Paycom Software, Inc. (PAYC) Q4 FY2025 Earnings Call Transcript & Summary

Good afternoon. My name is Cameron, and I will be your conference operator today. At this time, I would like to welcome everyone to Paycom's Fourth Quarter and Year-end 2025 Financial Results Conference Call. [Operator Instructions] I will now turn the call over to James Samford, Head of Investor Relations. You may begin.

Thank you, and welcome to Paycom's Earnings Conference Call for the fourth quarter of 2025. Certain statements made on this call that are not historical facts, including those related to our future plans, objectives and expected performance, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent our outlook only as of the date of this conference call. While we believe any forward-looking statements made on this call are reasonable, actual results may differ materially because the statements are based on our current expectations and subject to risks and uncertainties. These risks and uncertainties are discussed in our filings with the SEC, including our most recent annual report on Form 10-K. You should refer to and consider these factors when relying on such forward-looking information. Any forward-looking statement made speaks only as of the date on which it is made, and we do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Also during today's call, we will refer to certain non-GAAP financial measures, including adjusted EBITDA, non-GAAP net income and certain adjusted expenses. We use these non-GAAP financial measures to review and assess our performance and for planning purposes. A reconciliation schedule showing GAAP versus non-GAAP results is included in the press release that we issued after the close of the market today and is available on our website at investors.paycom.com. I will now turn the call over to Chad Richison, Paycom's CEO and President. Chad?

Thanks, James, and thank you to everyone joining our call today. I'll comment on our 2025 achievements and our areas of focus for 2026. I'll then turn it over to Bob for a review of our fourth quarter and full year results, along with our full year guidance. We will then take your questions. Let's get started. We executed well against our 2025 plan, exceeding our strategic and financial goals by focusing on full solution automation, client ROI achievement and providing world-class service. We delivered strong results, including double-digit recurring revenue growth and near-record adjusted EBITDA margins. We advanced our full solution automation strategy with the launch of many automated decisioning tools that complement our command-driven AI product, IWant, and other award-winning automation solutions, Beti and GONE. Our focus on client ROI achievement and world-class service strengthened revenue retention in 2025, which increased to 91%. This is a testament to the success that our clients are achieving through full solution automation as well as the world-class service we are providing across our client base. In addition, we experienced a record number of clients returning to the Paycom platform in 2025. Automation is the future of our industry, and Paycom is leading the way with the most automated solution in the market. While I'm excited about the momentum in client retention, we still only have approximately 5% of the total addressable market and the opportunities ahead of us are robust. Paycom is a truly differentiated company. Our single database architecture and employee-first technology allow us to offer automated decisioning that is unmatched in our industry. This architecture enables us to deliver greater accuracy and efficiency, eliminating the need for complex integrations while driving strong ROI and satisfaction for our clients and their employees. Our automation tools across our full solution are clear examples of our commitment to innovation. Beti is one of these and reduces payroll processing labor by up to 90% while cutting the time spent correcting payroll errors by up to 85%. Another is GONE, which automates PTO, fully streamlining time off requests. These are just a few solutions that eliminate duplicative tasks, reduce redundancies and contribute directly to unparalleled ROI for our clients. Our most advanced AI solution, IWant, is designed to accelerate the speed to value by allowing anyone to become an expert in the system without any training. Forrester's recent analysis of a composite organization with more than 500 employees found that organizations using IWant experienced an ROI of over 400%, driven by productivity gains at every level. Managers save as many as 600 hours per year, executives up to 60 hours, HR teams up to 240 hours and employees across the organization collectively reclaim 3,600 hours annually. Leaders describe IWant as a catalyst for deeper insight and one CEO remarked, I get immediate value. Without any training or knowledge of Paycom, I can go in and immediately understand more about my business. Since our founding, we have led the way in innovation and automation. With full solution automation and decisioning logic, we are again transforming our industry. Payroll and HCM are critical solutions in the enterprise that require 100% accuracy, and Paycom is delivering on that expectation every day. As we look to 2026 and beyond, we will continue to extend our technological lead and focus on delivering unparalleled value to our clients while continuing to attack the remaining 95% of the addressable market that is available to us. I want to thank our employees who have been diligently focused on leading our clients, executing our goals and delivering strong results in 2025. With that, let me turn it over to Bob. Bob?

