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What changed in Paycom's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Paycom's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+323 added−320 removedSource: 10-K (2026-02-19) vs 10-K (2025-02-20)

Top changes in Paycom's 2025 10-K

323 paragraphs added · 320 removed · 280 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

101 edited+17 added−11 removed85 unchanged
Biggest changeThis application also provides employees with online enrollment and helps educate them by allowing them to view per-pay-period deduction amounts and preview how these deductions would affect their take-home pay, driving better informed enrollment decisions for greater employee satisfaction. Our benefits to carrier functionality updates insurance carriers regarding benefit deduction amounts, address changes, termination of benefits and qualifying events.
Biggest changeEmployers can also update deduction amounts for all employees or groups of employees at once, which automatically updates all insurance carriers for any changes. This tool also provides employees with online enrollment and helps educate them on how these deductions would affect their take-home pay by allowing them to view per-pay-period deduction amounts, driving better-informed decisions for greater employee satisfaction.
The Vault Visa ® Payroll Card gives employees the financial convenience of allowing them to deposit all or a portion of their wages on a secure pay card usable with mobile wallets like Apple Pay ® , Google Pay ® and Samsung Pay ® .
Vault Visa ® Payroll Card. The Vault Visa ® Payroll Card gives employees the financial convenience of allowing them to deposit all or a portion of their wages on a secure pay card usable with mobile wallets like Apple Pay ® , Google Pay™ and Samsung Pay ® .
It enhances usage patterns and the interactions within organizations among leaders and employees, while distributing the approval responsibilities more broadly, freeing HR personnel. This tool allows managers and supervisors to, among other things, view their team’s time-off calendar, edit and approve punch-change requests, manage employees’ schedules and respond to employee inquiries through Ask Here.
It enhances usage patterns and the interactions within organizations among leaders and employees, while distributing approval responsibilities more broadly, freeing HR personnel. This tool allows managers and supervisors to, among other things, view their team’s time-off calendar, edit and approve punch-change requests, manage employees’ schedules and respond to employee inquiries through Ask Here.
Additionally, we provide our employees several opportunities to focus on physical, mental and financial wellness by maintaining a fully equipped on-site gym, 401(k) matching, an employee stock purchase plan, and paid vacation, holiday, family leave and sick leave, with numerous other benefits offered to our employees. 16 Segment Information We operate in a single operating segment and a single reporting segment.
Additionally, we provide our employees several opportunities to focus on physical, mental and financial wellness by maintaining a fully equipped on-site gym, 401(k) matching, an employee stock purchase plan, and paid vacation, holiday, family leave and sick leave, with numerous other benefits offered to our employees. Segment Information We operate in a single operating segment and a single reporting segment.
Our 14 money movement activities outside of the United States are subject to similar licensing and AML and reporting laws and requirements in the countries in which we provide such services. Certifications We voluntarily obtain third-party security examinations relating to our internal controls over financial reporting in accordance with System and Organization Controls Report, I (“SOC 1”).
Our money movement activities outside of the United States are subject to similar licensing and AML and reporting laws and requirements in the countries in which we provide such services. Certifications We voluntarily obtain third-party security examinations relating to our internal controls over financial reporting in accordance with System and Organization Controls Report, I (“SOC 1”).
Our can-do attitude helps us embrace uncertainty with optimism and believe we can achieve what others consider impossible. Workforce Demographics We recognize Paycom plays an important part in the lives of our employees and strive to create an inclusive workplace where employees feel heard, valued and appreciated for who they are.
Our can-do attitude helps us embrace uncertainty with optimism and believe we can achieve what others consider impossible. 17 Workforce Demographics We recognize Paycom plays an important part in the lives of our employees and strive to create an inclusive workplace where employees feel heard, valued and appreciated for who they are.
Physical security includes biometric and dedicated ID-oriented access control, redundant alarm systems and continuous camera monitoring by our security guards. The data centers also have environmental monitoring and extensive environmental controls such as heat and fire protection, moisture, temperature, and humidity sensors, backup power supply and exterior reinforced concrete walls.
Physical security includes biometric and dedicated ID-oriented access control, redundant alarm systems and continuous camera monitoring by our security guards. The data centers also have environmental monitoring and extensive environmental 14 controls such as heat and fire protection, moisture, temperature, and humidity sensors, backup power supply and exterior reinforced concrete walls.
We strive to foster an inclusive workplace that is free from harassment or discrimination, including harassment or discrimination involving race, color, sex, religion, gender, age, national origin, disability, gender identity or expression, sexual orientation, veteran or marital status. 15 Culture and Values Paycom’s purpose is to create technology that simplifies life for employees.
We strive to foster an inclusive workplace that is free from harassment or discrimination, including harassment or discrimination involving race, color, sex, religion, gender, age, national origin, disability, gender identity or expression, sexual orientation, veteran or marital status. Culture and Values Paycom’s purpose is to create technology that simplifies life for employees.
As we pursue and attract larger clients, we may face longer sales cycles and less predictability in completing some of our sales. Competition The market for HCM solutions is rapidly evolving, highly competitive and subject to changing technology, shifting client needs and frequent introduction of new products and services.
As we pursue and attract larger clients, we may face longer sales cycles and less predictability in completing some of our sales. 13 Competition The market for HCM solutions is rapidly evolving, highly competitive and subject to changing technology, shifting client needs and frequent introduction of new products and services.
After each payroll is processed and finalized, retirement plan reports are automatically created and delivered to the provider and the secure client inbox within 24 hours. Report Center. Our easy-to-use reporting software allows clients to create custom reports on HR data within our software.
After each payroll is processed and finalized, retirement plan reports are automatically created and delivered to the provider and the secure client inbox within 24 hours. Report Center. Our easy-to-use reporting tool allows clients to create custom reports on HR data within our software.
As of the filing of this Form 10-K, we have 58 sales teams (with CRRs and 12 emerging markets representatives counted as one team) located in 29 states and plan to open additional sales offices to further expand our market presence.
As of the filing of this Form 10-K, we have 58 sales teams (with CRRs and emerging markets representatives counted as one team) located in 29 states and plan to open additional sales offices to further expand our market presence.
All of our critical systems are fully redundant and backed up at regular intervals to these facilities, and backups are monitored for success and failure status daily. Client data is backed up in real-time among the three data centers.
All of our critical systems are fully redundant and backed up at regular intervals to these facilities, and backups are monitored for success and failure status daily. Client data is backed up in real-time among the data centers.
In addition, we also have a team of 13 transition specialists whose job it is to ensure that the process is performed smoothly, data is collected properly and all relevant employees are fully trained on the system.
In addition, we also have a team of transition specialists whose job it is to ensure that the process is performed smoothly, data is collected properly and all relevant employees are fully trained on the system.
Our GL concierge application offers organizations more control and transparency into their payroll general ledger and gives finance professionals intuitive reporting, enriched audit trails, customizable file layouts and real-time alerts. Clients of all sizes can use a wide variety of general ledger maps along with an action item alert system that improves the dynamics of their daily operations.
Our GL concierge tool offers organizations more control and transparency into their payroll general ledger and gives finance professionals intuitive reporting, enriched audit trails, customizable file layouts and real-time alerts. Clients of all sizes can use a wide variety of general ledger maps along with an action item alert system that improves the dynamics of their daily operations.
The application’s enhanced career site analytics reveal which job boards and marketing efforts produce the best return on investment. It not only sends candidates automated job alerts to notify them of a client’s newly posted positions but also allows them to provide their availability up front to discuss potential job opportunities, thereby saving a step for recruiters.
The tool’s enhanced career site analytics reveal which job boards and marketing efforts produce the best return on investment. It not only sends candidates automated job alerts to notify them of a client’s newly posted positions but also allows them to provide their availability up front to discuss potential job opportunities, thereby saving a step for recruiters.
A single database keeps our clients’ employee data consistent and enhances reporting capabilities by providing better accuracy and real-time insight. Benefits Administration . Our benefits administration application allows clients to customize benefit plan setup, deduction amounts, enrollment dates and waiting periods. Employers are provided census and reconciliation reports to ensure they do not overpay for benefits.
A single database keeps our clients’ employee data consistent and enhances reporting capabilities by providing better accuracy and real-time insight. Benefits Administration . Our benefits administration tool allows clients to customize benefit plan setup, deduction amounts, enrollment dates and waiting periods. Employers are provided census and reconciliation reports to ensure they do not overpay for benefits.
In addition, our core system of record helps clients minimize the risk of compliance errors due to inaccurate or missing 5 information that results from maintaining multiple databases. Through accurate tracking and management of employee payroll and other HR data, such information can be compiled for comprehensive and consistent reporting for our clients.
In addition, our core system of record helps clients minimize the risk of compliance errors due to inaccurate or missing information that results from maintaining multiple databases. Through accurate tracking and management 6 of employee payroll and other HR data, such information can be compiled for comprehensive and consistent reporting for our clients.
Our tax credits application helps employers process and calculate the available federal tax credits associated with hiring employees who meet various qualifications, ensuring organizations opting into this service receive their share of government-appropriated funds. This application also prescreens candidates to determine who is eligible for tax credits. Talent Management Employee Self-Service.
Our tax credits tool helps employers process and calculate the available federal tax credits associated with hiring employees who meet various qualifications, ensuring organizations opting into this service receive their share of government-appropriated funds. This tool also prescreens candidates to determine who is eligible for tax credits. Talent Management Employee Self-Service.
Clients can filter through specifications according to their needs, use the advanced report writer to view visual data representations, such as charts and graphs, and build a detailed analysis of workforce and budget. Report Center provides insights on return on investment, overtime, payroll, job applications, salaries, compensation forecasting and more. Enhanced ACA.
Clients can filter through specifications according to their needs, use the advanced report writer to view visual data representations, such as charts and graphs, and build a detailed analysis of workforce and budget. Report Center provides insights on return on investment, overtime, payroll, job applications, salaries, compensation forecasting and more.
Our surveys application allows employers to conduct confidential email surveys of employees on workplace matters, providing employers with candid feedback that otherwise may go undisclosed. From exit interviews and benefits assessments to rate-the-boss questionnaires, this valuable information can be used to drive decisions and realize company goals.
Our surveys tool allows employers to conduct confidential email surveys of employees on workplace matters, providing employers with candid feedback that otherwise may go undisclosed. From exit interviews and benefits assessments to rate-the-boss questionnaires, this valuable information can be used to drive decisions and realize company goals.
This international standard for continuity management specifies requirements to plan, implement, operate and continually improve a documented management system to protect against, prepare for, respond to and recover from disruptive incidents when they arise. The certification is valid until January 2026, with continuing assessments taking place annually.
This international standard for continuity management specifies requirements to plan, implement, operate and continually improve a documented management system to protect against, prepare for, respond to and recover from disruptive incidents when they arise. The certification is valid until January 2029, with continuing assessments taking place annually.
Our government and compliance application helps clients reduce exposure to violations, audits and penalties with respect to the employment laws impacting their business, such as the Fair Labor Standards Act, Family Medical Leave Act, Equal Employment Opportunity Act, COBRA and other state and federal regulations.
Our government and compliance tool helps clients reduce exposure to violations, audits and penalties with respect to the employment laws impacting their business, such as the Fair Labor Standards Act, Family Medical Leave Act, Equal Employment Opportunity Act, COBRA and other state and federal regulations.
Information contained on our website is not incorporated by reference into this Form 10-K. The SEC maintains a public website, www.sec.gov, which includes information about and the filings of issuers that file electronically with the SEC. 17
Information contained on our website is not incorporated by reference into this Form 10-K. The SEC maintains a public website, www.sec.gov, which includes information about and the filings of issuers that file electronically with the SEC. 18
With this simplified process, accounting departments can generate mapped GL reports for direct import into various accounting software packages. Talent Acquisition Applicant Tracking. Our applicant tracking application simplifies the recruiting processes needed to hire the most qualified employees. By using our comprehensive software, our clients can move candidates from the application process through new employee onboarding without re-keying data.
With this simplified process, accounting departments can generate mapped GL reports for direct import into various accounting software packages. Talent Acquisition Applicant Tracking. Our applicant tracking tool simplifies the recruiting processes needed to hire the most qualified employees. By using our comprehensive software, our clients can move candidates through the application process and new employee onboarding without re-keying data.
By pairing electronic signature verification with online storage and analytics, our E-Verify application automates employment verification and streamlines administration, reducing our clients’ exposure to audits and penalties that could result from I-9 violations. Tax Credits.
By pairing electronic signature verification with online storage and analytics, our E-Verify functionality automates employment verification and streamlines administration, reducing our clients’ exposure to audits and penalties that could result from I-9 violations. Tax Credits.
Organizations can maintain and easily access a list of potential employees from a talent pool with real-time candidate, recruiter and manager retrieval while eliminating manual redundancies. Clients can also distribute job openings and reach a wider candidate audience with tools to automatically post jobs to their organization’s website, career sites and online job boards.
Organizations can maintain and easily access a list of potential employees from a talent pool with real-time candidate, recruiter and manager retrieval while eliminating manual redundancies. Clients can also distribute job openings and reach a wider candidate audience with features that automatically post jobs to their organization’s website, career sites and online job boards.
Benefits information and paid time-off accruals also give employees the ability to make informed decisions regarding their benefit selections and time-off requests. Employees can access our self-service software through any device with an internet connection or by downloading the Paycom app on the Google Play ® store and the App Store ® online store. Compensation Budgeting .
Benefits information and paid time-off accruals also allow employees to make informed decisions regarding their benefit selections and time-off requests. Employees can access our self-service software through any device with an internet connection or by downloading the Paycom app on the Google Play ® store and the App Store ® online store. Compensation Budgeting .
See Note 15 “Segment Reporting” in the notes to the consolidated financial statements for additional information. Available Information Our internet address is www.paycom.com and our investor relations website is located at investors.paycom.com.
See Note 14 “Segment Reporting” in the notes to the consolidated financial statements for additional information. Available Information Our internet address is www.paycom.com, and our investor relations website is located at investors.paycom.com.
Expenses seamlessly flow through virtual approvals to payroll, and our application provides proper allocation of expenses to the general ledger, reducing manual work for accounting personnel. Organizations gain audit-ready reporting, which is critical when a client needs to know the important attributes of the expense approval process. Garnishment Administration.
Expenses seamlessly flow through virtual approvals to payroll, and our software provides proper allocation of expenses to the general ledger, reducing manual work for accounting personnel. Organizations gain audit-ready reporting, which is critical when a client needs to know the important attributes of the expense approval process. 9 Garnishment Administration.
Enhanced Background Checks ® . Our background check application helps clients easily screen prospective new hires or employees. Employers can choose the specific service or package of services desired for each individual, including verification of education, employment, driving history, criminal history, and drug and health screening, among others. Onboarding .
Enhanced Background Checks ® . Our background check tool helps clients easily screen prospective new hires or employees. Employers can choose the specific service or package of services desired for each individual, including verification of education, employment, driving history, criminal history, and drug and health screening, among others.
Our personnel action forms (“PAF”) application helps our clients reduce the amount of time and paperwork required to make employee changes, such as pay rate, position and title changes, by allowing managers to complete and approve online personnel action forms, subject to necessary approvals from the HR department.
Our personnel action forms (“PAF”) tool helps our clients reduce the amount of time and paperwork required to make employee changes, such as pay rate, position and title changes, by allowing managers to complete and approve changes to them online, subject to necessary approvals from the HR department.
Clients receive a comprehensive view of the data they need to make informed, accurate decisions — all centralized in one intuitive dashboard. With the Paycom mobile app, they can access quick views of wires, tax accounts and access to specialists for assistance. Expense Management.
Clients receive a comprehensive view of the data they need to make informed, accurate decisions — all centralized in one intuitive dashboard. The Paycom mobile app provides quick views of wires, tax accounts and access to specialists for assistance. Expense Management.
Our performance management application allows employees to set performance goals and competencies for positions across an organization, helping align company goals with workforce goals. It also helps streamline the performance review process with online facilitation of the review process and links performance to pay. Position Management .
Performance Management . Our performance management tool allows employees to set performance goals and competencies for positions across an organization, helping align company goals with workforce goals. It also helps streamline the performance review process with online facilitation of the review process and links performance to pay. 10 Position Management .
Further, because some of our clients have international establishments, the Canadian Personal Information Protection and Electronic Documents Act (“PIPEDA”), Mexico’s Federal Law on the Protection of Personal Data held by Private Parties, and the European Union’s General Data Protection Regulation (“GDPR”) and other foreign data privacy laws may impact our processing of certain client and employee information.
Further, because some of our clients have international establishments, the Canadian Personal Information Protection and Electronic Documents Act (“PIPEDA”), 15 Mexico’s Federal Law on the Protection of Personal Data held by Private Parties, and the European Union’s General Data Protection Regulation (“EU GDPR”) and other foreign data privacy laws may impact our processing of certain client and employee information.
Manager on-the-Go provides a seamless toggle between Manager on-the-Go and Employee Self-Service. Direct Data Exchange. Our comprehensive management analytics tool gives employers insights into efficiencies gained through employee usage of HR technology and provides a real-time return on investment on that usage (based on findings by EY).
With only one app, Manager on-the-Go provides a seamless toggle between Manager on-the-Go and Employee Self-Service. Direct Data Exchange. Our comprehensive management analytics tool gives employers insights into efficiencies gained through employee usage of HR technology and provides a real-time return on investment on that usage (based on findings by EY).
