Paycom shares slump as growth slows and buybacks surge
The payroll-software provider spent $1.06 billion repurchasing stock in the quarter while revenue growth decelerated to 7.8%.
Paycom Software (PAYC) reported a sharp slowdown in revenue growth and a tenfold increase in share repurchases, sending its stock lower after hours. The Oklahoma City-based payroll-software provider said recurring revenue rose 8.8% from a year earlier to $544.0 million in the first quarter, down from 11.2% growth in the prior quarter.
The results marked the second consecutive quarter of decelerating top-line growth, with total revenue climbing 7.8% to $571.9 million, below the 10.2% pace set in the fourth quarter of 2025. Non-GAAP net income reached $3.15 a share, up from $2.80 a year earlier but down sequentially from $2.45 in the prior quarter.
Margins showed mixed signals. Adjusted EBITDA expanded to 48.2% of revenue from 47.7% a year earlier, though the figure compressed from 43.4% in the fourth quarter as operating leverage waned. The company attributed the sequential decline to higher sales and marketing costs, which rose to 20.6% of revenue from 19.4% a year earlier, reversing a trend of efficiency gains.
Cash flow came under pressure as Paycom spent $1.06 billion repurchasing 8.4 million shares in the quarter, a 9.7-fold increase from the $108.8 million spent in the prior period. The buyback spree, funded in part by $675 million in new long-term debt, drained cash and equivalents to $153.9 million from $370.0 million at year-end. Client funds obligations, a key liability tied to payroll processing, fell 49% sequentially to $2.62 billion.
Guidance remained unchanged. Paycom reiterated full-year revenue of $2.175 billion to $2.195 billion, implying 6% to 7% growth, and adjusted EBITDA of $950 million to $970 million, or a 44% margin at the midpoint. Both ranges were held steady from the prior quarter’s outlook but reflected slower growth than the 9% revenue increase and 43% EBITDA margin reported in 2025.
Client retention ticked higher, with annual revenue retention improving to 91% in 2025 from 90% the prior year, the company disclosed in its fourth-quarter filing. Parent-company client count grew 5% to roughly 20,300, while employee records under management rose a matching 5% to 7.4 million.
The quarter underscored a shift in capital priorities. With revenue growth cooling, Paycom leaned into shareholder returns, deploying more than its entire quarterly free cash flow to buybacks while taking on debt for the first time in its public history.