Thank you, Chad. We delivered strong fourth quarter results with total revenue of $544 million (sic) [ $544.3 million ] up 10% (sic) [ 10.2% ] over the comparable prior year period and recurring and other revenue of $517 million (sic) [ $517.1 million ] up 11% (sic) [ 11.2% ] year-over-year. Looking at 2025 full year results, we are very pleased with the execution throughout the year. Total revenue in 2025 came in at $2.05 billion, ahead of our initial outlook with recurring and other revenue growth of 10% year-over-year to $1.94 billion compared to our initial expectation of 9% growth. We delivered even stronger fourth quarter and full year profit metrics that were driven by stronger revenues and operational efficiencies gained from automation and cost discipline initiatives. Adjusted EBITDA margin remained strong in Q4 at 43.4% or $236 million (sic) [ $236.3 million]. Full year 2025 adjusted EBITDA grew 14% year-over-year to $882 million representing a 180 basis point year-over-year margin expansion to 43%. Turning to GAAP results. GAAP net income in the fourth quarter was $114 million or $2.07 per diluted share based on 55 million shares. Full year 2025 GAAP net income was $453 million or $8.08 per diluted share based on 56 million shares. Non-GAAP net income for the fourth quarter increased 4% year-over-year to $135 million or $2.45 per diluted share. Full year 2025 non-GAAP net income was $519 million or $9.24 per diluted share based on 56 million shares. Margin strength in the quarter and full year was broad-based, driven by our continued focus on automation. We continue to invest in sales and marketing to drive future growth, and we maintain our commitment to world-class service. With that said, we are also finding significant opportunities to streamline processes across our organization while still expanding our sales capacity and maintaining a human approach to world-class service. Operating cash flow increased 27% year-over-year in 2025 to $679 million, representing 33% margin, up 470 basis points over the prior year. Total CapEx of $275 million in 2025 represented approximately 13% of total revenues compared to $197 million or approximately 10% of total revenues in 2024. We invested approximately $100 million to expand our data center footprint and capabilities to support our automation and AI initiatives. Free cash flow, defined as operating cash flow less CapEx was $404 million in 2025, up 20% year-over-year. Free cash flow margin expanded 180 basis points year-over-year to approximately 20%. In 2025, we repurchased over 1.7 million shares of common stock or approximately 3% of our shares outstanding for a total of $370 million, and we paid approximately $85 million in cash dividends. Since the beginning of 2023, we repurchased nearly 4.2 million shares or approximately 7% of shares outstanding for approximately $815 million. We had approximately $1.1 billion remaining under our buyback authorization as of December 31st, 2025, and we continue to be opportunistic buyers of our stock. In addition, the Board has approved our next quarterly dividend of $0.375 per share payable in mid-March. Turning to the balance sheet. Even after returning capital to stockholders through buybacks and dividends paid in 2025, we ended the year with a very strong balance sheet, including cash and cash equivalents of $370 million and 0 debt. The average daily balance on funds held for clients was approximately $2.8 billion in the fourth quarter of 2025, up 11% over the prior year period. We grew our client count to approximately 39,200 clients as of the end of 2025, representing growth of 4% compared to 2024. On a parent company grouping basis, we ended the year with approximately 20,300 clients, up 5%. Revenue growth was broad-based as we added clients across the various target client sizes, but we continue to have success upmarket with revenue from clients over 1,000 employees growing faster than total revenue. Total employee records stored in our system in 2025 was 7.4 million, up 5% year-over-year. Paycom's annual revenue retention rate in 2025 increased to 91% compared to 90% in 2024, and we believe our significant efforts and investments in automation and world-class service are contributing to the value and overall satisfaction that our clients are experiencing. Now let me turn to guidance for 2026. We have a highly predictable, profitable and resilient recurring revenue model. Similar to last year, we are providing our initial full year outlook, which represents our best estimate for certain key metrics based on what we can see today for revenues and budgeted expenses. For fiscal 2026, we expect total revenue to be between $2.175 billion and $2.195 billion or between 6% and 7% year-over-year growth. We expect full year recurring and other revenues to be up between 7% and 8% year-over-year. We expect full year adjusted EBITDA in the range of $950 million to $970 million, representing an adjusted EBITDA margin of approximately 44% at the midpoint of the range. Included in total revenue outlook is interest on funds held for clients of approximately $103 million and is based on the consensus assumption of 2 rate cuts in 2026. 2025 was a year of solid execution with very strong fundamentals. We will continue to focus on delivering the best product and service to our clients and enhance long-term stockholder value through attractive top line growth, operational discipline and opportunistic buybacks. We have less than 5% share of a large and growing total addressable market, and we believe our differentiated full solution automation strategy can drive long-term sustainable growth for years to come. With that, let's open the line for questions. Operator?

