Paycom Software, Inc Q4 2025 Earnings Call Transcript

Paycom Software, Inc (NYSE: PAYC) Q4 2025 Earnings Call dated Feb. 11, 2026

Presentation

Operator

Good afternoon, my name is Cameron and I will be your conference operator today. At this time I would like to welcome everyone to PACOM’s 4th quarter and year end 2025 Financial Results Conference call. All lines have been placed on mute. Prevent any background noise. After the Speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press STAR followed by the number one on your telephone keypad. If you would like to withdraw your question, press the STAR key. Thank you. I will now turn the call over to James Sanford, Head of Investor Relations may begin.

James Samford — Head of Investor Relations

Thank you and welcome to PACOM’s earnings conference call for the fourth quarter of 2025. Certain statements made on this call that are not historical facts, including those related to our future plans, objectives and expected performance, are forward looking statements within the meaning of the Private Securities Litigation Reform act of 1995. These forward looking statements represent our outlook only as of the date of this conference call. While we believe any forward looking statements made on this call are reasonable, actual results may differ materially because the statements are based on our current expectations and subject to risks and uncertainties.

These risks and uncertainties are discussed in our filings with the SEC, including our most recent annual report on Form 10K. You should refer to and consider these factors when relying on such forward looking information. Any forward looking statement made speaks only as of the date on which it is made and we do not undertake and expressly disclaim any obligation to update or alter our forward looking statements whether as a result of new information, future events or otherwise, except as required by applicable law. Also, during today’s call we will refer to certain non GAAP financial measures including adjusted ebitda, non GAAP net Income and certain adjusted expenses.

We use these non GAAP financial measures to review and assess our performance and for planning purposes, a reconciliation schedule showing GAAP vs non GAAP results is included in the press release that we issued after the close of the market today and is available on our website@investors.pacom.com I will now turn the call over to Chad Richardson, PACOM’s CEO and President. Chad.

Chad Richison — President, Chief Executive Officer and Director

Thanks James and thank you to everyone joining our call today. I’ll comment on our 2025 achievements and our areas of focus for 2026. I’ll then turn it over to Bob. For a review of our fourth quarter. And full year results along with our full year guidance. We will then take your questions. Let’s get started. We executed well against our 2025 plan exceeding our strategic and financial goals. By focusing on Full Solution automation, client ROI achievement and providing World Class service, we delivered strong results including double digit recurring revenue growth, near record adjusted EBITDA margins. We advanced our Full Solution automation strategy with the launch of many automated decisioning tools that complement our command driven AI product I Want and other award winning automation solutions. Betty and Gone Our focus on client ROI achievement and World Class service strengthened revenue retention in 2025 which increased to 91%.

This is a testament to the success that our clients are achieving through Full Solution automation as well as the World Class service we are providing across our client base. In addition, we experienced a record number of clients returning to the Paycom platform in 2025. Automation is the future of our industry and Paycom is leading the way with the most automated solution in the market. While I’m excited about the momentum in client retention, we still only have approximately 5% of the total addressable market and the opportunities ahead of us are robust. ACOM is a truly differentiated company.

Our single database architecture and Employee first technology allow us to offer automated decisioning that is unmatched in our industry. This architecture enables us to deliver greater accuracy and efficiency, eliminating the need for complex integrations while driving strong ROI satisfaction for our clients and their employees. Our automation tools across our Full Solution are clear examples of our commitment to innovation. BETI is one of these and reduces payroll processing labor by up to 90% while cutting the time spent correcting payroll errors by up to 85%. Another is gone which automates PTO fully streamlining time off requests. These are just a few solutions that eliminate duplicative tasks, reduce redundancies and contribute directly to unparalleled ROI for our clients.

Our most advanced AI solution I Want is designed to accelerate the speed to value by allowing anyone to become an expert in the system without any training. Forrester’s recent analysis of a composite organization with more than 500 employees found that organizations using iWant experience an ROI of over 400% driven by productivity gains at every level. Managers save as many as 600 hours per year, executives up to 60 hours, HR teams up to 240 hours, and employees across the organization collectively reclaim 3,600 hours annually. Leaders describe I want as a catalyst for deeper insight, and one CEO remarked, I get immediate value without any training or knowledge of paycom.

