterises Paycom as one of the largest U.S. pre-employment services providers and said the business is "up a measurable amount" in 2026. | All | Ongoing |
Onboarding | Online checklists assigned to an employee or group, initiated before day one. | All | Ongoing |
E-Verify | Pairs electronic signature verification with online storage and analytics; automates employment verification; reduces I-9 audit and penalty exposure. | All U.S. employers | Ongoing |
Tax Credits | Processes and calculates federal hiring tax credits; prescreens candidates for eligibility. | Employers with high-volume hiring | Ongoing |
| Product | Description and key capabilities | Target customer | Launch / status |
|---|---|---|---|
— | Available in 15 languages. Self-management of data and transactions; pay history; performance goals and reviews; total compensation reports; benefits information; PTO accruals. | All | Core |
Compensation Budgeting | Salary budget formulation and merit-increase management; new rates auto-upload to payroll once set; links performance reviews to pay. | Mid-market and enterprise | Ongoing |
Performance Management | Goal and competency setting across positions; online review facilitation; links performance to pay. | All | Ongoing |
Position Management | Ties job attributes to a position rather than an individual; generates job descriptions from a few keywords. | Larger, structured organisations | Ongoing |
Paycom Learning | Learning management with anytime-anywhere access, built-in video content creator for microlearning, performance-evidence lesson tool with manager feedback loop. Includes a library of Paycom-created courses on workplace violence, discrimination and harassment prevention, plus content subscriptions with hundreds of courses in English and Spanish across multiple industries. | All | Ongoing |
Certification Management | Tracks professional licences and certifications; assigns requirements; tracks expiry; notifications; employee document upload; centralised compliance repository and reporting. | Healthcare, construction, transport, regulated industries | Recent |
Career and Succession Planning | Identifies and develops talent; surfaces workforce talent gaps; assesses talent readiness; identifies key positions and successors. Notably purchasable in-app, bypassing the traditional booked-sales motion. A client with over 500 employees using performance and Paycom Learning added it and identified all key positions and successors for the first time. | Clients already using performance and learning modules | Launched early 2026 |
| Product | Description and key capabilities | Target customer | Launch / status |
|---|---|---|---|
Direct Data Exchange (DDX) | Industry-first employee-usage management analytics. Quantifies efficiency gained through employee usage of HR technology and provides real-time ROI on that usage, based on findings by EY. Drill-down by time and attendance, benefits, expenses, time-off requests, tax and payroll modifications. | All; a core sales-proof artefact | Ongoing |
Ask Here | Direct line for employees to ask work-related questions and receive timely answers. Dashboard, guided inquiry template, document and photo attachment, auto-saved responses. Includes an AI-powered search engine that answers frequent workplace questions from company resource documents and saved HR responses. | All | Ongoing |
Documents and Checklists | Digital storage and management of employee files; electronic signature; customised access levels; onboarding and offboarding checklists; retention compliance. | All | Ongoing |
Government and Compliance | Reduces exposure under FLSA, FMLA, EEO Act, COBRA and other state and federal regulations through single-database consistency and real-time reporting. | All | Ongoing |
Benefits Administration | Plan setup, deduction amounts, enrolment dates, waiting periods; census and reconciliation reports; bulk deduction updates with automatic carrier notification; online enrolment with per-pay-period deduction visibility; benefits-to-carrier updates for deductions, addresses, terminations and qualifying events; dedicated enrolment coordinator service. | All | Ongoing |
COBRA Administration | Auto-initiates compliance measures on entry of qualifying events; required correspondence and date tracking; dedicated Paycom COBRA service team handles participant questions; monthly reconciliation statements. | All U.S. employers subject to COBRA | Ongoing |
Personnel Action Forms (PAF) | Online completion and approval of pay rate, position and title changes with HR approval routing; auto-populates payroll with effective date. Includes Performance Discussion Forms for workplace behaviour, development and promotion-path conversations. | All | Ongoing |
Paycom Surveys | Confidential email surveys: exit interviews, benefits assessments, rate-the-boss questionnaires. Demographic analysis and time-series comparison. | All | Ongoing |
Retirement Reporting | Customises, maps and automates plan reports to each provider's specification; auto-created and delivered within 24 hours of payroll finalisation. | Clients with retirement plans | Ongoing |
Report Center | Custom reporting with advanced report writer, charts and graphs; insights on ROI, overtime, payroll, applications, salaries and compensation forecasting. | All | Ongoing |
Enhanced ACA | Dashboard tracking employee count, status, plan affordability and ACA periods; IRS Forms 1094/1095-B and -C filing; real-time compliance reports, alerts and historical audit-trail data. | Applicable large employers | Ongoing |
Clue | Secure collection, tracking and management of workforce vaccination and testing data, with automatic reminders and push notifications and a customisable reporting dashboard. | Healthcare and regulated employers | Launched 2021–2022 |
MyCom | Internal communications: company-wide announcements and newsletters, targeted messaging to individuals or groups, push notifications, engagement and usage reporting. | All | Ongoing |
Asset Management | Industry-first unified seating and property management built into HCM software. Automates the full asset life cycle for physical and digital assets; connects workspace and property details to employee role or asset location; identifies the exact resources a position requires, ensuring consistent deployment and retrieval. Management describes this as opening "an entirely new multibillion-dollar TAM." | All; sold by the existing sales force into the same buying centre | Launched 14 July 2026 |
| Product | Description and key capabilities | Target customer | Launch / status |
|---|---|---|---|
Time and Attendance | Web, badge, biometric-finger and hardware-terminal clocking in single- or multi-clock environments; customised rules; batch editing; timecard management; web time clock on any internet device with automatic flow to payroll on approval. | All, especially hourly workforces | Core |
Scheduling | Template creation and editing by Schedule Group; employee approve, decline, swap and shift-pickup; automated email notifications on creation, exchange request and approval or denial. | Shift-based employers | Ongoing |
Time-Off Requests featuring GONE | Automates and standardises the time-off request process. GONE auto-decisions requests against client-defined criteria to maintain adequate staffing, reducing manager and HR burden and dispute handling. Decisions flow directly into payroll. Company cites a study showing GONE produced more than 800% ROI. | All | GONE launched 2023 |
Labor Allocation | Setup and tracking of employee hours and wages by category such as job or location; streamlines pay rules and reporting from the point of time capture. | Multi-site, multi-job employers | Ongoing |
Financial Narrative
All figures in USD millions except per-share amounts, share counts and percentages. Sourced from the FY2021 through FY2025 fourth-quarter earnings releases and the FY2025 Form 10-K.