Thank you. [Operator Instructions] The first question comes from the line of Raimo Lenschow with Barclays.

Chad, like there's a lot of positive things on the product side coming out of you with kind of IWant, et cetera. Customer retention got better. But your guidance growth looks a little bit like a slowdown for many people. Can you just kind of bring these 2 kind of sites together? On the one hand, a lot of positivity, positive news. On the other hand, it looks -- is that kind of macro? Or how should we think about that?

Yes. Well, first, I'd say we've continued to automate our product rapidly as we -- now the product begins to decision itself in many different areas, and you don't have to log into it and use it as much as it will actually decision things. I feel good but not satisfied with our growth for last year. We have opportunities in sales, and that's an area of focus that we have right now, as we talked about, Raimo, at your conference in December. The good thing is that our clients are happy and retention is improving, and we have the most automated product in the industry. So I do think that when you look at it, I mean, bookings have been up every year. They were up 2025, continued that trend. And our expectation is no different from 2026. We'll have some inflection opportunities throughout the year. And as those materialize, those will be reflected in our numbers.

Okay. And then the follow-up I had was like with the change in sales leadership at the beginning of the year, should we think about like significant changes of go-to-market, et cetera? Or is this just fine-tuning? I know you have a very good sales organization in place anyway. But like -- how do we think about changes with the new leadership?

A lot of this is the replating of the value. Consumers and clients oftentimes have a more difficult time of digesting full solution automation. And so a lot of this is how we play them. And so we have been bringing in our salespeople over the last 3 months to make sure that they're all trained on the new product enhancements that we've made just since November, which automates a lot of our system. As we've been talking about for the last couple of years, full solution automation has been a goal of ours, and we continue to move our product toward that goal.

Your next question comes from the line of Samad Samana with Jefferies.

Maybe sticking on the guidance theme. Just as I think about the recurring revenue outlook and contextualize that last year, the initial guide was for 9%, and you guys ended up doing about 1 point and change better than that. So as I think about this year's 7% to 8% outlook, is there any change to the guidance methodology? Should we think about it as a similar construct? And then kind of similarly thinking about maybe what are the upside nodes maybe as the year progresses? And then I have one follow-up.

Yes. And so Samad, last year, we guided at 7% to 8% total revenue growth, and we just reported that we finished at 9%. This year, we're guiding to 6% to 7% total revenue growth. So about 1% difference this year versus last year. Again, last year, we focused very much on sales, but also on the full value achievement of our client world-class service. We were able to see a retention gains through that. Clients are happy. And as we focus on the new way to utilize our software, we've been focused on our go-to-market strategies here.

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

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

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

Your next question comes from the line of Mark Marcon with Baird.