I can go in and immediately understand more about my business. Since our founding we have led the way in innovation and automation. With full solution automation and decisioning logic, we are again transforming our industry. Payroll and HCM are critical solutions in the enterprise that require 100% accuracy and PACOM is delivering on that accuracy expectation every day. As we look to 2026 and beyond, we will continue to extend our technological lead and focus on delivering unparalleled value to our clients while continuing to attack the remaining 95% of the addressable market that is available to us. I want to thank our employees who have been diligently focused on leading our clients, executing our goals and delivering strong results in 2025.

With that, let me turn it over to Bob.

Robert D. Foster — Chief Financial Officer

Bob thank you Chad. We delivered strong fourth quarter results with total revenue of $544 million, up 10% over the comparable prior year period and recurring and other revenue of $517 million, up 11% year over year. Looking at 2025 full year results, we are very pleased with the execution throughout the year. Total revenue in 2025 came in at $2.05 billion ahead of our initial outlook with recurring another revenue growth of 10% year over year to $1.94 billion. Compared to our initial expectation of 9% growth, we delivered even stronger fourth quarter and full year profit metrics for that were driven by stronger revenues and operational efficiencies gained from automation and cost discipline initiatives.

Adjusted EBITDA margin remained strong in Q4 at 43.4% or $236 million full year. 2025 adjusted EBITDA grew 14% year over year to $882 million, representing a 180 basis point point year over year margin expansion to 43%. Turning to GAAP results, GAAP net income in the fourth quarter was $114 million or $2.07 per diluted share based on 55 million shares full year. 2025 GAAP net income was $453 million or $8.08 per diluted share based on 56 million shares. Non GAAP net income for the fourth quarter increased 4% year over year to $135 million or $2.45 per diluted share full year.

2025 non GAAP net income was $519 million or $9.24 per diluted share based on 56 million Shares. Margin strength in the quarter and full year was broad based, driven by our continued focus on automation. We continue to invest in sales and marketing to drive future growth and we maintain our commitment to world class service. With that said, we are also finding significant opportunities to streamline processes across our organization while still expanding our sales capacity and maintaining a human approach to world class service Operating cash flow increased 27% year over year in 2025 to $679 million, representing 33% margin, up 470 basis points over the prior year.

Total CapEx of $275 million in 2025 represented approximately 13% of total revenues compared to 197 million, or approximately 10% of total revenues in 2024. We invested approximately $100 million to expand our data center footprint and capabilities to support our automation and AI initiatives. Free cash flow, defined as operating cash flow less CapEx was $404 million in 2025, up 20% year over year. Free cash flow margin expanded 180 basis points year over year to approximately 20% in 2025. We repurchased over 1.7 million shares of common stock or approximately 3% of our shares outstanding for a total of $370 million and we paid approximately $85 million in cash dividends.

Since the beginning of 2023. We repurchased nearly 4.2 million shares, or approximately 7% of shares outstanding for approximately $815 million. We had approximately $1.1 billion remaining under our buyback authorization as of December 31, 2025, and we continue to be opportunistic buyers of our stock. In addition, the Board has approved our next quarterly dividend of 37.5 cents per share payable in mid March. Turning to the balance sheet Even after returning capital to stockholders through buybacks and dividends paid in 2025, we ended the year with a very strong balance sheet including cash and cash equivalents of $370 million and zero debt.

The average daily balance on funds held for clients was approximately $2.8 billion in the fourth quarter of 2025, up 11% over the prior year period. We grew our client count to approximately 39,200 clients as of the end of 2025, representing growth of 4% compared to 2024 on a parent company grouping basis. We ended the year with approximately 20,300 clients, up 5%. Revenue growth was broad based as we added clients across the various target client sizes, but we continue to have success upmarket with revenue from clients over 1000 employees growing faster than total revenue. Total employee records stored in our system in 2025 was 7.4 million, up 5% year over year.

Paycom’s annual revenue retention rate in 2025 increased to 91% compared to 90% in 2024, and we believe our significant efforts and investments in automation and world class service are contributing to the value and overall satisfaction that our clients are experiencing now. Let me turn to guidance for 2026. We have a highly predictable, profitable and resilient recurring revenue model similar to last year. We are providing our initial full year outlook which represents our best estimate for certain key metrics based on what we can see today. For revenues and budgeted expenses. For fiscal 2026, we expect total revenue to be between $2.175 billion and $2.195 billion or between 6 and 7% year over year growth.