Our mileage tracker feature allows employers to more accurately track, log and manage employees’ mileage reimbursements that are then automatically updated within our expense management application. Employees can then access an expense dashboard where they can view the status of their submitted expenses through Employee Self-Service ® .
Our mileage tracker feature allows employers to more accurately track, log and manage employees’ mileage reimbursements that are then automatically updated within our expense management tool. Employees can then access an expense dashboard to view the status of their submitted expenses through Employee Self-Service ® .
We compete with companies such as Automatic Data Processing, Inc., Cornerstone OnDemand, Inc., Dayforce, Inc., Intuit, Inc., Insperity, Inc., Oracle Corporation, Paychex, Inc., Paylocity Holding Corporation, Paycor HCM, Inc., SAP SE, ServiceNow, Inc., Ultimate Kronos Group, Workday, Inc., and other international, national, regional, and local providers. Our competitors provide HCM solutions by various means.
We compete with companies such as Automatic Data Processing, Inc., Dayforce, Inc., Intuit, Inc., Oracle Corporation, Paychex, Inc., Paylocity Holding Corporation, SAP SE, ServiceNow, Inc., Ultimate Kronos Group, Workday, Inc., and other international, national, regional, and local providers. Our competitors provide HCM solutions by various means.
Our learning management application delivers a smart, simple, data-driven experience that formalizes and standardizes our clients’ training processes, thereby allowing them to quickly adapt in an ever-changing business environment.
Paycom Learning . Our learning management tool delivers a smart, simple, data-driven experience that formalizes and standardizes our clients’ training processes, thereby allowing them to quickly adapt in an ever-changing business environment.
Operations We physically host our solution for our clients in three secure data center facilities located in Oklahoma and Texas. Each of these data centers is owned and managed by Paycom, and Paycom is the only tenant occupying the data centers.
Operations We physically host our solution for our clients in secure data center facilities located in Oklahoma, Texas, and Arizona. Each of these data centers is managed by Paycom, and Paycom is the only tenant occupying the data centers.
Our expense management application eliminates the manual, paper-based processes associated with employee expense reimbursement and allows employers to control and monitor expenses by setting clearly defined rules and parameters for employee reimbursement. Employees can upload or email photos of receipts for reimbursement and expenses are automatically parsed when submitted.
Our expense management tool eliminates the manual, paper-based processes associated with employee expense reimbursement and allows employers to control and monitor expenses by setting clearly defined rules and parameters for employee reimbursement. Employees can upload photos of receipts for reimbursement and expenses are automatically parsed when submitted.
Our garnishment administration application mitigates the risk of penalties and lawsuits from employees and agencies, allowing clients to handle communications with garnishment payees and agencies, as well as calculate and track garnishment payments. 8 GL Concierge.
Our garnishment administration tool mitigates the risk of penalties and lawsuits from employees and agencies, allowing clients to handle communications with garnishment payees and agencies, as well as calculate and track garnishment payments. GL Concierge.
Our SaaS solution reduces the time, risk, headcount and costs associated with installing and maintaining applications for on-premises products within the IT infrastructure of our clients. Secure Cloud-Based Architecture Our cloud-based architecture allows our solution to be implemented remotely with minimal client interaction.
Our SaaS solution reduces the time, risk, headcount and costs associated with installing and maintaining applications for on-premises products within the information technology (“IT”) infrastructure of our clients. Secure Cloud-Based Architecture Our cloud-based architecture allows our solution to be implemented remotely with minimal client interaction.
In November 2022, we renewed a certification based on ISO/IEC 27701:2019 criteria, a standard for establishing, implementing, maintaining and continually improving a Privacy Information Management System (“PIMS”) published by ISO. This international standard for PIMS specifies PIMS-related requirements and provides guidance for Personally Identifiable Information (“PII”) controllers and PII processors holding responsibility and accountability for PII processing.
We maintain a certification based on ISO/IEC 27701:2019 criteria, a standard for establishing, implementing, maintaining and continually improving a Privacy Information Management System (“PIMS”) published by ISO. This international standard for PIMS specifies PIMS-related requirements and provides guidance for Personally Identifiable Information (“PII”) controllers and PII processors holding responsibility and accountability for PII processing.
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. Scalability to Grow with our Clients Our solution is highly scalable. Our target client size is organizations with 50 to 10,000 or more employees.
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. 7 Scalability to Grow with our Clients Our solution is highly scalable. Our target client size is organizations with 50 to 10,000 or more employees.
This independent assessment of our conformity to the ISO 27001 standard includes assessing security risks, designing and implementing comprehensive security controls and adopting an information security management process to meet security needs on an ongoing basis. The certification is valid until October 2025, with continuing assessments taking place annually.
This independent assessment of our conformity to the ISO 27001 standard includes assessing security risks, designing and 16 implementing comprehensive security controls and adopting an information security management process to meet security needs on an ongoing basis. The certification is valid until February 2029, with continuing assessments taking place annually.
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 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.
Our web time clock feature allows employees to clock in and out using their mobile device or any device with an internet connection, which automatically updates into the payroll application when approved, eliminating the need to manually calculate time sheets and re-key information into payroll systems. Scheduling .
With our web time clock feature, employees can clock in and out using their mobile device or any device with an internet connection, which automatically sends the data to the payroll application when approved, eliminating the need to manually calculate time sheets and re-key information into payroll systems. Scheduling .
Our compensation budgeting application provides compensation information, giving clients valuable workforce insight to help manage and formulate salary budgets and establish merit-based compensation increases that automatically upload new rates to payroll once the merit increases are set. Having payroll linked with performance reviews is instrumental for compensation budgeting, which rewards employees fairly while staying within budget. Performance Management .
Our compensation budgeting tool provides compensation information, giving clients valuable workforce insights to help manage and formulate salary budgets, as well as establish merit-based compensation increases that automatically upload new rates to payroll once the merit increases are set. Having payroll linked with performance reviews is instrumental for compensation budgeting, which rewards employees fairly while staying within budget.
With performance evidence within Paycom Learning, our clients can create a lesson tool that allows their employees to demonstrate knowledge and mastery of a specific skill to confirm they are truly grasping the course material. Managers or trainers then can provide direct input about the employee’s performance, creating a true feedback loop that promotes employee development.
With performance evidence within Paycom Learning, our clients can create a lesson tool that enables their employees to demonstrate knowledge and mastery of a specific skill, confirming they have truly grasped the course material. Managers or trainers can then provide direct input about the employee’s performance, creating a true feedback loop that promotes employee development.
In November 2022, we renewed a certification based on ISO/IEC 27001:2013 criteria, a security standard for Information Security Management Systems published by ISO covering our production, quality assurance and implementation environments.
We maintain a certification based on ISO/IEC 27001:2022 criteria, a security standard for Information Security Management Systems published by ISO covering our production, quality assurance and implementation environments.
Maintain Our Leadership in Innovation by Strengthening and Extending our Solution Our ability to develop and deploy new applications and updates rapidly and cost-effectively has been integral to the results that we have achieved to date. We intend to continue extending the functionality and range of our solution in the future.
Maintain Our Leadership in Innovation by Strengthening and Extending our Solution Our ability to develop and deploy new applications and updates rapidly and cost-effectively has been integral to the results that we have achieved to date.
Human Capital As of December 31, 2024, we employed 7,306 people, substantially all of whom are full-time employees. Our human capital objectives include attracting, developing and retaining the best talent in the industry. We have been recognized both locally and nationally for providing our employees with an excellent work environment.
Human Capital As of December 31, 2025, we employed 5,770 people, substantially all of whom are full-time employees. Our human capital objectives include attracting, developing and retaining the best talent in the industry. We have been recognized nationally for providing our employees with an excellent work environment.
Available in English or Spanish, our Employee Self-Service application improves employee engagement by empowering employees to self-manage certain transactions, obtain quick answers to frequent payroll and HR questions, access their pay history, view performance goals and reviews, and view total compensation reports that show their compensation and benefits package.
Available in 15 languages, our Employee Self-Service software improves employee engagement by empowering employees to self-manage their own data and certain transactions, obtain quick answers to frequent payroll and HR questions, access their pay history, view performance goals and reviews, and view total compensation reports that show their compensation and benefits package.
Artificial intelligence (“AI”) and machine learning software tools have continued to evolve and improve, and these tools have become increasing vital to the development and support of our applications and services.
Furthermore, AI and machine learning software tools have continued to evolve and improve, and these tools have become increasing vital to the development and support of our applications and services.
Clients can apply customized rules, use batch editing and use timecard management tools to manage complex time and attendance needs. Employees can clock in and out at their desks with web-based time clocks or by using finger scans, badge-swipe or other types of hardware terminals in a single or multi-clock environment.
Clients can apply customized rules and use batch editing and timecard management tools to manage complex time and attendance needs. Employees can clock in and out at their desks using web-based time clocks or by scanning their fingers, swiping their badges, or accessing other types of hardware terminals in a single- or multi-clock environment.
Our SOC 1 examination is conducted every six months by one of the four largest independent international auditing firms, and addresses, among other areas, our physical and environmental safeguards for production data centers, data availability and integrity procedures, change management procedures and logical security procedures.
Our SOC 1 examination is conducted every six months by an independent international auditing firm, and addresses, among other areas, our physical and environmental safeguards for production data centers, data availability and integrity procedures, change management procedures and logical security procedures.
It allows clients to set criteria to fairly and consistently auto-resolve requests, which helps employers remain adequately staffed. GONE facilitates faster decisions for employees and reduces the burden on managers and HR teams to handle disputes. After setup, decisions flow seamlessly and accurately into payroll. Managers can also view an online time-off calendar to easily monitor time-off requests.
GONE, an enhancement to time-off requests, automates time-off decision-making. It allows clients to set criteria to fairly and consistently auto-decision on requests, which helps employers remain adequately staffed. GONE facilitates faster decisions for employees and reduces the burden on managers and HR teams to handle disputes. After setup, decisions flow seamlessly and accurately into payroll.
Furthermore, with the launch of our Global HCM ™ solution and expansion of payroll services into certain international markets, we have the opportunity to capture additional revenue from existing clients with international employees.
Many clients have subsequently deployed additional applications as they recognize the benefits of our comprehensive solution. Furthermore, with the launch of our Global HCM ™ solution and expansion of payroll services into certain international markets, we have the opportunity to capture additional revenue from existing clients with international employees.
Our scheduling application helps managers with employee scheduling through automated functionality that provides a seamless workflow with the payroll and time and attendance applications. This application allows clients to create and edit templates for different Schedule Groups.
Our scheduling tool helps managers with employee scheduling through automated functionality that provides a seamless workflow with the payroll and time and attendance applications. This tool allows clients to create and edit templates for different Schedule Groups. It also allows employees and managers to access their schedules at any time.
This one-on-one service is a key part of our client service model and helps to ensure we are delivering a differentiated solution and maintaining high client satisfaction.
For this reason, we assign each client a specialist within a dedicated team. This one-on-one service is a key part of our client service model and helps to ensure we are delivering a differentiated solution and maintaining high client satisfaction.
Level Officials & Managers Gender: Female 47.4 % 52.4 % 41.9 % Male 52.0 % 47.6 % 58.1 % Non-Binary 0.6 % — — Race and Ethnicity: American Indian or Alaskan Native 2.4 % 2.8 % — Asian 12.2 % 7.2 % 2.7 % Black or African American 8.0 % 4.2 % — Hispanic or Latino 11.1 % 6.1 % — Native Hawaiian or Pacific Islander 0.3 % 0.2 % — Two or more races 4.1 % 2.3 % — White 58.5 % 74.5 % 95.9 % Not Specified 3.4 % 2.7 % 1.4 % Training and Development Through the use of our Paycom learning tool, we empower our employees by providing tailored learning paths in areas such as leadership, inclusion, technical skills and compliance.
As of December 31, 2025 All Employees First/Mid-Level Officials & Managers Executive/Senior Level Officials & Managers Gender: Female 43.3 % 52.2 % 51.7 % Male 56.7 % 47.8 % 48.3 % Race and Ethnicity: American Indian or Alaskan Native 1.9 % 2.4 % — Asian 16.4 % 6.4 % 1.7 % Black or African American 7.1 % 5.0 % — Hispanic or Latino 10.7 % 7.3 % 1.7 % Native Hawaiian or Pacific Islander 0.4 % — — Two or more races 4.4 % 3.1 % — White 58.6 % 75.9 % 96.7 % Not Specified 0.5 % — — Training and Development Through the use of our Paycom learning tool, we empower our employees by providing tailored learning paths in areas such as leadership, inclusion, technical skills and compliance.
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. We have historically generated the majority of our revenues from our payroll applications.
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. We have historically generated the majority of our revenues from our payroll applications.
The demographic workforce data within the table below, including race and ethnicity, gender and job categories, aligns with the EEO-1 Component 1 data collection reporting requirements outlined by the U.S. Equal Employment Opportunity Commission, where applicable, and includes U.S.-based employees only. As of December 31, 2024 All Employees First/Mid Level Officials & Managers Executive/Sr.
The demographic workforce data within the table below, including race and ethnicity, gender and job categories, aligns with the EEO-1 Component 1 data collection reporting requirements outlined by the U.S. Equal Employment Opportunity Commission, where applicable, and includes U.S.-based employees only.
Allowing employees to make changes directly to our database creates efficiencies for both the employer and employee. Today’s employees have little tolerance for complexity, and with our solution, employees have become accustomed to having a direct relationship with their HR data. This relationship is directly correlated with our single-database that is key to increasing usage.
Today’s employees have little tolerance for complexity, and with our solution, employees have become accustomed to having a direct relationship with their HR data. This relationship is directly correlated with our single-database that is key to increasing usage and providing an employee-first experience.
Legislative authorities in the United States and the European Union have responded to this evolution by enacting and/or proposing legislation that imposes restrictions on the development, use, and training of generative AI models and algorithms. For example, earlier this year, the new European Union AI Act was approved, and Colorado enacted its Artificial Intelligence Act.
Legislative authorities in the United States and the European Union have responded to this evolution by enacting and/or proposing legislation that imposes restrictions on the development, use, and training of generative AI models and algorithms.
Email notifications are sent automatically to supervisors and employees when schedules are created, requests for shift exchanges are submitted or a shift change is approved or denied. 11 Time-Off Requests featuring GONE ® . Our time-off requests application automates and standardizes the time-off request process. GONE, an enhancement to time-off requests, automates time-off decision-making.
Employees can approve, decline, or swap their schedules and view available shifts for pickup. Email notifications are sent automatically to supervisors and employees when schedules are created, requests for shift exchanges are submitted or a shift change is approved or denied. Time-Off Requests featuring GONE ® . Our time-off requests tool automates and standardizes the time-off request process.
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. By guiding employees to access, view, manage, troubleshoot and approve their paycheck before payroll is submitted, HR can focus on more strategic endeavors. Payroll and Payroll Tax Management.
Employees already manage all other components of their paychecks, including timecards, expenses, PTO requests and benefits. Beti guides them to access, view, manage, troubleshoot and approve their paycheck before payroll is submitted, so HR can focus on more strategic endeavors. Payroll and Payroll Tax Management. Payroll is the foundation of our solution.
We will also execute our strategy for growth by targeting large clients and strengthening and extending our solution. Penetrate Existing Markets We believe a significant market opportunity exists to penetrate markets where we currently have existing sales offices. Each sales office is typically staffed with one outside sales team, consisting of a sales manager and approximately seven other sales professionals.
We will also execute our strategy for growth by targeting large clients and strengthening and extending our solution. Penetrate Existing Markets We believe a significant market opportunity exists to penetrate markets where we currently have existing sales offices.
Security We maintain a formal and comprehensive security program designed to ensure the confidentiality, integrity and availability of our clients’ data. For a discussion of our information security program, see “Item 1C. Cybersecurity.” Software Development Our application development team works closely with our clients to enhance our existing application offerings and develop new applications.
Security We maintain a formal and comprehensive security program designed to ensure the confidentiality, integrity and availability of our clients’ data. For a discussion of our information security program, see “Item 1C. Cybersecurity.” Software Development We develop our solutions from the “ground up” with our internal development and engineering teams.
This feature allows clients to see organizational employee usage trends arranged by their preferred time frame and total logins (filterable by individuals) to Employee Self-Service through any device. Ask Here.
This feature enables clients to view organizational employee usage trends, which are organized by their preferred time frame and total logins (filterable by individual), in Employee Self-Service on any device. Ask Here.
Our payroll tax management tool helps clients handle their payroll taxes, deposits, regulatory correspondence and amendments, as well as assists with penalty and interest disputes. With this tool, Paycom also debits clients’ payroll taxes, deposits them on their due date and submits clients’ filings. Vault Visa ® Payroll Card.
It can be accessed at any time to make changes, run payroll and generate custom reports. Our payroll tax management service helps clients handle their payroll taxes, deposits, regulatory correspondence and amendments, as well as assists with penalty and interest disputes. With this service, Paycom also debits clients’ payroll taxes, deposits them on their due date and submits clients’ filings.
The certification is valid until October 2025, with continuing assessments taking place annually. Intellectual Property We rely on a combination of copyrights, trademarks, service marks, trade secrets and contractual restrictions to establish and protect our intellectual property rights.
