PAYC Paycom Software Inc

Third Quarter Revenues of $256.2 million, up 30.4% from the comparable prior year period

Third Quarter GAAP Net Income of $30.4 million, representing 11.9% of total revenues, or $0.52 per diluted share

Third Quarter Non-GAAP Net Income of $53.6 million, or $0.92 per diluted share

Third Quarter Adjusted EBITDA of $89.7 million, representing 35.0% of total revenues

Paycom Software, Inc. (“Paycom,” “we” and “our”) (NYSE: PAYC), a leading provider of comprehensive, cloud-based human capital management software, today announced its financial results for the quarter ended September 30, 2021.

“We delivered very strong third quarter results, which is a reflection of the investments we’ve made in product innovation, sales and marketing, and providing world-class service,” said Paycom’s founder and CEO, Chad Richison. “Paycom’s differentiated solutions and go-to-market strategy are resonating with businesses of all sizes across the country. We continue to aggressively reinvest into the business to maximize our growth opportunities.”

Financial Highlights for the Third Quarter of 2021

Total Revenues of $256.2 million represented a 30.4% increase compared to total revenues of $196.5 million in the same period last year. Recurring revenues of $251.3 million increased 30.4% from the comparable prior year period, and constituted 98.1% of total revenues.

GAAP Net Income was $30.4 million, or $0.52 per diluted share, compared to GAAP net income of $27.5 million, or $0.47 per diluted share, in the same period last year.

Non-GAAP Net Income1 was $53.6 million, or $0.92 per diluted share, compared to $40.6 million, or $0.70 per diluted share, in the same period last year.

Adjusted EBITDA1 was $89.7 million, compared to $67.5 million in the same period last year.

Cash and Cash Equivalents were $230.9 million as of September 30, 2021, compared to $151.7 million as of December 31, 2020.

Total Debt, Net was $29.6 million as of September 30, 2021, compared to $30.9 million as of December 31, 2020.

1 Adjusted EBITDA and non-GAAP net income are non-GAAP financial measures. Please see the discussion below under the heading "Use of Non-GAAP Financial Information" and the reconciliations at the end of this release for additional information concerning these and other non-GAAP financial measures.

Financial Outlook

Paycom provides the following expected financial guidance for the quarter and year ending December 31, 2021:

Quarter Ending December 31, 2021:

Total Revenues in the range of $274.5 million to $276.5 million.

Adjusted EBITDA in the range of $103 million to $105 million.

Year Ending December 31, 2021:

Total Revenues in the range of $1.045 billion to $1.047 billion.

Adjusted EBITDA in the range of $413 million to $415 million.

We have not reconciled the forward-looking adjusted EBITDA ranges presented above and discussed on the teleconference call to net income, nor the forward-looking adjusted EBITDA margins and forward-looking non-GAAP effective income tax rate discussed on the teleconference call to comparable GAAP measures, because applicable information for future periods, on which these reconciliations would be based, are not readily available due to uncertainty regarding, and the potential variability of, depreciation and amortization, interest expense, taxes, non-cash stock-based compensation expense, change in fair value of our interest rate swap and other items. Further, we have not reconciled the forward-looking adjusted gross margin range discussed on the teleconference call to GAAP gross margin because applicable information for future periods, on which this reconciliation would be based, is not readily available due to uncertainty regarding, and the potential variability of, cost of revenues, including non-cash stock-based compensation expense. Accordingly, reconciliations of the forward-looking adjusted EBITDA ranges to net income, the forward-looking adjusted EBITDA margins to net income margin, the forward-looking adjusted gross margin range to gross margin and the forward-looking non-GAAP effective income tax rate to the GAAP effective income tax rate are not available at this time without unreasonable effort. During the teleconference call, we also refer to a forward-looking estimate of our implied revenue growth plus adjusted EBITDA margin for 2021, or the “Rule of 60.” Because we are unable to reconcile forward-looking adjusted EBITDA margin to net income margin without unreasonable effort, we are unable to reconcile the “Rule of 60” to a comparable GAAP measure without unreasonable effort.

