Paycom increases and extends stock repurchase plan

Rhea-AI Summary

Paycom Software, Inc. (NYSE: PAYC) has announced an increase and extension of its stock repurchase plan. The board of directors has authorized $1.5 billion for repurchases through Aug. 15, 2026, up from the previous $676 million available. CEO Chad Richison highlighted Paycom's leading product, resilient business model, and strong balance sheet with no debt. The company has already repurchased approximately 2.3 million shares (4% of the company) since July 2022 for about $413 million. Paycom will continue to opportunistically buy back stock at attractive valuations relative to peers. The repurchase plan's timing, number, and value of shares will be determined by a board committee, considering market conditions and other factors.

Positive

• Increased stock repurchase plan to $1.5 billion
• Extension of repurchase plan through Aug. 15, 2026
• Strong balance sheet with no debt
• Robust cash flow generation
• Already repurchased 2.3 million shares (4% of company) for $413 million

Negative

• None.

Financial Analyst

Paycom's decision to increase and extend its stock repurchase plan is a significant move that signals confidence in the company's financial health and future prospects. The expansion from $676 million to $1.5 billion available for repurchases through August 2026 is substantial, representing a 122% increase in the repurchase capacity.

This strategy can be seen as a positive signal for investors for several reasons:

• It suggests that management believes the stock is undervalued relative to its intrinsic value.
• It can potentially boost earnings per share by reducing the number of outstanding shares.
• It demonstrates the company's strong cash position and confidence in its ability to generate future cash flows.

The fact that Paycom has already repurchased 4% of the company since last July for $413 million shows a consistent commitment to this strategy. However, investors should note that the actual impact on stock price can vary and the effectiveness of buybacks depends on market conditions and execution timing.

Paycom's strong financial position, with no debt and robust cash flow, provides flexibility for this capital allocation decision. However, investors should also consider whether this large repurchase plan might limit investments in growth opportunities or other strategic initiatives.

Market Research Analyst

Paycom's expanded stock repurchase plan reflects broader trends in the tech sector, where companies with strong cash positions are increasingly using buybacks as a capital return strategy. This move positions Paycom competitively in the human capital management (HCM) software market, where investor sentiment can be influenced by such financial maneuvers.

The timing of this announcement is noteworthy, coming amidst market volatility and valuation pressures in the tech sector. By signaling confidence through this expanded buyback program, Paycom may be aiming to differentiate itself from peers and attract investor attention.

However, the effectiveness of this strategy depends on several factors:

• Market perception of Paycom's growth prospects in the competitive HCM space
• The company's ability to maintain its 'leading product' status and market share
• Investor preference for buybacks versus other forms of capital allocation, such as dividends or reinvestment in R&D

The mention of 'attractive valuations relative to peers' suggests that Paycom's management sees a disconnect between the company's intrinsic value and its market price. This could indicate potential upside for investors if the market eventually aligns with management's valuation perspective.

Investors should monitor how this buyback program impacts Paycom's financial metrics, particularly its return on invested capital and earnings per share growth, to assess the long-term value creation of this strategy.

Tech Industry Expert

Paycom's decision to substantially increase its stock repurchase plan is a strategic move that aligns with its position as a leading provider in the cloud-based human capital management (HCM) software space. This sector has seen significant growth and transformation, especially in the wake of remote work trends and increased focus on employee experience.

The company's claim of having a 'leading product in an attractive industry' is supported by several key factors:

• The HCM software market is expected to grow at a CAGR of 12.2% from 2021 to 2028, according to Grand View Research.
• Cloud-based solutions are increasingly preferred by businesses for their scalability and cost-effectiveness.
• Paycom's single database architecture differentiates it from competitors, potentially offering better data integrity and user experience.

However, the HCM software landscape is highly competitive, with players like Workday, ADP and SAP SuccessFactors vying for market share. Paycom's ability to maintain its leading position will depend on continued innovation and adaptation to evolving workforce management needs.

The company's 'resilient business model' claim is likely rooted in the recurring revenue nature of SaaS businesses and the critical role HCM software plays in organizational operations. This resilience, coupled with the strong balance sheet, provides Paycom with a solid foundation for this aggressive buyback strategy.

Investors should watch for Paycom's R&D investments and product roadmap to ensure that the buyback program doesn't come at the expense of innovation, which is important for long-term success in the fast-evolving tech sector.

OKLAHOMA CITY--(BUSINESS WIRE)-- Paycom Software, Inc. (NYSE: PAYC) (“Paycom”), a leading provider of comprehensive, cloud-based human capital management software, announced today that its board of directors has increased and extended its ongoing stock repurchase plan, such that $1.5 billion is available for repurchases through Aug. 15, 2026. Prior to the increase, approximately $676 million was available for repurchases.

“We have a leading product in an attractive industry, a resilient business model that generates robust cashflow and a strong balance sheet with no debt,” said Chad Richison, Paycom founder, CEO and chairman. “We have repurchased approximately 2.3 million shares, or 4% of the company, since last July for approximately $413 million. We will continue to opportunistically buy our stock if and when we see attractive valuations relative to peers.”

Shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws, including Rule 10b5-1 programs, and the repurchase plan may be suspended or discontinued at any time. The actual timing, number and value of shares repurchased will be determined by a committee of the board of directors at its discretion and will depend on a number of factors, including the market price of Paycom’s common stock, general market and economic conditions, and other corporate considerations.

About Paycom

For 25 years, Paycom Software, Inc. (NYSE: PAYC) has simplified businesses and the lives of their employees through easy-to-use HR and payroll technology to empower transparency through direct access to their data. And thanks to its industry-first solution, Beti®, employees now do their own payroll and are guided to find and fix costly errors before payroll submission. From onboarding and benefits enrollment to talent management and more, Paycom’s software streamlines processes, drives efficiencies and gives employees power over their own HR information, all in a single app. Recognized nationally for its technology and workplace culture, Paycom can now serve businesses of all sizes in the U.S. and internationally.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are any statements that look to future events and include, but are not limited to, statements regarding Paycom’s business strategy; anticipated future operating results and operating expenses, cash flows, capital resources and liquidity; trends, opportunities and risks affecting Paycom’s business, industry and financial results; and Paycom’s plans to purchase shares of its common stock under the authorized stock repurchase plan. These forward-looking statements speak only as of the date hereof and are subject to business and economic risks. As such, Paycom’s actual results could differ materially from those set forth in the forward-looking statements as a result of the factors discussed in Paycom’s filings with the Securities and Exchange Commission, including but not limited to those discussed in Paycom’s Annual Report on Form 10-K for the year ended December 31, 2023. Paycom undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable securities laws.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240731673591/en/

Investor Relations:

James Samford

investors@paycom.com

Paycom Software, Inc.

Source: Paycom Software, Inc.

FAQ

What is the new stock repurchase plan amount for Paycom (PAYC)?

Paycom (PAYC) has increased its stock repurchase plan to $1.5 billion, available through August 15, 2026.

How many shares has Paycom (PAYC) repurchased since July 2022?

Paycom (PAYC) has repurchased approximately 2.3 million shares, or 4% of the company, since July 2022 for about $413 million.

When does Paycom's (PAYC) new stock repurchase plan expire?

Paycom's (PAYC) new stock repurchase plan extends through August 15, 2026.

What factors will determine the timing and amount of Paycom's (PAYC) stock repurchases?

The timing, number, and value of Paycom's (PAYC) stock repurchases will be determined by a board committee, considering market price, general market and economic conditions, and other corporate factors.