ペイコム（PAYC）2026年第3四半期決算説明会：利益率は49.3%に達し、ガイダンスを引き上げ

ペイコム・ソフトウェア（NYSE: PAYC）が発表した2026年第3四半期決算は、継続課金およびその他収益が11%増加したことで、売上高が前年同期比10%増の5億4,400万ドルとなりました。自動化の推進、営業費用の削減、データセンターやAIインフラへの投資を背景に、収益性は大幅に拡大しました。

主要なポイント

• 第3四半期の売上高は前年同期比10%増の5億4,400万ドルとなりました。継続課金およびその他収益は11%増の5億1,900万ドルに達しました。
• 調整後EBITDAは粗利益率の拡大と営業費用の削減を反映し、2億6,800万ドル（売上高利益率49.3%に相当）に達しました。
• Non-GAAPベースの純利益は37%増の1億5,000万ドルとなり、希薄化後Non-GAAP EPSは自社株買いの効果も受けて74%増の3.37ドルに上昇しました。
• ペイコムは2026年の通期業績見通しを引き上げ、売上高を22億1,300万〜22億1,800万ドル、調整後EBITDAを10億6,900万〜10億7,900万ドルとしました。
• 「IWant」の利用件数は2025年末時点から約65%増加しました。ペイコムによると、このAI製品は顧客に追加コストを発生させることなく、数百万件の問い合わせを処理しました。
• 経営陣はテスト段階にある複数の製品や、販売・マーケティングへの注力を強化する計画を挙げ、2027年は大きく変革する可能性がある年だと説明しました。

主要財務業績

ペイコムは第3四半期中に300万ドルの自社株買いを実施し、自社株買い授権枠の残高は16億5,000万ドルとなりました。同社は2025年第3四半期末から2026年第3四半期末までの間に約1,150万株を買い戻しました。また、当四半期中に約1,700万ドルの現金配当を実施しました。取締役会は1株当たり0.375ドルの四半期配当を承認しており、12月上旬に支払われる予定です。

事業および営業業績

ペイコムは利益率拡大の要因として、社内での自動化活用の拡大、製品開発プロセスの改善、データセンターおよびAI技術への投資を挙げました。経営陣は現在の利益率水準は持続可能であり、社内にはさらなる効率化の余地が残されていると述べました。

同社は給与計算、勤怠管理（タイムカード）、経費精算、シフト管理、有給休暇、オンボーディング、資産管理の各分野で自動意思決定の適用拡大を続けています。これらのツールはプラットフォーム上で顧客のポリシーを直接適用し、一貫性の向上と手作業の削減を実現します。

前四半期に投入された「Asset Management」の顧客数は300社を超えました。同製品はノートPC、スマートフォン、社員証、ツール、ソフトウェアライセンスなどの機器の追跡、回収、再配置を行います。経営陣によると、クライアント・リレーションシップ担当者は過去1か月間、同製品の販売活動を強化しました。

「IWant」はペイコムの顧客基盤全体で導入され、数百万件の問い合わせに対応してきました。利用実績は2025年末の水準を約65%上回っています。ペイコムはフォレスター（Forrester）の調査を引用し、IWantを導入した中堅企業は400%を超える投資対効果（ROI）を達成し、年間で従業員時間を最大3,600時間、管理者時間を600時間、経営幹部時間を60時間削減できる可能性があると説明しました。

経営陣はまた、「GONE」を利用して36万ドル相当の未管理有給休暇を削減した顧客の事例を挙げました。この顧客は12州の73拠点に数百人の従業員を擁しています。

ペイコムは、自社所有のデータセンターインフラによりセキュリティ、パフォーマンス、経済性の面で強固な管理能力が得られると述べました。「Project Arc」によって拡張性が向上し、ある大企業クライアントではパフォーマンスが約4倍向上しました。経営陣は将来のデータセンター関連支出は小幅な増加にとどまると見込んでいるものの、顧客へのリターン向上につながる場合には積極的に投資を続ける意向です。