Income statement
Margin analysis
Growth and CAGR
Four-year compound annual growth rates, FY2021 to FY2025: total revenue 18.1%; recurring and other revenue 16.9%; adjusted EBITDA 20.4%; free cash flow 20.2%; GAAP net income 23.3%.
Balance sheet
Cash flow
Ratio analysis
ROIC is calculated as NOPAT (operating income multiplied by one minus the effective tax rate) divided by year-end invested capital (total debt plus total stockholders' equity). Interest coverage for FY2021 is not meaningful as interest expense was nil. Cash conversion cycle is not a meaningful metric for Paycom and is not presented: inventory is de minimis (under $2 million), the payables cycle is immaterial, and the business collects fees and client funds essentially concurrently with service delivery. The economically relevant working-capital dynamic is the float, which is a source of investable assets, not a use of working capital. The reported current ratio of approximately 1.1x is an accounting artefact of grossing up client funds and the offsetting obligation on both sides of the balance sheet; the ex-float current ratio of 3.03x is the economically meaningful figure.
Commentary on trends, inflections and drivers
Revenue. The four-year story is one of severe and sustained deceleration: 30.3% in FY2022, 23.2% in FY2023, 11.2% in FY2024, 9.0% in FY2025. Three forces explain it. First, the law of large numbers on a base that more than doubled. Second, and specific to Paycom, deliberate self-cannibalisation: Beti removed billable payroll-correction and reprocessing activity, and GONE removed manual administrative touches. Management chose long-term client ROI over near-term revenue capture, and the market punished the resulting FY2024 guide in October 2023. Third, from FY2024, the float-interest line turned from tailwind to modest headwind as short rates eased, subtracting roughly 60 basis points from FY2025 headline growth.
Gross margin. Gross margin compressed from 84.7% in FY2021 to a trough of 82.2% in FY2024 before recovering to 83.2% in FY2025 and 84.0% in H1 2026. The compression was driven by cost-of-revenue depreciation and amortisation rising from $31.4 million in FY2021 to $82.4 million in FY2025 — a direct consequence of capitalised software amortisation and, latterly, owned data-centre depreciation. The FY2025–2026 recovery reflects operating-expense discipline within cost of revenues (operating expenses within COGS actually fell year-over-year in both FY2025 and H1 2026) rather than lower depreciation, which continues to climb.
Operating income and the stock-compensation distortion. The FY2024 operating income of $634.3 million and 33.7% operating margin look like a step-change, and the FY2025 decline to $567.2 million looks like deterioration. Both are artefacts. FY2024 general and administrative expense of $158.6 million was suppressed by a negative $81.7 million of stock-based compensation within G&A, producing total company SBC expense of negative $22.9 million for the year. This is a reversal of previously recognised expense on performance-based awards whose vesting conditions were deemed unlikely to be met. FY2025 SBC swung back to positive $118.7 million, a $141.6 million year-over-year swing that entirely explains the apparent operating income decline. Adjusted EBITDA, which strips SBC, tells the true story: $775.4 million in FY2024 rising to $882.3 million in FY2025, with margin up 180 basis points to 43.0%. Any analysis of Paycom's FY2024 and FY2025 GAAP operating results that does not normalise for this is wrong.
The margin inflection. The genuine inflection began in FY2025 and accelerated violently in FY2026. Adjusted EBITDA margin: 41.2% in FY2024, 43.0% in FY2025, 46.3% in H1 2026, guided to approximately 46% for the full year FY2026. The drivers, per management, are: internal deployment of the company's own automation and AI across service, development and administrative functions; the shift to self-hosted AI models, which removed roughly $100 million of R&D cost and over $30 million of third-party inference fees in 2026; and a 21% reduction in headcount during FY2025. R&D expense in Q2 2026 fell to $51.9 million from $74.8 million a year earlier — a 30.6% decline in absolute dollars while revenue grew 9.8%. This is not a normal software-company cost curve.
Free cash flow. The gap between adjusted EBITDA margin and free cash flow margin was the central bear argument through FY2024 — 41.2% versus 17.9%, a 2,330 basis point spread driven by capitalised software, data-centre construction and deferred contract costs (sales commissions capitalised and amortised, which absorbed $89.5 million to $127.7 million of operating cash annually). CFO Bob Foster explicitly addressed this on the Q2 2026 call, saying the company had been "conscious of the fact that EBITDA margin and free cash flow margin had to begin to get closer." H1 2026 free cash flow margin reached 33.8% versus 20.3% a year earlier, and management guided to free cash flow above $650 million for FY2026 — which would be roughly 29.5% of revenue and a 61% increase over FY2025. Deferred contract cost absorption fell to $21.8 million in H1 2026 from $45.4 million, and capex fell to $54.9 million from $99.4 million.
Capital structure. Paycom carried zero debt at every year-end from FY2023 through FY2025 and a trivial $29 million before that. That changed in 2026: $900 million drawn on the revolver by 30 June 2026 to fund buybacks, against $198.0 million of cash, producing net debt of approximately $702 million and a pro forma net-debt-to-adjusted-EBITDA ratio of roughly 0.7x against FY2026 guidance. Stockholders' equity collapsed from $1,731.5 million to $571.5 million as treasury stock doubled from $1,403.4 million to $2,817.4 million. The company has voluntarily, and rapidly, converted itself from a fortress balance sheet to a modestly levered one — a deliberate choice, executed near the 52-week low.
Tax. The effective rate has oscillated between 22.7% and 27.9% with no clear trend, driven largely by discrete items on equity compensation. FY2025's $154.4 million deferred tax charge and $66.3 million income-tax receivable build are unusual and warrant attention; cash taxes paid fell to $78.1 million from $134.8 million. Management guided to a 29% GAAP and 27% non-GAAP rate for FY2026.
