Given the strong Q1 beat, why was full-year guidance reaffirmed, implying a slowdown? Is the company being conservative?

Management stated it's early in the year and they are confident in their full-year guidance, despite the strong Q1 results. “It's early in the year and so, we did have a strong first quarter. We've got the full year left. We're happy with what was there, but we like our guidance throughout the remainder of this year.”

What is the rationale for the new $2 billion buyback authorization, especially if growth is expected to slow down?

Management believes the stock is undervalued, trading on market narratives rather than fundamentals, and views the buyback as an opportunistic move to benefit long-term investors from this value disconnect. “I mean, right now our stock doesn't really trade, I don't believe, off what we do. It kind of trades based on the AI prophecy of the day. I think there's a little bit of a sky's falling narrative out there and if you believe that narrative, I mean, our stock should almost be at zero. Our value proposition's getting stronger and stronger with our clients. Our Net Promoter Scores are going up. They're continuing to increase. You know, we're kind of valued, I believe, at kind of a fool's gold price and we believe we're precious metal.”

How are IWant and other automation solutions supporting top-of-funnel activities, new opportunities, and pipeline conversion?

IWant creates significant value, being the first AI tool in the industry to access an entire system, with usage up 33% since Q4. It reduces learning barriers and simplifies the solution, contributing to leads and sales opportunities. “I mean IWant creates real value and was the first AI tool in our industry that accessed an entire system. You know, and we'll discuss future AI products as we're ready to launch them. I mean IWant's up another 33% just since the end of the fourth quarter from a usage perspective.”

PAYC

Paycom (PAYC) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Information Technology· May 6, 2026

Source: earnings call transcript

Executive summary

Paycom Q1 FY26 — Strong Revenue, Share Buyback, and Automation Progress

Paycom delivered solid Q1 FY26 results, driven by strong recurring revenue and operational efficiencies from automation. The company reaffirmed its full-year guidance, indicating a conservative outlook despite the strong start. Management highlighted increased client engagement and the strategic value of its automation solutions, including AI, while also executing a significant share repurchase program.

Highlights

Total revenues reached $572 million, marking an 8% increase over the prior year period.
Recurring and other revenue grew 9% year-over-year to $544 million.
Adjusted EBITDA expanded by 50 basis points year-over-year to 48.2%, totaling $275 million.
The company repurchased approximately 8.4 million shares for $1.06 billion in Q1 FY26.
A new $2 billion share buyback authorization was approved by the board.

Concerns

Full-year revenue and adjusted EBITDA guidance ranges were reaffirmed despite a strong Q1 beat, implying a slowdown in growth for the remainder of the year.

Guidance & targets

Category	Target	Timeline	Confidence
Total revenues	$2.175 billion to $2.195 billion high materiality	Full-year 2026 · FY26	High
Total revenues growth	approximately 6.5% year-over-year growth at the midpoint high materiality	Full-year 2026 · FY26	High
Recurring and other revenue growth	up 7% to 8% year-over-year medium materiality	Full-year 2026 · FY26	High
Adjusted EBITDA	$950 million to $970 million high materiality	Full-year 2026 · FY26	High
Adjusted EBITDA margin	44% at the midpoint high materiality	Full-year 2026 · FY26	High
Interest on funds held for clients	$103 million medium materiality	Full-year 2026 · FY26	High

PAYC operating KPIs by quarter

PAYC operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Average daily balance on funds held for clients	~$3.1B The average daily balance on funds held for clients was approximately $3.1 billion in the first quarter of 2026, up 8% over the prior year period. Source: earnings call transcript	~$2.9B The average daily balance of funds held for clients was approximately $2.9 billion in the second quarter of 2026, up 9% over the prior year period. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline
IWant	update	since end of Q4 FY25
Beti	milestone	—
GONE	milestone	—
Expense Management Module	update	around 9 or 10 years

Capital programs

Share Buyback Authorization approved $2 billion

Start: May 4, 2026

Benefit:Replaced prior authorization

Approved by the board on May 4, 2026, to replace the prior authorization. Management views the stock as undervalued, making buybacks opportunistic.