海外展開は引き続き戦略的優先事項です。ペイコムはメキシコで大手エンタープライズ顧客を獲得したことを明らかにし、欧州での営業人材採用をはじめとする国際的な取り組みを拡大していると述べました。

経営陣のガイダンス

年初来の堅調な業績を受け、ペイコムは2026年通期の売上高および調整後EBITDAのガイダンス予想レンジを引き上げました。

調整後EBITDAガイダンスの中間値は、2025年の水準を550ベーシスポイント上回る利益率を意味します。経営陣は通期のフリーキャッシュフローが力強いものになると見込んでおり、具体的な目標値は示さなかったものの、2027年にはフリーキャッシュフローがさらに強化されるとの見方を示しました。

リスクと注視すべきポイント

経営陣は四半期売上高が暦の変動による影響を受けやすい点に言及し、第4四半期は前年同期との比較ハードルが高いと説明しました。これは、通期の売上見通しが示唆する成長減速についてアナリストから質問を受けた際に説明されたものです。

ペイコムは営業組織を刷新し、多くの新規営業担当者を採用しました。経営陣は、新チームの業績は過去の採用グループを上回っており、営業全体の実行力は2026年の社内目標を満たしていると述べました。ただし、製品ポートフォリオを拡大するにつれて、生産性の維持・向上が引き続き重要になると指摘しました。

アプリ内での製品購入は増加しているものの、クライアント・リレーションシップ担当者が扱う商談機会と比べると規模は依然として小さいままです。経営陣は、より複雑な製品については導入や顧客のROI向上を支援するために、担当者による対面などの人的関与が引き続き重要であると述べました。

サイバーセキュリティとデータ管理についても協議されました。経営陣は、自社でインフラを所有・運用することで顧客はデータの所在を把握できると説明する一方、今後の海外展開においてはインフラ投資の継続的な評価が必要になる可能性があると述べました。

アナリスト質疑応答の主なポイント

• 自動化の収益化：ペイコムは、Asset Managementをはじめとする個別課金製品を通じて、自動化機能の一部を収益化する方針です。経営陣は、価格設定の機会は顧客に提供されるROIに左右されると述べました。
• 利益率の持続性：経営陣は、自社製品の社内活用や継続的な業務プロセスの自動化を挙げ、現在の利益率水準は持続可能であると考えています。
• 2027年の製品パイプライン：複数のテクノロジーがテスト段階にあるか、すでに一部の顧客に利用されています。経営陣は2027年を通じて順次リリースされると見込んでおり、一部の製品には異なる営業チームが必要になる可能性があると述べました。
• 研究開発（R&D）の効率性：R&D支出が減少したにもかかわらず、開発成果と製品品質は向上したと経営陣は述べました。ペイコムは必要に応じて支出を増やす意向を持っています。
• 営業投資：同社が製品パイプラインとより広範な対応可能市場（TAM）の開拓を進める中、販売・マーケティングは2027年も引き続き主要な注力分野となります。
• フリーキャッシュフロー：経営陣はペイコムのキャッシュ創出力を持続可能で強固なものと評価したものの、2027年の見通しについて具体的な数値は示しませんでした。

決算説明会トランスクリプト全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good afternoon. My name is Hillary, and I will be your conference operator today. At this time, I would like to welcome everyone to Paycom's Third Quarter 2026 Financial Results Conference Call. [Operator Instructions]

I will now turn the call over to James Samford, Head of Investor Relations. You may begin.

James Samford

Thank you, and welcome to Paycom's earnings conference call for the third quarter of 2026. 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 free cash flow. 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 Founder and CEO. Chad?

Chad Richison

Thanks, James, and thank you to everyone joining our call today. I'll briefly comment on current trends and recent achievements. Then I'll pass the call over to our President, Shane Hadlock, before Bob reviews our third quarter results and full year guidance. We will then take questions.