Financial Detail
Segment Revenue
| Revenue line (USD M) | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
Recurring and other revenue | 1036.7 | 1351.9 | 1665.0 | 1758.3 | 1938.7 |
Interest on funds held for clients | 0 | 0 | 0 | 124.9 | 113.0 |
Implementation and other (pre-2024 caption) | 18.8 | 23.4 | 28.7 | 0 | 0 |
Total revenues | 1055.5 | 1375.2 | 1693.7 | 1883.2 | 2051.7 |
Segment Revenue
| Growth and contribution metric (%) | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
Total revenue YoY growth | 25.4 | 30.3 | 23.2 | 11.2 | 9.0 |
Recurring and other YoY growth | 25.5 | 30.4 | 23.2 | 10.9 | 10.3 |
Recurring and other % of total | 98.2 | 98.3 | 98.3 | 93.4 | 94.5 |
Interest on client funds % of total | 0.0 | 0.0 | 0.0 | 6.6 | 5.5 |
Segment Revenue
| Function | Leadership | Notes |
|---|---|---|
Executive | Chad Richison (CEO, Chairman) | Sole principal executive officer; also the chief operating decision maker for segment purposes |
Operations / client | Shane Hadlock (President and Chief Client Officer) | Sole principal operating officer since February 2026; COO reports to him |
Operations | Randy Peck (COO) | Reports to Hadlock |
Finance | Robert D. Foster (CFO) | Appointed February 2025 |
Sales | Jeff York (Chief Sales Officer) | Appointed January 2026 |
Administration | Jason Clark (Chief Administrative Officer) | Since December 2023 |
Legal | Matthew Paque (General Counsel and Corporate Secretary) | |
Investor relations | James Samford (Head of Investor Relations) | Since May 2019 |
Banking subsidiary | Paycom National Trust Bank, N.A. | OCC-chartered; sole trustee of Paycom Client Trust |
International subsidiary | Paycom Canada, Inc. | Registered Money Service Business with FINTRAC |
Financial Analysis
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
Total revenue (USD M) | 1055.5 | 1375.2 | 1693.7 | 1883.2 | 2051.7 |
Cost of revenues (USD M) | 161.9 | 212.7 | 276.3 | 334.6 | 345.4 |
Gross profit (USD M) | 893.6 | 1162.5 | 1417.4 | 1548.6 | 1706.3 |
Adjusted gross profit (USD M) | 898.2 | 1167.1 | 1428.0 | 1562.1 | 1722.0 |
Sales and marketing expense (USD M) | 276.0 | 346.6 | 417.6 | 434.4 | 482.8 |
Research and development expense (USD M) | 118.4 | 148.3 | 199.0 | 242.6 | 283.4 |
General and administrative expense (USD M) | 209.8 | 239.1 | 288.1 | 158.6 | 279.0 |
Depreciation and amortization, total (USD M) | 67.2 | 92.7 | 113.9 | 145.9 | 176.3 |
Total operating expenses (USD M) | 802.0 | 996.5 | 1242.4 | 1248.9 | 1484.5 |
Operating income (USD M) | 253.6 | 378.7 | 451.3 | 634.3 | 567.2 |
EBITDA (USD M) | 323.2 | 484.8 | 588.3 | 798.3 | 799.2 |
Adjusted EBITDA (USD M) | 419.3 | 579.7 | 719.3 | 775.4 | 882.3 |
Interest expense (USD M) | 0.0 | 2.5 | 1.9 | 3.4 | 3.4 |
Other income net (USD M) | 2.4 | 13.4 | 23.0 | 18.1 | 55.6 |
Pre-tax income (USD M) | 256.0 | 389.6 | 472.4 | 649.0 | 619.4 |
Provision for income taxes (USD M) | 60.0 | 108.2 | 131.6 | 147.0 | 166.0 |
Net income (USD M) | 196.0 | 281.4 | 340.8 | 502.0 | 453.4 |
Non-GAAP net income (USD M) | 260.4 | 357.2 | 449.5 | 462.0 | 518.6 |
Stock-based compensation expense (USD M) | 97.5 | 94.9 | 129.8 | -22.9 | 118.7 |
EPS basic (USD) | 3.39 | 4.86 | 5.91 | 8.93 | 8.13 |
EPS diluted (USD) | 3.37 | 4.84 | 5.88 | 8.92 | 8.08 |
Non-GAAP EPS diluted (USD) | 4.48 | 6.14 | 7.75 | 8.21 | 9.24 |
Dividends per share (USD) | 0.00 | 0.00 | 1.125 | 1.50 | 1.50 |
Weighted average diluted shares (millions) | 58.2 | 58.2 | 58.0 | 56.3 | 56.1 |
Financial Analysis
| Margin metric (%) | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
Gross margin | 84.7 | 84.5 | 83.7 | 82.2 | 83.2 |
Adjusted gross margin | 85.1 | 84.9 | 84.3 | 83.0 | 83.9 |
Operating margin | 24.0 | 27.5 | 26.6 | 33.7 | 27.6 |
EBITDA margin | 30.6 | 35.3 | 34.7 | 42.4 | 39.0 |
Adjusted EBITDA margin | 39.7 | 42.2 | 42.5 | 41.2 | 43.0 |
Net income margin | 18.6 | 20.5 | 20.1 | 26.7 | 22.1 |
Sales and marketing as % of revenue | 26.1 | 25.2 | 24.7 | 23.1 | 23.5 |
R&D expense as % of revenue | 11.2 | 10.8 | 11.7 | 12.9 | 13.8 |
Effective tax rate | 23.4 | 27.8 | 27.9 | 22.7 | 26.8 |
Financial Analysis
| Growth metric (%) | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
Revenue growth YoY | 25.4 | 30.3 | 23.2 | 11.2 | 9.0 |
Adjusted EBITDA growth YoY | 26.8 | 38.3 | 24.1 | 7.8 | 13.8 |
Net income growth YoY | 25.7 | 43.6 | 21.1 | 47.3 | -9.7 |
Diluted EPS growth YoY | 25.7 | 43.6 | 21.5 | 51.7 | -9.4 |
Financial Analysis
| Balance sheet metric (USD M) | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
Cash and cash equivalents | 278.0 | 400.7 | 294.0 | 402.0 | 370.0 |
Accounts receivable | 9.5 | 22.8 | 16.4 | 39.2 | 44.9 |
Deferred contract costs, current | 76.7 | 96.4 | 118.2 | 140.4 | 159.5 |
Current assets before client funds | 405.5 | 561.2 | 486.1 | 639.3 | 701.8 |
Funds held for clients | 1846.6 | 2203.0 | 2327.4 | 3665.5 | 5137.0 |
Property and equipment net | 349.0 | 402.4 | 498.2 | 561.4 | 687.3 |
Intangible assets net | 58.0 | 54.0 | 50.1 | 46.2 | 37.4 |
Goodwill | 51.9 | 51.9 | 51.9 | 51.9 | 51.9 |
Long-term deferred contract costs | 461.9 | 568.0 | 680.3 | 783.6 | 857.4 |
Total assets | 3215.1 | 3902.5 | 4197.5 | 5859.9 | 7598.7 |
Current liabilities before client funds obligation | 143.8 | 169.3 | 206.6 | 241.1 | 231.4 |
Client funds obligation | 1846.6 | 2207.7 | 2328.1 | 3665.7 | 5137.0 |
Short-term debt | 1.8 | 0.0 | 0.0 | 0.0 | 0.0 |
Long-term debt | 27.4 | 29.0 | 0.0 | 0.0 | 0.0 |
Total debt | 29.2 | 29.0 | 0.0 | 0.0 | 0.0 |
Net debt | -248.8 | -371.7 | -294.0 | -402.0 | -370.0 |
Deferred revenue, total | 101.4 | 117.4 | 130.5 | 144.6 | 150.2 |
Total liabilities | 2321.4 | 2719.9 | 2894.5 | 4284.0 | 5867.2 |