Impact of the COVID-19 Pandemic

During the third quarter of 2021, we transitioned the majority of our employees back to our offices, with a large contingent temporarily utilizing alternating schedules between work-from-home and on-site arrangements. We may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees and clients. Business continuity and safety will continue to guide our return-to-office plans. Although we currently have some insight with respect to the effects of the COVID-19 pandemic to date, it is not possible at this time to estimate the full impact that the crisis could continue to have on our business and results of operations.

• The COVID-19 pandemic has resulted in, and may continue to result in, headcount fluctuations across our client base. Because we charge our clients on a per-employee basis for certain services we provide, headcount fluctuations at our clients impacts our recurring revenue. The negative effects on our client revenue of lower headcount resulting from the pandemic were more than offset by headcount additions from new clients and modestly improved headcount levels among our pre-pandemic client base throughout the third quarter of 2021. We expect that our recurring revenue in future periods will continue to be impacted by such headcount fluctuations.
• Despite growth in the number of clients in our base and growth in our average funds held for clients balance, significantly lower average interest rates during the first nine months of 2021 as compared to the first nine months of 2020 had a negative effect on interest earned on funds held for clients and, consequently, recurring revenue growth in the three and nine months ended September 30, 2021.
• Our solution allows clients to seamlessly manage and communicate with their remote workforces. In a work-from-home environment, our clients have recognized the benefits of our focus on employee usage, as well as the strengths and advantages of our single database solution.
• While our sales force continues to conduct meetings with current and prospective clients virtually, as prospective clients begin to take meetings in-person, we expect our sales process would transition to include a combination of virtual and in-person meetings.

Use of Non-GAAP Financial Information

To supplement our financial information presented in accordance with generally accepted accounting principles in the United States (“GAAP”), we present certain non-GAAP financial measures in this press release and on the related teleconference call, including adjusted EBITDA, non-GAAP net income, adjusted gross profit, adjusted gross margin, adjusted sales and marketing expenses, adjusted total administrative expenses, adjusted research and development expenses, adjusted total research and development costs and “Rule of 60”. Management uses these non-GAAP financial measures as supplemental measures to review and assess the performance of our core business operations and for planning purposes. We define (i) adjusted EBITDA as net income plus interest expense, taxes, depreciation and amortization, non-cash stock-based compensation expense, certain transaction expenses that are not core to our operations (if any) and the change in fair value of our interest rate swap, (ii) non-GAAP net income as net income plus non-cash stock-based compensation expense, certain transaction expenses that are not core to our operations (if any) and the change in fair value of our interest rate swap, all of which are adjusted for the effect of income taxes, (iii) adjusted gross profit as gross profit plus applicable non-cash stock-based compensation expense, (iv) adjusted gross margin as gross profit plus applicable non-cash stock-based compensation expense, divided by total revenues, (v) each adjusted expense item as the GAAP expense amount less applicable non-cash stock-based compensation expense, (vi) adjusted total research and development costs as total research and development costs (including the capitalized portion) less applicable non-cash stock-based compensation (including the capitalized portion), (vii) adjusted EBITDA margin as adjusted EBITDA (calculated as described in clause (i)) divided by total revenues and (viii) “Rule of 60” as revenue growth (expressed as a percentage) plus adjusted EBITDA margin (calculated as described in clause (vii)). The non-GAAP financial measures presented in this press release and discussed on the related teleconference call provide investors with greater transparency to the information used by management in its financial and operational decision-making. We believe these metrics are useful to investors because they facilitate comparisons of our core business operations across periods on a consistent basis, as well as comparisons with the results of peer companies, many of which use similar non-GAAP financial measures to supplement results under GAAP. In addition, adjusted EBITDA is a measure that provides useful information to management about the amount of cash available for reinvestment in our business, repurchasing common stock and other purposes. Management believes that the non-GAAP measures presented in this press release and discussed on the related teleconference call, when viewed in combination with our results prepared in accordance with GAAP, provide a more complete understanding of the factors and trends affecting our business and performance.