Let's get started. Third quarter results continue to demonstrate the strength of our platform coming in ahead of our expectations. Our focus on full solution automation, world-class service and ROI achievement is resonating in the market. Thanks to our strong performance year-to-date, we are once again raising our full year outlook for both revenue and profitability.

We are seeing greater adoption of automation across our client base as we continue to expand automated decisioning logic and AI capabilities. For any business, AI adoption starts with delivering real value at an affordable cost. Our early investments in data centers, AI technology and GPUs are paying off for our clients and ourselves. Our clients are not paying for tokens on our system. That creates a powerful economic advantage as we continue to deliver more automation at a lower cost, creating greater value for our clients and stronger returns on Paycom's investments.

On the product side, we continue to innovate and drive even more automation. Our clients appreciate a decisioning logic that is built into our platform as it allows them to incorporate their company policies such as PTO, payroll, scheduling, onboarding and more directly into the system. This allows for accurate and consistent decisions that generate tremendous ROI across an organization.

One of the most recent products we launched with built-in decision logic is Asset Management, and the response to this new tool has been excellent. Through our research, we found that companies are buying assets they already own. We've seen companies hiring 50 new employees and then buying 50 new laptops, phones, tools, badges, software licenses and other equipment while perfectly good ones sit unused in storage and others remain unreturned by former employees.

Our Asset Management platform helps clients track, recover and deploy their assets, reducing unnecessary spending and giving them control over what they already own. Demand for automation is accelerating and Paycom continues to lead the industry with the most intelligent platform for automating decisions across an organization. Our ability to develop, release, host, distribute and service our technology gives us a powerful advantage. I'm very excited about our upcoming product pipeline, which will add even more value to businesses across our large and expanding TAM.

Now I would like to turn the call over to Shane Hadlock.

Terrell Hadlock

Thanks, Chad. We delivered excellent third quarter results, thanks to our dedicated employees and their relentless focus on our clients' success. Throughout 2026, we released many powerful solutions, and client response to these releases has been incredibly positive.

Our award-winning AI solution, IWant, continues to accelerate speed to value for our clients by giving employees, managers and executives immediate access to critical data. IWant is enabled across our client base and has successfully responded to millions of queries. In fact, IWant usage is up approximately 65% today versus the end of 2025. Our AI is creating meaningful value for our clients and without any incremental cost to them. In fact, Forrester found that organizations in the mid-market using IWant can achieve greater than 400% ROI and save as many as 3,600 employee hours, 600 manager hours and 60 executive hours annually.

Another example of client ROI achievement is a business that used our product GONE to eliminate $360,000 in unmanaged PTO. This company had hundreds of employees across 73 locations in 12 states. Prior to using GONE, 1/5 of their PTO was approved manually after the day it had already been taken and the majority of their employees had negative time off balances. Thanks to GONE, the system makes the decisions, which helps eliminate time theft and ensures the workforce is operating at peak efficiency driving more to the bottom line. That's the power of decisioning logic our clients are realizing.

Expanding on Chad's comments, owning and operating our data center infrastructure is a significant competitive advantage. We are one of only a handful of companies in the U.S. to operate a Tier 4 data center. That infrastructure gives us greater control over our technology and the economics behind it, which increases the ROI our clients realize. This also drives operational efficiencies across R&D and service operations to drive even more internal value.

Strong usage of our products and investments in customer service are resulting in increasing client satisfaction and are driving higher Net Promoter Scores. This is related to the investments we have been making in automation, product innovation and our team's ability to deliver world-class service. I am proud of what our teams have achieved this year, focusing on strengthening client ROI and expanding the value of our platform.

With that, let me turn the call over to Bob.

Robert Foster

Thank you, Shane. Third quarter results came in strong with total revenues of $544 million, up 10% over the comparable prior year period, and recurring and other revenues of $519 million, up 11% year-over-year. Our continued focus on process automation and on leveraging our own technology is driving increased productivity across the organization, fundamentally strengthening our business. Our efforts over the last several quarters are driving durable revenue growth, sustainable margins and rapid earnings growth.

