Craig E. Boelte
Chief Financial Officer at Paycom Software
Before I review our fourth quarter and full-year results for 2022 and our outlook for the first quarter and full year 2023, I would like to remind everyone that my comments related to certain financial measures will be on a non-GAAP basis.
We ended the year with very strong results with full-year 2022 revenue of $1.375 billion, up 30.3% compared to 2021. Fourth quarter results were excellent with total revenues of $370.6 million, representing growth of 30% over the comparable prior year period. Our revenue growth was driven by strong demand, new business wins, and adoption of recent new product offerings.
Within total revenues, recurring revenue was $364 million for the fourth quarter of 2022 representing 98% of total revenues for the quarter and growing 30% from the comparable prior year period. We ended 2022 with approximately 36,600 clients representing a growth rate of 8% compared to 2021. On a parent-company grouping basis, we ended the year with roughly 19,100 clients, also up 8% compared to 2021. Total number of employee records increased 14% year-over-year in 2022 to 6.5 million.
Paycom's annual revenue retention rate in 2022 was 93%, which was consistent with our recent four-year average of 93% and up more than 200 basis points from the prior four-year period average of 91%. Total adjusted gross profit for the fourth quarter was $312.5 million, representing an adjusted gross margin of 84.3%. For the full year 2022, our adjusted gross margin was 84.9%.
Adjusted sales and marketing expense for the fourth quarter of 2022 was $87.3 million or 23.5% of revenues. Our marketing strategy in 2022 has been very effective at driving high-quality demo leads with the revenue generated from prior period investments, we saw a 100 basis point improvement in adjusted sales and marketing expense as a percentage of revenues for the year. We plan to continue to invest in marketing in Q1 and throughout 2023.
Adjusted R&D expense was $36.6 million in the fourth quarter of 2022 or 9.9% of total revenues. Adjusted total R&D costs, including the capitalized portion, were $51.8 million in the fourth quarter of 2022 compared to $44 million in the prior year period. We have a very strong pipeline of product development opportunities in 2023 that we believe will create tremendous value for our clients and for Paycom.
Adjusted EBITDA was $163.9 million in the fourth quarter of 2022 or 44.2% of total revenues compared to $109.6 million in the fourth quarter of 2021 or 38.4% of total revenues. For the full year 2022, adjusted EBITDA was $579.7 million or 42.2% of total revenues compared to $419.3 million or 39.7% of total revenues in 2021, representing over 240 basis points of margin expansion.
Our GAAP net income for the fourth quarter was $80 million or $1.38 per diluted share versus $48.7 million or $0.84 per diluted share in the prior year period based on approximately 58 million shares in both periods.
For the full year 2022, our GAAP net income was $281.4 million, or $4.84 per diluted share, up 44% year-over-year. Non-GAAP net income for the fourth quarter of 2022 was $100.2 million or $1.73 per diluted share versus $64.4 million or $1.11 per diluted share in the prior year period.
For the full year 2022, our non-GAAP net income was $357.2 million or $6.14 per diluted share versus $260.4 million or $4.48 per diluted share in the prior year period, up 37% year-over-year. For Q1 and full year 2023, we anticipate our effective income tax rate to be approximately 28% on a GAAP basis and approximately 26% on a non-GAAP basis.
Turning to the balance sheet. We ended the year with a very strong balance sheet, including cash and cash equivalents of $401 million and total debt of $29 million. During 2022, we repurchased approximately 365,000 shares for a total of nearly $100 million. Through December 31, 2022, Paycom has repurchased nearly 4.7 million shares since 2016 for a total of nearly $590 million, and we currently have $1.1 billion remaining in our buyback program.
Cash from operations was $365 million in 2022, representing an increase of 14.3%. The new requirement in 2022 to capitalize instead of expense R&D costs resulted in approximately $27 million in additional income tax payments that would have been deferred under previous law. This impacted both our operating cash flow and free cash flow as compared to 2021. The average daily balance of funds held on behalf of clients was approximately $2.1 billion in the fourth quarter of 2022. For 2023, we anticipate stock compensation to be approximately $120 million. On the capital expenditure front, we're in full construction of our fifth building in Oklahoma City, and we now estimate total CapEx as a percent of revenues to be approximately 12% in 2023.
Now let me turn to guidance. For fiscal 2023, we expect revenue in the range of $1.700 billion to $1.702 billion or approximately 24% year-over-year growth at the midpoint of the range. We expect adjusted EBITDA in the range of $700 million to $702 million, representing an adjusted EBITDA margin of approximately 41% at the midpoint of the range. Once again, we are starting the year's guidance at the Rule of 65.
For the first quarter of 2023, we expect total revenues in the range of $443 million to $445 million, representing a growth rate over the comparable prior year period of approximately 26% at the midpoint of the range. We expect adjusted EBITDA for the first quarter in the range of $210 million to $212 million, representing an adjusted EBITDA margin of approximately 48% at the midpoint of the range.
2022 was a very strong year for Paycom, reflecting the strength of prior year investments and consistent execution. We will continue to invest in talent, marketing, innovation, customer service, and geographic expansion to meet the strong demands we are experiencing.
With that, we will open the line for questions. Operator?