We expect full year recurring and other revenue to be up between 7 and 8% year over year. We expect full year adjusted EBITDA in the range of 950 to $970 million, representing an adjusted EBITDA margin of approximately 44% at the midpoint of the range. Included in total revenue outlook is interest on funds held for clients of approximately $103 million and is based on the consensus assumption of two rate cuts in 2026. 2025 was a year of solid execution with very strong fundamentals. We will continue to focus on delivering the best product and service to our clients and enhance long term stockholder value through attractive top line growth, operational discipline and opportunistic buybacks.

We have less than 5% share of a large and growing total addressable market and we believe our differentiated full solution automation strategy can drive long term sustainable growth for years to come. With that, let’s open the line for questions. Operator.

Question & Answers

Operator

Thank you. At this time I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. In the interest of time we ask that you please limit your questions to one question and one follow up. We will pause for just a moment to compile the Q and A roster. The first question comes from the line of Ramo Lynchau with Barclays May proceed.

Raimo Lenscho

Thank you. Chad. Like there’s a lot of positive things on the product side coming out of you with kind of I want etc. Customer attention got better. But your guidance growth looks a little bit like a slowdown for many people. Can you just kind of bring these two kind of tied together? On the one hand a lot of positivity, positive news. On the other hand, you know, it looks. Is that kind of macro or how should we think about that?

Chad Richison — President, Chief Executive Officer and Director

Thank you. Yeah, well first I’d say we’ve continued to automate our product rapidly. You know, as we now the product begins to decision itself in many different areas and you don’t have to log into it and use it as much as, you know, it’ll actually decision things.

You know, I feel good but not satisfied with our growth for last year. You know, we have opportunities in sales, and that’s an area of focus that we have right now. As we talked about Rymo at your conference in December. You know, the good things that our clients are happy and retention’s improving and we have the most automated product in the industry. So, you know, I do think that when you look at it, I mean, bookings have been up every year. They were up 2025 continued that trend. And our expectations, no different from 2026. You know, we’ll have some inflection opportunities throughout the year.

And as those materialize, you know, those will be reflected in our numbers. Okay.

Robert D. Foster — Chief Financial Officer

And then the follow up that I.

Chad Richison — President, Chief Executive Officer and Director

Had was like, with the change in sales leadership, it’s the beginning of a year. Should we think about, like significant changes of go to market, et cetera, or is this just fine tuning? I know you have a very good sales organization in place anyway, but like, how do we think about changes with the new leadership? Thank you. You know, a lot of it, you know, a lot of this is the replaiting of the value. You know, consumers and clients oftentimes have a more difficult time of digesting full solution automation. And so a lot of this is how we plate them.

And so we have been bringing in our salespeople over the last three months to make sure that they’re all trained on the new product enhancements that we’ve made just since November, which automates a lot of our system. As we’ve been talking about for the last couple of years, full solution automation has been a goal of ours and we continue to move our product, you know, toward that goal.

Operator

Your next question comes from the line of Samadhi Mano with Jefferies. You may proceed.

Samad Samana

Hi, good evening and thanks for taking my question. Maybe sticking on the guidance theme, just as I think about the recurring revenue outlook and contextualize that last year the initial guide was for nine and you guys ended up doing about a point and change better than that. So as I think about this year’s 7 to 8% outlook, is there any change to the guidance methodology? Should we think about it as a similar construct and then kind of similarly thinking about maybe what are the upside nodes? Maybe as the year progresses? And then I have one follow up.

Chad Richison — President, Chief Executive Officer and Director

Yeah, so last year we guided at 7 to 8% total revenue growth. And you know, we just reported that we finished at 9. This year we’re guiding to 6 to 7% total revenue growth. So about a percent difference this year versus last year. Again last year we focused very much on sales, but also on the full value achievement of our client world class service. We were able to see retention gains. Through that clients are happy. And you know, as we focus on the new way to utilize our software, you know, we’ve been focused on, you know, our go to market strategies here.

Robert D. Foster — Chief Financial Officer

And Samad, I’ll add that there has been no change. We’re guiding to what we can see right now and we’ll continue to update throughout the year as we see that change. Understood.

Samad Samana

And then maybe just understanding just kind of the growth algorithm. If I think about the client count growth in 25 being around 5% and use that kind of as a unit growth number. And if I think about the 26 growth kind of that again, 7 to 8% of recurring revenue, should we think about that kind of similar unit growth and then any ARPU expansion opportunities just help us understand what the different contributors are to that 7 to 8% growth and maybe where you see the room for either most conservatism or outperformance.

