Skip to content
    PAYC
    Earnings call· Jun 2026(Q2 FY26)

    Paycom Software Q2 FY26 earnings call PAYC

    Aug 5, 2026 Source

    Executive summary

    Paycom Q2 FY26 — Strong Revenue Growth and Margin Expansion

    Paycom delivered a strong second quarter, exceeding revenue and profitability expectations driven by consistent product demand and increased client satisfaction. The company continues to leverage its automation initiatives and internal AI models to drive efficiencies and expand margins, while also returning significant capital to shareholders through aggressive share repurchases. New product launches and enhanced system performance are expected to further automate client processes and contribute to future growth.

    Highlights

    5

    • Total revenue grew 10% year-over-year to $531 million.

    • Adjusted EBITDA increased to $235 million, representing a 320 basis point year-over-year margin expansion to 44.2%.

    • Non-GAAP net income reached $128 million or $2.78 per diluted share.

    • The company repurchased 2.6 million shares for $346 million in Q2, reducing shares outstanding by approximately 6%.

    • Full-year 2026 revenue guidance was raised to between $2.197 billion and $2.212 billion, and adjusted EBITDA guidance to between $1.007 billion and $1.022 billion.

    Guidance & targets

    8
    CategoryTargetConfidence
    Total revenues
    $2.197 billion and $2.212 billion
    high materiality
    High
    Recurring and other revenue growth
    up 8% to 9% year-over-year
    medium materiality
    High
    Interest on funds held for clients
    approximately $105 million
    medium materiality
    High
    Adjusted EBITDA
    $1.007 billion and $1.022 billion
    high materiality
    High
    Free cash flow
    exceed $650 million
    high materiality
    High
    GAAP tax rate
    29%
    low materiality
    High
    Non-GAAP tax rate
    27%
    low materiality
    High
    Stock-based compensation as % of revenues
    3% of revenues
    low materiality
    High

    Operational metrics

    20
    Total revenue growth
    10%YoY
    Q2 FY26

    Total revenue was $531 million.

    Recurring and other revenue growth
    11%YoY
    Q2 FY26

    Recurring and other revenue was $505 million.

    GAAP net income growth
    20%YoY
    Q2 FY26

    GAAP net income was $107 million.

    Non-GAAP net income
    $128M
    Q2 FY26

    Non-GAAP net income for the second quarter.

    Non-GAAP diluted EPS
    $2.78
    Q2 FY26

    Based on an average of 46 million shares outstanding.

    Adjusted EBITDA
    $235M
    Q2 FY26

    Adjusted EBITDA in the second quarter.

    Adjusted EBITDA margin
    44.2%320 bps YoY expansion
    Q2 FY26

    Representing a 320 basis point year-over-year margin expansion.

    Shares outstanding
    44M
    Q2 FY26

    Shares outstanding at the end of the second quarter.

    Shares repurchased
    2.6M
    Q2 FY26

    Repurchased approximately 6% of shares outstanding for a total of $346 million.

    Shares repurchased
    11M
    H1 FY26

    Reduced shares outstanding by 20% by repurchasing nearly 11 million shares of common stock, returning approximately $1.4 billion to stockholders over the first 6 months of the year.

    Buyback authorization remaining
    $1.66B
    Q2 FY26

    Remaining on the buyback authorization.

    Cash dividends paid
    $18M
    Q2 FY26

    Cash dividends paid during the second quarter.

    Quarterly dividend per share
    $0.375
    Q3 FY26

    Board approved next quarterly dividend payable in early September.

    Cash and cash equivalents
    $198M
    Q2 FY26

    Ended the quarter with cash and cash equivalents.

    Revolving credit facility drawn
    $900M
    Q2 FY26

    Drawn down a total of $900 million on the $2.1 billion revolving credit facility to support year-to-date stock repurchases.

    Average daily balance of funds held for clients
    $2.9Bup 9% YoY
    Q2 FY26

    Average daily balance of funds held for clients, up 9% over the prior year period.

    R&D savings from internal AI models
    $100M
    FY26

    Savings expected from prior year's investment in data centers to host own AI models.

    IWant response fees savings
    $30M+
    FY26

    Savings from third-party IWant response fees due to internal AI models.