GAAP net income in the third quarter was $133 million or $2.99 per diluted share based on an average of 44.5 million shares outstanding. Non-GAAP net income increased 37% year-over-year in the third quarter to $150 million or $3.37 per diluted share. Diluted non-GAAP EPS increased 74% year-over-year, reflecting strong earnings growth and the benefits of our capital allocation strategy.

Adjusted EBITDA in the third quarter came in very strong at $268 million or 49.3% of revenues, driven by expanding gross margin and reductions in operating costs. The investments we made in data centers, AI technology, and product development processes are paying off and driving our expanded adjusted EBITDA margin. Based on the strength of our year-to-date results, we are raising our outlook for full year revenue and adjusted EBITDA.

Turning to capital allocation. We ended the third quarter with approximately 44 million shares outstanding, down nearly 20% from approximately 55 million shares at the end of the third quarter of 2025. During that same time period, we repurchased approximately 11.5 million shares. We bought back $3 million of stock in the third quarter and have $1.65 billion remaining on our buyback authorization as of the end of Q3.

During the quarter, we paid down $150 million of our balance on a revolving credit facility. We ended the quarter with cash and cash equivalents of $194 million and an outstanding balance of $750 million under our revolving credit facility. We generated free cash flow of $536 million in the first 9 months of 2026 and continue to expect to deliver very strong full year free cash flow. We expect even stronger free cash flow in 2027.

In the third quarter, we paid approximately $17 million in cash dividends. And on November 2, the Board approved our next quarterly dividend of $0.375 per share payable in early December. The average daily balance of funds held for clients was approximately $2.7 billion in the third quarter of 2026, up 7% over the prior year period.

Now let me turn to guidance for 2026. Based on the strength of our year-to-date results, we are increasing our revenue and adjusted EBITDA guidance ranges. We expect total revenues to be between $2.213 billion and $2.218 billion, or approximately 8% year-over-year growth. We now expect full year recurring and other revenue to be up nearly 9% year-over-year. Included in our total revenue outlook is interest on funds held for clients of approximately $107 million. Full year adjusted EBITDA is now expected to be between $1.069 billion and $1.079 billion, representing an industry-leading adjusted EBITDA margin of 48.5% at the midpoint of the range, a full 550 basis points higher than 2025 adjusted EBITDA margin.

For modeling purposes, stock-based comp is expected to be approximately 3% of revenues in 2026, and CapEx is expected to be approximately 6% of revenues. We expect 2026 GAAP tax rate to be 29% and 2026 non-GAAP tax rate to be approximately 27%. We are executing well against our 2026 plan, which is flowing through to the bottom line. Our clients are increasingly pleased with our expanding intelligent platform and the value they are achieving. We'd like to thank our employees for their contributions to today's results.

With that, let's open the line for questions. Operator?

Operator

[Operator Instructions] Your first question comes from the line of Raimo Lenschow from Barclays.

質疑応答

Raimo Lenschow

I have 2 questions. Chad, one for you. If you think about you guys doing more automation that's getting broader than like the core HR payroll platform, et cetera. How do you think about the monetization strategy for you in terms of making sure you're obviously delivering value to clients because they like it and seem to adopting it, but also making sure that you guys are participating in the value created there? And then the follow-up is on the margin side. Obviously, very, very strong margins this quarter. How do you think about the leverage from here going forward?

Chad Richison

Yes, I'll let Bob take the second part of that. I'll take the first. We create solutions for clients, and sometimes we participate that through products that we release that are billable items such as asset management being one of the latest products that we've actually brought to market. We've got 300 so or more clients on it. We do continue to -- and it just came out last quarter. And so we do continue to provide that value.