So you're coming off of a quarter where sequentially, your year-over-year growth rate ended up accelerating, at 11.3% on the recurring side against a tough comp, which was up 14.5% the year before. And the guide basically does imply a bit of a slowdown. I'm wondering what are you seeing in the field? And you did make a change with regards to sales leadership. So I'm wondering, what are you seeing in the field? Obviously, all of the stocks across all of SaaS have been hit. Are clients expressing any sort of hesitation or longer decision cycles anything that you're seeing that's different or that would suggest that things are going to slow down? Perhaps it's employment and just fewer seats, I don't know. Just wondering if you can give us any sense there.

No, we're not. We're not seeing any change in the desire to buy our product. Again, we did for the last 3 months. We have been going through bringing everybody into training and going through what our product does now. We released a lot of automation just since November. And a lot of the product decisions itself. I mean you do not have to log in, you do not have to move data. And so we're making decisions on things. And so we've been talking about that for a long time. It was important for us to make sure our salespeople are going to market with that message. But no, we have not seen any reluctance from people and prospects to make changes out there in the marketplace.

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

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

Your next question Steve [indiscernible] .

I guess one of just kind of [Technical Difficulty] wondering the [Technical Difficulty] impact in terms of incremental [Technical Difficulty] look at when you [ use ] the pipeline.

Yes. I would say I was shifted on quality, something that's been very important to us. I mean it's hard to say that we're in a sales environment that quality over quantity, but it is very, very important that we're out there doing things the right way because like I said, we lost some clients that we just shouldn't have lost because the value is there for them. And then as we brought those clients back on and as we look at going to market to sell new clients, we want to make sure that all the clients get the full solution automation available to them upfront, and they purchased for the right reasons. And so as a sales organization, we've got gotten together over the last 3 months, gone through all of our training to come out the other side of this. And so we are excited about that. We're also excited about what we see in the pipeline. Our opportunity hasn't changed. We only have 5% of the total addressable market available to us. We do have the most automated product. And we are beginning to see people crave that in a way that they're willing to digest automation.

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

Yes. Stabilization is what our expectation is, and that's what we saw in Q4, too. Without some dramatic change in unemployment, really what's going to impact us would be our execution of our strategy.

Your next question comes from the line of Jason Celino with KeyBanc Capital Markets.

This was the biggest new customer adds here since I think, 2022. How much of this is maybe due to those new sales offices that have been ramping or for those new returning customers that you talked about? And then what are some new incremental initiatives that are targeted toward new customers for 2026, if you have anything to share?

Yes. I mean the new offices definitely spun up quicker than any offices in the past. To say that they were the largest contributor to the gain, I think, would be false there. But we've done very well with our product throughout the year, and we continue to have strong go-to-market. I mean, in some areas, we have offices that do well over $9 million in sales. In some areas, we have offices that do much, much, much lower than that. In some areas, we have a sales rep that will sell $4 million as they did last year. And so all these are opportunities for this. And so we've had both pockets of success and pockets of opportunity. And as we've looked at our organization as a whole, we're very confident on the go forward of capturing all that opportunity and continue to maximize those pockets of success that we see across the board.

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

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

Your next question comes from the line of Patrick O'Neill with Wolfe Research.

Can you just elaborate a little bit on how AI is improving internal productivity and efficiencies and maybe which areas you are specifically seeing improvement? And then how are you thinking about sort of balancing the benefits between bottom line expansion and reinvesting in the business for growth?

I mean AI is helping us across the board. I mean, while we can talk about specific products, we can talk about speed of processing and all the different types of things that we've been able to do on our back end to really speed things up. I think there's a little misjudgment about the AI thesis materializing as a threat weapon that will be used against us. I mean AI is our friend at Paycom. And I've worked very hard to ensure that the misunderstanding of AI's impact on us isn't on our end. And I just believe as you look into the future, we have opportunities now that we didn't have in the past, right? Like the speed of development has increased, the pace of the user buyer being able to digest it might lag a little bit, but we can develop a lot more today than what we've been able to in the past. We're in this age of software development and in some instances, replacement of specific software. Paycom can get into every adjacent industry now within weeks or months. And I'll remind everybody that I was the first Bob [ coater ] back in 1998. So there are several easy-to-displace industries that don't just sit ancillary to our industry, but they're dependent upon our industry of where the data starts. And so now that we can develop anything very quickly and use all these technologies to replace other industries in a matter of weeks or months, we're excited about how that -- what that looks like for our future as well.

