PAYCMEDIUM SIGNALOPPORTUNITY10-K

PAYC demonstrated strong operational momentum with meaningful revenue growth and substantially improved operating cash flow generation while investing heavily in AI capabilities and capital expansion.

The company's revenue retention rate improved to 91% from 90%, indicating stronger client stickiness, while management highlighted new AI-powered features like the "IWant" engine and enhanced Beti technology for employee self-service payroll. The substantial increase in capital expenditures suggests aggressive investment in infrastructure and technology capabilities to support growth, though this should be monitored for return on investment.

Comparing 2026-02-19 vs 2025-02-20View on EDGAR →
FINANCIAL ANALYSIS

PAYC delivered strong financial performance with revenue growing over 30% while maintaining disciplined expense management, as SG&A expenses grew at a more moderate pace. Operating cash flow expanded meaningfully to $679M, demonstrating improved operational efficiency and cash generation capability. The balance sheet grew proportionally across assets and liabilities, with the 40% increase in capital expenditures signaling significant investment in growth infrastructure, though this heavy investment phase warrants monitoring for sustainable returns.

FINANCIAL STATEMENT CHANGES
Capital Expenditure
Cash Flow
+40.4%
$192.9M→$270.9M

Capital expenditure jumped 40.4% — major investment cycle underway; assess returns on deployment.

Current Liabilities
Balance Sheet
+37.4%
$3.9B→$5.4B

Current liabilities surged 37.4% — significant near-term obligations; verify ability to meet short-term debt.

Total Liabilities
Balance Sheet
+37%
$4.3B→$5.9B

Liabilities grew 37% — significant increase in debt or obligations, assess impact on financial flexibility.

Current Assets
Balance Sheet
+35.6%
$4.3B→$5.8B

Current assets grew 35.6% — improving short-term liquidity or inventory/receivables build.

Revenue
P&L
+31.6%
$329.1M→$433.0M

Strong top-line growth of 31.6% — accelerating demand or successful expansion into new markets.

Total Assets
Balance Sheet
+29.7%
$5.9B→$7.6B

Asset base grew 29.7% — expansion through organic growth, acquisitions, or capital deployment.

Operating Cash Flow
Cash Flow
+27.2%
$533.9M→$678.9M

Operating cash flow grew 27.2% — strong conversion of earnings to cash, healthy business fundamentals.

SG&A Expense
P&L
+24.6%
$914.3M→$1.1B

SG&A increased modestly — likely reflects growth-related hiring or sales expansion investment.

Inventory
Balance Sheet
+21.4%
$1.4M→$1.7M

Inventory built 21.4% — monitor whether demand supports this build or if write-downs may follow.

R&D Expense
P&L
+16.8%
$242.6M→$283.4M

R&D investment increased 16.8% — signals commitment to future product development, though near-term margin impact.

LANGUAGE CHANGES
NEW — 2026-02-19
PRIOR — 2025-02-20
ADDED
As of June 30, 2025 , the aggregate market value of voting stock held by non-affiliates of the registrant was approximately $ 11.9 billion (based on the closing price for shares of the registrant s common stock as reported by the New York Stock Exchange on that date).
We believe that as a result of our focus on client experience, we enjoy high client satisfaction as evidenced by an annual revenue retention rate of 91% and 90% for the years ended December 31, 2025 and 2024, respectively.
We believe our revenue retention rate understates our client loyalty because this rate is negatively impacted when former clients are acquired or otherwise cease operations.
Our industry-first AI engine, IWant , provides instant and accurate access to employee data without requiring the user to navigate or learn our software.
Employees can even do their own payroll with our first-of-its-kind Beti technology.
This relationship is directly correlated with our single-database that is key to increasing usage and providing an employee-first experience.
For example, IWant provides employees access to their HR data easily through voice-to-text functionality or typing a question, and our AI engine immediately provides the answer or directs users to the appropriate location to interact with their information.
Our focus on, and investment in, technology, data security, and resiliency has been recognized with ISO/IEC 22301:2019, ISO/IEC 27001:2022, ISO/IEC 27701:2019, and ISO/IEC 42001:2023 certified security and business continuity standards.
Pricing is determined based on employee headcount and the number of applications utilized, enabling our clients to align HCM spending with their evolving HCM needs.
Each sales office is typically staffed with one outside sales team, consisting of a sales manager and six to 10 other sales professionals.
REMOVED
As of June 28, 2024 , the aggregate market value of voting stock held by non-affiliates of the registrant was approximately $ 7.2 billion (based on the closing price for shares of the registrant s common stock as reported by the New York Stock Exchange on that date).
We believe that as a result of our focus on client experience, we enjoy high client satisfaction as evidenced by an annual revenue retention rate of 90% for the years ended December 31, 2024 and 2023.
We believe our revenue retention rate understates our client loyalty because this rate is decreased by former clients that were acquired or otherwise ceased operations.
Employees can even do their own payroll with our industry-first Beti technology.
This relationship is directly correlated with our single-database that is key to increasing usage.
Our focus on, and investment in, technology, data security, and resiliency has been recognized with ISO/IEC 27001:2013, ISO/IEC 27701:2019, and ISO/IEC 22301:2019 certified security and business continuity standards.
Pricing is determined based on employee headcount and the number of applications utilized, enabling our clients to align HCM spending with their evolving HCM 6 needs as compared to traditional HCM products that require clients to migrate to new software as they grow but retain fixed costs even if the client s employee headcount shrinks.
Each sales office is typically staffed with one outside sales team, consisting of a sales manager and approximately seven other sales professionals.
We intend to continue extending the functionality and range of our solution in the future.
Employees already manage all other components of their paychecks, including timecards, expenses, PTO requests and benefits; now they have the convenience within Paycom to process their own payroll, too.
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