Paycom Software Q2 Earnings Call Highlights
Key Points
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- Paycom exceeded Q2 expectations: Revenue rose 10% year over year to $531 million, while adjusted EBITDA increased to $235 million with a 44.2% margin, supported by automation and operating efficiencies.
- Full-year guidance was raised: Paycom now expects 2026 revenue of $2.197 billion to $2.212 billion, adjusted EBITDA of $1.007 billion to $1.022 billion, and free cash flow above $650 million.
- Growth initiatives and capital returns remain priorities: The company is expanding automation and AI products, adding sales capacity, and repurchased nearly 11 million shares for about $1.4 billion in the first half of 2026.
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.
Full-Year Outlook Raised
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.
Product Releases Focus on Automation and AI
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. The update added customization features intended to give users more tailored views of information and action items, while also improving performance and scalability. Hadlock cited one client with more than 10,000 employees that reported system performance had increased fourfold.
Hadlock also discussed Paycom’s AI offering, I Want, which automates events and tasks within the system. Richison said I Want is frequently the first interaction new employees have with Paycom’s platform and emphasized that the company’s focus is on providing accurate responses rather than deploying AI solely for its own sake.
Sales Capacity, Bookings and Client Demand
Richison said second-quarter revenue strength was broad-based and did not stem from one-time factors. Products launched last year are beginning to contribute to results, while the more recently released career and succession planning and Asset Management products are expected to contribute more in future periods.
He said bookings came in as expected during the quarter. Paycom’s sales include both sales to new prospects and sales to existing customers, though the company has also implemented in-app purchasing capabilities that can bypass the traditional booked-sales process for certain products.
Management said Paycom’s sales pipeline remains strong and that new sales representatives are reaching productivity faster than they have historically. Richison said the company has expanded teams from eight to 10 representatives and has added more than 100 new sales representatives. Existing representatives are expected to remain more productive in the near term, while the larger new-representative cohort is expected to support future booked sales as it develops.
The company said client employment growth remained stable during the first half, consistent with levels seen in recent years outside of the COVID-19 period.
Capital Returns and Balance Sheet
Paycom repurchased approximately 2.6 million shares, or about 6% of shares outstanding, for $346 million during the second quarter. Over the first six months of 2026, the company repurchased nearly 11 million shares for approximately $1.4 billion, reducing shares outstanding by 20%.
Paycom ended the quarter with roughly 44 million shares outstanding and $1.66 billion remaining under its repurchase authorization. The company also paid approximately $18 million in cash dividends during the quarter. Its board approved a quarterly dividend of $0.375 per share on Aug. 3, payable in early September.
At quarter-end, Paycom had $198 million in cash and cash equivalents. It had drawn $900 million on its $2.1 billion revolving credit facility to support year-to-date repurchases. Average daily funds held for clients rose 9% year over year to approximately $2.9 billion.
About Paycom Software (NYSE:PAYC)
Paycom Software, Inc (NYSE: PAYC) is a cloud-based human capital management (HCM) software provider that delivers an end-to-end solution for human resources, payroll, talent acquisition, time and labor management, and talent management. Its single-database platform enables organizations to process payroll, track time, administer benefits, and manage recruiting and employee development through a unified system. Paycom's software is designed to streamline administrative tasks, improve data accuracy, and provide real-time reporting and analytics to support strategic HR decisions.
The company's core offerings include payroll processing with built-in tax compliance, employee self-service functionality, automated time tracking, and customizable talent acquisition tools that allow employers to create and post job requisitions, screen candidates, and conduct onboarding electronically.
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