Treasury stock at cost | 488.1 | 587.9 | 891.0 | 1036.4 | 1403.4 |
Total stockholders' equity | 893.7 | 1182.6 | 1303.0 | 1575.9 | 1731.5 |
Working capital excluding client funds | 261.7 | 391.9 | 279.5 | 398.2 | 470.4 |
Goodwill and intangibles combined | 109.9 | 105.9 | 102.0 | 98.1 | 89.3 |
Shares outstanding at year end (millions) | 58.0 | 57.9 | 56.5 | 55.9 | 54.8 |
Financial Analysis
| Cash flow metric (USD M) | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
Net cash provided by operating activities | 319.4 | 365.1 | 485.0 | 533.9 | 678.9 |
Purchases of property and equipment | 120.7 | 132.7 | 192.6 | 192.9 | 270.9 |
Purchases of intangible assets | 5.5 | 4.1 | 4.2 | 4.4 | 4.5 |
Total capital expenditure | 126.2 | 136.8 | 196.8 | 197.3 | 275.4 |
Free cash flow | 193.2 | 228.3 | 288.2 | 336.6 | 403.5 |
Dividends paid | 0.0 | 0.0 | 64.8 | 84.8 | 84.8 |
Share repurchases | 0.0 | 94.7 | 286.6 | 122.8 | 325.5 |
Withholding taxes on net share settlements | 65.6 | 5.2 | 13.9 | 21.7 | 44.5 |
Net change in client funds obligation | 233.1 | 361.1 | 120.4 | 1337.6 | 1471.3 |
Cash paid for income taxes net | 33.1 | 100.6 | 139.9 | 134.8 | 78.1 |
Operating cash flow margin (%) | 30.3 | 26.5 | 28.6 | 28.4 | 33.1 |
Free cash flow margin (%) | 18.3 | 16.6 | 17.0 | 17.9 | 19.7 |
Capex as % of revenue | 12.0 | 9.9 | 11.6 | 10.5 | 13.4 |
Financial Analysis
| Ratio | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
Return on equity, average basis (%) | 21.9 | 27.1 | 27.4 | 34.9 | 27.4 |
Return on assets, average basis (%) | 6.1 | 7.9 | 8.4 | 10.0 | 6.7 |
Return on invested capital, year-end basis (%) | 21.1 | 22.6 | 25.0 | 31.1 | 24.0 |
Current ratio excluding client funds (x) | 2.82 | 3.31 | 2.35 | 2.65 | 3.03 |
Current ratio as reported (x) | 1.13 | 1.16 | 1.11 | 1.10 | 1.09 |
Debt to equity (x) | 0.03 | 0.02 | 0.00 | 0.00 | 0.00 |
Net debt to adjusted EBITDA (x) | -0.59 | -0.64 | -0.41 | -0.52 | -0.42 |
Interest coverage, EBIT to interest expense (x) | 0 | 149 | 234 | 187 | 167 |
Asset turnover, revenue to average assets (x) | 0.36 | 0.39 | 0.42 | 0.37 | 0.30 |
Days sales outstanding (days) | 3.3 | 6.1 | 3.5 | 7.6 | 8.0 |
Geographic Revenue
| Geographic fact | Status |
|---|---|
Revenue by reportable geography | Not publicly disclosed |
Country-level revenue | Not publicly disclosed |
Long-lived assets by geography | Not publicly disclosed |
Countries where clients are served | United States, Canada, Mexico, United Kingdom, Ireland (per FY2025 fact sheet, as of 31 Dec 2025) |
Countries where native payroll is offered | Canada, Mexico, United Kingdom, Ireland |
Countries where Global HCM is accessible | More than 190 |
Languages and dialects supported | 15 |
Sales offices | 58 sales teams located in 29 U.S. states as of the FY2025 10-K filing; no disclosed international sales offices |
Data centres | Oklahoma, Texas, Arizona — all United States |
Corporate campuses | Oklahoma City, Oklahoma and Grapevine, Texas — both United States |
Geographic Revenue
| Metric | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
Total revenue (USD M) | 1693.7 | 1883.2 | 2051.7 |
United States revenue (USD M) | 0 | 0 | 0 |
International revenue (USD M) | 0 | 0 | 0 |
Capital Markets
| Price metric | Value | As-of / source |
|---|---|---|
Share price | approximately $218.96 | 14 September 2026, Yahoo Finance via secondary reporting |
Market capitalisation | approximately $10.07 billion | 15 September 2026, MarketBeat snapshot |
52-week range | $104.90 – $267.76 | September 2026 |
52-week low date context | Shares traded near the low in Q1 2026 while the company was executing the $1.06 billion buyback | Q1 2026 |
50-day simple moving average | $192.71 | 15 September 2026 |
200-day simple moving average | $151.89 | 15 September 2026 |
Year-to-date performance | approximately +51% | September 2026 |
Post-Q2-earnings performance | approximately +25.3% | Since 5 August 2026 |
All-time high closing price | $538.32 | 2 November 2021 |
Beta | 0.78 | 15 September 2026 |
Capital Markets
| Period | Reference price | Reference date | Approximate price change to 14 Sep 2026 |
|---|---|---|---|
1 year | $219.66 | 24 September 2025 | Approximately flat, -0.3% |
3 years | approximately $270 | September 2023 (52-week high of $279.96 set 10 Oct 2023) | Approximately -19% |
5 years | approximately $470 | September 2021 (all-time high $538.32 on 2 Nov 2021) | Approximately -53% |
Since IPO | $15.00 | 15 April 2014 | Approximately +1,360% |
Capital Markets
| Valuation metric | Paycom | Basis |
|---|---|---|
Market capitalisation | $10.07 billion | 15 September 2026 |
Net debt | approximately $702 million | $900 million drawn less $198.0 million cash at 30 June 2026 |
Enterprise value | approximately $10.77 billion | Derived |
P/E, trailing | 23.74x | MarketBeat, 15 September 2026 |
P/E, alternative source | 20.4x | InvestingPro, 5 August 2026 |
PEG ratio | 1.22 | MarketBeat, 15 September 2026 |
PEG ratio, alternative source | 0.79 | InvestingPro, 5 August 2026 |
P/B | approximately 17.6x | Market cap over $571.5 million book equity at 30 June 2026 |
EV / FY2026E adjusted EBITDA | approximately 10.6x | EV over $1.0145 billion guidance midpoint |
EV / FY2026E revenue | approximately 4.9x | EV over $2.2045 billion guidance midpoint |
EV / FY2026E free cash flow | approximately 16.6x | EV over $650 million guided floor |
Dividend yield | approximately 0.69% | $1.50 annualised over $218.96 |
Capital Markets
| Consensus metric | Value | Source and date |
|---|---|---|
Consensus rating | Hold | 15 September 2026 |
Average 12-month price target | $214.23 | 15 September 2026 |