This international standard for AIMS specifies AIMS-related requirements and provides guidance for ensuring responsible development and use of AI systems. The certification is valid until November 2028, with continuing assessments taking place annually. Intellectual Property We rely on a combination of copyrights, trademarks, service marks, trade secrets and contractual restrictions to establish and protect our intellectual property rights.
In April 2023, we renewed a certification based on ISO 9001:2015 criteria, a standard for the implementation of a Quality Management System published by ISO, covering our activities required to create and deliver our solution.
We maintain a certification based on ISO 9001:2015 criteria, a standard for the implementation of a Quality Management System published by ISO, covering our activities required to create and deliver our solution. This independent assessment of our conformity to the ISO 9001:2015 standard includes assessing the design and implementation of quality objectives to meet delivery standards on an ongoing basis.
In October 2022, we renewed a certification based on ISO 22301:2019 criteria, a standard for implementing and managing an effective Business Continuity Management System (BCMS) published by ISO.
The certification is valid until April 2026, with continuing assessments taking place annually. We maintain a certification based on ISO 22301:2019 criteria, a standard for implementing and managing an effective Business Continuity Management System (BCMS) published by ISO.
Our position management application provides customizable tools to categorize personnel, increasing consistency and organization companywide. The system ties job attributes to a specific position within the organization, not an individual employee, which frees up time to focus on people instead of antiquated processes. 9 Paycom Learning .
Our position management tool allows our clients to configure and categorize personnel, increasing consistency and organization company-wide. The tool ties job attributes to a specific position within the organization, not an individual employee, which frees up time to focus on people instead of antiquated processes. This tool can also generate job descriptions based on just a few keywords.
Through our employee self-service technology, employees can view real-time HR information, including pay stubs, payroll tax filing forms and benefits information, as well as manage their schedules and vacation time and update contact information. Employees can even do their own payroll with our industry-first Beti ® technology. Our mobile app makes it easier for employees to access their self-service information.
Through our employee self-service technology, employees can view real-time HR information, including pay stubs, payroll tax filing forms and benefits information, as well as manage their schedules and vacation time and update contact information. Our industry-first AI engine, IWant™, provides instant and accurate access to employee data without requiring the user to navigate or learn our software.
To further enhance the effectiveness of management throughout our clients’ organizations, we also offer easy to use software with Manager on-the-Go ® . Built within our mobile app, this tool allows for 24/7 accessibility to essential manager-side functionality, giving supervisors and managers the ability to perform a variety of tasks — anytime, anywhere.
Built within our mobile app, this tool allows for 24/7 accessibility to essential manager-side functionality, giving supervisors and managers the ability to perform a variety of tasks — anytime, anywhere. In addition to our self-service, app-based functionality, we also provide our clients with a strategy to drive usage among their employees.
Our Employee Self-Service application allows employees to view the time off they have available, submit requests, view the status of requests and any manager comments, and view company holidays and blackout dates. Labor Allocation. Our labor allocation application simplifies the process of setting up and tracking employee hours and wages based on different categories, such as job or location.
Managers can also view a time-off calendar on their desktop or in-app to easily monitor time-off requests. Our Employee Self-Service application allows employees to view the time off they have available, submit requests, view the status of requests and any manager comments, and view company holidays and blackout dates. Labor Allocation.
Our ACA application provides clients with access to a dashboard that tracks employee count, employee status, health care plan affordability and ACA periods. Plus, it enables Paycom to file IRS Forms 1094/1095-B and/or -C. Clients using this application also have access to additional real-time compliance reports, alerts and historical data for audit trail purposes. Clue ® .
Plus, it enables Paycom to file IRS Forms 1094/1095-B and/or -C. Clients using this application also have access to additional real-time compliance reports, alerts and historical data for audit trail purposes. Clue ® . Clue helps businesses securely collect, track and manage the vaccination and testing data of their workforce.
Our clients are able to use the same solution while their businesses grow by deploying applications as needed in real-time.
Our clients are able to use the same solution while their businesses grow by deploying applications as needed in real-time. 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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur business, operating results or financial condition could be adversely affected if our solution fails to perform properly or our clients are not satisfied with our services. Our solution is inherently complex and may in the future contain, or develop, undetected defects or errors.
Biggest changeOur solution is inherently complex and may in the future contain, or develop, undetected defects or errors. Any defects in our applications could adversely affect our reputation, impair our ability to sell our applications in the future and result in significant costs to us.
Also, to the extent that our applications depend upon the successful operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software could prevent the deployment or impair the functionality of our applications, delay new application introductions, result in a failure of our applications and harm our reputation.
Also, to the extent that our applications depend upon the successful operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software could prevent the deployment or impair the functionality of our applications, delay new application introductions, or result in a failure of our applications and harm our reputation.
If we inappropriately use open source software, we may be required to redesign our applications, discontinue the sale of our applications or take other remedial actions, which could adversely impact our business, operating results or financial condition. Our increasing focus on, and investments in, automation expose us to a number of risks.
If we inappropriately use open-source software, we may be required to redesign our applications or software, discontinue the sale of our applications or software or take other remedial actions, which could adversely impact our business, operating results or financial condition. Our increasing focus on, and investments in, automation expose us to a number of risks.
In the United States, these include numerous state-level consumer privacy laws, such as California’s CCPA and Texas’ Data Privacy and Security Act, Illinois’ IBIPA, rules and regulations promulgated under the authority of the Federal Trade Commission, the Health Insurance Portability and Accountability Act of 1996, the Family Medical Leave Act of 1993, the ACA, the Financial Services Modernization Act of 1999 (the “GLBA”), the Fair Credit Reporting Act (“FCRA”), federal and state labor and employment laws, state data breach notification laws, and state cybersecurity laws such as the New York Stop Hacks and Improve Electronic Data Security (SHIELD) Act.
In the United States, these include numerous state-level consumer privacy laws, such as California’s CCPA, Texas’ Data Privacy and Security Act, Illinois’ IBIPA, rules and regulations promulgated under the authority of the Federal Trade Commission, the Health Insurance Portability and Accountability Act of 1996, the Family Medical Leave Act of 1993, the ACA, the Financial Services Modernization Act of 1999 (the “GLBA”), the Fair Credit Reporting Act (“FCRA”), federal and state labor and employment laws, state data breach notification laws, and state cybersecurity laws such as the New York Stop Hacks and Improve Electronic Data Security (SHIELD) Act.
Launching into international markets and doing business internationally involves a number of risks, including but not limited to: • multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits, and licenses; • failure to obtain and maintain regulatory approvals for the use of our products in various countries; • lack of brand recognition, including greater brand recognition of local or other global competitors who have more established operations in the markets we are seeking to enter; • lack of familiarity with local, regional or national politics, culture, economics, market conditions and commerce; • complexities and difficulties in obtaining protection for and enforcing our intellectual property rights; • difficulties in staffing and managing foreign operations; 22 • financial risks, such as the impact of local and regional financial crises on demand for our products and exposure to foreign currency exchange rate fluctuations; • natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; • certain expenses including, among others, expenses for travel, translation and insurance; and • regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the U.S.
Launching into international markets and doing business internationally involves a number of risks, including but not limited to: • multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits, and licenses; • failure to obtain and maintain regulatory approvals for the use of our products in various countries; • lack of brand recognition, including greater brand recognition of local or other global competitors who have more established operations in the markets we are seeking to enter; • lack of familiarity with local, regional or national politics, culture, economics, market conditions and commerce; • complexities and difficulties in obtaining protection for and enforcing our intellectual property rights; • difficulties in staffing and managing foreign operations; • financial risks, such as the impact of local and regional financial crises on demand for our products and exposure to foreign currency exchange rate fluctuations; • natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; • certain expenses including, among others, expenses for travel, translation and insurance; and • regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the U.S.
Certain of our competitors have in the past or may in the future: • adapt more rapidly to new or emerging technologies and changes in client requirements; • develop superior products or services, gain greater market acceptance and expand their product and service offerings more efficiently or rapidly; 19 • offer products and services that we may not offer individually or at all, or bundle products and services in a manner that provides them with a price advantage; • offer products that can be integrated with other software or systems, whereas our single software may not allow for such integration; • develop and implement control processes that drive internal efficiencies, resulting in a better client experience; • establish and maintain partnerships with third parties that enhance and expand their product offering to business clients and employees; • take advantage of acquisition and other opportunities for expansion more readily; • maintain a lower cost basis; • secure contractual terms and implement other client retention strategies that increase our costs to acquire new clients; • adopt more aggressive or desirable pricing policies; • devote greater resources to the promotion, marketing and sale of their products and services; and • devote greater resources to the research and development of their products and services.
Certain of our competitors have in the past or may in the future: • adapt more rapidly to new or emerging technologies and changes in client requirements; • develop superior products or services, gain greater market acceptance and expand their product and service offerings more efficiently or rapidly; • offer products and services that we may not offer individually or at all, or bundle products and services in a manner that provides them with a price advantage; • offer products that can be integrated with other software or systems, whereas our single software may not allow for such integration; • develop and implement control processes that drive internal efficiencies, resulting in a better client experience; • establish and maintain partnerships with third parties that enhance and expand their product offering to business clients and employees; • take advantage of acquisition and other opportunities for expansion more readily; • maintain a lower cost basis; • secure contractual terms and implement other client retention strategies that increase our costs to acquire new clients; • adopt more aggressive or desirable pricing policies; • devote greater resources to the promotion, marketing and sale of their products and services; and • devote greater resources to the research and development of their products and services.
We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including: • the inability to integrate or benefit from acquired applications or services in a profitable manner; • unanticipated costs or liabilities associated with the acquisition; • the incurrence of acquisition-related costs; • difficulty integrating the accounting systems, operations and personnel of the acquired business; • difficulty and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; • difficulty converting the clients of the acquired business onto our solution, including disparities in the revenues, licensing, support or services of the acquired company; • diversion of management’s attention from other business concerns; • harm to our existing relationships with clients as a result of the acquisition; • the potential loss of key employees; • the use of resources that are needed in other parts of our business; and • the use of substantial portions of our available cash to consummate the acquisition.
We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including: • the inability to integrate or benefit from acquired applications or services in a profitable manner; • unanticipated costs or liabilities associated with the acquisition; • the incurrence of acquisition-related costs; • difficulty integrating the accounting systems, operations and personnel of the acquired business; • difficulty and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; • difficulty converting the clients of the acquired business onto our solution, including disparities in the revenues, licensing, support or services of the acquired company; • diversion of management’s attention from other business concerns; • harm to our existing relationships with clients as a result of the acquisition; 26 • the potential loss of key employees; • the use of resources that are needed in other parts of our business; and • the use of substantial portions of our available cash to consummate the acquisition.
Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or if no Court of Chancery located within the State of Delaware has jurisdiction, the Federal District Court for the District of Delaware) will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any 31 provision of Delaware law or our certificate of incorporation or our bylaws (as either may be amended from time to time) or any action asserting a claim against us or any of our directors, officers or other employees governed by the internal affairs doctrine.
Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or if no Court of Chancery located within the State of Delaware has jurisdiction, the Federal District Court for the District of Delaware) will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of Delaware law or our certificate of incorporation or our bylaws (as either may be amended from time to time) or any action asserting a claim against us or any of our directors, officers or other employees governed by the internal affairs doctrine.
Any defects in functionality or defects that cause interruptions in the availability of our applications could result in: • loss or delayed market acceptance and sales of our applications; • termination of service agreements or loss of clients; • credits, refunds or other liability to clients, including reimbursements for any fees or penalties assessed by regulatory agencies; • breach of contract, breach of warranty or indemnification claims against us, which may result in litigation; 20 • diversion of development and service resources; • increased scrutiny of our solution from regulatory agencies; and • injury to our reputation.
Any defects in functionality or defects that cause interruptions in the availability of our applications could result in: • loss or delayed market acceptance and sales of our applications; • termination of service agreements or loss of clients; • credits, refunds or other liability to clients, including reimbursements for any fees or penalties assessed by regulatory agencies; • breach of contract, breach of warranty or indemnification claims against us, which may result in litigation; • diversion of development and service resources; • increased scrutiny of our solution from regulatory agencies; and • injury to our reputation.
If our SaaS network infrastructure or our clients’ ability to access our solution is interrupted, client and employee data from recent transactions may be permanently lost, and we could be exposed to significant claims by clients, particularly if the access interruption is associated with problems in the timely delivery of funds payable to employees or tax authorities.
If our network infrastructure or our clients’ ability to access our solution is interrupted, client and employee data from recent transactions may be permanently lost, and we could be exposed to significant claims by clients, particularly if the access interruption is associated with problems in the timely delivery of funds payable to employees or tax authorities.
If the third-party software we currently license becomes unavailable, we may be unable to identify commercially reasonable alternatives without significant cost or difficulty, or available alternatives may not meet our internal cybersecurity requirements. In addition, incorporating the software used in our applications with new third-party software may require significant work and substantial investment of our time and resources.
If the third-party software we currently license becomes unavailable, we may be unable to identify commercially reasonable alternatives without significant cost or difficulty, or 24 available alternatives may not meet our internal cybersecurity requirements. In addition, incorporating the software used in our applications with new third-party software may require significant work and substantial investment of our time and resources.
For example, numerous 28 state and local authorities have implemented “ban the box” and “fair chance” hiring laws that limit or prohibit employers from inquiring or using a candidate’s criminal history to make employment decisions, and many of these authorities have in recent years amended these laws to increase the restrictions on the use of such information.
For example, numerous state and local authorities have implemented “ban the box” and “fair chance” hiring laws that limit or prohibit employers from inquiring or using a candidate’s criminal history to make employment decisions, and many of these authorities have in recent years amended these laws to increase the restrictions on the use of such information.
Our applications and services are subject to various complex laws and regulations on the federal, state, local, and foreign levels, including those governing data security and privacy, which have become significant compliance issues globally. The regulatory framework for privacy of personal data is rapidly evolving and is likely to remain uncertain for the foreseeable future.
Our applications and services are subject to various complex laws and regulations on the federal, state, local, and foreign levels, including those governing data security, privacy, and AI which have become significant compliance issues globally. The regulatory framework for privacy of personal data is rapidly evolving and is likely to remain uncertain for the foreseeable future.
Any actual or alleged noncompliance with these new laws and regulations, or failure to meet client expectations with respect to the use of generative AI and machine learning, could also result in negative publicity or harm to our reputation, subject us to investigations and expose us to significant fines, penalties and other damages.
Any actual or alleged noncompliance with these new laws and regulations, or failure to meet client expectations 28 with respect to the use of generative AI and machine learning, could also result in negative publicity or harm to our reputation, subject us to investigations and expose us to significant fines, penalties and other damages.
If we fail to successfully promote and maintain our brand, or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new clients or retain our existing clients to the extent necessary to realize a sufficient return on our brand-building efforts, which could have an adverse effect on our business.
If we fail to successfully promote and maintain our brand, or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new clients or retain our existing 23 clients to the extent necessary to realize a sufficient return on our brand-building efforts, which could have an adverse effect on our business.
Government could adversely affect our ability to receive U.S. Government contracts and could result in financial or reputational harm. 25 In addition, federal, state and foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the internet as a commercial medium.
Government could adversely affect our ability to receive U.S. Government contracts and could result in financial or reputational harm. In addition, federal, state and foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the internet as a commercial medium.
Our success is dependent in part upon our intellectual property. We rely on a combination of copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish and to protect our intellectual property rights in the United States and 23 in foreign jurisdictions. However, the steps we take to protect our intellectual property may be inadequate.
Our success is dependent in part upon our intellectual property. We rely on a combination of copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish and to protect our intellectual property rights in the United States and in foreign jurisdictions. However, the steps we take to protect our intellectual property may be inadequate.
We expect competition to continue to remain intense as new technologies and new market entrants emerge and aggressive pricing and client retention strategies persist. Competition in the HCM solutions market is primarily based on service responsiveness, application quality and reputation, breadth of service and product offering, and price.
We expect competition to 20 continue to remain intense as new technologies and new market entrants emerge and aggressive pricing and client retention strategies persist. Competition in the HCM solutions market is primarily based on service responsiveness, application quality and reputation, breadth of service and product offering, and price.
Because some of our clients are located in Mexico and other clients have establishments internationally, Canada’s PIPEDA, Mexico’s Federal Law on the Protection of Personal Data, and other foreign data privacy laws, such as the GDPR, may impact our processing of certain client and employee information.
Because some of our clients are located in Mexico and other clients have establishments internationally, Canada’s PIPEDA, Mexico’s Federal Law on the Protection of Personal Data, and other foreign data privacy laws, such as the EU GDPR, may impact our processing of certain client and employee information.
Our potential exposure to lawsuits or government investigations may increase depending in part on our clients’ compliance with these laws and regulations and applicable employment laws in their procurement and use of our background checks as part of their hiring process, which is generally outside of our control.
Our potential exposure to lawsuits or government investigations may increase depending in part on our clients’ compliance with these laws 30 and regulations and applicable employment laws in their procurement and use of our background checks as part of their hiring process, which is generally outside of our control.
Certain of our products and services use data-driven insights to help our clients manage their businesses more efficiently. Our business increasingly relies on AI and machine learning to model and create these insights. Use of these methods has recently come 26 under increased regulatory scrutiny.
Certain of our products and services use data-driven insights to help our clients manage their businesses more efficiently. Our business increasingly relies on AI and machine learning to model and create these insights. Use of these methods has recently come under increased regulatory scrutiny.