Chad Richison — President, Chief Executive Officer and Director

New logo ads is going to be our biggest opportunity for growth. We have other opportunities as well now with adjacencies that are available to us. But new logo ads, that’s what we’re focused on. Our sales primarily come from our outside sales organization. They only focus on new logo ads. And again, after a client’s been with us for 30 days, that’s when we move toward the CRR.

Operator

Your next question comes from the line of Marc Marcone with Baird. You may proceed.

Mas Marcan

Good afternoon and thanks for taking my questions. So you’re coming off of a quarter where sequentially your year over year growth rate ended up accelerating, hit 11.3% on the recurring side against a tough comp which was up 14 and a half percent the year before. And the guide basically does imply a bit of a slowdown. I’m wondering what are you seeing, you know, in, in the field and you did make a change with regards to sales leadership. So I’m wondering what are you seeing in the field? Obviously all of the stocks with, across all of SAS have been hit.

Are, are clients expressing any sort of hesitation or longer decision cycles? Anything that you’re seeing that’s different or, or that you know, would suggest that things are going to slow down. Perhaps it’s employment and just fewer seats. I don’t know. Just wondering if you can give us any sense there.

Chad Richison — President, Chief Executive Officer and Director

No, we’re not. We’re not seeing any change in the desire to buy our product. You know again we did for the last three months we have been going through bringing everybody into training and you know, going through, you know, what our product does now. We released a lot of automation just since November and a lot of the product decisions itself. I mean you do not have to log in, you do not have to move data and so or make decisions on things. And so we’ve been talking about that for a long time. It was important for us to make sure our salespeople are going to market with that message.

But no, we have not seen any reluctance from people and prospects from to make changes out there in the marketplace.

Mas Marcan

That’s great. And can you talk a little bit about the usage with regards to I want at this point? I mean it looks really slick. So I’m just wondering what the usage patterns are there and what the customer feedback’s been.

Chad Richison — President, Chief Executive Officer and Director

Yeah, so I definitely think, you know, I want definitely contributed to help with our retention last year. As I mentioned in prepared remarks, we’re having a record number of clients return to paycom as they left for you know, maybe something that they felt was a lower price but ended up being 10 times our cost. And so specific to I want usage is up 80% in January alone just based and that’s you know from fourth quarter. And so I want continues to generate greater and greater usage and I think especially at the employee level it’s really becoming the predominant way to access data as well as for the C suite level, I think that you still have user buyers and administrators that are used to certain parts of the system and you know, although they’re gaining value through I want I also think that you have certain creatures of habits that are.

Also continuing to get value by utilizing our system. The other way. Which is all.

Operator

Your next question of Steve and Stevie. You may.

Steven Enders

Thanks for here. I guess one of just kind of the fusion I’m wondering the recon over the past any impact, you know, in terms of incremental appointments kind of the leading look at when you pipeline. Yeah, I would say I shifted on quality.

Chad Richison — President, Chief Executive Officer and Director

Something that’s been very important to us. I mean, you know, it’s hard to say that when you’re in a sales environment that, you know, quality over quantity. But it is very, very important that we’re out there doing things the right way because you know, like I said, we lost some clients that we just shouldn’t have lost because the value was there for them. And then as we brought those clients back on and as we look at going to market to sell new clients, we want to make sure that all the clients get the full solution automation available to them up front and they purchase for the right reasons.

And so as a sales organization, we’ve got to get gotten together over the last three months, gone through all of our training to come out the other side of this. And so we are excited about that. We’re also excited about what we see in the pipeline. Our opportunity hasn’t changed. We only have 5% of the total addressable market available to us. We do have the most automated product and we are beginning to see, you know, people crave that in a way that they’re willing to digest automation.

Steven Enders

Okay, great. And then I guess just in terms of the guide, just wondering what you’re assuming from an underlying kind of employee level perspective and maybe how does it compare versus what you saw in Q4?

Chad Richison — President, Chief Executive Officer and Director

Yeah, stabilization is what our expectation is and that’s what we saw in Q4 too. Without some dramatic change in unemployment, you know, really what’s going to impact us would be our execution of our strategy.

Operator

Your next question comes from the line of Jason Salino with Keybanc Capital Markets. You may proceed.

Jason Celino

Hi, thanks for taking my question. You know, this was the biggest new customer ads year since I think 2022. You know, how much of this is maybe due to those new sales offices that have been ramping or those new returning customers that you talked about? And then what are some new incremental initiatives that are targeted toward new customers for 2026, if you have anything to share?