We've been working a lot on products. AI has had a massive impact on our business, especially our ability to create solutions for our clients. We released IWant to all of our clients last fall. In the last year, we released more solutions than any previous 12-month period. We have enough product in testing right now or already in use by select clients to have confidence that 2027 won't be any different.

Robert Foster

And Raimo, on the margins, we believe that they are sustainable. We continue to find efficiencies in our business and the way that we process and use automation ourselves. We are the biggest user of our products. So we get the same ROI that our clients are getting. So we feel comfortable about that.

Operator

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

Mark Marcon

Let me add my congratulations. I mean the quarterly performance was really strong, particularly in terms of recurring revenue growth and in terms of going out to various HR and IT conferences, it seems like you're getting a lot of traction. I'm wondering just a little bit about the guide as it relates to for the full year. It seems to imply a bit of a deceleration. And so I'm wondering if you can explain that given that seems like the momentum is really quite strong.

And then the second question is, Chad, you mentioned you're going to have a big release and you've got an upcoming product pipeline. I'm wondering when that will be? And to what extent will we see even greater AI capabilities? Because IWant is great about summarizing the existing data, but like actually doing the kind of what is. I'm wondering if that's going to be part of the plan.

Robert Foster

Yes, Mark, we're pleased with our guidance for the whole year. We put our plan in place at the beginning of the year. We were fortunate enough to exceed that plan and raise our guide twice during the year. And as you know, the quarterly, there can be all kinds of fluctuations and fourth quarter was a tough comp compared to last year as well. So we're pleased with where we sit right now.

Chad Richison

To kind of follow up on that, we're creating solutions with greater velocity and quality. We've expanded our decision logic throughout our system. Now we can decision your expenses, time cards, time-off request, assets and a lot more. I see 2027 as being transformational for us as far as the technologies that we have in the hopper right now.

And again, once those are ready, and I do believe that we have a strong trusted brand to be able to go out and provide a lot of these technologies, and we've got several of them in testing. And so we'll release them over the next year. And I think 2027 will hold a different transformational time period for us.

Operator

Your next question comes from the line of Steve Enders from Citi.

Steven Enders

Maybe just to start, it would be great to kind of get your view on how, I guess, bookings or new bookings and sales execution this quarter and maybe how you're kind of seeing the environment today and how that compares to some of the prior -- some of the past few quarters?

Chad Richison

Sure. So we have a lot of new salespeople. We revamped the group as we shifted our entire organization towards automation. We want to make sure the clients are also utilizing the automation and the products that we have. And so -- we've had some new sales reps. I can tell you that the sales group that we have right now, the new people are doing better than any groups done in the past. They are doing very well. And sales overall is hitting the mark that we needed them to hit for this year. We're excited about all the opportunities next year and the discussions we're having as more and more prospects kind of get to the table on being willing to automate more and more of their decisions.

Steven Enders

Okay. Great. And then maybe just a follow-up on some of the free cash flow commentary. I guess, in the last quarter, you kind of gave a framework for how to think about where free cash flow could be for this year. I just want to see if there's any update on that. And I guess dovetailing off of that, when you're talking about expecting free cash flow to be kind of stronger next year, any way to maybe kind of directionally kind of put us in the right place for how to think about what that could look like from either a margin perspective or factors that could impact incremental dollars for next year?

Robert Foster

Steve, we made that onetime comment. We feel comfortable with that comment on where we were. The comment about next year being stronger is the comment more about it's sustainable and durable free cash flow that this business generates.

Operator

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

Jason Celino

Great. I wanted to ask about CapEx. So I think the 6% of CapEx for the full -- revenue for the full year kind of unchanged from last quarter. It looks like if you're kind of running $20-ish million of CapEx about 2 quarters. So it would kind of imply like a little bit of a step up in Q4. Maybe can you just speak to what some of your priorities would be for Q4 kind of implied in that framework, Bob?

Robert Foster

Yes. So the 6%, again, we want to be flexible there so that we can do what's right for our clients when we think about how we're going to provide the ROI. So there's nothing really important to point out there yet, but we did want to have that flexibility.

