Paycom Software, Inc.

What they do

Paycom sells a single-database HCM platform covering payroll, talent acquisition, talent management, HR, and time and labor management. The solution is sold directly through an internally trained sales force based in offices across the U.S. Clients are assigned a specialist for personalized service. Approximately 39,200 clients use the platform.

Revenue drivers

• Payroll applications — Historically the majority of revenues; all clients must use payroll to access other applications.
• Recurring and other revenues — Comprised of fixed per-billing-period fees plus per-employee/per-transaction fees; was 95.1% of total revenues in Q2 2026.
• Additional HCM applications — Non-payroll applications (talent, HR, time and labor) cross-sold to existing clients, contributing to recurring revenue growth.

Recent performance

Q2 2026 total revenues were $531.2 million, up 9.8% year-over-year. GAAP net income was $107.4 million, or $2.34 per diluted share. Non-GAAP net income was $127.7 million, or $2.78 per diluted share. Adjusted EBITDA was $235.0 million, representing 44% of total revenues. Cash and cash equivalents were $198.0 million as of June 30, 2026, down from $370.0 million at year-end 2025 due to dividends and share repurchases.

Strategy

Management emphasizes an automation-first strategy, with the industry-first command-driven AI engine 'IWant' as a differentiator. The company focuses on driving client employee usage to increase recurring revenue, cross-selling additional applications, and expanding sales capacity. It also plans to open additional sales offices, though expansion details were not fully provided in the excerpt.

Risks

• Client retention pressure — Annual revenue retention rate was 91% in 2025, but the rate is negatively impacted when clients are acquired or cease operations.
• Competition and market evolution — The HCM industry is evolving, and competitors using multiple third-party systems may challenge Paycom's single-platform approach.
• Cybersecurity and data privacy — The company faces risks of security vulnerabilities, cyber-attacks, network disruptions, and compliance with data privacy laws.
• Dependence on key personnel — Paycom relies on its key executives and qualified personnel to manage growth and organizational change effectively.

Outlook

For full-year 2026, management expects total revenue of $2.197 billion to $2.212 billion, representing 7% to 8% growth. Recurring and other revenue is expected to grow 8% to 9%. Adjusted EBITDA is guided between $1.007 billion and $1.022 billion. Management raised its full-year outlook following stronger-than-expected Q2 results.