Your next question comes from the line of Daniel Jester with BMO.

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

Yes. The way I would look at IWant is IWant allows someone to access the value that's there. They do not have to be an expert in the system. They do not have to be trained in the system. And through the other automation that we've built throughout our system with IWant it's just much, much easier to access that. And so we continue to build out the IWant system. We continue to add more and more functionality to it. It continues to get stronger and stronger. And we're putting out more products. We're putting out more products now than we ever have. And we don't even -- we don't necessarily announce it to the market, but our clients are experiencing it every day as we call them and turn them on, on these products and this automation. And so that's going to be our focus from this point forward. The goal of the Paycom software is truly full solution automation to where you buy it, you configure it, and it does everything else for you. And so we've been focused on that. It's something I've been talking about with the AI tools that we have right now and additional that we've become aware of and begun to start using also, there's faster opportunities for us there. I'm going to say that there's still things you have to do on the back end with these types of things, but we're excited about what's happening within our industry and definitely within our product and how this is all materializing for strong ROI for clients that utilize Paycom.

That's great. And then maybe, Bob, to you, I know that there was a lot of onetime capital spending this past year. Any color you can share with us about how we should expect CapEx and free cash flow to look in 2026?

Sure. So we did have that onetime expenditure, like you mentioned. The way we look at that, though, is we do run this business with the long-term outlook. If we do see an opportunity again like that to invest and help our clients achieve even more ROI, we would take that. And the positive thing there is we do have the EBITDA margins and the cash to do that.

Your next question comes from the line of Jared Levine with TD Cowen.

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

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

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

Yes. So as I disclosed in the Barclays conference, we have expanded our sales teams to 10 from 8. So that puts an extra 100 salespeople in the field. All salespeople now are experiencing a different level of training through our program. That's happening right now. And we're hiring as many salespeople as we can right now. We would expect that those would give us an opportunity in the future to open up more offices. It is a goal of ours, and it is also a goal of ours to capture the opportunity available to us in the offices that we have opened.

Your next question comes from the line of Kevin McVeigh with UBS.

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

Yes. I would say there are some clients that will run toward the full automation or what you might be calling a GenAI consumption. But I will tell you, it's much more important that you meet them further than halfway there if you want to get them full -- fully utilized and actually getting the value out of it. You've got to make it easy for people to digest. And that's what we've spent a lot of time doing. You release something great, you're like, why aren't they using it? Well, it's not good enough for them to understand how to digest it or plug into it. And so those are the things that we've been working on, both with our software as well as our go-to-market to make sure that we're bridging all of those gaps.

That's helpful. And then just one quick question on the guidance. What retention numbers embedded in the '26 guidance? And then how much buyback do you have in the '26 estimates as well?

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

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

Your next question comes from the line of Bhavin Shah with Deutsche Bank.

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

Yes. I mean you guys kind of know what's going on in fourth quarter there. You can kind of see the sequential change, and you know kind of how revenue comes in week by week, day by day. You can see the sequential change as it goes into this year and look at kind of how that sequential change also normalizing for the things I just mentioned, what that looked like for last year. And I think when you come to that, you'll kind of see that our guide here is not incredibly dissimilar to last year's guide. It may be different than where we ended. But from where we started last year, we took the same approach, and we're comfortable with the guide as we go into this year. As I mentioned, we do have inflection opportunities throughout the year. And as those materialize, we will make sure we report those.