The non-GAAP financial measures presented in this press release and discussed on the related teleconference call are not measures of financial performance under GAAP and should not be considered a substitute for net income, gross profit, gross margin, research and development expenses, sales and marketing expenses, administrative expenses and total research and development costs. Non-GAAP financial measures have limitations as analytical tools, and when assessing our operating performance, you should not consider these non-GAAP financial measures in isolation, or as a substitute for the consolidated statements of income data prepared in accordance with GAAP. The non-GAAP financial measures that we present may not be comparable to similarly titled measures of other companies and other companies may not calculate such measures in the same manner as we do.

Conference Call Details:

In conjunction with this announcement, Paycom will host a conference call today, November 2, 2021, at 5:00 p.m. Eastern time to discuss its financial results. To access this call, dial (833) 233-4461 (domestic) or (647) 689-4140 (international) and announce Paycom as the conference name to the operator. A live webcast as well as the replay of the conference call will be available on the Investor Relations page of Paycom’s website at investors.paycom.com. A replay of this conference call can also be accessed by dialing (800) 585-8367 (domestic) or (416) 621-4642 (international) until November 9, 2021. The replay passcode is 9493807.

About Paycom

As a leader in payroll and HR technology, Oklahoma City-based Paycom redefines the human capital management industry by allowing companies to effectively navigate a rapidly changing business environment. Its cloud-based software solution is based on a core system of record maintained in a single database for all human capital management functions, providing the functionality that businesses need to manage the complete employment lifecycle, from recruitment to retirement. Paycom has the ability to serve businesses of all sizes and in every industry. As one of the leading human capital management providers, Paycom serves clients in all 50 states from offices across the country.

Forward-Looking Statements

Certain statements in this press release are, and certain statements on the related teleconference call may be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are any statements that refer to Paycom’s estimated or anticipated results, other non-historical facts or future events and include, but are not limited to, statements regarding our business strategy; anticipated future operating results and operating expenses, cash flows, capital resources, dividends and liquidity; trends, opportunities and risks affecting our business, industry and financial results; future expansion or growth plans and potential for future growth; our ability to attract new clients to purchase our solution; our ability to retain clients and induce them to purchase additional applications; our ability to accurately forecast future revenues and appropriately plan our expenses; market acceptance of our solution and applications; our expectations regarding future revenues generated by certain applications; our ability to attract and retain qualified employees and key personnel; future regulatory, judicial and legislative changes; how certain factors affecting our performance correlate to improvement or deterioration in the labor market; our plan to open additional sales offices and our ability to effectively execute such plan; the sufficiency of our existing cash and cash equivalents to meet our working capital and capital expenditure needs over the next 12 months; our ability to relocate our Texas operations facility within an expected timeframe; our plans regarding our capital expenditures and investment activity as our business grows, including with respect to our new Texas operations facility and research and development; the expected impact on our consolidated financial statements of new accounting pronouncements; our plans to repurchase shares of our common stock through a stock repurchase plan; our expected income tax rate for future periods; and the impact of the novel coronavirus (COVID-19) pandemic on our business, results of operations, cash flows, financial condition and liquidity. In addition, forward-looking statements also consist of statements involving trend analyses and statements including such words as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “should,” “will,” “would,” and similar expressions or the negative of such terms or other comparable terminology. These forward-looking statements speak only as of the date hereof and are subject to business and economic risks. As such, our actual results could differ materially from those set forth in the forward-looking statements as a result of the factors discussed in our filings with the Securities and Exchange Commission, including but not limited to those discussed in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. We do not undertake any obligation to update or revise the forward-looking statements to reflect events or circumstances that exist after the date on which such statements were made, except to the extent required by law.

Paycom Software, Inc.

