Paycom Software Q2 Earnings Call Highlights

Paycom Software NYSE: PAYC reported second-quarter results that exceeded its expectations, citing broad-based revenue strength, growing demand for automation and improving operating efficiency. The company also raised its full-year revenue and adjusted EBITDA outlook. Total revenue rose 10% year over year to $531 million in the second quarter, while recurring and other revenue increased 11% to $505 million. GAAP net income climbed 20% to $107 million, or $2.34 per diluted share. On a non-GAAP basis, net income was $128 million, or $2.78 per diluted share. Adjusted EBITDA totaled $235 million, producing a 44.2% margin, up 320 basis points from a year earlier. CFO Bob Foster said the company’s automation efforts and use of its own technology are increasing productivity across the business and supporting sustainable margin expansion.

Following its first-half performance, Paycom increased its 2026 guidance. The company now expects total revenue of $2.197 billion to $2.212 billion, representing growth of 7% to 8% from 2025. It expects recurring and other revenue to rise 8% to 9% for the full year. The outlook includes approximately $105 million of interest on funds held for clients and assumes current interest rates remain in place for the rest of the year. Foster said that even if rates moved higher or lower, the impact on 2026 would be minimal. Paycom now forecasts full-year adjusted EBITDA of $1.007 billion to $1.022 billion, implying a record 46% adjusted EBITDA margin at the midpoint of the range. Foster also said the company expects free cash flow to exceed $650 million in 2026. Asked about the improved cash-flow outlook, Foster pointed to broad-based efficiencies in processes and labor. He said the company had been working to bring EBITDA margins and free-cash-flow margins closer together and views the progress as sustainable.

Founder and CEO Chad Richison said Paycom’s full-solution automation and service model continue to drive client return on investment. He said demand for automation is increasing and that the company is expanding its capabilities through artificial intelligence and automated decisioning. During the year, Paycom introduced a career and succession planning solution designed to help organizations identify talent gaps, assess readiness and develop potential successors. Richison said client adoption has been solid. In July, the company launched Asset Management, a product that enables businesses to track and manage physical and digital assets. Richison said the offering expands Paycom into what he described as a new multibillion-dollar total addressable market and represents the company’s 45th product developed, hosted, distributed and serviced during its nearly 28-year history. President Shane Hadlock highlighted Project Arc, which he called Paycom’s largest system-wide release. Th...