Chad Richison — President, Chief Executive Officer and Director

Yeah, I mean, the new offices definitely spun up quicker than any offices in the past. You know, to say that they were the largest contributor to the gain I think would be false there. But you know, we’ve done very well with our product throughout the year and we continue to have strong go to market. I mean, in some areas, you know, we have offices that do well over $9 million in sales. In some areas we have offices that do much, much, much lower than that. In some areas we have a sales rep that will sell $4 million as they did last year.

And so all these are opportunities for this. And so we’ve had both pockets of success and pockets of opportunity. And you know, as we’ve looked at our organization as a whole, you know, we’re very confident on the go forward of capturing all that opportunity and continue to maximize those pockets of success that we see across the board. Okay.

Jason Celino

And then retention 91%. You know, nice to see the improvement. I think with I want, you know, part of that product was to improve retention. So it’s nice to see, but maybe it was unrealistic for me to have wanted to see more improvement, you know, no pun intended. And it sounds like you’re doing some training, but you might have some more room to chop on getting kind of retention back to whereas in years past. But maybe talk about the strategy there and how to think about improvement in the years to come. Thanks.

Chad Richison — President, Chief Executive Officer and Director

Sure. Well, providing world class service to clients and making sure that they achieve the full value that’s available to us to them, excuse me, has been our focus. And so I did expect retention would go up last year because of how hard we focused and how well the clients now are using and getting value from the product. Do I think retention still has room to raise? Absolutely. And not only do I think it has an opportunity, I mean, I think there’s an expectation there across the board with all the work that we’ve done. And we have that momentum going in the right direction right now.

So that’s definitely a focus.

Operator

Your next question comes from the line of Patrick o’ Neill with Wolf Research. You may proceed.

Patrick Neill

Hey guys, thanks for taking my question. Can you just elaborate a little bit. On how AI is improving internal productivity and efficiencies and maybe which areas you. Are specifically seeing improvement? And then how are you thinking about. Sort of balancing the benefits between bottom line expansion and reinvesting in the business for growth? Thanks.

Chad Richison — President, Chief Executive Officer and Director

I mean, you know, AI is helping us across the board. I mean, well, we can talk about specific products, we can talk about speed of processing and all the different types of things that we’ve been able to do on our back end to really speed things up. You know, I think there’s a little misjudgment about the AI thesis materializing as a threat, a weapon that will be used against us. I mean, AI is our friend at Paycom, you know, and I’ve worked very hard to ensure that the misunderstanding of AI’s impact on us isn’t on our end.

And I just believe as you look into the future, you know, we have opportunities now that we didn’t have in the past. Right. Like the speed of development’s increased, the pace of the user buyer being able to digest. It might lag a little bit. But you know, we can develop a lot more today than what we’ve been able to in the past. You know, we’re in this age of software development and in some instances, you know, replacement of specific software. PACOM can get into every adjacent industry. Now within weeks or months. And I’ll remind everybody that you know, I was the first Bob coder back in 1998.

So there are several easy to displace industries that don’t just sit ancillary to our industry, but they’re dependent on upon our industry of where the data starts. And so now that we can develop anything very quickly and use all these technologies to replace other industries in a matter of weeks or months, you know, we’re excited about how that look what that looks like for our future as well. Super helpful, thank you.

Operator

Your next question comes from the line of Daniel Jester with bmo. You may proceed.

Daniel Jester

Yeah, great. Thanks for taking my question. I think maybe I’ll just piggyback a little bit off the answer that you just gave there, Chad. I think you know, in your prepared remarks you talked about building some tools maybe around i1 and so if there’s any examples you could share there, that’d be great. And I know that part of the thesis, though not the biggest one, was about the ability to cross sell as customers use. I want and want access to all the data and functionality. So are you seeing any evidence of that? Thanks.

Chad Richison — President, Chief Executive Officer and Director

Yes, the way I would look at I want is I want allow someone to access the value that’s there. They do not have to be an expert in the system, they do not have to be trained in the system. And through the other automation that we’ve built throughout our system with i1 it’s just much, much easier to access that. And so you know, we continue to build out the I want system, we continue to add more and more functionality to it. It continues to get stronger and stronger and we’re putting out more products, we’re putting out more products now than we ever have.

