What is an income statement waterfall?

An income statement waterfall is a bar chart that walks from total revenue down to net income, with each step showing how much a cost or tax line removes (or adds). Subtotals — gross profit, operating income, pre-tax income — are anchored to zero so the cascade reconciles exactly to the bottom line.

How much of Paycom Software (PAYC) revenue becomes net income?

For TTM through Q1 2026, Paycom Software turned $2.09B of revenue into $470M of net income — a net margin of 22.4%. The waterfall shows where the rest goes: cost of revenue, operating expenses, non-operating items, and taxes.

What are Paycom Software (PAYC) gross, operating, and net margins?

For TTM through Q1 2026, Paycom Software reported a gross margin of 79.7%, an operating margin of 28.3%, and a net margin of 22.4%. Each subtotal in the waterfall corresponds to one of these margins.

Why does Paycom Software (PAYC) have such a high (or low) gross margin?

Gross margin (gross profit ÷ revenue) reflects how much of each revenue dollar remains after direct production costs. Capital-light software and platform businesses often show gross margins above 60–80% because their cost of revenue is mainly hosting and support. Hardware, retail, and commodity businesses show lower gross margins because raw materials and manufacturing costs are significant. The waterfall makes this visible at a glance — the size of the "Cost of Revenue" bar relative to Revenue is the gross margin complement.

What is the difference between gross, operating, and net margin?

Gross margin = (Revenue − Cost of Revenue) ÷ Revenue. It measures production efficiency. Operating margin = Operating Income ÷ Revenue. It adds operating expenses (R&D, S&M, G&A) and measures the profitability of core operations. Net margin = Net Income ÷ Revenue. It also includes interest, other income/expense, and taxes, and represents the shareholder take after everything.

Paycom Software (PAYC) Income Statement Waterfall

Revenue

$2.09B

Gross Margin

+79.7%

Operating Margin

+28.3%

Net Margin

+22.4%

Income statement waterfall for Paycom Software (PAYC) — TTM through Q1 2026

Net income: $470M

Margin breakdown for Paycom Software (PAYC) — TTM through Q1 2026

Line item	Amount	Running total
Revenue	$2.09B	$2.09B
Cost of Revenue	-$424M	$1.67B
Gross Profit	$1.67B	$1.67B
Operating Expenses	-$1.08B	$592M
Operating Income	$592M	$592M
Other Income / Expense	$52.1M	$645M
Pre-tax Income	$645M	$645M
Income Tax	-$175M	$470M
Net Income	$470M	$470M

Revenue$2.09B
Cost of Revenue-$424M
Gross Profit$1.67B
Operating Expenses-$1.08B
Operating Income$592M
Other Income / Expense$52.1M
Pre-tax Income$645M
Income Tax-$175M
Net Income$470M

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