 

Unaudited Consolidated Balance Sheets

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

230,926

 

 

$

151,710

 

Accounts receivable

 

 

13,004

 

 

 

9,130

 

Prepaid expenses

 

 

26,643

 

 

 

17,854

 

Inventory

 

 

866

 

 

 

1,151

 

Income tax receivable

 

 

10,211

 

 

 

10,447

 

Deferred contract costs

 

 

71,559

 

 

 

60,819

 

Current assets before funds held for clients

 

 

353,209

 

 

 

251,111

 

Funds held for clients

 

 

2,959,973

 

 

 

1,613,494

 

Total current assets

 

 

3,313,182

 

 

 

1,864,605

 

Property and equipment, net

 

 

329,296

 

 

 

285,218

 

Intangible assets, net

 

 

59,057

 

 

 

319

 

Goodwill

 

 

51,889

 

 

 

51,889

 

Long-term deferred contract costs

 

 

430,761

 

 

 

371,357

 

Other assets

 

 

33,853

 

 

 

34,524

 

Total assets

 

$

4,218,038

 

 

$

2,607,912

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

9,441

 

 

$

6,787

 

Accrued commissions and bonuses

 

 

12,431

 

 

 

13,703

 

Accrued payroll and vacation

 

 

36,138

 

 

 

24,529

 

Deferred revenue

 

 

16,175

 

 

 

13,567

 

Current portion of long-term debt

 

 

1,775

 

 

 

1,775

 

Accrued expenses and other current liabilities

 

 

50,340

 

 

 

44,175

 

Current liabilities before client funds obligation

 

 

126,300

 

 

 

104,536

 

Client funds obligation

 

 

2,959,973

 

 

 

1,613,494

 

Total current liabilities

 

 

3,086,273

 

 

 

1,718,030

 

Deferred income tax liabilities, net

 

 

125,228

 

 

 

112,598

 

Long-term deferred revenue

 

 

81,702

 

 

 

73,259

 

Net long-term debt, less current portion

 

 

27,815

 

 

 

29,119

 

Other long-term liabilities

 

 

71,679

 

 

 

19,263

 

Total long-term liabilities

 

 

306,424

 

 

 

234,239

 

Total liabilities

 

 

3,392,697

 

 

 

1,952,269

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.01 par value (100,000 shares authorized, 62,275 and 61,861 shares issued at September 30, 2021 and December 31, 2020, respectively; 57,997 and 57,739 shares outstanding at September 30, 2021 and December 31, 2020, respectively)

 

 

622

 

 

 

618

 

Additional paid-in capital

 

 

441,479

 

 

 

357,908

 

Retained earnings

 

 

866,892

 

 

 

719,619

 

Treasury stock, at cost (4,278 and 4,122 shares at September 30, 2021 and December 31, 2020, respectively)

 

 

(483,652

)

 

 

(422,502

)

Total stockholders’ equity

 

 

825,341

 

 

 

655,643

 

Total liabilities and stockholders’ equity

 

$

4,218,038

 

 

$

2,607,912

 

Paycom Software, Inc.

 

Unaudited Consolidated Statements of Income

 

(in thousands, except per share amounts)

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

 

$

251,306

 

 

$

192,664

 

 

$

756,665

 

 

$

609,109

 

Implementation and other

 

 

4,888

 

 

 

3,868

 

 

 

13,873

 

 

 

11,378

 

Total revenues

 

 

256,194

 

 

 

196,532

 

 

 

770,538

 

 

 

620,487

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

34,766

 

 

 

24,278

 

 

 

92,612

 

 

 

71,651

 

Depreciation and amortization

 

 

7,914

 

 

 

6,634

 

 

 

22,751

 

 

 

18,865

 

Total cost of revenues

 

 

42,680

 

 

 

30,912

 

 

 

115,363

 

 

 

90,516

 

Administrative expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

69,745

 

 

 

62,146

 

 

 

200,485

 

 

 

173,228

 

Research and development

 

 

31,077

 