The principal reason that we release guidance is to provide a basis for our management to discuss our business outlook with analysts and investors. We do not accept any responsibility for any projections or reports published by any third parties.
The principal reason that we release guidance is to provide a basis for our management to discuss our 32 business outlook with analysts and investors. We do not accept any responsibility for any projections or reports published by any third parties.
New income, 27 sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time (possibly with retroactive effect), and could be applied solely or disproportionately to services and applications provided over the internet.
New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time (possibly with retroactive effect), and could be applied solely or disproportionately to services and applications provided over the internet.
These forms are typically processed in the first quarter of the year and, as a result, positively impact first quarter recurring revenues. In addition, unscheduled payroll runs at the end of the year (such as bonuses) have a positive impact on our recurring 29 revenues in the fourth quarter.
These forms are typically processed in the first quarter of the year and, as a result, positively impact first quarter recurring revenues. In addition, unscheduled payroll runs at the end of the year (such as bonuses) have a positive impact on our recurring revenues in the fourth quarter.
Any damage, failure or disruption of our SaaS network infrastructure or data centers could impair our ability to effectively provide our solution, harm our reputation and adversely affect our business. Our SaaS network infrastructure is a critical part of our business operations.
Any damage, failure or disruption of our network infrastructure or data centers could impair our ability to effectively provide our solution, harm our reputation and adversely affect our business. Our network infrastructure is a critical part of our business operations.
In addition, to continue to execute our growth strategy, we must also attract and retain 21 qualified sales, marketing and operational personnel capable of supporting a larger and more diverse client base.
In addition, to continue to execute our growth strategy, we must also attract and retain qualified sales, marketing and operational personnel capable of supporting a larger and more diverse client base.
The loss of the services of a significant number of employees could be disruptive to our development efforts, which may adversely affect our business by causing us to lose clients, increase operating expenses or divert management’s attention to recruit replacements for the departed employees. Our business and operations have experienced significant growth and organizational change.
The unplanned loss of the services of a significant number of skilled employees could be disruptive to our development efforts, which may adversely affect our business by causing us to lose clients, increase operating expenses or divert management’s attention to recruit replacements for the departed employees. Our business and operations have experienced significant growth and organizational change.
Also, failure to comply with continually evolving privacy, cybersecurity, and AI regulations during our use of this LLM could lead to substantial fines and damage to our reputation. Rapid advancements in technology could quickly render our existing LLM obsolete, requiring the licensing and training of a replacement LLM at significant cost to us.
Also, failure to comply with continually evolving privacy, cybersecurity, and AI regulations during our use of this LLM could lead to substantial fines and damage to our reputation. Rapid advancements in technology could quickly render our existing LLM-powered tools obsolete, requiring the licensing and training of a replacement LLM at significant cost to us.
Additionally, because certain of our clients rely on government resources to fund their operations, a prolonged government shutdown may affect such clients’ ability to make timely payments to us, which could adversely affect our operations results or financial condition. Item 1B. Unresolve d Staff Comments None. 32
Additionally, because certain of our clients rely on government resources to fund their operations, a prolonged government shutdown may affect such clients’ ability to make timely payments to us, which could adversely affect our operations results or financial condition. Item 1B. Unresolve d Staff Comments None. 34
In addition, we may incur additional compliance costs to the extent our automation initiatives utilize tools and technologies that are the subject of increasing regulatory and legal scrutiny, such as AI. These laws and regulations are developing and vary from one 24 jurisdiction to another.
In addition, we may incur additional compliance costs to the extent our automation initiatives utilize tools and technologies that are the subject of increasing regulatory and legal scrutiny, such as our AI-powered tools. These laws and regulations are developing and vary from one jurisdiction to another.
We believe the success of our business and execution of our strategy depend, in part, on the leadership of Chad Richison, our founder, Chief Executive Officer, President and Chairman of the Board of Directors, and that of our other key executive officers and employees. The loss of their leadership, expertise and experience could adversely impact our operations.
We believe the success of our business and execution of our strategy depend, in part, on the leadership of Chad Richison, our founder, Chief Executive Officer and Chairman of the Board of Directors, and that of our other key executive officers and 22 employees. The loss of their leadership, expertise and experience could adversely impact our operations.
Although we have security measures in place to protect client information and prevent data loss and other security breaches, these measures have been in the past and in the future may be breached as a result of third-party action, employee error, third-party or employee malfeasance or otherwise.
Although we have security measures in place to protect client information and prevent data loss and other security breaches, these measures have been in the past and in the future may be breached as a result of third-party action, employee error, third-party or employee malfeasance or other events.
A key part of our strategy is our focus on automation. We currently utilize automation and machine learning in certain of our products and services to deliver a better experience for our clients and their employees, and we expect to automate more functions within our solution in the future.
A key part of our strategy is our focus on automation. We currently utilize automation and machine learning in certain of our products and services to deliver a better experience for our clients and their employees or customers, and we expect to automate more functions within our solution in the future.
These third parties may be sources of cybersecurity or other technological risks in the future, including operational errors, system interruptions or breaches, unauthorized disclosure of confidential information and misuse of intellectual property. Even without a direct breach of our systems, cyber-attacks on such third-party vendors or on our clients could adversely impact our business and reputation.
These third parties may be sources of cybersecurity or other technological risks in the future, including operational errors, design or manufacturing defects, system interruptions or breaches, unauthorized disclosure of confidential information and misuse of intellectual property. Even without a direct breach of our systems, cyber-attacks on such third-party vendors or on our clients could adversely impact our business and reputation.
Furthermore, existing and prospective clients may be hesitant to adopt products that rely on automation, particularly those that utilize AI. Data sourcing, technology, integration and process issues, programmed bias in decision-making algorithms, concerns over intellectual property, security concerns, and the protection of privacy could impair the adoption and acceptance of our automated solutions.
Furthermore, existing and prospective clients may be hesitant to adopt products that rely on automation, particularly those that utilize AI. Data sourcing, technology, integration and process issues, programmed bias in decision-making algorithms, concerns over intellectual property, concerns over incorrect or inaccurate outputs, security concerns, and the protection of privacy could impair the adoption and acceptance of our automated solutions.
We have licensed and deployed a third-party large language model (“LLM”) on our own internal network. This LLM processes a large amount of employee and customer data, including potentially sensitive information. Unauthorized access to or a breach of this LLM software could lead to significant legal and financial repercussions to us.
We have licensed and deployed a third-party large language model (“LLM”) on our own internal network and AI-powered tools. This LLM processes a large amount of employee and customer data, including potentially sensitive information. Unauthorized access to or a breach of this LLM software could lead to significant legal and financial repercussions for us.
In addition, global and regional macroeconomic developments, such as increased unemployment, decreased income, uncertainty related to future economic activity, reduced access to credit, increased interest rates, inflation, volatility in capital markets, and decreased liquidity, among other possible factors, could negatively affect our ability to conduct business.
In addition, global and regional macroeconomic developments, such as changes in global trade policies and tariffs, increased unemployment, decreased income, uncertainty related to future economic activity, reduced access to credit, increased interest rates, inflation, volatility in capital markets, and decreased liquidity, among other possible factors, could negatively affect our ability to conduct business.
Certain companies with which we compete for talent offer work arrangements more flexible than ours, which may impact our ability to attract and retain qualified personnel if potential or current employees prefer such policies. The competition for qualified personnel also may be amplified by new immigration laws or policies that could limit software companies’ ability to recruit internationally.
Certain companies with which we compete for talent offer work arrangements more flexible than ours, which may impact our ability to attract and retain qualified personnel if potential or current employees prefer such policies. The competition for qualified personnel has been amplified by new immigration laws and policies that limit software companies’ ability to recruit internationally.
Although certain providers continue to deliver legacy enterprise software, most now offer cloud-based solutions, resulting in increased competition for clients seeking the greater flexibility and access to information provided by cloud-based offerings. Furthermore, the HCM industry has experienced an emergence of white label and embedded payroll offerings.
Our competitors provide HCM solutions by various means. Although certain providers continue to deliver legacy enterprise software, most now offer cloud-based solutions, resulting in increased competition for clients seeking the greater flexibility and access to information provided by cloud-based offerings. Furthermore, the HCM industry has experienced an emergence of white label and embedded payroll offerings.
Although we would not expect such changes in immigration laws or policies to have a significant direct impact on our workforce, the ensuing increase in demand for software developers and IT personnel could impair our ability to attract or retain skilled employees and/or significantly increase our costs to do so.
Although such changes in immigration laws and policies have not had a significant direct impact on our workforce to date, the ensuing increase in demand for software developers and IT personnel could impair our ability to attract or retain skilled employees and/or significantly increase our costs to do so.
As we continue to expand our operations outside the United States, our applications and services are or will be subject to additional laws governing data security and privacy in relevant jurisdictions, such as Canada’s PIPEDA and Mexico’s Federal Law on the Protection of Personal Data held by Private Parties, as well as the GDPR, which is applicable in the European Economic Area and the United Kingdom.
As we continue to expand our operations outside the United States, our applications and services are or will be subject to additional laws governing data security and privacy in relevant jurisdictions, such as Canada’s PIPEDA and Mexico’s Federal Law on the Protection of Personal Data held by Private Parties, as well as the EU GDPR and United Kingdom’s 27 General Data Protection Regulation, which are applicable in the European Economic Area and the United Kingdom, respectively.
Many of these newer state-level consumer privacy laws give consumers located in those states certain rights to be informed of, opt-out of, and request deletion of the personal information that we hold, similar to those rights provided by the European Union’s GDPR.
Many of these newer state-level consumer privacy laws give consumers located in those states certain rights, including the right to be informed of, opt-out of, and request deletion of the personal information that we hold, similar to those rights provided by the EU GDPR.
If we identify material weaknesses in our internal control over financial reporting or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and/or we could become subject to investigations by the New York Stock Exchange (the “NYSE”), the SEC, or other regulatory authorities, and the market price of our common stock could be negatively affected. 30 Our actual operating results may differ significantly from our guidance.
If we identify material weaknesses in our internal control over financial reporting or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and/or we could become subject to investigations by the New York Stock Exchange (the “NYSE”), the SEC, or other regulatory authorities, and the market price of our common stock could be negatively affected.
We have released, and may continue to release, guidance in our earnings conference calls, earnings releases, or otherwise, regarding our future performance, which represents our estimates as of the date of release. This guidance, which includes forward-looking statements, has been and will be based on projections prepared by our management.
Our actual operating results may differ significantly from our guidance. We have released, and may continue to release, guidance in our earnings conference calls, earnings releases, or otherwise, regarding our future performance, which represents our estimates as of the date of release. This guidance, which includes forward-looking statements, has been and will be based on projections prepared by our management.
In addition, there are a number of other legislative proposals worldwide for comprehensive privacy laws affecting consumer and employee personal information, which could impose additional and potentially conflicting obligations in areas affecting our business.
In addition, there are a number of other legislative proposals in jurisdictions across the world for comprehensive privacy laws affecting consumer and employee personal information, which could impose additional and potentially conflicting obligations in areas affecting our business.
In the future, we may experience issues with our computing and communications infrastructure or data centers caused by the following factors: • human error; • telecommunications failures or outages from third-party providers; • computer viruses or cyber-attacks; 18 • break-ins or other security breaches; • acts of terrorism, sabotage, intentional acts of vandalism or other misconduct; • tornadoes, fires, earthquakes, hurricanes, floods and other natural disasters; • power loss; and • other unforeseen interruptions or damages.
Our network infrastructure and data centers are vulnerable to damage, failure and disruption. 19 In the future, we may experience issues with our computing and communications infrastructure or data centers caused by the following factors: • human error; • telecommunications failures or outages from third-party providers; • computer viruses or cyber-attacks; • break-ins or other security breaches; • acts of terrorism, sabotage, intentional acts of vandalism or other misconduct; • tornadoes, fires, earthquakes, hurricanes, floods and other natural disasters; • insufficient supply or loss of power; and • other unforeseen interruptions or damages.
In addition, we are required to maintain as of the end of each fiscal quarter a consolidated interest coverage ratio of not less than 3.0 to 1.0 and a consolidated leverage ratio of not greater than 3.25 to 1.0, stepping down to 3.0 to 1.0 as of December 31, 2025, and thereafter.
In addition, we are required to maintain as of the end of each fiscal quarter a consolidated interest coverage ratio of not less than 3.0 to 1.0 and a consolidated leverage ratio of not greater than 3.0 to 1.0.
Our payment of dividends, as well as the rate at which we pay dividends, are solely at the discretion of our Board of Directors. Further, dividend payments, if any, are subject to our financial results and the availability of statutory surplus. These factors could result in a change to our dividend policy.
Our payment of dividends, as well as the rate at which we pay dividends, are solely at the discretion of our Board of Directors. Further, dividend payments, if any, are subject to our financial results and the availability of statutory surplus.
As our employees are located in a number of states and we are beginning to hire internationally, compliance with evolving laws and regulations could substantially increase our cost of doing business.
As our employees are located in a number of states and countries, compliance with evolving laws and regulations could substantially increase our cost of doing business.
Our clients access our solution through standard web browsers, smart phones, tablets and other web-enabled devices and depend on us for fast and reliable access to our solution. We serve all of our clients from our three fully redundant data centers located in Oklahoma and Texas. Our SaaS network infrastructure and data centers are vulnerable to damage, failure and disruption.
Our clients access our solution through standard web browsers, smart phones, tablets and other web-enabled devices and depend on us for fast and reliable access to our solution. We serve all of our clients from our fully redundant data centers located in Oklahoma, Texas and Arizona.
If our clients do not continue to use our applications, renew on less favorable terms or fail to purchase additional applications, or if we fail to add new clients, our annual revenue retention rate may decline and our business, operating results or financial condition could be adversely affected.
If our clients reduce headcount, do not continue to use our applications, renew on less favorable terms or fail to purchase additional applications, or if we fail to add new clients, our annual revenue retention rate may decline and our business, operating results or financial condition could be adversely affected. 21 Our business, operating results or financial condition could be adversely affected if our solution fails to perform properly or our clients are not satisfied with our services.
The third-party LLM we license was trained on large datasets that may contain biases, and these biases can be reflected in the output of our LLM, leading to ethical concerns and potential harm to our employees and/or customers.
The third-party LLM we license was trained on large datasets that may contain biases, and these biases can be reflected in the output of our LLM, leading to potential harm to our employees and/or customers. The third-party LLM may also produce incorrect or inaccurate outcomes, also known as “hallucinations”.
General Risks Adverse economic and market conditions could affect our business, operating results or financial condition. Our business depends on the overall demand for HCM applications and on the economic health of our current and prospective clients.
These factors could result in a change to our dividend policy. 33 General Risks Adverse economic and market conditions could affect our business, operating results or financial condition. Our business depends on the overall demand for HCM applications and on the economic health of our current and prospective clients.
Globally, cybersecurity attacks are increasing in number and the threat actors are increasingly organized and well financed, or at times supported by state actors. In addition, geopolitical tensions or conflicts, such as Russia’s invasion of Ukraine, the ongoing conflict between Israel and Hamas, or increasing tension with China, may create a heightened risk of cybersecurity attacks.
Globally, cybersecurity attacks are increasing in number and the threat actors are increasingly organized and well financed, or at times supported by state actors. In addition, geopolitical tensions or conflicts may create a heightened risk of cybersecurity attacks.
Any such material charges may have a negative impact on our operating results or financial condition. If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.
If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.
Any defects in our applications could adversely affect our reputation, impair our ability to sell our applications in the future and result in significant costs to us. The costs incurred to correct any application defects may be substantial and could adversely affect our business, operating results or financial condition.
The costs incurred to correct any application defects may be substantial and could adversely affect our business, operating results or financial condition.
Although we expect the magnitude of seasonal fluctuations in our revenues to decrease in the future to the extent clients utilize more of our non-payroll applications, seasonal fluctuations in certain of our operating results and financial metrics may make such results and metrics difficult to predict.
Although we expect the magnitude of seasonal fluctuations in our revenues to decrease in the future to the extent clients utilize more of our non-payroll applications, seasonal fluctuations in certain of our operating results and financial metrics may make such results and metrics difficult to predict. 31 We are subject to certain operating and financial covenants that may restrict our business and financing activities and may adversely affect our cash flow and our ability to operate our business.
The proliferation of white label offerings and products and technologies utilizing embedded payroll systems may adversely affect our competitive position. In addition, some of our principal competitors offer their products or services at a lower price, which has resulted in pricing pressures. Similarly, some competitors offer different billing terms, which has resulted in pressures on our billing terms.
The proliferation of white label offerings and products and technologies utilizing embedded payroll systems may adversely affect our competitive position. In addition, some of our principal competitors offer their products or services at a lower price, which has resulted in pricing pressures. If we are unable to maintain our pricing levels, our operating results would be negatively impacted.
In addition, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us (possibly with retroactive effect), which could require us or our clients to pay additional tax amounts, as well as require us or our clients to pay fines or penalties and substantial interest for past amounts.
We cannot ensure that we will not be subject to sales and use taxes or related penalties for past sales in jurisdictions where we currently believe no such taxes are required. 29 In addition, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us (possibly with retroactive effect), which could require us or our clients to pay additional tax amounts, as well as require us or our clients to pay fines or penalties and substantial interest for past amounts.