Average 12-month price target, alternative | $243.69 | MarketBeat, recent |
High target | $285.00 | UBS, 1 September 2026 |
Low target | $120.00 | Investing.com compilation |
Number of analysts | 16 to 20 depending on source | — |
Capital Markets
| Date | Firm | New target | Prior target | Rating |
|---|---|---|---|---|
6 Aug 2026 | Baird | $245 | $183 | Not specified |
6 Aug 2026 | Deutsche Bank | $205 | $140 | Not specified |
Aug 2026 | KeyBanc | $270 | Not specified | Overweight |
Aug 2026 | TD Cowen | $244 | $149 | Upgraded to Buy |
Aug 2026 | BTIG | $230 | $160 | Buy |
7 Aug 2026 | Cantor Fitzgerald | $195 | $135 | Not specified |
7 Aug 2026 | Citi | $194 | $136 | Hold |
25 Aug 2026 | JPMorgan | $264 | $140 | Not specified |
1 Sept 2026 | UBS | $285 | $205 | Not specified |
9 Sept 2026 | Citi | Reiterated | — | Hold |
Capital Markets
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
Dividends per share (USD) | 0.00 | 0.00 | 1.125 | 1.50 | 1.50 |
Total dividends paid (USD M) | 0.0 | 0.0 | 64.8 | 84.8 | 84.8 |
Payout ratio on GAAP net income (%) | 0.0 | 0.0 | 19.0 | 16.9 | 18.7 |
Payout ratio on free cash flow (%) | 0.0 | 0.0 | 22.5 | 25.2 | 21.0 |
Capital Markets
| Date | Action | Detail |
|---|---|---|
Pre-2026 | Prior authorisation | Stood at $2,558.3 million remaining in March 2026 |
Q1 2026 | Execution | 8,375,443 shares for $1.060 billion |
4 May 2026 | New authorisation | $2.00 billion, replacing the prior plan |
Q2 2026 | Execution | 2,570,072 shares for $345.9 million |
30 June 2026 | Remaining authorisation | $1.66 billion |
Cumulative since 2016 | Total repurchased | approximately $2.68 billion, retiring over one third of the share base |
Capital Markets
| Item | Status |
|---|---|
Moody's rating | Not publicly disclosed — no rating identified |
S&P rating | Not publicly disclosed — no rating identified |
Fitch rating | Not publicly disclosed — no rating identified |
Public bonds outstanding | None |
Rationale for absence of ratings | Paycom has never issued public debt. All borrowings are under a private bank revolver, which does not require a public rating |
Capital Markets
| Instrument | Amount drawn | Facility size | Maturity | Security | Pricing |
|---|---|---|---|---|---|
Senior secured revolving credit facility (amended and restated 23 April 2026) | $900 million as at 30 June 2026 | $2.13 billion, plus a $750 million accordion | 23 April 2031 | Secured against the loan parties' personal property | ABR and SOFR benchmarks with a leverage-based margin grid; leverage and interest-coverage covenants |
Analyst Conclusions
Management guidance
For the year ending 31 December 2026, as raised on 5 August 2026: total revenue of $2.197 to $2.212 billion, representing 7% to 8% growth; recurring and other revenue growth of 8% to 9%; interest on funds held for clients of approximately $105 million, assuming rates hold; adjusted EBITDA of $1.007 to $1.022 billion, a record approximately 46% margin at the midpoint; free cash flow above $650 million; capital expenditure of approximately 6% of revenue; a GAAP effective tax rate of 29% and non-GAAP of 27%; and stock-based compensation of approximately 3% of revenue.
Management explicitly framed the implied second-half deceleration — 7–8% full-year growth against 9.8% in Q2 — as conservatism rather than expectation, with CFO Bob Foster noting that the market "has consistently underestimated the strength of our business model over the last few quarters."
Consensus expectations
Consensus rating is Hold, with an average twelve-month target of $214.23 to $243.69 depending on source, a high of $285 (UBS) and a low of $120. Paycom trades above the lower consensus average. The sell side is, in aggregate, behind the price — the natural consequence of ten target raises in six weeks following a quarter in which EPS beat by 16.8%.
Three bull-case arguments
1. The free cash flow conversion gap is closing permanently, and the market has not repriced it. For years the bear case on Paycom was that a 41% adjusted EBITDA margin converted to an 18% free cash flow margin — the difference absorbed by capitalised software, data-centre construction and capitalised sales commissions. H1 2026 free cash flow margin was 33.8% against 20.3% a year earlier, and guided FY2026 free cash flow above $650 million implies approximately 29.5% of revenue, a 61% increase over FY2025's $403.5 million. Capex fell to $54.9 million in H1 2026 from $99.4 million; deferred contract cost absorption halved to $21.8 million from $45.4 million; capitalised R&D fell 42% to $41.0 million. At approximately 16.6x EV to guided free cash flow, a business with 83%+ gross margins, 94.5% recurring revenue and zero customer concentration is not expensively priced. Foster stated the improvement "is sustainable" and driven by "efficiencies in how we do our processes" and "efficiencies in our labor workforce."
2. The buyback is a structurally accretive machine executed at a demonstrably good price. Paycom retired 20% of its shares in six months at an average cost of roughly $128 per share against a current price near $219 — an approximate 71% unrealised gain on $1.4 billion deployed, achieved while the stock sat near a 52-week low of $104.90. With $1.66 billion of authorisation remaining, $1.23 billion of undrawn revolver, a $750 million accordion, a 2031 maturity and free cash flow above $650 million, the company can retire a further 15–20% of the float without stressing a balance sheet that will carry under 1.0x net leverage. Every dollar of the margin inflection now falls on a share count roughly 20% smaller than it was nine months ago.