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

You talked about seeing momentum upmarket and winning larger deals, which is really encouraging to see. First, is this an area where you're expanding sales capacity for 2026? Also, as you move upmarket to organizations that often have greater integration needs, is there a road map to expand API access while also balancing your core single database advantages? And do you view monetization of APIs as a growth lever in the future?

I think helping upmarket digest the importance of full solution automation is critical for them, and it's critical for us. I mean most of your upmarkets, they're only used to ordering food from the buffet. And you go to the table and you're like, "Hey, I'd like to take your order. And they're like, well, where is the buffet, hand me my plate" And so there's a whole different world here in how you plate these items to the upmarket and how they can easily plug into it. We've made it easier for ourselves to do that. And through full solution automation and what we're doing right now, evaluating Paycom is very simple. It's very simple to evaluate it. I would say in the past, with certain strategies that we had, it may have been simple to evaluate, but we still kind of kept a little bit of it in the buffet line kind of as we've gone through this and we're dealing with full solution automation and decisioning logic, the system is decisioning everything. So before, just to give you an example, and I've talked about time off, you could talk about demotions, promotions, hiring. I mean, I can go through our entire system. But just with time off, you have an employee that request time off tonight at 7:00 at night, they're trying to request next week off. A manager the next day is dealing with overlapping decisions, who's going to be at the office to actually work because for some of us, paid time off is about who gets off work. But for the shift manager, time off is about who showed up to work. And we've all been there where you didn't have enough staff, so now you're losing revenue. And these managers have to go through all types of decisions, and they have decision fatigue. Does the person even have enough time to request off? Do I have coverage? Do I have any overlapping shift? Who asked first? Are any of these people on a writeup? Is anybody of this that I let off going to hit over time? If I have to pull somebody else, you got to connect it to their schedule. You got to connect it to their shift, you got to connect it to time and attendance. The point is it's impossible to make good decisions on this on a regular basis unless you've implemented the Paycom system and the Paycom system will decision all of that. So the employee who, by the way, already expects their time off as soon as they request it. The employee gets what they need. The manager does not have to go through all the decisioning of these policies. The policy administrator, who's the person that set all this stuff up in the beginning, gets consistent behaviors as well across the board. And so it is a way, and that's just one item. I mean, I can take you through all many different items where the system now will decision everything for a client and everything for an employee. The problem that oftentimes comes up is -- they don't -- oftentimes, clients and people, they don't have full documentations of the decisions that would be made in those scenarios. And so those are the processes that before we were going through manually with them to discuss. And now we can go through even those in a more automated process to move them in toward full decision automation through decisioning logic, which gives them full solution automation. And so that's what we've been working on. We have the system. We're making sure that all of our current clients understand that and what's available to them. So they don't just get sold on something and then go through another conversion process to come back with us. And then also our go-to-market, it's very important that we're doing it correct now. We've made it easier. We've made it easier for a prospect to decide on Paycom's value and use it. It's very easy to evaluate Paycom these days. It's only 4 simple steps, and we look forward to walking through that with every prospect out there.

Your next question comes from the line of Joshua Reilly with Needham.

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

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

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

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

Your next question comes from the line of Siti Panigrahi with Mizuho.

Chad, just a follow-up to the prior question. ADP also talked about improving their retention rate slightly. How is that -- are you seeing any kind of changes to your business from that?

No.

Okay. And then other question that investors says is the AI impact to overall employment. How do you see that impacting Paycom business? Are you well diversified? Do you expect it to be more in certain kind of industry? Any color would be helpful.

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

The last question comes from the line of Allan Verkhovski with BTIG

Strong margins. Can you share what the size and scope of the layoffs you did the past month was as well as how you're thinking about the company's headcount trajectory over the next year in the context of just realizing more and more AI efficiencies over time?

Sure. So we did announce a restructuring last year and ended the year with about 5,800 employees. We don't -- we aren't going to discuss internal employment trends or strategies associated with that, but that will be the number that you'll see in the [ K ].

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

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

And this concludes today's conference call. You may now disconnect.