Summary
Paycom's fourth quarter revenue rose 13.6% year over year to $493.87 million. Full-year revenue was $1,883.2 million, up 11.2%. Operating income was $148.47 million in the quarter, up 39.1%, and $634.30 million for the full year, up 40.5%. Net income was $113.56 million in the quarter, up 38.9%, and $502.00 million for the full year, up 47.3%. Diluted earnings per share for the full year were $8.92, up 51.7%. Operating margin expanded to 30.1% in the quarter, up 5.5 percentage points, and to 33.7% for the full year, up 7.0 percentage points. Gross margin was 83.0% in the quarter. Full-year gross margin was 82.2%, down 1.5 percentage points.
Cash generation also improved. Operating cash flow was $160.39 million in the quarter, up 19.3%, and $533.90 million for the full year, up 10.1%. Capital expenditures were $51.35 million in the quarter, down 9.7%, and $192.90 million for the full year, flat. Deferred revenue was $144.60 million at December 31, 2024, up 10.8% year over year. Free cash flow was $336.6 million for the full year, compared with $288.2 million, and free cash flow margin was 17.9%, compared with 17.0%. On a non-GAAP basis, adjusted EBITDA was $214.9 million in the quarter, compared with $176.6 million in the prior-year quarter, and $775.4 million for the full year, compared with $719.3 million. Non-GAAP net income was $130.1 million in the quarter, compared with $110.2 million, and $462.0 million for the full year, compared with $449.5 million. Non-GAAP net income per diluted share was $2.32 in the quarter, compared with $1.93, and $8.21 for the full year, compared with $7.75.
Operational metrics show a steady but not accelerating client base. Client count on a parent company grouping basis was 19,422 at December 31, 2024, relatively flat compared with the prior year. Total client count on a taxpayer identification number basis was 37,543, up 2%. Annual revenue retention rate was 90%, consistent with the prior year. Paycom stored data for over 7.0 million persons employed by clients during 2024, up 3%. The company had 58 sales teams at December 31, 2024, compared with 55 a year earlier. In January 2025, Paycom opened three new sales offices in Raleigh, North Carolina; Los Angeles, California; and Providence, Rhode Island. Paycom also received several awards in 2024, including being named one of the World's Best Companies by Time magazine and a USA Today Top Workplace USA winner, and earning a top HR Product of the Year award for its automated time-off request tool, GONE, by Human Resource Executive magazine.
Management's guidance for the full fiscal year ending December 31, 2025 calls for total revenue growth of approximately 8% at the midpoint and recurring and other revenue growth of approximately 9% year over year. Adjusted EBITDA is guided to a range of $820 million to $840 million, or approximately 41% at the midpoint. That outlook covers the full fiscal year, not the next quarter. The MD&A flags several risks. The HCM software market is highly competitive and fragmented, with aggressive pricing and client retention strategies. Revenue growth and annual revenue retention rate declined in 2023 and remained under pressure throughout 2024. Beti automates payroll and reduces billable corrections and unscheduled payroll runs, which has lowered those revenue-generating activities. Macroeconomic pressures such as inflation and interest rates affect clients' hiring. Paycom expects continued margin pressure as it hires to support growth, and international expansion requires considerable investment. Capital expenditures in 2025 are expected to be generally consistent with the prior year on a total dollar basis. The company also notes that challenges of managing payroll and HR complexity continue to drive companies to outsourced providers, and it has grown at a 22% compound annual growth rate from January 1, 2021 through December 31, 2024. Paycom expects research and development expenses exclusive of stock-based compensation to continue to increase, particularly as it hires more personnel, but it anticipates the rate of increase to decline over time. Seasonality also matters: first quarter revenues and margins are positively impacted by annual payroll tax filing forms and ACA form filing requirements, and fourth quarter revenues are positively impacted by unscheduled payroll runs before year end.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2024 | Q3 FY2024 | QoQ | Q4 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $493.9M | $451.9M | +9.3% | $434.6M | +13.6% |
| Gross profit | $410.1M | $363.6M | +12.8% | $359.9M | +14.0% |
| Gross margin | 83.0% | 80.5% | +2.6 pp | 82.8% | +0.2 pp |
| Research & development | $66.7M | $63.0M | +5.8% | $55.3M | +20.6% |
| Sales & marketing | $261.7M | $258.7M | +1.1% | $253.2M | +3.4% |
| Total operating expenses | $345.4M | $347.1M | -0.5% | $327.9M | +5.3% |
| Operating income (loss) | $148.5M | $104.9M | +41.6% | $106.7M | +39.1% |
| Operating margin | 30.1% | 23.2% | +6.8 pp | 24.6% | +5.5 pp |
| Net income (loss) | $113.6M | $73.3M | +55.0% | $81.8M | +38.9% |
| Net margin | 23.0% | 16.2% | +6.8 pp | 18.8% | +4.2 pp |
| Diluted EPS | $2.02 | $1.31 | +$0.71 | $1.41 | +$0.61 |
Risks
MD&A states revenue growth rate and annual revenue retention rate declined in 2023 and remained under pressure throughout 2024; annual revenue retention rate was 90% for 2024. Client attrition, particularly among smaller clients, partially offset favorable revenue drivers.
