Summary
Paycom closed fiscal 2021 with fourth-quarter revenue of $284.99 million, up 29.0% from the prior-year quarter. GAAP operating income reached $68.63 million, up 89.3%, and GAAP net income was $48.69 million, up 99.8%. Operating margin improved to 24.1%, up 7.7 percentage points. For the full year, revenue was $1.06 billion, up 25.4%. GAAP operating income was $253.57 million, up 36.2%, and GAAP net income was $195.96 million, up 36.6%. Full-year operating margin was 24.0%, up 1.9 percentage points. Diluted GAAP earnings per share for the full year were $3.37, up $0.91, or 37.0%.
Cash generation was strong. Fourth-quarter operating cash flow was $89.72 million, up 69.7%, and capital expenditures were $33.97 million, up 64.9%. For the full year, operating cash flow was $319.36 million, up 40.6%, and capital expenditures were $120.69 million, up 28.3%. Deferred revenue stood at $101.43 million as of December 31, 2021, up 16.8%. Adjusted EBITDA was $109.6 million in the quarter, compared with $84.2 million, and $419.3 million for the full year, or 39.7% of total revenue, compared with $330.8 million. Non-GAAP net income was $64.4 million, or $1.11 per diluted share, compared with $49.1 million, or $0.84 per diluted share. Full-year non-GAAP net income was $260.4 million, or $4.48 per diluted share, compared with $203.5 million, or $3.49 per diluted share. Adjusted gross margin slipped to 84.1% in the quarter from 85.5%, and to 85.1% for the full year from 85.9%.
Operational metrics showed progress. The annual revenue retention rate rose to 94% in 2021 from 93% in 2020. Total client count expanded to 33,875 as of December 31, 2021, up 9% from the prior year-end. On a parent company grouping basis, client count was 17,703, up 10%. Paycom ended 2021 with 51 sales teams, up from 50. In January 2022, the company added new sales teams in Las Vegas, Jacksonville, New England and South Jersey, bringing the total to 55 sales teams located in 28 states. Between September 2021 and January 2022, Paycom opened five new outside sales offices in Manhattan, Jacksonville, Las Vegas, New England and South Jersey. The company also highlighted Beti, its employee-driven payroll product, which received a Top HR Product of the year honor. Management tied the record retention rate to the employee usage strategy and said sales and marketing investments should support high-margin revenue growth.
Guidance points to continued expansion. For the quarter ending March 31, 2022, Paycom guided adjusted EBITDA of $161 million to $163 million. For the year ending December 31, 2022, the company guided adjusted EBITDA of $524 million to $526 million and a total revenue outlook for both periods that it did not reconcile to comparable GAAP measures. Risks remain. COVID-19 continues to create uncertainty, and client headcount fluctuations affect recurring revenue because Paycom charges on a per-employee basis for certain services. Significantly lower average interest rates during 2021 hurt interest earned on funds held for clients and pressured recurring revenue growth. The company also faces execution risk from opening new sales offices and from a $60 million to $70 million construction project at its Oklahoma City headquarters, which is expected to take about two years. Naming rights payments escalate from $4.0 million in 2021 to $6.1 million in 2035. Paycom has $300.0 million authorized for stock repurchases, with $266.3 million available as of December 31, 2021.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2021 | Q3 FY2021 | QoQ | Q4 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $285.0M | $256.2M | +11.2% | $220.9M | +29.0% |
| Gross profit | $238.5M | $213.5M | +11.7% | $187.9M | +26.9% |
| Gross margin | 83.7% | 83.3% | +0.3 pp | 85.0% | -1.4 pp |
| Research & development | $34.4M | $31.1M | +10.7% | $25.1M | +37.3% |
| Sales & marketing | $169.8M | $170.2M | -0.2% | $151.7M | +12.0% |
| General & administrative | $49.6M | $60.0M | -17.3% | $56.7M | -12.5% |
| Total operating expenses | $216.4M | $212.9M | +1.6% | $184.7M | +17.1% |
| Operating income (loss) | $68.6M | $43.3M | +58.5% | $36.2M | +89.3% |
| Operating margin | 24.1% | 16.9% | +7.2 pp | 16.4% | +7.7 pp |
| Net income (loss) | $48.7M | $30.4M | +60.3% | $24.4M | +99.8% |
| Net margin | 17.1% | 11.9% | +5.2 pp | 11.0% | +6.0 pp |
| Diluted EPS | $0.84 | $0.52 | +$0.32 | $0.42 | +$0.42 |
Risks
Paycom charges clients on a per-employee basis for certain services, so COVID-19 related business closures, layoffs and furloughs have negatively impacted recurring revenue. MD&A states significantly lower average interest rates in 2021 versus 2020 also had a negative effect on recurring revenue growth for the year ended December 31, 2021.
Interest earned on funds held for clients decreased for the year ended December 31, 2021 compared with the year ended December 31, 2020 due to significantly lower average interest rates, which had a negative effect on recurring revenue growth. Paycom expects adverse macroeconomic factors to continue to negatively affect recurring revenues while conditions persist.
The filing warns that future disruptive technologies, such as artificial intelligence and machine learning, could deliver HCM solutions at lower prices, more efficiently or more conveniently, adversely impacting Paycom's ability to compete.
Paycom's sales employees have conducted meetings virtually since March 2020, but as prospective clients begin taking in-person meetings, a shift to a mix of virtual and in-person engagement could lengthen sales cycles or impede client acquisition if clients are not willing to engage via video conference and teleconference.
Paycom depends on attracting and retaining qualified software developers and skilled IT, sales, marketing and operational personnel, and the software industry has high employee mobility and aggressive recruiting. Immigration law changes could limit international recruiting and increase costs to attract or retain employees.
Paycom faces evolving privacy and data protection laws, including the CPRA and new Virginia and Colorado consumer data privacy statutes scheduled to go into effect in 2023. The CCPA provides a private right of action for data breaches, and noncompliance could lead to fines, lawsuits, required changes to its solution or reduced demand.
New or reinterpreted state and federal money transmitter or money services business statutes could require Paycom to obtain licenses, limit business activities or change how it invests client funds. Paycom is registered as a money services business in one jurisdiction and intends to apply for licenses in others, and unlicensed operation could lead to civil and criminal fines.
Paycom has experienced rapid growth in headcount, clients and transactions, placing significant demands on management, operational and financial resources. Failure to manage growth and organizational change effectively could reduce client satisfaction, increase costs or delay introduction of new applications.
Paycom serves all clients from three fully redundant data centers in Oklahoma and Texas, which are vulnerable to tornadoes, fires, earthquakes, hurricanes, floods, power loss, telecommunications failures and cyber-attacks. Interruptions could cause client data loss, refunds, client terminations and reduced revenues.
SaaS KPIs
All quarters →Adjusted EBITDA margin
Annual Revenue Retention Rate
Clients (based on parent company grouping)
Clients
Summary, forecast, risks and KPIs are extracted from Paycom Software, Inc.'s SEC filings for Q4 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.