Jason Celino

Okay. And then, Chad, it's not lost on me that your R&D in Q3 is down, obviously, sequentially and year-over-year. So you are seemingly getting a lot of efficiency from AI and AI coding. And I hear you on the product hopper for next year and the paid SKUs that you've launched this year. But maybe can you elaborate a little bit more on what gives you the confidence that you're spending enough on R&D? I know it's a silly question given kind of the amount of leverage you're seeing. But is it in this forum, I'm happy to hear your thoughts.

Chad Richison

Well, it's the result that the R&D that we're spending is delivering right now. I would say both within our current product that we continue to develop and innovate and create all the automation available. I think people will be hard-pressed to find a better product and ours has just gotten a lot better this year with that lower spend and a greater focus.

And I would also say that with the new technologies and the other spend that we're able to do and more of a greenfield-type opportunity for us that didn't previously exist. We're just -- we have a lot of quality right now. And so that's what we focused on, not necessarily the spend. That's not to say that if we needed to spend more that we wouldn't. It's just that's where we're at right now, and we feel really good with the result that our R&D spend is delivered.

Operator

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

Jacob Cody Smith

Chad, you've always emphasized the benefits of owning your own data centers from reliability to cost efficiency. But I think the security benefits of controlling your own technology stack are especially relevant right now. The growing concern about cyber risk is AI models become more capable. Are customers and prospects placing more value on that control? And is that becoming a bigger selling point against competitors that rely on third-party infrastructure and integrations?

Chad Richison

I'll let Shane take that one. He's been instrumental in this process for a long time.

Terrell Hadlock

Yes, absolutely. Security is top of mind for everyone and them knowing exactly where their data resides is a big positive. They don't have to guess. They know exactly where it resides and feel confident in our ability to do that. It's something we've done since the inception of Paycom, and we're very confident in that.

Jacob Cody Smith

And as a follow-up there, you mentioned last quarter that customers can increasingly buy additional products directly within the Paycom platform. How meaningful is that self-service motion becoming to bookings? And do you expect that to increase going forward?

Chad Richison

Yes. I mean I think it's becoming more and more meaningful as we continue to release products and things that someone can buy through app. I will say that in the perfect world, you have a person influencing the purchasing decision there. And so many of our products, it's really important that we continue to do that to obviously hit volume that we want to hit, but as well as just to make sure that clients are utilizing the product the right way to get that ROI.

Some things we sell are they don't require a large amount of influence. They're somewhat necessary for a client or an additional add-on to something that they already have and they just need more of. And so I don't want to go through all of our in-app type opportunities there. But I would say that's an amount that continues to grow, but is still quite small compared to the opportunities that our CRRs have as they go out to our current clients.

Operator

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

Patrick O'Neill

Just as you all continue to roll out more functionality into the platform that helps customers drive more automation efficiencies within their business. Are you seeing or maybe anticipating to see the opportunity to potentially capture some of the labor pool spending that customers might be saving as a result? And how do you think about that opportunity long term?

Chad Richison

Again, I really think this -- it really just depends on the ROI delivered. We are looking to expand into other ROI cases that drive significant value for our clients' bottom line. And we would hope to share in some of that. And that's been our focus. And I think we've done a really good job this year of doing that, making sure that a client value achievement is made. That was one of our core goals coming into this year. We've been working on that now for a couple of years to make sure clients get the full value of what they purchased.

And there's a lot of things we've been able to develop that makes it easier for a client to get that value. One thing was IWant, but we've developed a lot and automated a lot of workflows within our system that really helped limit profit gaps that a business would otherwise have without. And so we continue to focus on that, and we see more of that going forward. And yes, I absolutely do believe in the future, as we've seen currently with asset management and others that there will be opportunities in the future.