Beti is designed to eliminate payroll errors that lead to billable corrections and unscheduled payroll runs, and the company has experienced a reduction in these activities that historically generated additional revenue. This dynamic may continue to pressure recurring revenues.
Risk factors highlight future disruptive technologies such as AI and machine learning; failure to develop enhancements incorporating natural language processing, AI, and machine learning may impact efficiency and costs for clients. New technologies delivering HCM solutions at lower prices or more efficiently could adversely impact the company's ability to compete.
The company has licensed and deployed a third-party large language model on its internal network that processes large amounts of employee and customer data, including potentially sensitive information. Unauthorized access, regulatory noncompliance, biased or inaccurate outputs, or rapid obsolescence could lead to legal, financial, and reputational harm.
Certain third parties with which the company does business have been subject to cyber-attacks, one of which resulted in unauthorized access to data of certain Company clients and their employees as well as Company data and employee records. HCM software is often targeted, and the company has been targeted, in cyber-attacks.
The company serves all clients from three fully redundant data centers located in Oklahoma and Texas, which are vulnerable to damage, failure and disruption from human error, telecommunications failures, cyber-attacks, natural disasters, or power loss. Interruptions could cause permanent client data loss or significant client claims.
Interest earned on funds held for clients can be positively or negatively impacted by changes in interest rates; a decreasing interest rate environment would compress the additional interest earnings and potentially adversely affect operating results.
The company is subject to rapidly evolving privacy, data protection, cybersecurity, and AI regulations, including CCPA, CPRA, GDPR, state privacy statutes, and automated decision-making rules. Noncompliance could result in fines, litigation, required changes to the solution, or reduced demand.
Adoption of new or adverse interpretations of money transmitter, money services business, or payment services regulations could subject the company to additional regulation and related expenses. Paycom National Trust Bank now manages U.S. client money movement activity, and the company has surrendered historically maintained state money transmitter licenses.
The company needs to attract and retain software developers, product managers, and skilled IT, sales, marketing, and operational personnel; competition is intense and an office-centric operational model may be less attractive than competitors' flexible remote or hybrid work arrangements.
MD&A states the company has experienced and expects to continue to experience pressure on margins as it hires to support growth. Gross margin was 82.2% for FY2024 year to date, down 1.5 percentage points from prior-year year to date, and cost of revenues operating expenses increased 19.5% while research and development expenses increased 21.9% for the year ended December 31, 2024.
The company faces challenges attracting and retaining larger clients, including demand for customized features, longer sales cycles and less predictability in completing sales. Pursuing larger clients may require significant support and service resources without guarantee of adoption.
As of December 31, 2024, the company had recorded $51.9 million of goodwill and $46.2 million of other intangible assets, net. Adverse changes in domestic or global market conditions could result in an impairment charge that may negatively impact operating results or financial condition.
The Revolving Credit Facility requires a consolidated interest coverage ratio of not less than 3.0 to 1.0 and a consolidated leverage ratio of not greater than 3.25 to 1.0, stepping down to 3.0 to 1.0 as of December 31, 2025. A breach could result in an event of default, acceleration, or foreclosure.
SaaS KPIs
All quarters →Adjusted EBITDA margin
Adjusted EBITDA
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 FY2024 (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.