• Full Year Revenue: $1.88 billion, 11% organic growth compared to 2023.
• Fourth Quarter Revenue: $494 million, 14% growth year-over-year.
• Full Year Recurring and Other Revenue: $1.76 billion, up 11% from 2023.
• Interest on Funds Held for Clients: $125 million for the full year, up 16% year-over-year; $29 million for the fourth quarter, up 2% year-over-year.
• Full Year GAAP Net Income: $502 million or $8.92 per diluted share.
• Fourth Quarter GAAP Net Income: $114 million or $2.02 per diluted share.
• Full Year Non-GAAP Net Income: $462 million or $8.21 per diluted share.
• Fourth Quarter Non-GAAP Net Income: $130 million or $2.32 per diluted share.
• Full Year Adjusted EBITDA: $775 million, 41.2% margin.
• Fourth Quarter Adjusted EBITDA: $215 million, 43.5% margin, up 290 basis points year-over-year.
• Cash Flow from Operations: $534 million, 28% margin for 2024.
• Free Cash Flow: $337 million, up 17% year-over-year, 18% margin.
• CapEx: $197 million, approximately 10% of total revenues for 2024.
• Share Repurchase: Over 900,000 shares repurchased for $145 million in 2024.
• Cash and Cash Equivalents: $402 million, 0 debt at year-end 2024.
• Client Growth: Approximately 37,500 clients, 2% growth year-over-year.
• Employee Records: 7 million, up 3% year-over-year.
• Annual Revenue Retention Rate: 90%, consistent with 2023.

• Warning! GuruFocus has detected 1 Warning Sign with PAYC.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Paycom Software Inc (NYSE:PAYC) achieved strong momentum in 2024, driven by focused execution, organic sales growth, and operational efficiency gains.
• The company reported a 14% year-over-year increase in fourth-quarter revenue, with total revenue reaching $494 million.
• Paycom's automated solutions, such as Beti and GONE, have significantly improved client ROI and operational efficiency, with some clients reducing payroll processing time by 85%.
• The company maintained a high annual revenue retention rate of 90% in 2024, consistent with the previous year.
• Paycom opened three new sales offices in January 2025, indicating strong sales growth and expansion potential.

Negative Points

• The company's client growth rate was relatively low at 2% compared to 2023, indicating potential challenges in acquiring new clients.
• Interest on funds held for clients is expected to decrease by 12% year-over-year in 2025, impacting overall revenue growth.
• Paycom's guidance for 2025 indicates a slowdown in revenue growth, with an expected increase of approximately 8% year-over-year at the midpoint.
• The transition to an annual revenue and adjusted EBITDA guidance framework may reduce transparency for investors accustomed to quarterly updates.
• The company's effective income tax rate is anticipated to increase to approximately 29% on a GAAP basis in 2025, up from 23% in 2024.

Q & A Highlights

Q: What drove the decision to transition from quarterly to annual guidance, given Paycom's predictability? A: Bob Foster, the new CFO, explained that the shift aligns with Paycom's long-term focus and investment strategy. The annual guidance better reflects how the company operates, with strong guidance and high EBITDA margins indicating confidence in their business model.

Q: Can you elaborate on the 9% recurring revenue growth guidance and the macroeconomic assumptions behind it? A: Chad Richison, CEO, stated that the 9% growth is based on onboarding new business clients at higher revenue rates, consistent with past practices. Craig Boelte, CFO, added that the guidance does not factor in macroeconomic impacts, either positive or negative.

Q: How does Paycom plan to balance gross margin improvements with investments in sales, marketing, R&D, and G&A? A: Chad Richison highlighted that sales and marketing have performed well, with record sales months. The focus is on larger clients, which has led to strong growth. Craig Boelte noted that new building costs impacted margins, but efficiencies are being sought across all areas.

Q: What is the expected impact of the new sales offices on revenue and staffing? A: Chad Richison explained that it takes about 24 months for new offices to be fully staffed and operational. These offices will contribute to revenue in a smaller capacity initially, with a more significant impact expected in 2026 and beyond.

Q: How does Paycom view the competitive environment, especially with recent industry consolidations? A: Chad Richison stated that the competitive environment remains unchanged, with competition benefiting clients. Paycom's focus on differentiation through automation and client value remains strong, and they do not see recent consolidations affecting their strategy.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.