 

 

21,772

 

 

 

84,012

 

 

 

65,171

 

General and administrative

 

 

59,980

 

 

 

40,516

 

 

 

160,234

 

 

 

121,487

 

Depreciation and amortization

 

 

9,407

 

 

 

7,150

 

 

 

25,503

 

 

 

20,209

 

Total administrative expenses

 

 

170,209

 

 

 

131,584

 

 

 

470,234

 

 

 

380,095

 

Total operating expenses

 

 

212,889

 

 

 

162,496

 

 

 

585,597

 

 

 

470,611

 

Operating income

 

 

43,305

 

 

 

34,036

 

 

 

184,941

 

 

 

149,876

 

Interest expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(19

)

Other income (expense), net

 

 

244

 

 

 

246

 

 

 

1,019

 

 

 

(522

)

Income before income taxes

 

 

43,549

 

 

 

34,282

 

 

 

185,960

 

 

 

149,335

 

Provision for income taxes

 

 

13,170

 

 

 

6,800

 

 

 

38,687

 

 

 

30,249

 

Net income

 

$

30,379

 

 

$

27,482

 

 

$

147,273

 

 

$

119,086

 

Earnings per share, basic

 

$

0.52

 

 

$

0.48

 

 

$

2.55

 

 

$

2.07

 

Earnings per share, diluted

 

$

0.52

 

 

$

0.47

 

 

$

2.53

 

 

$

2.04

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

57,935

 

 

 

57,603

 

 

 

57,843

 

 

 

57,609

 

Diluted

 

 

58,190

 

 

 

58,171

 

 

 

58,192

 

 

 

58,312

 

Paycom Software, Inc.

 

Unaudited Consolidated Statements of Cash Flows

 

(in thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

147,273

 

 

$

119,086

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

48,254

 

 

 

39,073

 

Accretion of discount on available-for-sale securities

 

 

(276

)

 

 

(1,374

)

Non-cash marketing expense

 

 

618

 

 

 

—

 

Loss on disposition of property and equipment

 

 

146

 

 

 

—

 

Amortization of debt issuance costs

 

 

27

 

 

 

27

 

Stock-based compensation expense

 

 

76,364

 

 

 

56,531

 

Cash paid for derivative settlement

 

 

(558

)

 

 

(424

)

(Gain)/loss on derivative

 

 

(305

)

 

 

2,042

 

Deferred income taxes, net

 

 

12,630

 

 

 

11,204

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(3,874

)

 

 

(3,057

)

Prepaid expenses

 

 

(8,789

)

 

 

(7,196

)

Inventory

 

 

97

 

 

 

32

 

Other assets

 

 

671

 

 

 

(3,757

)

Deferred contract costs

 

 

(68,041

)

 

 

(56,922

)

Accounts payable

 

 

1,659

 

 

 

4,491

 

Income taxes, net

 

 

236

 

 

 

(5,260

)

Accrued commissions and bonuses

 

 

(1,272

)

 

 

(4,403

)

Accrued payroll and vacation

 

 

11,609

 

 

 

12,853

 

Deferred revenue

 

 

11,051

 

 

 

9,143

 

Accrued expenses and other current liabilities

 

 

2,117

 

 

 

2,239

 

Net cash provided by operating activities

 

 

229,637

 

 

 

174,328

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchase of short-term investments from funds held for clients

 

 

(170,760

)

 

 

(217,858

)

Proceeds from maturities of short-term investments from funds held for clients

 

 

195,000

 

 

 

93,593

 

Purchases of intangible assets

 

 

(1,500

)

 

 

—

 

Purchases of property and equipment

 

 

(86,718

)

 

 

(73,502

)

Net cash used in investing activities

 

 

(63,978

)

 

 

(197,767

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Repurchases of common stock

 

 

—

 

 

 

(52,040

)

Withholding taxes paid related to net share settlements

 

 

(61,149

)

 

 

(26,099

)

Payments on long-term debt

 

 

(1,331

)

 

 

(1,331

)

Net change in client funds obligation

 

 

1,346,479

 

 

 

(140,421

)

Net cash provided by (used in) financing activities

 

 

1,283,999

 

 

 

(219,891

)

Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents

 

 

1,449,658

 

 

 

(243,330

)

Cash, cash equivalents, restricted cash and restricted cash equivalents

 

 

 

 

 

 

 

 

Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period

 

 

1,585,275

 

 

 

1,641,854

 

Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period

 

$

3,034,933

 

 

$

1,398,524

 

Paycom Software, Inc.