A breach of any of the covenants under our Credit Agreement could result in an event of default, which could result in the acceleration of any outstanding indebtedness or foreclosure on our assets pledged to secure the indebtedness. If our goodwill or other intangible assets become impaired, we may be required to record a significant charge to earnings.
A breach of any of the covenants under our Credit Agreement could result in an event of default, which could result in the acceleration of any outstanding indebtedness or foreclosure on our assets pledged to secure the indebtedness.
There also may be real or perceived social harm, unfairness, or other outcomes that undermine public confidence in the use and deployment of AI. Any of the foregoing may result in decreased demand for our solution or harm to our business, results of operations or reputation.
There also may be real or perceived social harm, unfairness, or other outcomes that undermine public confidence in the use and deployment of AI.
We compete with companies such as Automatic Data Processing, Inc., Cornerstone OnDemand, Inc., Dayforce, Inc., Intuit, Inc., Insperity, Inc., Oracle Corporation, Paychex, Inc., Paylocity Holding Corporation, Paycor HCM, Inc., SAP SE, ServiceNow, Inc., Ultimate Kronos Group, Workday, Inc., and other international, national, regional, and local providers. Our competitors provide HCM solutions by various means.
Our competitors offer HCM solutions that may overlap with one, several or all categories of the applications we offer. We compete with companies such as Automatic Data Processing, Inc., Dayforce, Inc., Intuit, Inc., Oracle Corporation, Paychex, Inc., Paylocity Holding Corporation, SAP SE, ServiceNow, Inc., Ultimate Kronos Group, Workday, Inc., and other international, national, regional, and local providers.
Furthermore, the impact of such macroeconomic developments may be exacerbated by geopolitical events such as the ongoing military conflict in Ukraine and the ongoing conflict between Israel and Hamas.
Furthermore, the impact of such macroeconomic developments may be exacerbated by geopolitical events and ongoing military conflicts throughout the world.
If new technologies emerge that are able to deliver HCM solutions at lower prices, more efficiently or more conveniently, such technologies could adversely impact our ability to compete. Furthermore, as we continue to use such new technologies in our own solution, developing, testing, and deploying resource-intensive AI systems will require additional investment and may increase our costs.
If new technologies emerge that are able to deliver HCM solutions at lower prices, more efficiently or more conveniently, such technologies could adversely impact our ability to compete. We have made significant investments in developing, testing, deploying and supporting AI-powered tools in our solution.
Because the techniques used to obtain unauthorized access or to sabotage systems change frequently, we may not be able to anticipate these techniques and implement adequate preventative or protective measures. While we currently maintain a cyber liability insurance policy, cyber liability insurance may be inadequate or may not be available in the future on acceptable terms, or at all.
Because the techniques used to obtain unauthorized access to or to sabotage systems change frequently, we may not be able to anticipate these techniques and implement adequate preventative, responsive or protective measures.
In order for us to maintain or improve our operating results, it is important that our current clients continue to use our applications and purchase additional applications from us, and that we add new clients. Most of our clients have the right to cancel their agreements with us for any or no reason by providing 30 days’ prior written notice.
In order for us to maintain or improve our operating results, it is important that our current clients continue to use our applications and purchase additional applications from us, and that we add new clients.
Fourteen other states have now enacted their own consumer data privacy statutes, many of which are modeled on the CCPA. New data privacy statutes are slated to go into effect later this year in Delaware, Iowa, Nebraska, New Hampshire, and New Jersey.
Numerous other states have now enacted their own consumer data privacy statutes, many of which are modeled on the CCPA, including states like Colorado, Connecticut, Delaware, Oregon, Montana, Nebraska, New Hampshire, New Jersey, Utah, Virginia, Iowa, and Tennessee.
A change in these principles or interpretations could have a significant effect on our reported financial results and could affect the reporting of transactions completed before the announcement of a change. Risks Related to Ownership of Our Securities The issuance of additional stock in connection with acquisitions, our stock incentive plans, warrants or otherwise will dilute all other stockholders.
Risks Related to Ownership of Our Securities The issuance of additional stock in connection with acquisitions, our stock incentive plans, warrants or otherwise will dilute all other stockholders.
The use of open source software in our applications may expose us to additional risks and harm our intellectual property rights. Some of our applications use software covered by open source licenses.
The ongoing accuracy of the output of our LLM is critical for its effectiveness, and inaccurate or unreliable outputs could lead to customer dissatisfaction and potential legal liabilities. The use of open-source software in our applications may expose us to additional risks and harm our intellectual property rights. Some of our applications use software and models covered by open-source licenses.
Moreover, from time to time, clients choose not to continue to use our applications at the same or higher level of service, if at all.
Many of our clients have the right to cancel their agreements with us for any or no reason by providing 30 days’ prior written notice. Moreover, from time to time, clients choose not to continue to use our applications at the same or higher level of service, if at all.
Future legislative and regulatory action, court decisions or other governmental action may adversely impact our ability to pursue our automation strategy and, in turn, may adversely impact our operations and financial results.
Future legislative and regulatory action, court decisions or other governmental action may adversely impact our ability to pursue our automation strategy and, in turn, may adversely impact our operations and financial results. 25 If we fail to adequately protect our proprietary rights, our competitive advantage could be impaired and we may lose valuable assets, generate reduced revenues or incur costly litigation to protect our rights.
Newly-passed legislative and regulatory initiatives may adversely affect the ability of our clients to process, handle, store, use and transmit demographic and personal information from their employees, which could reduce demand for our services. In addition to government regulation, privacy advocates and industry groups may propose and adopt new and different self-regulatory standards.
Newly-passed legislative and regulatory initiatives may adversely affect the ability of our clients to process, handle, store, use and transmit demographic and personal information from their employees, which could reduce demand for our services. On May 21, 2024, the European Union legislators approved the EU AI Act, which establishes a comprehensive, risk-based governance framework for AI in the EU market.
We are subject to certain operating and financial covenants that may restrict our business and financing activities and may adversely affect our cash flow and our ability to operate our business. We maintain a senior secured revolving credit facility (the “Revolving Credit Facility”), which can be accessed as needed to supplement our operating cash flow and cash balances.
We maintain a Revolving Credit Facility, which can be accessed as needed to supplement our operating cash flow and cash balances.
Removed
Our competitors offer HCM solutions that may overlap with one, several or all categories of the applications we offer.
Added
The techniques used to obtain unauthorized access to information, disable or degrade service, or sabotage systems change frequently, and are increasingly more complex and sophisticated, including due to the use of AI.
Removed
If we are unable to maintain our pricing levels and our billing terms, our operating results would be negatively impacted.
Added
In addition, new computing technologies, including quantum computing, new discoveries in the field of cryptography or other developments could result in a compromise or breach of the algorithms we or our authorized third parties use or have used to encrypt and protect data.
Removed
In addition, because our Beti technology is designed to eliminate payroll errors that lead to billable corrections and unscheduled payroll runs, we have experienced a reduction in these activities that would historically otherwise generate additional revenue for us.
Added
As these threats continue to evolve and increase, including due to the use of AI by us and third parties, we continue to invest significant resources, and may be required to invest significant additional resources, to modify and enhance our cybersecurity controls and to investigate and remediate any security vulnerabilities.
Removed
The ongoing accuracy of the output of our LLM is critical for its effectiveness, and inaccurate or unreliable outputs could lead to customer dissatisfaction and potential legal liabilities. If we fail to adequately protect our proprietary rights, our competitive advantage could be impaired and we may lose valuable assets, generate reduced revenues or incur costly litigation to protect our rights.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn addition, reports related to activities and outcomes are provided to the audit committee of the Board of Directors on a quarterly basis. 33 Certifications and Audits We maintain the following ISO certifications related to our information systems: • ISO 22301:2019 (standard for implementing and managing an effective business continuity management system); • ISO/IEC 27001:2013 (security standard for information security management systems, covering our production, quality assurance and implementation environments); • ISO/IEC 27701:2019 (standard for establishing, implementing, maintaining and continually improving a privacy information management system); and • ISO 9001:2015 (standard for the implementation of quality management processes).
Biggest changeCertifications and Audits We maintain the following ISO certifications related to our information systems: • ISO 9001:2015 (standard for the implementation of quality management processes); • ISO 22301:2019 (standard for implementing and managing an effective business continuity management system); • ISO/IEC 27001:2022 (security standard for information security management systems, covering our production, quality assurance and implementation environments); • ISO/IEC 27701:2019 (standard for establishing, implementing, maintaining and continually improving a privacy information management system); and • ISO/IEC 42001:2023 (standard for establishing, implementing, maintaining and continually improving an AIMS).
Although prior cybersecurity incidents have not had a material adverse effect on our business strategy, results of operations, or financial condition to date, any actual or perceived breach of our security could damage our reputation, cause existing clients to discontinue the use of our solution, prevent us from attracting new clients, or subject us to third-party lawsuits, regulatory investigations and fines or other actions or liabilities, any of which could materially adversely affect our business strategy, results of operations, or financial condition.
Although prior cybersecurity incidents have not had a material adverse effect on us, our business strategy, results of operations, or financial condition to date, any actual or perceived breach of our security could damage our reputation, cause existing clients to discontinue the use of our solution, prevent us from attracting new clients, or subject us to third-party lawsuits, regulatory investigations and fines or other actions or liabilities, any of which could materially adversely affect us, our business strategy, results of operations, or financial condition.
The Director of IT Security is responsible for the growth and implementation of the information security and data privacy programs and oversees the operations of the information security team. The Director of IT Security also provides oversight for information security and privacy policies and controls, oversees compliance activities, and provides metrics and guidance to executive management regarding the program.
The Director of Information Security is responsible for the growth and implementation of the information security and data privacy programs and oversees the operations of the information security team. The Director of Information Security also provides oversight for information security and privacy policies and controls, oversees compliance activities, and provides metrics and guidance to executive management regarding the program.
The aforementioned leaders and teams have a breadth of experience and manage programs related to governance, risk, and compliance; data privacy and security; vulnerability management; security operations; and application security. The Chief Information Officer is regularly informed about the latest developments in cybersecurity, including potential threats and innovative risk management techniques.
The aforementioned leaders and teams have a breadth of experience and manage programs related to governance, risk, and compliance; data privacy and security; vulnerability management; security operations; and application security. 36 The Senior Director of IT and Information Security is regularly informed about the latest developments in cybersecurity, including potential threats and innovative risk management techniques.
Role of the Board of Directors The Board of Directors has delegated to the audit committee primary responsibility for overseeing enterprise risk management, including oversight of risks from cybersecurity threats. The audit committee receives quarterly reports and updates from our Chief Information Officer and Vice President of IT and Information Security with respect to cybersecurity risk management.
Role of the Board of Directors The Board of Directors has delegated to the audit committee primary responsibility for overseeing enterprise risk management, including oversight of risks from cybersecurity threats. The audit committee receives quarterly reports and updates from our Senior Director of IT and Information Security with respect to cybersecurity risk management.
Our Vice President of IT and Information Security has been with Paycom for over a decade and has worked in technology development, improvement, infrastructure, and security for over 15 years. The Vice President of IT and Information Security is supported by our Director of IT Security, who has worked in technology development, improvement, infrastructure, and security for over a decade.
Our Senior Director of IT and Information Security has been with Paycom for over a decade and has worked in technology development, improvement, infrastructure, and security for over 12 years. The Senior Director of IT and Information Security is supported by our Director of Information Security, who has worked in technology development, improvement, infrastructure, and security for over a decade.
Governance Both management and the Board of Directors are actively involved in the oversight of risks from cybersecurity threats.
Go vernance Both management and the Board of Directors are actively involved in the oversight of risks from cybersecurity threats.
This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. As discussed above, our information systems are routinely reviewed for compliance with information security policies and standards. Outcomes of reviews and audits are reported to the Director of IT Security, Vice President of IT and Information Security, and the Chief Information Officer.
This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. Our information systems are routinely reviewed for compliance with information security policies and standards. Outcomes of reviews and audits are reported to the Director of Information Security and the Senior Director of IT and Information Security.
Relevant information about security 34 nonconformities, incidents, and events are reported to the working group described below and to the Board of Directors. As discussed above, the Chief Information Officer and Vice President of IT and Information Security report to the audit committee and the Board of Directors on cybersecurity matters at least quarterly.
Relevant information about security nonconformities, incidents, and events are reported to the working group described below and to the Board of Directors. As discussed above, the Senior Director of IT and Information Security reports to the audit committee and the Board of Directors on cybersecurity matters at least quarterly.
Such reports cover the Company’s information security program, including its current status, capabilities, objectives and plans, as well as the evolving cybersecurity threat landscape. Role of Management The Chief Information Officer oversees the activities of our IT and information security teams.
Such reports cover the Company’s information security program, including its current status, capabilities, objectives and plans, as well as the evolving cybersecurity threat landscape.
The activities related to the business continuity management system are routinely reported to executive management as part of our IT security team’s ongoing metrics reporting.
The activities related to the business continuity management system are routinely reported to executive management as part of our IT security team’s ongoing metrics 35 reporting. In addition, reports related to activities and outcomes are provided to the audit committee of the Board of Directors on a quarterly basis.
Our SOC 1 examination is conducted every six months by one of the four largest independent international auditing firms, and addresses, among other areas, our physical and environmental safeguards for production data centers, data availability and integrity procedures, change management procedures and logical security procedures.
We voluntarily obtain third-party security examinations relating to our internal controls over financial reporting in accordance with SOC 1. Our SOC 1 examination is conducted every six months by an independent international auditing firm, and addresses, among other areas, our physical and environmental safeguards for production data centers, data availability and integrity procedures, change management procedures and logical security procedures.
Our Chief Information Officer has been with Paycom since 2005 and has more than 30 years of IT and software development experience. The Vice President of IT and Information Security, who reports to our Chief Information Officer, is responsible for ensuring that both new implementations and ongoing operations comply with the policies, procedures, and guidelines of our information security program.
Role of Management The Senior Director of IT and Information Security oversees the activities of our IT and information security teams and is responsible for ensuring that both new implementations and ongoing operations comply with the policies, procedures, and guidelines of our information security program.
Removed
We voluntarily obtain third-party security examinations relating to our internal controls over financial reporting in accordance with SOC 1.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. P roperties Our corporate headquarters is an approximately 815,000-square-foot campus located on over 150 acres of Company-owned property in Oklahoma City, Oklahoma. We also have an operations facility on approximately 14 acres of Company-owned property in Grapevine, Texas.
Biggest changeItem 2. P roperties Our corporate headquarters is an approximately 815,000-square-foot campus located on over 150 acres of Company-owned property in Oklahoma City, Oklahoma. We also have an operations facility on approximately 14 acres of Company-owned property in Grapevine, Texas. We operate fully redundant data centers in Oklahoma, Texas and Arizona.
As of December 31, 2024, we lease offices in 29 states and in certain international locations. We believe that these facilities are suitable for our current operations and, upon the expiration of the terms of the leases, we believe we could renew these leases or find suitable space elsewhere on acceptable terms.
As of December 31, 2025, we lease facilities in 29 states and in certain international locations. We believe that these facilities are suitable for our current operations and, upon the expiration of the terms of the leases, we believe we could renew these leases or find suitable space elsewhere on acceptable terms.
Removed
In addition to housing two fully redundant data centers at our corporate headquarters in Oklahoma City, we operate another fully redundant data center at our Grapevine facility. Furthermore, we have acquired a data center in Arizona, which we expect will be fully operational in mid-2025.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeNonetheless, we cannot predict the outcome of these proceedings, as legal matters are subject to inherent uncertainties, and there exists the possibility that the ultimate resolution of these matters could have a material adverse effect on our business, financial condition, results of operations or cash flows. 35 Item 4. Mine Saf ety Disclosures None. 36 PART II
Biggest changeNonetheless, we cannot predict the outcome of these proceedings, as 37 legal matters are subject to inherent uncertainties, and there exists the possibility that the ultimate resolution of these matters could have a material adverse effect on our business, financial condition, results of operations or cash flows. Item 4. Mine Saf ety Disclosures None. 38 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDeclaration Date Record Date Payment Date Per Share Dividend Total Cash Dividends Paid (in millions) (1) October 28, 2024 November 25, 2024 December 9, 2024 $ 0.375 $ 21.0 July 29, 2024 August 26, 2024 September 9, 2024 $ 0.375 $ 21.0 April 29, 2024 May 28, 2024 June 10, 2024 $ 0.375 $ 21.2 February 5, 2024 March 4, 2024 March 18, 2024 $ 0.375 $ 21.2 (1) All unvested equity incentive awards currently outstanding are entitled to receive dividends or dividend equivalents, provided that such dividends or dividend equivalents are withheld by the Company and distributed to the applicable holder upon vesting of the award.
Biggest changeDeclaration Date Record Date Payment Date Per Share Dividend Total Cash Dividends Paid (in millions) (1) November 3, 2025 November 24, 2025 December 8, 2025 $ 0.375 $ 20.6 August 4, 2025 August 25, 2025 September 8, 2025 $ 0.375 $ 21.1 May 5, 2025 May 27, 2025 June 9, 2025 $ 0.375 $ 21.1 February 10, 2025 March 10, 2025 March 24, 2025 $ 0.375 $ 21.0 (1) All unvested equity incentive awards currently outstanding are entitled to receive dividends or dividend equivalents, provided that such dividends or dividend equivalents are withheld by the Company and distributed to the applicable holder upon vesting of the award.