Operator

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

Daniel Jester

So I got to see the asset management tool firsthand recently, and that was nice to see. Maybe can you help us understand sort of the ramp of either attach rate since you've launched that? Or how would that compare to some of the other products you've launched recently? And are there any learnings you'd share with us about how to sell a product like that compared to the core HR?

Chad Richison

Sure. Well, part of this product sell, as you know, kind of created within its development. We really go to -- we really try to create products that will drive immediate ROI for clients. For instance, our research told us that clients were buying assets that they had already owned. They just didn't know where they were. They didn't know what rooms they were in. They didn't know what employees they had handed them out to.

And you know with our system and through automated decisioning, we're able to track all of those. We're able to sign all assets that someone has. We're able to find where the other assets are, you're able to track assets, whether they've been handed to an employee or whether they're just sitting in a building in Toledo. We're able to track all of those assets. And that's a pretty important part of all business to be able to know where their assets are.

And so -- and especially the ones that also get deployed to employees, you want to make sure you get those back. And so this has been a really good product for us. It does fit in with the other things that we're selling. And CRRs have had a hard push on that, I would say, for about the last month and in a concerted effort to make sure that all of our clients understand the value that can be delivered with this product.

Daniel Jester

Okay. That's great. And then for my follow-up, so I mean, clearly, the profitability of the business has improved significantly. Maybe, Chad, you can -- in the past, you've shared that you've got 5% of the TAM. So there's still a lot of the market to go after. So what's your latest thinking about balancing productivity and growth? And as we think about 2027, any change in sort of how you would expect to invest in sales and go-to-market to capture more of the TAM?

Chad Richison

Sales and marketing is a large focus for us. It's been a large focus for us this year. And as we look into next year, I would say our focus is going to be significant there. We have -- like I said, we have an ambitious pipeline of products. Some of these products will require a different type of sales group to do that. And so you will see both sales and marketing with a strong focus next year. And again, technology, service, hosting and all the other things that we do.

Operator

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

Jared Levine

I wanted to talk about your international efforts here. It does look like you are hiring some sales folks in Europe here. Can you talk -- give us an update in terms of where you are in terms of international expansion efforts? And, I guess, what the plan is here over the near term?

Terrell Hadlock

Yes. This is Shane, and I'll take that one. International is an integral part of what we have been doing and continue to do. Yes, we are expanding that. We're seeing many new adoptions. For instance, we just brought on the large enterprise client in Mexico, and that has been going very well, and it's a strategic direction for us going forward.

Jared Levine

Got it. And then for my follow-up here, I think some were expecting a little bit more of a recurring acceleration in 3Q here just given the extra Wednesday dynamic. Anything to call out in terms of deferral of revenue or other kind of onetime impacts that might have impacted the level of growth here in 3Q?

Robert Foster

Yes, Jared, nothing particular to call out other than the calendar kind of anomalies that you all know so well and last year was a good quarter. So it was a little bit more of a tougher comp going forward.

Operator

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

Bhavin Shah

Chad, you spoke a little bit about the service organization you're seeing. Where are you kind of seeing that most play out? How sustainable are these kind of given some thoughts you've had in the past of making sure you have enough investments going to the service organization?

Chad Richison

Yes. I don't know that you kind of broke up there at the end, but you were talking about our service organization and how we're gaining the efficiencies there and how we see this playing out in the future, I believe, is what you're saying.

Just greater efficiencies. I mean, when we make a product more automated, that gets a client out of it more. I think if you guys kind of listened to some of my calls in the past, I've said the perfect world, our product would just work for you and you'd never have to log in. And so when you automate a lot of these very important workflows, you're able to actually achieve a lot of that. And so that does -- when you make something easier to use and easier for someone to get the result, you do supply less service. When you set somebody up correct from the beginning with that automation, you are going to be able to provide less service. Receiving a service call on how to do something that's really an old model.

