Paycom Stock Gains as Q1 Earnings and Revenues Beat Estimates

Paycom Software, Inc.'s PAYC shares gained 2.1% during Wednesday’s extended trading session after the company reported better-than-expected first-quarter 2025 results. The online payroll and human resource technology provider reported non-GAAP earnings of $2.80 per share, which beat the Zacks Consensus Estimate of $2.60.

Moreover, the bottom line increased 8% year over year, mainly driven by higher revenues, operating efficiency and lower share counts. Paycom has an impressive earnings surprise history. It beat on earnings in each of the trailing four quarters, the average surprise being 7.5%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Paycom reported revenues of $530.5 million, which outpaced the consensus mark of $525.6 million. The top line increased 6.1% year over year, primarily benefiting from increased sales momentum, international expansion and artificial intelligence (AI) integration in its products.

Paycom’s Q1 in Detail

Paycom’s Recurring revenues (representing 94% of the total revenues) improved by 7.3% to $500 million in the first quarter. Our estimate for the company’s Recurring revenues was pegged at $500.7 million.

Paycom’s revenues from the Implementation and Other segment decreased to $30.5 million from $33.9 million in the year-ago quarter and contributed 6% to total sales. Our estimate for the segment’s revenues was pegged at $26 million.

Adjusted gross profits increased 5.8% from the year-ago period to $445.9 million. However, the adjusted gross margin contracted 30 basis points (bps) on a year-over-year basis to 84.6%.

Paycom’s adjusted EBITDA increased 10.3% year over year to $253.2 million. The adjusted EBITDA margin improved from 45.9% to 47.7%.

Paycom’s Balance Sheet & Cash Flow

Paycom exited the first quarter with cash and cash equivalents of $520.8 million compared with $402 million recorded in the previous quarter. The company had no debt as of March 31, 2025.

In the first quarter, PAYC generated an operating cash flow of approximately $182.5 million, paid out $21.1 million in dividends and bought back $5.2 million worth of its common stock.

The company had $1.48 billion remaining under its buyback authorization as of March 31, 2025. Paycom’s board has approved its upcoming quarterly dividend of 37.5 cents per share, payable on June 9, 2025.

Paycom Raises 2025 Guidance

Buoyed by stronger-than-expected first-quarter performance, Paycom raised its guidance for 2025. For 2025, it now forecasts revenues to be in the band of $2.023-$2.038 billion, up from the previous projected range of $2.015-$2.035 billion. The Zacks Consensus Estimate is pegged at $2.03 billion.

The company projects recurring revenues to grow 9% year over year and generate $110 million from interest on funds held for clients in 2025.

Paycom now expects its 2025 adjusted EBITDA to be between $843 million and $858 million, translating to an EBITDA margin of approximately 41% at the mid-point. Earlier, it had forecasted adjusted EBITDA between $820 million and $840 million.

Paycom’s Zacks Rank and Stocks to Consider

Currently, Paycom carries a Zacks Rank #3 (Hold).

Impinj PI, StoneCo STNE and Broadcom AVGO are some top-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. While Impinj and StoneCo each sports a Zacks Rank #1 (Strong Buy) at present, Broadcom carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Impinj’s 2025 earnings has been revised upward by 21 cents to $1.68 per share over the past 30 days, and suggests a year-over-year decrease of 20.4%. Impinj shares have plunged 38.4% over the past year.

The Zacks Consensus Estimate for StoneCo’s 2025 earnings has moved upward by 19 cents to $1.38 per share in the past 30 days, reflecting 2.2% year-over-year growth. StoneCo shares have plunged 20.8% in the trailing 12 months.

The Zacks Consensus Estimate for Broadcom’s fiscal 2025 earnings has been revised upward by 4 cents to $6.60 per share in the past 60 days, suggesting an increase of 35.5% from fiscal 2024’s reported figure. Broadcom shares have rallied 56.8% over the past year.

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This article originally published on Zacks Investment Research (zacks.com).

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