And we don’t even, you know, we don’t necessarily announce it to the market but our clients are experiencing it every day as we call them and turn them on, on these products and this automation. And so that’s going to be our focus from this point forward. The goal of the PAYCOM software is truly full solution automation to where you buy it, you configure it and it does everything else for you. And so we’ve been focused on that. It’s something I’ve been talking about with the AI tools that we have right now and you know, additional that we’ve become aware of and begun to start using also, you know, there’s faster opportunities for us there.

I’m going to say that, you know, there’s still things you have to do on the back end with these types of things. But you know, we’re excited about what’s happening within our industry and definitely within our product and how this is all materializing for strong ROI for clients that utilize paycom.

Operator

That’s great. Thanks, Chad. And then maybe Bob to you.

Robert D. Foster — Chief Financial Officer

I know that there was a lot. Of one time capital spending this past year. Any color you can share with us about how we should expect capex and free cash flow to look in 2026. Thank you. Sure. So we did have that one time expenditure like you mentioned. The way we look at that though is we do run this business with the long term outlook. If we do see an opportunity again like that to invest and help our clients achieve even more roi, we would take that. And the positive thing there is we, we do have the EBITDA margins and the cash to do that.

Operator

Your next question comes from the line of Jared Levine with TD Cohen. You may proceed.

Jared Livina

Thank you. Can you give us a sense in terms of your January retention performance just given the significance of that churn for the full year? And then as we kind of look at the 26 guidance here, what are you assuming in terms of retention versus 25? Are you assuming any improvement or relatively stable?

Chad Richison — President, Chief Executive Officer and Director

Yeah. So we disclose retention once a year. We did just disclose it for 2025. I’ll let my prior comments kind of speak for themselves as far as how important usage is and value attained is for a client in order to increase retention and how well I thought we did last year with this initiative and how more and more usage should be accretive for us into the future. Got it.

Jared Livina

And then can you give us your latest thoughts in terms of new sales office openings? Here is the kind of change in sales leadership going to impact potentially the pace of additional sales office this year over the near term?

Chad Richison — President, Chief Executive Officer and Director

Yeah. So as I disclosed in the Barclays conference, we have expanded our sales teams to 10 from eight. So that puts an extra hundred salespeople in the field. All salespeople now are experiencing a different level of training through our program that’s happening right now. And you know, we’re hiring as many salespeople as we can right now. We would expect that those would give us an opportunity in the future to open up more offices. It is a goal of ours and it is also a goal of ours to capture the opportunity available to us in the offices that we have open.

Have opened.

Operator

Your next question comes from the line of Kevin McVey with UBS. You may proceed.

Kevin McVeigh

Great. Thanks so much. Your comments on Gen AI were pretty helpful. I wonder, could you give us a sense of have you seen client behavior patterns in terms of consumption across any modules change as a result of the gen AI adoption? I mean, obviously one of the questions we get a lot is the perpetual displacement risk, which, you know, we don’t subscribe to. But is there anything you can help kind of the market understand that helps, you know, alleviate some of that concern? Whether it’s, you know, clients that have these tools that are still using paycom, or, you know, leveraging different parts of your platform that they haven’t in the past just to help dimensionalize and calibrate some of this concern?

Chad Richison — President, Chief Executive Officer and Director

Yeah, I would say there’s some clients that will run toward, you know, the full automation or what you might be calling a Gen AI consumption. But I will tell you, it’s much more important that you meet them, you know, further than halfway there. If you want to get them full, fully utilized and actually getting the value out of it, you’ve got to make it easy for people to digest. And that’s what we’ve spent a lot of time doing. You know, you release something great, you’re like, why aren’t they using it? Well, it’s not good enough for them to understand how to digest it or plug into it.

And so those are the things that we’ve been working on both with our software as well as our go to market to make sure that we’re bridging all of those gaps.

Kevin McVeigh

One quick question on the guidance. What retention numbers embedded in the 26 guidance? And then how much buyback do you have in the 26 estimates as well?

Chad Richison — President, Chief Executive Officer and Director

We haven’t disclosed what type of retention. I mean, obviously we’re happy with, with the retention, and I would be very disappointed if retention reversed. And I think with all the work that we are doing and all the value and happiness that clients are achieving right now, you know, I think we’re in a pretty good position for that. You know, we just finished up January and retention to measurement throughout the year. And so, you know, we’re going to continue to do our work this year to make sure that we finish strong at the end of 2026.

Robert D. Foster — Chief Financial Officer

On the buyback side, those are opportunistic as we’re going through and taking a look at where the stock is and what we think if there’s a displacement. So those are just opportunistic and we don’t put anything into the guide on that.