The Board of Directors retains the power to modify, suspend, or cancel the dividend policy in any manner and at any time that it may deem necessary or appropriate. 37 Performance Graph Notwithstanding any statement to the contrary in any of our filings with the SEC, the following performance graph shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act or “soliciting material” under the Exchange Act and shall not be incorporated by reference into any such filings irrespective of any general incorporation language contained in such filing.
The Board of Directors retains the power to modify, suspend, or cancel the dividend policy in any manner and at any time that it may deem necessary or appropriate. 39 Performance Graph Notwithstanding any statement to the contrary in any of our filings with the SEC, the following performance graph shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act or “soliciting material” under the Exchange Act and shall not be incorporated by reference into any such filings irrespective of any general incorporation language contained in such filing.
On August 15, 2022, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $1.1 billion and extended the 38 expiration date to August 15, 2024.
On August 15, 2022, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $1.1 billion and extended the expiration date to August 15, 2024.
The following graph compares the cumulative total stockholder return on our common stock with the cumulative total return of the S&P 500 Index and the S&P 500 Software & Services Index during the five-year period commencing on December 31, 2019 and ending on December 31, 2024.
The following graph compares the cumulative total stockholder return on our common stock with the cumulative total return of the S&P 500 Index and the S&P 500 Software & Services Index during the five-year period commencing on December 31, 2020 and ending on December 31, 2025.
On February 10, 2025, our Board of Directors declared a quarterly cash dividend of $0.375 per share of common stock payable on March 24, 2025 to stockholders of record at the close of business on March 10, 2025.
On February 10, 2026, our Board of Directors declared a quarterly cash dividend of $0.375 per share of common stock payable on March 23, 2026 to stockholders of record at the close of business on March 9, 2026.
Item 5. Market for Registrant’s Common Equi ty, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NYSE under the symbol “PAYC.” As of February 11, 2025, there were approximately 3,200 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equi ty, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NYSE under the symbol “PAYC.” As of February 10, 2026, there were approximately 2,862 holders of record of our common stock.
The following table summarizes quarterly dividends paid during 2024.
The following table summarizes quarterly dividends paid during 2025.
Purchases of Equity Securities The number of shares of common stock repurchased by us during the three months ended December 31, 2024 is set forth below: Total Number of Shares Purchased Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)(2) October 1 - 31, 2024 (3) 1,087 $ 166.17 1,087 $ 1,486,052,000 November 1 - 30, 2024 (3) 30,737 $ 231.14 30,737 $ 1,478,947,000 December 1 - 31, 2024 — $ — — $ 1,478,947,000 Total 31,824 31,824 (1) Pursuant to a stock repurchase plan announced on November 20, 2018, we were authorized to purchase (in the aggregate) up to $150.0 million of our common stock in open market purchases, privately negotiated transactions or by other means.
Purchases of Equity Securities The number of shares of common stock repurchased by us during the three months ended December 31, 2025 is set forth below: Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) October 1 - 31, 2025 (2) 503,962 $ 199.86 503,962 $ 1,116,986,000 November - 30, 2025 (3) 50,264 $ 160.98 50,264 $ 1,108,894,000 December 1 - 31, 2025 — $ — — $ 1,108,894,000 Total 554,226 554,226 (1) Pursuant to a stock repurchase plan announced on November 20, 2018, we were authorized to purchase (in the aggregate) up to $150.0 million of our common stock in open market purchases, privately negotiated transactions or by other means.
(3) Consists of shares withheld to satisfy tax withholding obligations for certain employees upon the vesting of equity incentive awards. Item 6. R eserved 39
(3) Includes 8,583 shares withheld to satisfy tax withholding obligations for certain individuals upon the vesting of equity incentive awards. Item 6. R eserved 40
On July 31, 2024, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $1.5 billion and extended the expiration date to August 15, 2026. (2) Exclusive of the impact of the one-percent excise tax under the Inflation Reduction Act of 2022.
On July 31, 2024, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $1.5 billion and extended the expiration date to August 15, 2026. (2) Includes 3,527 shares withheld to satisfy tax withholding obligations for certain individuals upon the vesting of equity incentive awards.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

71 edited+11 added−19 removed79 unchanged
Biggest changeYear Ended December 31, 2024 2023 % Change Revenues Recurring and other $ 1,758.3 93.4 % $ 1,585.7 93.6 % 10.9% Interest on funds held for clients 124.9 6.6 % 108.0 6.4 % 15.7% Total revenues 1,883.2 100.0 % 1,693.7 100.0 % 11.2% Cost of revenues Operating expenses 267.4 14.2 % 223.7 13.2 % 19.5% Depreciation and amortization 67.2 3.6 % 52.6 3.1 % 27.8% Total cost of revenues 334.6 17.8 % 276.3 16.3 % 21.1% Administrative expenses Sales and marketing 434.4 23.1 % 417.6 24.7 % 4.0% Research and development 242.6 12.9 % 199.0 11.7 % 21.9% General and administrative 158.6 8.4 % 288.1 17.0 % -44.9% Depreciation and amortization 78.7 4.2 % 61.4 3.6 % 28.3% Total administrative expenses 914.3 48.6 % 966.1 57.0 % -5.4% Total operating expenses 1,248.9 66.3 % 1,242.4 73.4 % 0.5% Operating income 634.3 33.7 % 451.3 26.6 % 40.5% Interest expense (3.4 ) -0.2 % (1.9 ) -0.1 % 75.2% Other income (expense), net 18.1 1.0 % 23.0 1.4 % -21.3% Income before income taxes 649.0 34.5 % 472.4 27.9 % 37.4% Provision for income taxes 147.0 7.8 % 131.6 7.8 % 11.7% Net income $ 502.0 26.7 % $ 340.8 20.1 % 47.3% Revenues Recurring and Other Revenues The increase in recurring and other revenues for the year ended December 31, 2024 from the year ended December 31, 2023 was the result of the addition of new clients, increased revenue from sales of additional applications and services to existing clients, additions and increased usage of existing products and services, and the realization of pricing strategies.
Biggest changeYear Ended December 31, 2025 2024 % Change Revenues Recurring and other $ 1,938.7 94.5 % $ 1,758.3 93.4 % 10.3% Interest on funds held for clients 113.0 5.5 % 124.9 6.6 % -9.6% Total revenues 2,051.7 100.0 % 1,883.2 100.0 % 9.0% Cost of revenues Operating expenses 263.0 12.8 % 267.4 14.2 % -1.6% Depreciation and amortization 82.4 4.0 % 67.2 3.6 % 22.5% Total cost of revenues 345.4 16.8 % 334.6 17.8 % 3.2% Administrative expenses Sales and marketing 482.8 23.5 % 434.4 23.1 % 11.2% Research and development 283.4 13.8 % 242.6 12.9 % 16.8% General and administrative 279.0 13.6 % 158.6 8.4 % 75.9% Depreciation and amortization 93.9 4.6 % 78.7 4.2 % 19.3% Total administrative expenses 1,139.1 55.5 % 914.3 48.6 % 24.6% Total operating expenses 1,484.5 72.4 % 1,248.9 66.3 % 18.9% Operating income 567.2 27.6 % 634.3 33.7 % -10.6% Interest expense (3.4 ) -0.2 % (3.4 ) -0.2 % 1.9% Other income, net 55.6 2.7 % 18.1 1.0 % 207.2% Income before income taxes 619.4 30.2 % 649.0 34.5 % -4.6% Provision for income taxes 166.0 8.1 % 147.0 7.8 % 13.0% Net income $ 453.4 22.1 % $ 502.0 26.7 % -9.7% Revenues Recurring and Other Revenues The increase in recurring and other revenues for the year ended December 31, 2025 from the year ended December 31, 2024 was the result of the addition of new clients, increased revenue from sales of additional applications and services to existing clients, additions and increased usage of existing products and services, and the realization of pricing strategies.
When we calculate the number of clients based on parent company grouping at period end, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers (or, in certain circumstances, separate client 41 codes), which often combines client accounts that are affiliated with the same parent organization.
When we calculate the number of clients based on parent company grouping at period end, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers (or, in certain circumstances, separate client codes), which often combines client accounts that are affiliated with the same parent organization.
Actual future capital requirements will depend on many factors, including our future revenues, cash from operating activities and the level of expenditures in all areas of our business. In addition, we purchased the naming rights to the downtown Oklahoma City arena that is home to the Oklahoma City Thunder National Basketball Association franchise.
Actual future capital requirements will depend on many factors, including our future revenues, cash from operating activities and the level of expenditures in all areas of our business. In addition, we purchased the naming rights to the downtown Oklahoma City arena that is currently home to the Oklahoma City Thunder National Basketball Association franchise.
As is customary for our business, we also expect fluctuations in research and development expense as a percentage of revenue on a quarter-to-quarter basis due to seasonal revenue trends, the introduction of new products, the amount and timing of research and development costs that may be capitalized and the timing of onboarding new hires and restricted stock vesting events.
As is customary for our business, we expect fluctuations in research and development expense as a percentage of revenue on a quarter-to-quarter basis due to seasonal revenue trends, the introduction of new products, the amount and timing of research and development costs that may be capitalized and the timing of onboarding new hires and restricted stock vesting events.
The contract period for the majority of contracts associated with these revenues is one month due to the fact that both we and the client typically have the unilateral right to terminate a wholly unperformed contract without compensating the other party by providing 30 days’ notice of termination.
The contract period for the majority of contracts associated with these revenues is one month due to the fact that both we and the client typically have the unilateral right to terminate a wholly unperformed contract without compensating the other 49 party by providing 30 days’ notice of termination.
We typically invest funds held for clients in money market funds, demand deposit accounts, certificates of deposit, commercial paper and U.S. treasury securities until they are paid to the applicable tax or regulatory agencies or to client employees.
We typically invest funds held for clients in money market funds, demand deposit accounts, certificates of deposit, 43 commercial paper and U.S. treasury securities until they are paid to the applicable tax or regulatory agencies or to client employees.
Revenues from the sale of time clocks are recognized when control is transferred to the client upon delivery of the product. 42 Interest on Funds Held For Clients We earn interest income on funds held for clients.
Revenues from the sale of time clocks are recognized when control is transferred to the client upon delivery of the product. Interest on Funds Held For Clients We earn interest income on funds held for clients.
As part of our payroll and payroll tax filing services, we collect funds from our clients for employment taxes, which we remit to the appropriate tax agencies and accounts designated by our clients.
As part of our payroll and payroll tax filing services, we collect funds from our clients for employment taxes and payroll obligations, which we remit to the appropriate tax agencies and accounts designated by our clients.
We recognize a valuation allowance to reduce deferred tax assets to the net amount we believe is more likely than not to be realized. 43 Results of Operations The following table sets forth selected consolidated statements of income data and such data as a percentage of total revenues for each of the periods indicated, as well as year-over-year changes with respect to each line item.
We recognize a valuation allowance to reduce deferred tax assets to the net amount we believe is more likely than not to be realized. 44 Results of Operations The following table sets forth selected consolidated statements of income data and such data as a percentage of total revenues for each of the periods indicated, as well as year-over-year changes with respect to each line item.
Additionally, we maintain a $1.0 billion senior secured revolving credit facility (the “Revolving Credit Facility”), which can be accessed as needed to supplement our operating cash flow and cash balances. As of December 31, 2024, we did not have any outstanding borrowings under the Revolving Credit Facility. We fund our operations primarily from cash flows generated from operations.
Additionally, we maintain a $1.0 billion senior secured revolving credit facility (the “Revolving Credit Facility”), which can be accessed as needed to supplement our operating cash flow and cash balances. As of December 31, 2025, we did not have any outstanding borrowings under the Revolving Credit Facility. We fund our operations primarily from cash flows generated from operations.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.” 46 Cash Flow Analysis Our cash flows from operating activities have historically been significantly impacted by profitability, implementation revenues received but deferred, our investment in sales and marketing to drive growth, and research and development.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.” 47 Cash Flow Analysis Our cash flows from operating activities have historically been significantly impacted by profitability, implementation revenues received but deferred, our investment in sales and marketing to drive growth, and research and development.
Substantially all of our revenues are generated from (i) fixed amounts charged per billing period plus a fee per employee or transaction processed and (ii) fixed amounts charged per billing period. Our billing period varies by client based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly.
Substantially all of our revenues are generated from (i) fixed amounts charged per billing period plus a fee per employee or transaction processed and (ii) fixed amounts charged per billing period. Our billing period varies by client and is typically based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly.
We plan to open additional sales offices in the future to further expand our market presence. The market for HCM software is highly competitive, rapidly evolving and fragmented. We expect competition to remain intense as new market entrants and disruptive technologies emerge and aggressive pricing and client retention strategies persist.
In addition, we plan to open additional sales offices in the future to further expand our market presence. 41 The market for HCM software is highly competitive, rapidly evolving and fragmented. We expect competition to remain intense as new market entrants and disruptive technologies emerge and aggressive pricing and client retention strategies persist.
Each outside sales team typically consists of a sales manager and approximately seven sales professionals. Certain larger metropolitan areas can support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods. • Annual Revenue Retention Rate .
Each outside sales team typically consists of a sales manager and approximately seven other sales professionals. Certain larger metropolitan areas can 42 support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods. • Annual Revenue Retention Rate .
We measure the fair value of awards that vest solely based on condition of service, such as our time-based shares of restricted stock and time-based restricted stock units, and the fair value of awards that vest based on achieving certain performance metrics, by using the closing market price on the date of grant.
We measure the fair value of awards that vest solely based on condition of service, such as our time-based shares of restricted stock and time-based RSUs, and the fair value of awards that vest based on achieving certain performance metrics, by using the closing market price on the date of grant.
Refer to Note 12 “Stock-Based Compensation” in the notes to our consolidated financial statements for further information regarding our stock-based compensation awards. Recent Accounting Pronouncements Refer to Note 2 “Summary of Significant Accounting Policies” in the notes to the consolidated financial statements for a full description of recent accounting pronouncements.
Refer to Note 11 “Stock-Based Compensation” in the notes to our consolidated financial statements for further information regarding our stock-based compensation awards. Recent Accounting Pronouncements Refer to Note 2 “Summary of Significant Accounting Policies” in the notes to the consolidated financial statements for a full description of recent accounting pronouncements.
In August 2022, our Board of Directors authorized a stock repurchase plan allowing for the repurchase up to $1.1 billion of shares of our common stock in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws, including Rule 10b5-1 programs.
In August 2022, our Board of Directors authorized a stock repurchase plan allowing for the repurchase up to $1.1 billion of shares of our common stock in open market transactions at prevailing market prices, in privately negotiated transactions (including accelerated share repurchases) or by other means in accordance with federal securities laws, including Rule 10b5-1 programs.
As we introduce new applications, expand our client base and renew and expand relationships with existing clients, we expect our average funds held for clients balance and, accordingly, interest earned on funds held for clients, will increase; however, the amount of interest we earn can be positively or negatively impacted by changes in interest rates.
As we introduce new applications, expand our client base and renew and expand relationships with existing clients, we expect our average funds held for clients balance and, accordingly, interest earned on funds held for clients, will increase; however, the amount of interest we earn is positively or negatively impacted by changes in interest rates.
We regularly review our assets recognized from the costs to obtain and costs to fulfill client contracts for potential impairment and did not recognize an impairment loss during the years ended December 31, 2024 or December 31, 2023. Stock-Based Compensation Awards Historically, our stock-based compensation programs have included restricted stock awards and restricted stock unit awards.
We regularly review our assets recognized from the costs to obtain and costs to fulfill client contracts for potential impairment and did not recognize an impairment loss during the years ended December 31, 2025 or December 31, 2024. Stock-Based Compensation Awards Historically, our stock-based compensation programs have included restricted stock awards and restricted stock unit (“RSU”) awards.
The stock repurchase plan was set to expire on August 15, 2024. In July, 2024, our Board of Directors increased and extended the stock repurchase plan, such that $1.5 billion is available for repurchases through August 15, 2026. As of December 31, 2024, there was $1.48 billion available for repurchases under our stock repurchase plan.
The stock repurchase plan was set to expire on August 15, 2024. In July 2024, our Board of Directors increased and extended the stock repurchase plan, such that $1.5 billion is available for repurchases through August 15, 2026. As of December 31, 2025, there was $1.11 billion available for repurchases under our stock repurchase plan.
Cost of Revenues Cost of revenues consists of expenses related to hosting and supporting our applications, hardware costs, systems support and technology and depreciation and amortization. These costs include employee-related expenses (including non-cash stock-based compensation expenses) and other expenses related to client support, bank charges for processing ACH transactions, certain implementation expenses, delivery charges and paper costs.
Cost of Revenues Cost of revenues consists of expenses related to hosting and supporting our applications, hardware costs, systems support and technology and depreciation and amortization. These costs include employee-related expenses (including non-cash stock-based compensation expenses) and other expenses related to client support, bank charges for processing automated clearing house transactions, certain implementation expenses, delivery charges and paper costs.
Our payment of the taxes on behalf of those employees resulted in an aggregate cash expenditure of $21.7 million and, as such, we generally subtract the amounts attributable to such withheld shares from the aggregate amount available for future purchases under our stock repurchase plan. Dividends on Common Stock. For a discussion of our dividends, see “Item 5.
