HR software provider Paycom (NYSE: PAYC) met Wall Streets revenue expectations in Q3 CY2025, with sales up 9.2% year on year to $493.3 million. The company’s outlook for the full year was close to analysts’ estimates with revenue guided to $2.05 billion at the midpoint. Its non-GAAP profit of $1.94 per share was 1.1% below analysts’ consensus estimates.

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Company Overview

Pioneering the concept of employees doing their own payroll with its "Beti" technology, Paycom (NYSE: PAYC) provides cloud-based human capital management software that helps businesses manage the entire employment lifecycle from recruitment to retirement.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, Paycom’s 19.7% annualized revenue growth over the last five years was decent. Its growth was slightly above the average software company and shows its offerings resonate with customers.

Long-term growth is the most important, but within software, a half-decade historical view may miss new innovations or demand cycles. Paycom’s recent performance shows its demand has slowed as its annualized revenue growth of 10.8% over the last two years was below its five-year trend.

This quarter, Paycom grew its revenue by 9.2% year on year, and its $493.3 million of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 9.6% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and implies its products and services will see some demand headwinds.

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Billings

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Paycom’s billings came in at $494.7 million in Q3, and over the last four quarters, its growth was underwhelming as it averaged 9.5% year-on-year increases. This performance mirrored its total sales and suggests that increasing competition is causing challenges in acquiring/retaining customers.

Customer Acquisition Efficiency

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

Paycom is extremely efficient at acquiring new customers, and its CAC payback period checked in at 13.4 months this quarter. The company’s rapid recovery of its customer acquisition costs means it can attempt to spur growth by increasing its sales and marketing investments.

Key Takeaways from Paycom’s Q3 Results

Revenue was in line and EPS missed. The company reaffirmed full-year revenue guidance, but this wasn't enough. The market seemed to be hoping for more, and the stock traded down 9.2% to $166.84 immediately following the results.

Big picture, is Paycom a buy here and now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.