Operator

Your next question comes from the line of Babin Shaw with Deutsche Bank. You may proceed Great.

Bravin Shan

Thanks for taking my question, Chad or Bob. There’s clearly a lot of positives here with better client growth versus last year along with an improvement in retention. I’m just trying to reconcile that with the recurring revenue guide for next year. That would imply the smallest dollar ads in several years. Is there the change in sales training or an increased efficacy on client service impacting growth next year? Or is it maybe I want slowing down decision making processes. Any insights in terms of what could be impacting growth will be helpful, especially as industry dynamics seem to be somewhat stable.

Chad Richison — President, Chief Executive Officer and Director

Yeah, I mean, you know, you guys kind of know what’s going on in fourth quarter there. You can kind of see the sequential change and you know, kind of how revenue comes in week by week, day by day. You can see the sequential change as it goes into this year and look at kind of how that’s sequential change. Also normalizing for the things. I just mentioned what that looked like for last year. And I think when you come to that, you’ll kind of see that our guide here is not incredibly dissimilar to last year’s guide.

It may be different than where we ended, but from where we started last year, you know, we took the same approach and we’re comfortable with the guide as we go into this year. As I mentioned, we do have inflection operations opportunities throughout the year and as those materialize, we will make sure we report those.

Bravin Shan

Great. Thanks for taking my question.

Operator

Your next question comes from the line of Jacob Smith with Guggenheim. You may proceed.

Jacob Cody Smith

Hey, thanks for taking my question. We talked about seeing momentum upmarket and winning larger deals, which is really encouraging to see. First, is this an area where you’re expanding sales capacity for 2026 also, as you move up market to organizations that often have greater integration needs, their roadmap to expand API access while also balancing your core single database advantages. And do you view Monetization of APIs as a growth lever in the future? Thanks.

Chad Richison — President, Chief Executive Officer and Director

I think helping upmarket digest the importance of full solution automation is critical for the them and it’s critical for us. I mean, most of your upmarkets, they’re only used to ordering food from the buffet. And you go to the table and you’re like, hey, I’d like to take your order. And they’re like, well, where’s the buffet? Hand me my plate. And so, you know, there’s a whole different world here in how you plate, you know, these items to the up market and how they can easily plug into it. We’ve made it easier for ourselves to do that.

And through full solution automation. And what we’re doing right now, you know, evaluating paycom is very simple. It’s very simple to evaluate it. I would say in the past, you know, with certain strategies that we had, it may have been simple to evaluate, but we still kind of kept a little bit of it in the buffet line kind of as we’ve gone through this and we’re dealing with full solution automation and decisioning logic. The system is decisioning everything. So before, just to give you an example, and I’ve talked about time off, you could talk about demotions, promotions, hiring.

I mean I can go through our entire system, but just with time off, you have an employee that requests time off tonight at 7 o’ clock at night. They’re trying to request next week off. A manager the next day is dealing with overlapping decisions who’s going to be at the office to actually work. Because for some of us, paid time off is about who gets off work. But for the shift manager, time off is about who showed up to work. You know, and we’ve all been there where you didn’t have enough staff, so now you’re losing revenue.

And these managers have to go through all types of decisions and they have decision fatigue. Does the person even have enough time to request stock? Do I have coverage? Do I have any overlapping shift? Who asks first? Are any of these people on a write up? Is anybody of this that I let off going to hit overtime? If I have to pull somebody else? You got to connect it to their schedule, you got to connect it to their shift, you got to connect it to time and attendance. The point is, is it’s impossible to make good decisions on this on a regular basis unless you’ve implemented the Paycom system.

And the Paycom system will decision all of that. So the employee who by the way already expects their time off as soon as they receive requested, the employee gets what they need. The manager does not have to go through all the decisioning of these policies. The policy administrator, who’s the person that set all this stuff up in the beginning, gets consistent behavior as well across the board. And so it is a way, and that’s just one item. I mean I can take you through all many different items where the system now will decision everything for a client and everything for an employee.

Employee. The problem that oftentimes comes up is they don’t oftentimes clients and people, they don’t have full documentations of the decisions that would be made in those scenarios. And so those are the processes that before we were going through manually with them to discuss and now we can go through even those in a more automated process to move them in toward full decision automation through decisioning logic which gets them full solution automation. And so that’s what we’ve been working on. We have the system, we’re making sure that all of our current clients understand that and what’s available to them so they don’t just get sold on something and then go through another conversion process to come back with us and then also our go to market.

