Online payroll and human resource software provider Paycom (NYSE: PAYC) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 6.1% year on year to $530.5 million. The company expects the full year’s revenue to be around $2.03 billion, close to analysts’ estimates. Its non-GAAP profit of $2.80 per share was 9.4% above analysts’ consensus estimates.
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Paycom (PAYC) Q1 CY2025 Highlights:
- Revenue: $530.5 million vs analyst estimates of $525.6 million (6.1% year-on-year growth, 0.9% beat)
- Adjusted EPS: $2.80 vs analyst estimates of $2.56 (9.4% beat)
- Adjusted EBITDA: $253.2 million vs analyst estimates of $236.9 million (47.7% margin, 6.9% beat)
- The company slightly lifted its revenue guidance for the full year to $2.03 billion at the midpoint from $2.03 billion
- EBITDA guidance for the full year is $850.5 million at the midpoint, above analyst estimates of $830 million
- Operating Margin: 34.9%, down from 57.2% in the same quarter last year
- Free Cash Flow Margin: 0%, down from 22.1% in the previous quarter
- Market Capitalization: $12.89 billion
Company Overview
Founded in 1998 as one of the first online payroll companies, Paycom (NYSE: PAYC) provides software for small and medium-sized businesses (SMBs) to manage their payroll and HR needs in one place.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last three years, Paycom grew its sales at a 19% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell slightly short of our standards for the software sector, which enjoys a number of secular tailwinds. Luckily, there are other things to like about Paycom.
This quarter, Paycom reported year-on-year revenue growth of 6.1%, and its $530.5 million of revenue exceeded Wall Street’s estimates by 0.9%.
Looking ahead, sell-side analysts expect revenue to grow 8.6% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and implies its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.
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Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
Paycom is extremely efficient at acquiring new customers, and its CAC payback period checked in at 9.7 months this quarter. The company’s rapid recovery of its customer acquisition costs means it can attempt to spur growth by increasing its sales and marketing investments. 
Key Takeaways from Paycom’s Q1 Results
We enjoyed seeing Paycom beat analysts’ EBITDA expectations this quarter. We were also glad its full-year EBITDA guidance exceeded Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 1.1% to $231 immediately following the results.
Indeed, Paycom had a rock-solid quarterly earnings result, but is this stock a good investment here? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