Revolving Credit Facility replaced $2.125 billion

Spent to date: $675 million currently drawn down

Start: April 2026

Replaced the previous revolving credit facility with a new 5-year facility in April. $675 million is currently drawn down.

Risks & headwinds

Market perception and stock valuation current

Stock doesn't trade off company performance, but on 'AI prophecy' and 'sky's falling narrative'.

Mitigation:Opportunistic share repurchases, belief in long-term value for investors.

Data center moratoriums and CapEx impact FY26

Impact on CapEx for the year is uncertain.

Mitigation:Monitoring opportunities to expand in power and purchase of items, no specific guidance given yet.

Sales force training impact on book sales Q1 FY26

Put 'a little air in the line' for Q1 book sales.

Mitigation:Expect greater opportunities for book sales inflection throughout the year as training concludes and reps return to the field.

What to watch in Q2 FY26

Book sales inflection

throughout the year

Current according to budget for Q1, 'a little air in the line' from training

Target greater opportunities for book sales to have some inflection

Why it matters

Indicates the effectiveness of recent sales force changes and will be a key driver for future revenue growth.

I will say that book sales came in, according to budget and what our expectation was for first quarter. I also had kind of mentioned that we had pulled our sales group out of the field for a 3-month period of time. Not full 3 months, but you'd have to come for a week and then go back and then come back for a week. You know, that put a little air in the line, and we would expect as we move throughout the year to have greater opportunities for book sales to have some inflection there.

Find out whether PAYC delivers this. Inve re-checks your case every morning.

Q&A highlights

What factors, such as new bookings, seller headcount/productivity, or employment growth, contributed to the stronger-than-expected recurring revenue in Q1?

Q1 performance was in line with internal expectations, with the forms filing business contributing to a higher margin profile. Sales department changes did not significantly impact Q1 starts.

“I would say it came in about what we expected for our expectations. You know, when deal starts matter within a quarter, and you know, we had a successful quarter in the first quarter. Also first quarter, to keep in mind, it is the quarter where we have our forms filing business. That also can contribute to a higher margin profile in the first quarter.”

asked by Jordan Ross Boretz · answered by Chad Richison

2 min read 6 chapters

Detailed narrative

Automation and Client ROI

Paycom's full solution automation strategy, including products like Beti, GONE, and IWant, is driving significant client ROI. Beti has been shown to reduce payroll processing labor by 90%, while GONE delivers an ROI of over 800%. The AI solution, IWant, is accelerating speed to value for clients, with its usage increasing by 33% since the end of Q4 FY25, becoming a predominant interface for many users.

Market Opportunity and Industry Recognition

The company currently serves approximately 5% of the addressable market, indicating a significant long-term growth opportunity. Paycom has received multiple industry accolades, including being named the best HR and payroll software provider by G2 in Spring 2026 and recognized as a 2026 Platinum Employer on the 'Where You Work Matters' list.

It was also the only company in its industry to earn a 5-star rating on USA Today's Most Trusted Brands in 2026.

Capital Allocation Strategy and Share Repurchases

Paycom executed a substantial share repurchase program in Q1 FY26, buying back approximately 8.4 million shares for $1.06 billion, representing about 15% of shares outstanding at the end of 2025. The board subsequently approved a new $2 billion buyback authorization. Management views the company's stock as undervalued, presenting an opportunistic scenario for repurchases that benefits long-term investors.

Sales Force and Go-to-Market Evolution

Significant changes were implemented in the sales organization starting in late October/November of the previous year. The focus is on effectively selling automation and ensuring clients achieve the promised ROI from the outset. These changes, coupled with enhanced training, are leading to new sales representatives ramping up faster than those in the past 6-7 years.

Internal Efficiencies and AI Adoption

Paycom is leveraging its automation strategy, including AI, across all internal departments and functions to boost efficiencies. While specific internal examples are not disclosed for competitive reasons, the company emphasizes that there is no area of its business untouched by this automation focus, which is a continuous discipline for future improvements.

Pricing Model and Client Value

The company considers its pricing model proprietary but states that the overall value proposition to clients has not changed meaningfully. Paycom utilizes different pricing structures tailored to individual clients based on factors like hiring patterns and turnover, aiming to provide the most helpful and value-driven approach.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.