And when you're using self-service technologies and especially in our case, automated technologies with layers of AI, you would expect to make that easier to service. And that's been the case. And actually, what it allows our service individuals to shift toward a more value of that client. We're able to do more analysis of how they're using the system and what areas of the system that we could impact for them for even greater ROI. And so I guess to answer that, it turns into more outbound calls for us in proactive service based on analysis versus inbound calls of waiting for a client to call us to be able to ask a question about how to use something.

Bhavin Shah

That's helpful. And just a quick follow-up for Craig. Just based on the last question, you kind of hired dedicated sales team in Europe. How do we think about the level of investment going into this initiative? And how do we think about CapEx, especially as it relates to data centers and data sovereignty?

Robert Foster

Yes. So this is Bob. I'll answer that question. As anything, we look at the investment and what it's going to pay off over the long term. We do play the long game, and we're in it for that. So as you see while we're expanding those offices that we're having some success over there. Your data -- the data center investment question, I think you asked about how do we see that. We see that as a critical value for our clients and for Paycom itself, and we'll continue to monitor those investments. Last year, as you all know, we made a big investment in that. We're not afraid to do that again if it makes sense for our clients.

Operator

Your next question comes from the line of Patrick McIlwee from William Blair.

Patrick McIlwee

Just a 2-parter here. So to continue on the comments you were just making on the data center investments. So last quarter, you highlighted some big numbers, $100 million in R&D savings and take another $30 million in avoided third-party fees from some of the infrastructure investments you made last year. Just wanted to ask how much of that leverage or opportunity do you feel like you've already realized versus what incremental efficiencies we might expect heading into '27?

Chad Richison

I think there's a lot more internal efficiencies to be gained. I think we just kind of scratched the surface. We didn't set up these data centers for GPUs and AI. We've set up our data centers for security, uptime, speed and all the things that we had been doing prior to having the chance to purchase the GPUs and going ahead and hosting that. But it's just something we've done for a long time, and we're good at.

To Bob's last comments that we're not afraid to continue to spend a data center. We will continue to spend in data center, but it will also be more incremental over time, kind of, how we go through that process. And so we feel good about where we're at with our CapEx spend and guide right now. And then as we look into 2027, Bob has already given kind of a directional comment in regards to cash flow. And so that might let you know that where we sit -- where we feel like we sit from a capacity perspective in those areas.

Patrick McIlwee

Okay. That's great. And switching gears on Project Arc just following the rollout of that, that functionality, that enhanced scalability. Have you seen any meaningful change in your win rates thus far or sales cycles thus far? I know it's early, but I just wanted to ask if you feel like that enhanced platform has opened up any opportunities that you previously felt might have been difficult to pursue?

Chad Richison

Yes. I think well, both Projects Arc as well as a lot of the products that came out around the same time. During that time, we also produced a greater data lake. We produced a lot of automation. I mean I can't speak enough about. We didn't really release it to the market from a conversational perspective, but we did to our clients. And so now clients are -- they have automated punch changes, time card approvals.

Expenses. If someone goes into expense -- to actually expense something. The system can decision it. And so we've been able to remove an inconsistent decisioning in many of the areas that produce profit leaks, revenue -- reduces revenue opportunities for our clients. And so we'll continue to focus on that as we move forward. And definitely, Project Arc kind of built a foundation through which all that can be realized.

Terrell Hadlock

Yes, I'd say in addition to that, we talked about the speed, and that really played out for more enterprise clients where we had one that saw kind of a 4x increase in performance. And so that was a big enhancement across the board.

Operator

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.

Chad Richison

All right. I just want to thank everyone for joining the call today. We look forward to speaking with many of you at the UBS Conference on December 1 in Phoenix and the Barclays Conference in San Francisco on December 9.

Our people have done a great job transforming our products and processes toward automation. I want to thank our software teams, our sales and conversion teams, our service organization, really everyone. 2026 has been a year of pride as we get back to our old selves and prepare for an exciting future. With that, operator, you may end the call.

Operator

This concludes today's conference call. You may now disconnect.