3. Growth optionality is real, cheap and not in the price. Paycom has a sales office in 41 of the top 50 U.S. MSAs but staffs only seven with more than one outside sales team — a capacity gap requiring no new product, no acquisition and no new market. Over 100 incremental representatives were added, teams went from eight to ten, and management reports new hires reaching productivity "much faster than they ever have in the past," against a historical 24-month office maturation curve that implies the 2025–2026 hiring cohort contributes from late 2026 into 2027. Layer on Asset Management opening a stated new multibillion-dollar TAM, career and succession planning proving an in-app purchase motion that bypasses commissioned selling, retention inflecting from 90% to 91%, and management's claim of a record number of clients returning to the platform. Consensus is modelling 7–8% growth in perpetuity for a company with under 5% penetration of its own market.
Three bear-case arguments
1. The margin expansion is arithmetically finite and the growth deceleration is not. Revenue growth has fallen from 30.3% to 9.0% in three years and guidance implies deceleration in H2 2026. Meanwhile the margin story is approaching its ceiling: adjusted EBITDA margin has gone from 41.2% to 43.0% to a guided 46%, and Richison himself conceded on the Q2 2026 call that "while there's no limit to what can be automated, there is a limit on labor efficiency as we do believe there's a strong human aspect to developing, selling, converting, and servicing business." Total R&D costs fell 39.5% year-over-year in Q2 2026 and capitalised R&D fell 57.7% — at some point cost removal becomes underinvestment, and the company has no patents protecting the products it has already built. When the margin lever exhausts in 2027 or 2028, what remains is a high-single-digit grower with 91% retention in a consolidating market — and the multiple will reflect that, not this.
2. The competitive position is deteriorating on the metrics that actually matter, and the balance sheet flexibility has been spent. Paylocity, the closest comparable, grew 11.0% against Paycom's 9.0% and has maintained retention above 92% for three consecutive years against Paycom's 91%, with losses "concentrated primarily among smaller clients." Paychex bought Paycor for $4.1 billion and now attacks the mid-market with three platforms and 17% growth. Dayforce sits behind $12.3 billion of Thoma Bravo capital, free of quarterly scrutiny. Workday bought Paradox and Sana. Paycom alone has consolidated nothing, holds zero patents, runs no partner channel, and has no answer to the embedded and white-label payroll trend its own 10-K names as a threat. And it has spent its optionality: stockholders' equity is down to $571.5 million from $1,731.5 million, $900 million is drawn, and $1.4 billion of cash that could have funded a competitive response has been converted into treasury stock.
3. The single-product, single-geography, single-founder concentration is a genuine tail risk that the disclosure regime obscures. One segment, one database, three U.S. data centres in a tornado corridor, one licensed third-party LLM on which IWant depends, one founder who is also Chairman and 20% owner and on whose life no key-man insurance is carried, and a revenue line that is literally priced per employee in a world where the company's own product removes employees. Layer on live securities litigation alleging that management concealed exactly this kind of self-cannibalisation once before, refiled as recently as June 2026, and a disclosed third-party breach that already exposed client and employee data. Paycom does not disclose revenue by product, geography, segment or cohort, so there is no way for an outside investor to see deterioration in any one of these before it appears in the consolidated number — which is precisely what happened on 31 October 2023, when the stock lost roughly a third of its value in a day.
Catalysts and monitorables for the next twelve months
Analyst verdict
Paycom in September 2026 is a company that has been mispriced twice in three years, in opposite directions, for the same underlying reason: the market persistently mistakes a deliberate strategic trade-off for an execution failure.
In 2021 and 2022 the market priced Paycom as a durable 30% grower and paid 30x sales for it. That was wrong. In October 2023 the market discovered that Beti was cannibalising fee revenue, punished the stock by roughly a third in a day, and spent the next twenty-seven months pricing a decelerating mid-market vendor with a widening gap between EBITDA and cash. That was also wrong — not about the deceleration, which was real and is permanent, but about the cash. The gap has closed. Free cash flow margin went from 20.3% to 33.8% in twelve months, and the company will generate more than $650 million of it this year on $2.2 billion of revenue, against a $10.8 billion enterprise value.
What Paycom actually is: a structurally advantaged, high-margin, high-cash, low-growth franchise with a genuine architectural moat, a regulated float business that most investors do not model separately, and a management team that has now demonstrated it will apply its own automation product to its own cost base with unusual severity — 1,536 people removed in one year, R&D costs down 39.5% in a quarter, and an AI infrastructure investment that paid back inside twelve months. It is also a company with no patents, no partner channel, no embedded-payroll answer, retention below its closest comparable, a founder-chairman with no key-man insurance, three data centres in one weather corridor, and live litigation alleging it concealed precisely this kind of product-driven revenue cannibalisation once before.
The buyback deserves specific credit and specific caution. Retiring 20% of the share base near a 52-week low, funded partly with a 2031-maturity revolver, is capital allocation of a quality rarely seen in mid-cap software — and it has already produced roughly $1 billion of unrealised value. But it converted a fortress balance sheet into a modestly levered one, and it spent the optionality that would have funded a competitive response in a market where every other major player has just consolidated.
The stock now trades above consensus, at roughly 10.6x forward EV/EBITDA and 16.6x forward EV/free cash flow, after a 51% year-to-date move. The easy re-rating is done. From here the thesis requires something Paycom has not delivered in three years: evidence that revenue growth can stabilise or inflect, rather than merely that costs can fall. The 100-plus new sales representatives, the 43 under-covered top-50 MSA sales territories, Asset Management, and the in-app purchase motion are the four places that evidence would come from. Watch retention in February and bookings commentary every quarter.
Verdict: a high-quality, structurally profitable franchise that is no longer cheap and is not yet growing. Own it for the cash and the capital allocation, not for the growth — and size the position for the concentration risk the disclosure regime will not let you see coming.
END OF DOSSIER
Data-quality appendix. Source conflicts were flagged in three places: the FY2022 annual revenue retention rate (93% as originally reported versus 91% as restated); Paycom trailing P/E and PEG (23.74x and 1.22 per MarketBeat versus 20.4x and 0.79 per InvestingPro); and institutional and insider ownership percentages, where multiple aggregators publish mutually inconsistent and in some cases arithmetically impossible figures owing to stale denominators following the 2026 buyback.