    Total employees
    5,770
    Annual update

    As of the last update given on the February earnings call.

    Preemployment services growth
    up a measurable amount
    FY26

    This side of the service business continues to be very strong and is up a measurable amount for this year.

    Industry KPIs

    2
    MetricValueDetails
    Client funds balances yield$2.9BUSD
    New business bookings growthas expecteddirectional

    Product announcements

    4
    ProductTypeDetails
    Career and Succession Planninglaunch
    Asset Managementlaunch
    Project Arclaunch
    IWant (AI solution)update

    Capital programs

    1
    Data centers for AI modelscompleted$100M+
    Spent to date: $100M+
    Start: FY25

    Benefit: Host own AI models, improve system performance, greater processing power, $100M R&D savings, $30M+ IWant response fees savings

    Investment made last year to prepare data centers to host Paycom's own AI models. This investment is expected to lead to significant savings in R&D and third-party IWant response fees in FY26, and also improved system performance.

    What to watch in Q3 FY26

    4

    New product contribution to revenue

    Future quarters
    CurrentMinimal contribution in Q2 FY26
    TargetIncreased contribution

    Why it matters

    New products like Asset Management and Career and Succession Planning expand TAM and are expected to drive future growth.

    I would say their contribution to this quarter wouldn't have been meaningful but they would -- one of them would have contributed a little bit. But we do look for both of those to contribute more as we move into the future.

    Q&A highlights

    6

    Inquired about the significant revenue beat and whether there were any one-off factors or new product contributions driving the strength.

    Chad Richison stated the strength was broad-based with no one-off factors, coming from the same buckets as always. He noted some products from the previous year contributed, but new Q2 products had minimal impact, though expected to contribute more in the future.

    “No, it was broad-based, nothing new, all from the same buckets that we've always had in the past.”

    asked by Raimo Lenschow · answered by Chad Richison

    2 min read6 chapters

    Detailed Narrative

    01

    Product Innovation and Automation

    Paycom continues to expand its automation capabilities with AI and automated decisioning, delivering increased value to clients. Recent product releases include Career and Succession Planning, which equips leaders to identify and develop talent, and Asset Management, launched in July, which manages physical and digital assets. Asset Management expands Paycom's capabilities into a new multibillion-dollar Total Addressable Market (TAM) and is the 45th product developed, hosted, distributed, and serviced by the company.

    02

    Project Arc and System Performance

    The company released Project Arc, its largest system-wide release, fundamentally changing the client and employee experience. This update enhances customization, performance, scalability, and functionality, with one client reporting a 4x increase in system performance. Paycom's award-winning AI solution, IWant, continues to accelerate speed to value by providing system intelligence that automates events and tasks, making the system easier for new users.

    03

    Sales Productivity and Headcount Expansion

    Paycom's sales organization is experiencing improved productivity, with new representatives ramping up faster than in previous classes. The company expanded its sales teams from 8 to 10 members, adding over 100 new sales reps. This additional headcount is expected to be accretive to future book sales as their pipelines mature, contributing to continued growth throughout the year and into next year.

    04

    Capital Allocation Strategy

    The company executed aggressive share repurchases, buying back 2.6 million shares for $346 million in Q2 FY26 and a total of 11 million shares for $1.4 billion in the first half of the year, reducing shares outstanding by 20%. This strategy reflects management's view of a valuation disconnect and commitment to returning value to shareholders. The Board also approved a quarterly dividend of $0.375 per share, payable in early September.

    05

    Efficiency and Margin Expansion

    Efforts over the past several quarters, including process automation and leveraging internal technology, are driving increased productivity and sustainable margin expansion. Investments made in FY25 to prepare data centers for hosting AI models are now yielding significant savings, including approximately $100 million in R&D and over $30 million in IWant response fees for FY26, contributing to a record adjusted EBITDA margin of 46% at the midpoint of the full-year guidance.

    06

    Client Employment Stability

    Client employment growth has remained stable, consistent with historical trends, excluding the significant decline during the COVID-19 pandemic and subsequent recovery. This stability is factored into the company's guidance, indicating no significant changes in client workforce sizes are anticipated to impact revenue. Paycom's focus remains on client ROI achievement through automation, rather than solely on headcount growth.

    AI-generated summary of the company’s earnings call. Not investment advice.