Our payment of the taxes on behalf of those individuals resulted in an aggregate cash expenditure of $44.5 million and, as such, we generally subtract the amounts attributable to such withheld shares from the aggregate amount available for future purchases under our stock repurchase plan. Dividends on Common Stock. For a discussion of our dividends, see “Item 5.
Provision for Income Taxes The provision for income taxes is based on a current estimate of the annual effective income tax rate adjusted to reflect the impact of discrete items. Our effective income tax rate was 23% and 28% for the years ended December 31, 2024 and 2023.
Provision for Income Taxes The provision for income taxes is based on a current estimate of the annual effective income tax rate adjusted to reflect the impact of discrete items. Our effective income tax rate was 27% and 23% for the years ended December 31, 2025 and 2024.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 15, 2024 , for a presentation of the amounts for the year ended December 31, 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 20, 2025 , for a presentation of the amounts for the year ended December 31, 2023.
The HCM industry historically has been driven, in part, by legislation and regulatory action, including COBRA, the Affordable Care Act (“ACA”), changes to the minimum wage laws or overtime rules, and legislation from federal, state, or municipal taxation authorities.
The HCM industry historically has been driven, in part, by legislation and regulatory action, including COBRA, changes to the minimum wage laws or overtime rules, and legislation from federal, state or municipal taxation authorities.
The average daily balance of funds held for clients was $2.4 billion and $2.2 billion the years ended December 31, 2024 and 2023, respectively.
The average daily balance of funds held for clients was $2.7 billion and $2.4 billion the years ended December 31, 2025 and 2024, respectively.
Recurring revenues include revenues relating to the annual processing of payroll tax filing forms and ACA form filing requirements and revenues from processing unscheduled payroll runs (such as bonuses) for our clients.
Recurring revenues include revenues relating to the annual processing of payroll tax filing forms and Affordable Care Act (“ACA”) form filing requirements and revenues from processing unscheduled payroll runs (such as bonuses) for our clients.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on February 15, 2024 , for a discussion of results for the year ended December 31, 2022, including a discussion of the changes in our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the “SEC”) on February 20, 2025 , for a discussion of results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023.
We believe our strategy of focusing on automation across the full solution and employee usage is an important differentiator for attracting new clients and is also key to long-term client satisfaction and client retention. Our software vision is that people should not perform payroll- and HCM-related tasks that systems can safely automate.
We believe our strategy of focusing on incorporating artificial intelligence (“AI”) and automation across our full solution is an important differentiator for attracting new clients and key to long-term client satisfaction and client retention. Our software vision is that people should not perform payroll-related and HCM-related tasks that systems can automate.
Historically, our revenue growth and geographic expansion have driven increases in our employee headcount, which in turn precipitated increases in (i) salaries and benefits, (ii) stock-based compensation expense and (iii) facility costs related to the expansion of our corporate headquarters and operations facilities and additional sales office leases.
Historically, our revenue growth and geographic expansion have driven increases in (i) facility costs related to data centers, the expansion of our corporate headquarters, operations facilities and additional sales office leases and (ii) salaries and benefits and stock-based compensation expense.
GAAP and non-GAAP metrics discussed elsewhere in this Form 10-K, we also monitor the following metrics to evaluate our business, measure our performance and identify trends affecting our business: Year Ended December 31, 2024 2023 2022 Key performance indicators: Clients 37,543 36,820 36,561 Clients (based on parent company grouping) 19,422 19,481 19,081 Sales teams 58 55 55 Annual revenue retention rate (1) 90 % 90 % 91 % (1) During 2023, we modified the method by which we calculate annual revenue retention rate.
GAAP and non-GAAP metrics discussed elsewhere in this Form 10-K, we also monitor the following metrics to evaluate our business, measure our performance and identify trends affecting our business: Year Ended December 31, 2025 2024 2023 Key performance indicators: Clients 39,199 37,543 36,820 Clients (based on parent company grouping) 20,321 19,422 19,481 Sales teams 58 58 55 Annual revenue retention rate (1) 91 % 90 % 90 % • Clients.
On July 29, 2022, we entered into a credit agreement (as amended from time to time, the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as a lender, swingline lender and issuing bank, the lenders from time to time party thereto (collectively with JPMorgan Chase Bank, N.A., the “Lenders”), and JPMorgan Chase Bank, N.A., as the administrative agent.
We are party to a credit agreement (as amended from time to time, the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as a lender, swingline lender and issuing bank, the lenders from time to time party thereto (collectively with JPMorgan Chase Bank, N.A., the “Lenders”), and JPMorgan Chase Bank, N.A., as the administrative agent.
Depreciation and amortization expenses consist of (i) the amount of depreciation and amortization of property and equipment allocated to administrative expenses (based upon an estimate of assets used to support our selling, general and administrative functions) and (ii) amortization of intangible assets.
Depreciation and amortization expenses consist of (i) the amount of depreciation and amortization of property and equipment allocated to administrative expenses (based upon an estimate of assets used to support our selling, general and administrative functions) and (ii) amortization of intangible assets. Interest Expense Interest expense includes interest on our long-term debt.
We define (i) adjusted EBITDA as net income plus interest expense, taxes, depreciation and amortization, non-cash stock-based compensation expense, certain transaction expenses that are not core to our operations (if any), the change in fair value of our interest rate swap (if any) and any loss on the extinguishment of debt and (ii) non-GAAP net income as net income plus non-cash stock-based compensation expense, certain transaction expenses that are not core to our operations (if any), the change in fair value of our interest rate swap (if any) and any loss on the extinguishment of debt, all of which are adjusted for the effect of income taxes.
We define (i) adjusted EBITDA as net income plus interest expense, taxes, depreciation and amortization, non-cash stock-based compensation expense, certain transaction expenses that are not core to our operations (if any) and any loss on the extinguishment of debt, less any gain on modification of the naming rights agreement, and (ii) non-GAAP net income as net income plus non-cash stock-based compensation expense, certain transaction expenses that are not core to our operations (if any) and any loss on the extinguishment of debt, less any gain on modification of the naming rights agreement, all of which are adjusted for the effect of income taxes.
Growing our business has resulted in, and will continue to result in, substantial investments in sales professionals, operating expenses, system development and programming costs and general and administrative expenses, which have increased and will continue to increase our expenses.
Growing our business has resulted in, and will continue to result in, substantial investments in sales professionals, operating expenses, system development and programming costs (including those related our full solution automation and AI initiatives) and general and administrative expenses, which have increased and will continue to increase our expenses.
Critical Accounting Policies and Estimates Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. Estimates made in accordance with U.S.
The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. Estimates made in accordance with U.S.
Although these revenues are related to our recurring revenues, they represent distinct performance obligations. The nonrefundable upfront fee charged to our clients results in an implied performance obligation in the form of a material right to the client related to the client’s option to renew at the end of the contract period.
The nonrefundable upfront fee charged to our clients results in an implied performance obligation in the form of a material right to the client related to the client’s option to renew at the end of the contract period.
Subject to certain conditions set forth in the Credit Agreement, we may borrow, prepay and reborrow under the Revolving Credit Facility and terminate or reduce the Lenders’ commitments at any time prior to the Scheduled Maturity Date.
All loans under the Credit Agreement will mature on July 29, 2027 (the “Scheduled Maturity Date”). Subject to certain conditions set forth in the Credit Agreement, we may borrow, prepay and reborrow under the Revolving Credit Facility and terminate or reduce the Lenders’ commitments at any time prior to the Scheduled Maturity Date.
The table below sets forth the amounts of capitalized and expensed research and development costs for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 % Change Capitalized portion of research and development $ 125.7 $ 96.7 30% Expensed portion of research and development 242.6 199.0 22% Total research and development costs $ 368.3 $ 295.7 25% General and administrative During the year ended December 31, 2024, general and administrative expenses decreased $129.5 million from the prior year primarily due to a $117.5 million reversal of previously recognized stock-based compensation expense related to the forfeiture of a restricted stock award upon Chad Richison’s transition to Co-Chief Executive Officer, and a $11.4 million decrease in other employee-related expenses.
The table below sets forth the amounts of capitalized and expensed research and development costs for the years ended December 31, 2025 and 2024: Year Ended December 31, 2025 2024 % Change Capitalized portion of research and development $ 152.9 $ 125.7 22% Expensed portion of research and development 283.4 242.6 17% Total research and development costs $ 436.3 $ 368.3 18% General and administrative During the year ended December 31, 2025, general and administrative expenses increased $120.4 million from the prior year primarily due to a $117.5 million reversal of previously recognized stock-based compensation expense related to the forfeiture of a restricted stock award upon Chad Richison’s transition to Co-Chief Executive Officer in February 2024 and a $2.0 million increase in other employee-related expenses.
General and administrative expenses consist of employee-related expenses for finance and accounting, legal, human resources and management information systems personnel (including non-cash stock-based compensation expenses), legal costs, professional fees and other corporate expenses.
Research and development expenses consist primarily of employee-related expenses (including non-cash stock-based compensation expenses) for our development staff, net of capitalized software costs for internally developed software. General and administrative expenses consist of employee-related expenses for finance and accounting, legal, human resources and management information systems personnel (including non-cash stock-based compensation expenses), legal costs, professional fees and other corporate expenses.
Other Income (Expense), net Other income (expense), net includes interest earned on our own funds, any gain or loss on the sale or disposal of fixed assets, costs associated with the early repayment of debt, loss on the extinguishment of debt, and the realized gain that resulted from the settlement of our interest rate swap agreement.
Other Income, net Other income, net includes interest earned on our own funds, any gain or loss on the sale or disposal of fixed assets, any costs associated with the early repayment of debt, any loss on the extinguishment of debt, and any gain on the modification of the naming rights agreement.
The following table summarizes the consolidated statements of cash flows for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 % Change Net cash provided by (used in): Operating activities $ 533.9 $ 485.0 10% Investing activities (22.2 ) (196.7 ) -89% Financing activities 1,108.3 (274.6 ) -504% Change in cash, cash equivalents, restricted cash and restricted cash equivalents $ 1,620.0 $ 13.7 11725% Operating Activities Cash provided by operating activities for the year ended December 31, 2024 primarily consisted of payments received from our clients and interest earned on funds held for clients.
The following table summarizes the consolidated statements of cash flows for the years ended December 31, 2025 and 2024: Year Ended December 31, 2025 2024 % Change Net cash provided by (used in): Operating activities $ 678.9 $ 533.9 27% Investing activities (611.2 ) (22.2 ) 2653% Financing activities 1,022.0 1,108.3 -8% Increase in cash, cash equivalents, restricted cash and restricted cash equivalents $ 1,089.7 $ 1,620.0 -33% Operating Activities Cash provided by operating activities for the year ended December 31, 2025 primarily consisted of payments received from our clients and interest earned on funds held for clients.
The Monte Carlo simulation model used to determine the fair value of awards that vest based on market conditions considers various subjective assumptions as inputs, which involve inherent uncertainties and the application of our judgment as it relates to 49 market volatilities, the historical volatility of our stock price, risk-free rates, expected performance period, dividend yield, and correlation to benchmark (for total stockholder return based awards).
Stock-based compensation cost is recognized on a straight-line basis over the requisite or derived service period of the award, which is generally the vesting period of the award, with forfeitures recognized as incurred. 50 The Monte Carlo simulation model used to determine the fair value of awards that vest based on market conditions considers various subjective assumptions as inputs, which involve inherent uncertainties and the application of our judgment as it relates to market volatilities, the historical volatility of our stock price, risk-free rates, expected performance period, dividend yield, and correlation to benchmark (for total stockholder return based awards).
We track the number of our clients to provide an accurate gauge of the size of our business. Unless we state otherwise or the context otherwise requires, references to clients throughout this Form 10-K refer to this metric. • Clients (based on parent company grouping).
Unless we state otherwise or the context otherwise requires, references to clients throughout this Form 10-K refer to this metric. • Clients (based on parent company grouping).
Expenses Cost of Revenues During the year ended December 31, 2024, operating expenses increased from the prior year by $43.7 million, primarily due to a $29.2 million increase in employee-related expenses, an $8.3 million increase in banking related fees, and a $6.1 million increase in shipping and supplies fees.
Expenses Cost of Revenues During the year ended December 31, 2025, operating expenses decreased from the prior year by $4.3 million, primarily due to an $8.2 million decrease in employee-related expenses, which was partially offset by a $2.5 million increase in shipping and supplies fees and a $1.1 million increase in banking related fees.
Non-Cash Stock-Based Compensation Expense The following table presents the non-cash stock-based compensation expense that is included within the specified line items in our consolidated statements of comprehensive income: Year Ended December 31, 2024 2023 % Change Operating expenses $ 13.5 $ 10.6 27% Sales and marketing 19.0 23.9 -21% Research and development 26.3 22.3 18% General and administrative (81.7 ) 73.0 -212% Total non-cash stock-based compensation expense $ (22.9 ) $ 129.8 -118% Depreciation and Amortization During the year ended December 31, 2024, depreciation and amortization expense increased from the prior year period primarily due to the development of additional technology, purchases of other related fixed assets, and the impact of our corporate headquarters expansion that was placed into service in April 2024.
Non-Cash Stock-Based Compensation Expense The following table presents the non-cash stock-based compensation expense that is included within the specified line items in our consolidated statements of comprehensive income: Year Ended December 31, 2025 2024 % Change Operating expenses $ 15.7 $ 13.5 16% Sales and marketing 28.8 19.0 52% Research and development 34.7 26.3 32% General and administrative 39.5 (81.7 ) -148% Total non-cash stock-based compensation expense $ 118.7 $ (22.9 ) -619% Depreciation and Amortization During the year ended December 31, 2025, depreciation and amortization expense increased from the prior year primarily due to the development of additional technology, purchases of other related fixed assets, and the impact of our corporate headquarters expansion that was placed into service in April 2024, which increases were partially offset by the impact of an increase in the estimated useful lives of servers and network equipment.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. In the third quarter of 2025, we completed an assessment of the useful lives of our servers and network equipment.
Under the Credit Agreement, we are required to maintain as of the end of each fiscal quarter a consolidated interest coverage ratio of not less than 3.0 to 1.0 and a consolidated leverage ratio of not greater than 3.25 to 1.0, stepping down to 3.0 to 1.0 as of December 31, 2025 and thereafter.
Under the Credit Agreement, we are required to maintain as of the end of each fiscal quarter a consolidated interest coverage ratio of not less than 3.0 to 1.0 and a consolidated leverage ratio of not greater than 3.0 to 1.0. Stock Repurchase Plan and Withholding Shares to Cover Taxes.
During the year ended December 31, 2024, we repurchased an aggregate of 924,493 shares of our common stock at an average cost of $156.29 per share, including 112,288 shares withheld to satisfy tax withholding obligations for certain employees upon the vesting of equity incentive awards.
During the year ended December 31, 2025, we repurchased an aggregate of 1,730,720 shares of our common stock at an average cost of $213.81 per share, including 184,752 shares withheld to satisfy tax withholding obligations for certain individuals upon the vesting of equity incentive awards.
Depreciation and amortization expense increased $14.6 million primarily due to the development of additional technology, purchases of other related fixed assets, and the impact of our corporate headquarters expansion that was not in service in the prior year. 44 Administrative Expenses Sales and marketing During the year ended December 31, 2024, sales and marketing expenses increased from the prior year by $16.8 million due to a $36.4 million increase in employee-related expenses, which was partially offset by a $19.6 million decrease in marketing and advertising expense.
Depreciation and amortization expense increased $15.2 million primarily due to the development of additional technology, purchases of other related fixed assets, and the impact of our corporate headquarters expansion that was placed into service in April 2024, which increases were partially offset by the impact of an increase in the estimated useful lives of servers and network equipment. 45 Administrative Expenses Sales and marketing During the year ended December 31, 2025, sales and marketing expenses increased from the prior year by $48.4 million due to a $40.4 million increase in marketing and advertising expense and an $8.0 million increase in employee-related expenses.
The 2022 annual revenue retention rate has been recast to conform to the methodology described below. • Clients. When we calculate the number of clients at period end, we treat client accounts with separate taxpayer identification numbers (or, in certain circumstances, separate client codes) as separate clients, which often separates client accounts that are affiliated with the same parent organization.
When we calculate the number of clients at period end, we treat client accounts with separate taxpayer identification numbers (or, in certain circumstances, separate client codes) as separate clients, which often separates client accounts that are affiliated with the same parent organization. We track the number of our clients to provide an accurate gauge of the size of our business.
We consider the total price charged to a client in a given period to be indicative of the standalone selling price, as the total amount charged is within a reasonable range of prices typically charged for our goods and services for comparable classes of client groups, which we periodically assess for price adjustments. 48 Other revenues consist of nonrefundable implementation fees, which are charged upfront to new clients to offset the expense of new client set-up, as well as revenues from the sale of time clocks as part of our time and attendance application.
We consider the total price charged to a client in a given period to be indicative of the standalone selling price, as the total amount charged is within a reasonable range of prices typically charged for our goods and services for comparable classes of client groups, which we periodically assess for price adjustments.
We believe our ability to continue to develop new applications and to improve existing applications will enable us to increase revenues in the future, and the number of our new applications adopted by our 40 clients has been a significant factor in our revenue growth.
Client adoption of new applications and, historically, client employee usage of both new and existing applications have been significant factors in our recurring revenue growth. We believe our ability to continue to develop new applications and to improve existing applications will enable us to increase recurring revenues in the future.