Executive Leadership
| Name | Title | Age | In role since | Prior roles and background |
|---|---|---|---|---|
Chad Richison | Chief Executive Officer and Chairman of the Board | 55 | CEO since 1998 (founder); Chairman since 2016; sole CEO again since Feb 2024; relinquished the President title in Feb 2026 | Began his career at a national payroll and HR company and a regional payroll company before founding Paycom. BA, Mass Communications–Journalism, University of Central Oklahoma. Director since 1998. |
Shane Hadlock | President and Chief Client Officer | 51 | President since 18 Feb 2026 | Previously Chief Client Officer. Credited by Richison with increasing retention, driving world-class service and delivering automation across the organisation. Functions as the sole principal operating officer; the COO reports to him. Base salary raised to $700,000 on promotion. |
Robert D. "Bob" Foster | Chief Financial Officer | 64 | CFO since Feb 2025; Treasurer since Feb 2025 | EVP of Accounting and Finance 2024–2025; Director of International Strategy 2022–2024. |
Randy Peck | Chief Operating Officer | 61 | COO since May 2024 | Previously Strategic Advisor to Executive Management; earlier Director of Software Strategy, Director of Operations and Director of Client Service at Paycom. |
Jeff York | Chief Sales Officer | Not disclosed | Since January 2026 | Long-tenured Paycom sales leadership. |
Jason Clark | Chief Administrative Officer | 55 | Since 4 December 2023 | Not further disclosed. |
Matthew Paque | General Counsel and Corporate Secretary | Not disclosed | Not disclosed | Not further disclosed. |
James Samford | Head of Investor Relations | Not disclosed | Since May 2019 | Not further disclosed. |
| Director | Class | Age | Independent | Director since | Committees | Key background |
|---|---|---|---|---|---|---|
Chad Richison | III | 55 | No | 1998 | None | Founder, CEO, Chairman |
Frederick C. Peters II | II | 76 | Yes | 2014 | Audit (Chair), Compensation | Lead Independent Director. Chairman, Community Financial Institutions Fund (since 2015; CEO 2015–2026). Chairman, President and CEO, Bryn Mawr Bank Corporation 2001–2014. Founder, Chairman and CEO of First Main Line Bank and National Bank of the Main Line. Federal Reserve Bank of Philadelphia director 2009–2014, audit committee chair 2013–2014. BA, Amherst College. |
Henry C. Duques | III | 82 | Yes | 2016 | Audit, Nominating and Corporate Governance | Chairman and CEO, First Data Corporation 1992–2002 and 2005–2007, including its $29 billion KKR buyout. President and CEO, American Express Travel Related Services Database Services Group 1987–1992. Group President Financial Services and Director, ADP 1984–1987. Chairman of Unisys 2006–2008. BA and MBA, George Washington University. |
J.C. Watts, Jr. | I | 68 | Yes | 2016 | Compensation (Chair), Nominating and Corporate Governance | Co-Founder, President and CEO, Watts Partners (since 2003). U.S. Representative for Oklahoma 1995–2003; Chairman of the Republican Conference 1999–2003. Director of Dillard's (since 2009), CSX, ITC Holdings, Clear Channel, Terex. BA, University of Oklahoma. |
Sharen J. Turney | I | 69 | Yes | 2021 | Nominating and Corporate Governance (Chair), Compensation | CEO, Gloria Jeans 2018–2019. President and CEO, Victoria's Secret 2006–2016. President and CEO, Neiman Marcus Direct. Director of Bread Financial Holdings (since 2019), chair of its compensation committee. BA, University of Oklahoma. |
Joseph L. Binz | II | 58 | Yes | 2024 | Audit | CFO, Atlassian 2022–2026. Corporate VP and CFO, Corporate Finance Team, Microsoft 2015–2022; CFO, Cloud and Enterprise Group; Director of Investor Relations. Earlier at Intel and KPMG. BS Finance, Illinois Urbana-Champaign; MBA, Michigan Ross. |
Craig Boelte | Not disclosed | Not disclosed | Not disclosed | July 2026 | Not disclosed | Former Chief Financial Officer of Paycom. |
William Kerber | Not disclosed | Not disclosed | Not disclosed | July 2026 | Not disclosed | — |
Archana Vemulapalli | — | 47 | Yes | July 2024 | Audit (former) | Resigned prior to April 2026. |
| Governance feature | Status |
|---|---|
Board independence | Only Richison is non-independent. |
Chair / CEO separation | Combined. Richison is both CEO and Chairman. |
Lead Independent Director | Yes — Frederick C. Peters II. Presides over executive sessions, facilitates communication among independent directors, acts as liaison to the CEO. |
Board classification | Classified into three classes with staggered three-year terms. The company explicitly defends this on anti-takeover grounds, stating the structure "reduces the vulnerability of the Company to certain potentially abusive takeover tactics." |
Committee independence | All three committees (Audit, Compensation, Nominating and Corporate Governance) composed entirely of independent directors. |
Board meetings in 2025 | Four. Each committee met five times. All directors attended 100% of applicable meetings. |
Voting standard | Majority vote for uncontested director elections, with a plurality carve-out for contested elections. |
Say-on-pay | Annual. |
Stock ownership guidelines | 6x salary for CEO; 3x salary for other executive officers; 5x cash compensation for non-employee directors. |
Overboarding policy | Maximum four public boards; two if the director is an active public-company executive; maximum three public audit committees for Audit Committee members. |
Compensation consultant | Independent, retained directly by the Compensation Committee, performing no other services. |
Cybersecurity and AI oversight | Audit Committee receives quarterly reports from the Senior Director of Information Technology and Information Security on cybersecurity and automation initiatives, including mitigation of adversarial AI attacks. |
Sustainability oversight | Nominating and Corporate Governance Committee. |
Board tenure distribution | 17% of directors 0–3 years; 50% 4–9 years; 33% 10+ years (as of April 2026). |
Board leadership diversity | 40% of board leadership roles held by directors diverse by gender or race/ethnicity. |
| Compensation item | FY2025 |
|---|---|
Chad Richison total compensation, Summary Compensation Table | $22,837,152 |