It’s very important that we’re doing it correct now. We’ve made it easier. We’ve made it easier for a prospect to decide on PACOM’s value and use it. It’s very easy to evaluate PACOM these days. It’s only four simple steps and we look forward to walking through that with every prospect out there.

Jacob Cody Smith

Great, thanks.

Operator

Your next question comes from the line of Joshua Riley with Needham. You may receive.

Josnus Rally

Yeah, thanks for taking my questions. Most of my questions have been asked, but any update on how the CRR team performed in 2025 relative to 2024 sales productivity and how much room do you see for improvement in 2026 cross sell activity?

Chad Richison — President, Chief Executive Officer and Director

Yeah, I mean I think CRRs have done a good job. They did exactly what we expected them to do last year. They’re doing a good job this year. CRR is a big part of the play when we talk about full solution automation and helping clients understand that value that’s available to them. And absolutely, in some cases there’s products the clients don’t currently have which are needed to get to full solution automation. In addition to that, we’re rapidly continuing to put out new products and many of those have revenue opportunities, opportunities associated with it. So you know, CRRs are a part of the play as we move forward through 2026 and beyond.

Josnus Rally

Got it. And then just on the overall competitive landscape, just curious, have you seen any impact on just your overall win rates or price competition from the marketplace? As you know, growth hasn’t really decelerated significantly in the industry, but it’s kind of, I would say, gone sideways. And just curious if that’s leading to any changes in competitive dynamics.

Chad Richison — President, Chief Executive Officer and Director

We’re ambitious with what our expectations are for win rates both this year and going forward. You know, when I look into last year, I would say, you know, they were up to court to consistent with what they’ve kind of been in the past. But you know, we have a new view on what close rates should look like. These Days just because of the major differentiation between our product and what we see out there. And we’ve made it again easier to sell and easier for a client to understand and achieve its full value. So, you know, we are bullish on those opportunities this year.

Operator

Your next question comes from the line of Sitkanima Panigrahi with Mizuho. You may proceed.

Sitkanima Panigrahi

Thanks for taking my question, Chad. Just a follow up to the prior question. ADP also talked about improving their retention rate slightly. How is that? Are you seeing any kind of changes to your business from that?

Chad Richison — President, Chief Executive Officer and Director

No. Okay. And then other question that investors has, is the AI impact to overall employment? How do you see that impacting paycom business? Are you well diversified? Do you expect it to be more in of terms certain kind of industry? Any, any color would be helpful. Well, when I say we’re not seeing it, I’m not going to dismiss potential impacts for us to the future.

I would say that we are not overexposed to any one industry, any one client client size. And again, we only have 5% of the market. And so, you know, you could do some calculations and we’re the most automated product in the industry and the best product for the best value that someone’s going to achieve throughout the industry. And so when you look at that, I think that you could do some adjustments in employment which again we have not seen. But I mean, even if you did, I still think the opportunity is intact for us. So I’ll just leave it at that.

Sitkanima Panigrahi

Great. Thank you. Thank you.

Operator

The last question comes from the line of Alan Burkovsky with btig. You may proceed.

Allan M. Venihovsk

Hey, thanks for squeezing me in here, guys. Strong margins. Can you share what the size and scope of the layoffs you did the past month was as well as how you’re thinking about the company’s headcount trajectory over the next year in the context. Of just realizing more and more AI efficiencies over time? Sure. So we did announce a restructuring last year and ended the year with about 5,800 employees. You know, we don’t. We aren’t going to discuss internal employment trends or strategies associated with that, but that will be the number that you’ll see in the K.

Robert D. Foster — Chief Financial Officer

Thanks, Joseph.

Chad Richison — President, Chief Executive Officer and Director

All right, thank you.

Operator

This concludes the question and answer portion of today’s call. I will now turn the call back over to Mr. Chad Richardson for closing remarks.

Chad Richison — President, Chief Executive Officer and Director

Thanks everyone for joining the call today. I want to congratulate the 2025 Jim Thorpe Award winner, Caleb Downs from Ohio State University. This award recognizes the most outstanding defensive back in college football. It also memorializes one of the greatest all around athletes in history and a fellow Oklahoman, Jim Thorpe. I’d also like to thank our employees for their contribution to PACOM’s success in 2025. We remain focused on world class service, full solution automation and the client ROI achievement which is resonating across our client base. With that operator. You may disconnect. Thank you.

Operator

This concludes today’s conference call. You may now disconnect.