Year Ended December 31, 2024 2023 Net income to adjusted EBITDA: Net income $ 502.0 $ 340.8 Interest expense 3.4 1.9 Provision for income taxes 147.0 131.6 Depreciation and amortization 145.9 114.0 EBITDA 798.3 588.3 Non-cash stock-based compensation expense (22.9 ) 129.8 Loss on extinguishment of debt — 1.2 Adjusted EBITDA $ 775.4 $ 719.3 50 Year Ended December 31, 2024 2023 Net income to non-GAAP net income: Net income $ 502.0 $ 340.8 Non-cash stock-based compensation expense (22.9 ) 129.8 Loss on extinguishment of debt — 1.2 Income tax effect on non-GAAP adjustments (17.1 ) (22.3 ) Non-GAAP net income $ 462.0 $ 449.5 Weighted average shares outstanding: Basic 56.2 57.7 Diluted 56.3 58.0 Earnings per share, basic $ 8.93 $ 5.91 Earnings per share, diluted $ 8.92 $ 5.88 Non-GAAP net income per share, basic $ 8.22 $ 7.79 Non-GAAP net income per share, diluted $ 8.21 $ 7.75 Year Ended December 31, 2024 2023 Earnings per share to non-GAAP net income per share, basic: Earnings per share, basic $ 8.93 $ 5.91 Non-cash stock-based compensation expense (0.41 ) 2.25 Loss on extinguishment of debt — 0.02 Income tax effect on non-GAAP adjustments (0.30 ) (0.39 ) Non-GAAP net income per share, basic $ 8.22 $ 7.79 Year Ended December 31, 2024 2023 Earnings per share to non-GAAP net income per share, diluted: Earnings per share, diluted $ 8.92 $ 5.88 Non-cash stock-based compensation expense (0.41 ) 2.24 Loss on extinguishment of debt — 0.02 Income tax effect on non-GAAP adjustments (0.30 ) (0.39 ) Non-GAAP net income per share, diluted $ 8.21 $ 7.75
Year Ended December 31, 2025 2024 Net income to adjusted EBITDA: Net income $ 453.4 $ 502.0 Interest expense 3.4 3.4 Provision for income taxes 166.0 147.0 Depreciation and amortization 176.3 145.9 EBITDA 799.2 798.3 Non-cash stock-based compensation expense 118.7 (22.9 ) Gain on modification of naming rights agreement (35.6 ) — Adjusted EBITDA $ 882.3 $ 775.4 51 Year Ended December 31, 2025 2024 Net income to non-GAAP net income: Net income $ 453.4 $ 502.0 Non-cash stock-based compensation expense 118.7 (22.9 ) Gain on modification of naming rights agreement (35.6 ) — Income tax effect on non-GAAP adjustments (17.9 ) (17.1 ) Non-GAAP net income $ 518.6 $ 462.0 Weighted average shares outstanding: Basic 55.8 56.2 Diluted 56.1 56.3 Earnings per share, basic $ 8.13 $ 8.93 Earnings per share, diluted $ 8.08 $ 8.92 Non-GAAP net income per share, basic $ 9.30 $ 8.22 Non-GAAP net income per share, diluted $ 9.24 $ 8.21 Year Ended December 31, 2025 2024 Earnings per share to non-GAAP net income per share, basic: Earnings per share, basic $ 8.13 $ 8.93 Non-cash stock-based compensation expense 2.13 (0.41 ) Gain on modification of naming rights agreement (0.64 ) — Income tax effect on non-GAAP adjustments (0.32 ) (0.30 ) Non-GAAP net income per share, basic $ 9.30 $ 8.22 Year Ended December 31, 2025 2024 Earnings per share to non-GAAP net income per share, diluted: Earnings per share, diluted $ 8.08 $ 8.92 Non-cash stock-based compensation expense 2.12 (0.41 ) Gain on modification of naming rights agreement (0.64 ) — Income tax effect on non-GAAP adjustments (0.32 ) (0.30 ) Non-GAAP net income per share, diluted $ 9.24 $ 8.21
Interest on Funds Held For Clients Higher interest rates and an increase in average funds held for client balances, resulted in increased interest earned on funds held for clients for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Interest on Funds Held For Clients The impact of lower interest rates during the year ended December 31, 2025 as compared to the prior year was partially offset by an increase in average funds held for client balances, but nonetheless resulted in decreased interest earned on funds held for clients for the year ended December 31, 2025 as compared to the year ended December 31, 2024.
Research and development During the year ended December 31, 2024, research and development expenses increased $43.6 million from the prior year primarily due to an increase in employee-related expenses.
Research and development During the year ended December 31, 2025, research and development expenses increased $40.8 million from the prior year primarily due to an increase in employee-related expenses. As a result of reduced headcount, we expect research and development employee-related expenses to be lower in 2026 as compared to 2025.
Our principal marketing efforts include national and local advertising campaigns, email campaigns, social and digital media campaigns, search engine marketing methods, sponsorships, tradeshows, print advertising and outbound marketing including personalized direct mail campaigns.
Our revenues are primarily generated through our sales force that solicits new clients and our client relations representatives (“CRRs”) who sell additional applications to existing clients. Our principal marketing efforts include national and local advertising campaigns, email campaigns, social and digital media campaigns, search engine marketing methods, sponsorships, tradeshows, print advertising and outbound marketing including personalized direct mail campaigns.
Interest Expense Interest expense includes interest on our long-term debt and settlements related to an interest rate swap prior to the termination of the interest rate swap agreement on August 24, 2022. Prior to the repayment of our long-term debt in November 2023, we capitalized interest costs incurred for indebtedness related to construction in progress.
Prior to the repayment of our long-term debt in November 2023, we capitalized interest costs incurred for indebtedness related to construction in progress. See Note 6 “Long-Term Debt” for discussion of the repayment of our debt.
Financing Activities Cash provided by financing activities for the year ended December 31, 2024 increased from the prior year due to the impact of a $1,217.2 million change related to the client funds obligation, which is due to the timing of receipts from our clients and payments 47 made to our clients’ employees and applicable taxing authorities on their behalf, a $163.8 million decrease in repurchases of common stock, a $29.0 million decrease in payments on long-term debt, and a $0.7 million decrease in payment of debt issuance costs.
The decrease in cash provided by financing activities was partially offset by the impact of a $133.7 million change related to the client funds obligation, which is due to the timing of receipts from our clients and payments made to our clients’ employees and applicable taxing authorities on their behalf, and a $5.5 million increase in proceeds from the employee stock purchase plan.
We are funding our ongoing capital expenditures from available cash. Further, to date, all cash dividends and purchases under our stock repurchase plan have been funded from available cash.
We are funding our ongoing capital expenditures from available cash. Further, to date, all cash dividends and purchases under our stock repurchase plan have been funded from available cash, although we may determine that it is appropriate to fund future stock repurchases or other capital requirements from a combination of available cash and borrowings under the Revolving Credit Facility.
For additional information regarding our naming rights agreement, leases, and our commitments and contingencies, see Note 4 “Goodwill and Intangible Assets, Net”, Note 5 “Leases” and Note 13” Commitments and Contingencies”. We plan to continue to lease additional office space to support our growth. In addition, many of our existing lease agreements provide us with the option to renew.
Contractual Obligations Our principal commitments primarily consist of leases for office space and the naming rights agreement. For additional information regarding our naming rights agreement, leases, and our commitments and contingencies, see Note 4 “Goodwill and Intangible Assets, Net”, Note 5 “Leases” and Note 12” Commitments and Contingencies”.
Under the terms of the naming rights agreement, we committed to make payments escalating annually from $4.0 million in 2021 to $6.1 million in 2035. The payments are due in the fourth quarter of each year. Upon the conclusion of the initial term, the agreement may be extended upon the mutual agreement of both parties for an additional five-year period.
Under the terms of the naming rights agreement, we committed to make escalating annual sponsorship fee payments from 2021 to 2035. The payments are due in the fourth quarter of each year.
While these trends may continue in the near-term, our long-term focused investments in automation, client ROI achievement, and world-class service are designed to counteract these recent negative trends. Our target client size is organizations with 50 to 10,000 or more employees.
These market pressures can directly affect our recurring revenue growth and our ability to attract and retain clients. We believe our long-term focused investments in automation, client ROI achievement, and world-class service can strengthen our recurring revenue growth and annual revenue retention rate. Our target client size is organizations with 50 to 10,000 or more employees.
Investing Activities Cash used in investing activities for the year ended December 31, 2024 decreased from the prior year primarily due to a $175.0 million increase in proceeds from investments from funds held for clients.
Compared to the year ended December 31, 2024, our operating cash flows for the year ended December 31, 2025 were positively impacted by changes in working capital. 48 Investing Activities Cash used in investing activities for the year ended December 31, 2025 increased from the prior year primarily due to an $811.0 million increase in purchases of investments from funds held for clients and a $78.0 million increase in purchases of property and equipment, which were partially offset by a $300.0 million increase in proceeds from investments from funds held for clients.
Our billing period varies by client based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly.
Our billing period varies by client and is typically based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly. Over time, an increasing number of clients will be billed on a monthly basis for certain HCM applications and services, regardless of the client’s payroll cycle.
When applicable, our future operating lease obligations include payments due during any renewal period provided for in the lease where the lease imposes a penalty for failure to renew. Additional details on our leases, including the related future cash outflows, are included within Note 5 “Leases” in the notes to our consolidated financial statements included elsewhere within this Form 10-K.
Additional details on our leases, including the related future cash outflows, are included within Note 5 “Leases” in the notes to our consolidated financial statements included elsewhere within this Form 10-K. Critical Accounting Policies and Estimates Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP.
We completed an expansion of our corporate headquarters, which was placed into service in the second quarter of 2024. As our business grows, we expect our capital expenditures related to research and development and other strategic expansion activities to increase.
We completed an expansion of our corporate headquarters, which was placed into service in the second quarter of 2024. Our capital expenditures will fluctuate based on our strategic initiatives. Depending on certain growth opportunities, we may choose to accelerate investments in sales and marketing, acquisitions, technology and services.
In addition, with Global HCM, a number of our HCM applications and tools are available in 15 languages and dialects and are accessible to users in more than 190 countries. The client’s use of our applications routinely fluctuates based upon factors that include the number of payrolls run and changes in the client’s employee population.
For a description of our applications, refer to Part I, Item 1, “Business,” of this Form 10-K. The client’s use of our applications routinely fluctuates based upon factors that include the number of payrolls run and changes in the client’s employee population.
The increase in cash provided by financing activities was partially offset by a $20.0 million increase in dividends paid and a $7.8 million increase in withholding taxes paid related to net share settlements. Contractual Obligations Our principal commitments primarily consist of leases for office space and the naming rights agreement.
Financing Activities Cash provided by financing activities for the year ended December 31, 2025 decreased from the prior year primarily due to a $202.7 million increase in repurchases of common stock and a $22.8 million increase in withholding taxes paid related to net share settlements.
Interest Expense The increase in interest expense for the year ended December 31, 2024 primarily due to the timing of our expansion project at our corporate headquarters, which resulted in a higher capitalization rate of interest in 2023. 45 Other Income (Expense), net The decrease in other income (expense), net for the year ended December 31, 2024, as compared to the prior year, was primarily attributable to a decrease in interest earned on our corporate funds primarily due to lower operating cash balances.
Interest Expense During the year ended December 31, 2025, interest expense was flat compared to the prior year. Other Income, net The increase in other income, net for the year ended December 31, 2025, as compared to the prior year, was primarily attributable to a $35.6 million gain that resulted from the July 2025 amendment to the naming rights agreement.
The Credit Agreement provides for the Revolving Credit Facility in the aggregate principal amount of up to $1.0 billion. All loans under the Credit Agreement will mature on July 29, 2027 (the “Scheduled Maturity Date”).
The Credit Agreement provides for the Revolving Credit Facility in the aggregate principal amount of up to $1.0 billion. In addition, we may request an incremental facility of up to an additional $500.0 million, subject to obtaining additional lender commitments and approvals and satisfying certain other conditions.
Removed
We serve a diverse client base in terms of size and industry. Our revenues are primarily generated through our sales force that solicits new clients and our client relations representatives (“CRRs”) who sell new applications to existing clients.
Added
Over time, an increasing number of clients will be billed on a monthly basis for certain HCM applications and services, regardless of the client’s payroll cycle. We serve a diverse client base in terms of size and industry.
Removed
For example, our industry-first Beti technology automates and streamlines the payroll process by empowering employees to do their own payroll. Client adoption of new applications and, historically, client employee usage of both new and existing applications have been significant factors in our revenue growth.
Added
We have designed our software so users do not have to be system experts or even need training to access information. For example, our industry-first command-driven AI engine, IWant, provides an easy, automated avenue for seeking information about employee data without having to navigate through the software.
Removed
Nonetheless, because Beti is designed to eliminate payroll errors that lead to billable corrections and unscheduled payroll runs, we have experienced a reduction in these activities that historically would otherwise generate additional revenue for us.
Added
Automating our core business systems is creating new efficiencies that have led to reductions in headcount and, as a result, contributed to a decrease in certain employee-related expenses during the year ended December 31, 2025. Due to lower headcount, we expect that certain employee-related expenses will be lower in 2026 as compared to 2025.
Removed
These market pressures can directly affect our revenue growth and our ability to attract and retain clients. Our revenue growth rate and annual revenue retention rate declined in 2023 and remained under pressure throughout 2024.
Added
Client attrition, particularly among smaller clients, partially offset the favorable impact of these revenue drivers.
Removed
Based on our total revenues, we have grown at a 22% compound annual growth rate from January 1, 2021 through December 31, 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+0 added−0 removed0 unchanged
Biggest changeOur available-for-sale securities consisted of a U.S. treasury security with an original maturity of two years. The primary objectives of our investing activities are capital preservation, meeting our liquidity needs and, with respect to investing client funds, generating interest income while maintaining the safety of principal. We do not enter into investments for trading or speculative purposes.
Biggest changeOur available-for-sale securities consisted of U.S. treasury securities with original maturities of two years or less and a certificate of deposit. The primary objectives of our investing activities are capital preservation, meeting our liquidity needs and, with respect to investing client funds, generating interest income while maintaining the safety of principal.
Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates, or we 51 may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates.
Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates, or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes 52 in interest rates.
We consider all highly liquid debt instruments with an original maturity of three months or less and SEC-registered money market mutual funds to be cash equivalents. Additionally, we had available-for-sale securities totaling $24.7 million included within funds held for clients on the consolidated balance sheets as of December 31, 2024.
We consider all highly liquid debt instruments with an original maturity of three months or less and SEC-registered money market mutual funds to be cash equivalents. Additionally, we had available-for-sale securities totaling $374.5 million included within funds held for clients on the consolidated balance sheets as of December 31, 2025.
As of December 31, 2024, a hypothetical increase or decrease in interest rates of 100 basis points would result in an approximately $23.9 million increase or decrease, respectively, in interest earned on funds held for clients over the ensuing 12-month period. There are no incremental costs of revenue associated with changes in interest earned on funds held for clients.
As of December 31, 2025, a hypothetical increase or decrease in interest rates of 100 basis points would result in an approximately $22.1 million increase or decrease, respectively, in interest earned on funds held for clients over the ensuing 12-month period. There are no incremental costs of revenue associated with changes in interest earned on funds held for clients.
We classify all debt securities as available-for-sale and, as a result, no gains or losses are recognized due to changes in interest rates until such securities are sold or decreases in fair value are determined to be nonrecoverable. To date, we have not recorded any credit impairment losses on our portfolio.
We classify all debt securities with an original maturity greater than three months as available-for-sale and, as a result, no gains or losses are recognized due to changes in interest rates until such securities are sold or decreases in fair value are determined to be nonrecoverable. To date, we have not recorded any credit impairment losses on our portfolio.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk Interest Rate Sensitivity As of December 31, 2024, we had corporate cash and cash equivalents totaling $402.0 million and funds held for clients cash and cash equivalents totaling $3.7 billion. These amounts are invested primarily in demand deposit accounts and money market funds.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk Interest Rate Sensitivity As of December 31, 2025, we had corporate cash and cash equivalents totaling $370.0 million and funds held for clients cash and cash equivalents totaling $4.8 billion. These amounts are invested primarily in demand deposit accounts and money market funds.
Our investments are subject to market risk due to changes in interest rates. The market value of fixed rate securities may be adversely affected due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall.
We do not enter into investments for trading or speculative purposes. Our investments are subject to market risk due to changes in interest rates. The market value of fixed rate securities may be adversely affected due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall.
An immediate decrease in interest rates of 100 basis points would have resulted in a $0.5 million increase in the aggregate market value of our fixed rate securities as of December 31, 2024. These estimates are based on a sensitivity model that measures market value changes when changes in interest rates occur. 52
An immediate decrease in interest rates of 100 basis points would have resulted in a $1.7 million increase in the aggregate market value of our available-for-sale securities as of December 31, 2025. These estimates are based on a sensitivity model that measures market value changes when changes in interest rates occur. 53
An immediate increase in interest rates of 100 basis points would have resulted in a $0.5 million reduction in the aggregate market value of our fixed rate securities as of December 31, 2024.
An immediate increase in interest rates of 100 basis points would have resulted in a $1.7 million reduction in the aggregate market value of our available-for-sale securities as of December 31, 2025.

Other PAYC 10-K year-over-year comparisons