Chad Richison prior-year (FY2024) total compensation | $3,454,117 |
Year-over-year change | +561% |
Chad Richison target total compensation | $19.73 million |
Portion of CEO target compensation at risk | Over 95% |
Performance stock units granted to CEO | $9 million |
Time-based RSUs granted to CEO | $9 million |
Compensation mix — salary | 4% |
Compensation mix — stock awards | 81% |
Compensation mix — non-equity incentive | 8% |
Compensation mix — all other compensation | 8% |
CEO-to-median-employee pay ratio | 220:1 |
Median employee total compensation | $103,900 |
Share of continuing NEO equity granted as PSUs | 50% |
Core performance metric for cash and equity incentives | Revenue |
Shane Hadlock base salary on promotion (Feb 2026) | $700,000 |
| Holder | Shares / stake | Source and as-of date | Confidence |
|---|---|---|---|
Chad R. Richison | 9.69 million shares, 20.33% | WallStreetZen, August 2026 | Directionally credible; Richison is unambiguously the largest individual holder |
Chad R. Richison | 5.91% | TradingKey, April 2026 | Conflicts materially with the above; likely a different beneficial-ownership definition or a stale denominator |
BlackRock, Inc. | 6.04 million shares | BusinessQuant, 31 March 2026 | Credible share count |
BlackRock Institutional Trust Company, N.A. | 6.26% | TradingKey, April 2026 | Subset entity, not the consolidated group |
Vanguard Group Inc. | 5.80 million shares, approx. $1.21 billion | MarketBeat, Q3 filing cited March 2026 | Credible |
Vanguard Portfolio Management, LLC | 5.13% | TradingKey, April 2026 | Subset entity |
State Street Corp | Top-10 holder | Fintel | Rank only |
Harris Associates L.P. | Top-10 holder | Fintel | Rank only |
Polen Capital Management LLC | Top-10 holder; sold 1.80 million shares in Q1 2026 | Fintel / BusinessQuant | Rank and flow |
First Trust Advisors LP | Top-10 holder; sold 783,650 shares in Q1 2026 | Fintel / BusinessQuant | Rank and flow |
FMR LLC (Fidelity) | Top-10 holder; sold 467,830 shares in Q1 2026 | Fintel / BusinessQuant | Rank and flow |
Geode Capital Management, LLC | Top-10 holder | Fintel | Rank only |
Baillie Gifford & Co | Top-10 holder | Fintel | Rank only |
Invesco Ltd. | Top-10 holder; sold 1.38 million shares in Q1 2026 | Fintel / BusinessQuant | Rank and flow |
Competitive Landscape
| Competitor | Segment overlap | Latest disclosed revenue | Fiscal period | Positioning relative to Paycom |
|---|---|---|---|---|
Automatic Data Processing (ADP) | Full HCM, payroll, PEO | $21.9 billion | FY2026 ended June 2026, +7% | The scale incumbent. 10.7x Paycom's revenue. Employer Services retention 92.1%; new business bookings $2.2 billion, +6%. Vast partner ecosystem and international reach. Chad Richison's father-figure competitor — Henry Duques, a Paycom director, was an ADP Group President 1984–1987 |
Paychex | Full HCM, payroll, PEO, insurance, retirement | $6.51 billion | FY2026 ended May 2026, +17% | Acquired Paycor for approximately $4.1 billion enterprise value, closed April 2025, adding an upmarket platform. Now runs three platforms (SurePayroll, Paychex Flex, Paycor). Launched WISE agentic AI engine with patent-pending technology. Adjusted operating margin 43.2% — directly comparable to Paycom's adjusted EBITDA margin discipline. Returned $2.2 billion to shareholders in FY2026 |
Paylocity Holding | Mid-market HCM — the closest direct comparable | $1,771.3 million | FY2026 ended June 2026, +11.0% | Approximately 44,400 clients versus Paycom's 39,200; revenue retention above 92% in each of FY2024–FY2026, better than Paycom's 91%. Adjusted EBITDA margin 37.0%. GAAP net income $269.7 million. Acquired Grayscale Labs in April 2026 for AI recruiting. Growing faster than Paycom with lower margins — the precise inverse trade-off |
Dayforce | Enterprise and upper-mid HCM | Not publicly reported post-transaction | Taken private Jan/Feb 2026 | Acquired by Thoma Bravo for approximately $12.3 billion at $70.00 per share. Q3 2025 recurring revenue growth 14%, adjusted EBITDA margin 30.6%. Now privately funded and no longer subject to quarterly scrutiny — a more dangerous competitor, not a less dangerous one |
Workday | Enterprise HCM and financials | $9.552 billion | FY2026 ended January 2026, +13.1% | Subscription revenue $8.833 billion (+14.5%); backlog $28.101 billion (+12.2%); non-GAAP operating margin 29.6%; free cash flow $2.777 billion. Acquired Paradox and Sana in FY2026, pushing into AI recruiting and knowledge. Competes above Paycom's core but increasingly overlaps at the 5,000-plus employee tier Paycom is targeting |
Ultimate Kronos Group (UKG) | Full HCM and workforce management | Private; not disclosed | — | Private-equity backed. Dominant in time and labour. Direct competitor in Paycom's core mid-market |
Intuit | SMB payroll (QuickBooks Payroll) | Not disaggregated for payroll | — | Competes below Paycom's target range but is the primary engine of embedded payroll expectations among small businesses |
Oracle | Enterprise HCM Cloud | Not disaggregated | — | Enterprise suite competitor; overlaps only at the top of Paycom's range |
SAP SE | Enterprise HCM (SuccessFactors) | Not disaggregated | — | As above |
ServiceNow | HR service delivery | Not disaggregated | — | Adjacent rather than head-to-head; encroaching via employee workflow |
Gusto, Rippling, Justworks, TriNet, Insperity, isolved | SMB payroll, PEO, embedded payroll | — | — | Not named in the 10-K but competitively relevant. Rippling in particular exemplifies the "white label and embedded payroll" threat the 10-K flags by name |
| Metric | Paycom (FY2025) | Paylocity (FY2026, Jun) | Paychex (FY2026, May) | Workday (FY2026, Jan) |
|---|---|---|---|---|
Total revenue (USD M) | 2051.7 | 1771.3 | 6510.0 | 9552.0 |
Revenue growth (%) | 9.0 | 11.0 | 17.0 | 13.1 |
GAAP net income (USD M) | 453.4 | 269.7 | 1800.0 | 700.0 |
GAAP net margin (%) | 22.1 | 15.2 | 27.6 | 7.3 |
Adjusted EBITDA (USD M) | 882.3 | 654.9 | 0 | 0 |
Adjusted EBITDA margin (%) | 43.0 | 37.0 | 0 | 0 |
Adjusted operating margin (%) | 0 | 31.5 | 43.2 | 29.6 |
GAAP diluted EPS (USD) | 8.08 | 4.92 | 4.89 | 2.59 |
Total R&D costs as % of revenue | 21.3 | 0 | 0 | 0 |
Client count | 39200 | 44400 | 0 | 0 |
Revenue retention (%) | 91 | 92 | 0 | 0 |