 

Unaudited Consolidated Statements of Cash Flows, continued

 

(in thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

230,926

 

 

$

156,398

 

Restricted cash included in funds held for clients

 

 

2,804,007

 

 

 

1,242,126

 

Total cash, cash equivalents, restricted cash and restricted cash equivalents, end of period

 

$

3,034,933

 

 

$

1,398,524

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment, accrued but not paid

 

$

5,994

 

 

$

2,707

 

Stock-based compensation for capitalized software

 

$

5,108

 

 

$

5,284

 

Right of use assets obtained in exchange for operating lease liabilities

$

4,439

$

9,323

 

Paycom Software, Inc.

Unaudited Reconciliations of GAAP to Non-GAAP Financial Measures

(in thousands, except per share amounts)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income to adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

30,379

 

 

$

27,482

 

 

$

147,273

 

 

$

119,086

 

Interest expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

19

 

Provision for income taxes

 

 

13,170

 

 

 

6,800

 

 

 

38,687

 

 

 

30,249

 

Depreciation and amortization

 

 

17,321

 

 

 

13,784

 

 

 

48,254

 

 

 

39,074

 

EBITDA

 

 

60,870

 

 

 

48,066

 

 

 

234,214

 

 

 

188,428

 

Non-cash stock-based compensation expense

 

 

28,991

 

 

 

19,502

 

 

 

76,364

 

 

 

56,531

 

Change in fair value of interest rate swap

 

 

(158

)

 

 

(88

)

 

 

(863

)

 

 

1,618

 

Adjusted EBITDA

 

$

89,703

 

 

$

67,480

 

 

$

309,715

 

 

$

246,577

 

Net income margin

 

 

11.9

%

 

 

14.0

%

 

 

19.1

%

 

 

19.2

%

Adjusted EBITDA margin

 

 

35.0

%

 

 

34.3

%

 

 

40.2

%

 

 

39.7

%

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income to non-GAAP net income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

30,379

 

 

$

27,482

 

 

$

147,273

 

 

$

119,086

 

Non-cash stock-based compensation expense

 

 

28,991

 

 

 

19,502

 

 

 

76,364

 

 

 

56,531

 

Change in fair value of interest rate swap

 

 

(158

)

 

 

(88

)

 

 

(863

)

 

 

1,618

 

Income tax effect on non-GAAP adjustments

 

 

(5,626

)

 

 

(6,332

)

 

 

(26,798

)

 

 

(22,802

)

Non-GAAP net income

 

$

53,586

 

 

$

40,564

 

 

$

195,976

 

 

$

154,433

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

57,935

 

 

 

57,603

 

 

 

57,843

 

 

 

57,609

 

Diluted

 

 

58,190

 

 

 

58,171

 

 

 

58,192

 

 

 

58,312

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share, basic

 

$

0.52

 

 

$

0.48

 

 

$

2.55

 

 

$

2.07

 

Earnings per share, diluted

 

$

0.52

 

 

$

0.47

 

 

$

2.53

 

 

$

2.04

 

Non-GAAP net income per share, basic

 

$

0.92

 

 

$

0.70

 

 

$

3.39

 

 

$

2.68

 

Non-GAAP net income per share, diluted

 

$

0.92

 

 

$

0.70

 

 

$

3.37

 

 

$

2.65

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Earnings per share to non-GAAP net income per share, basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share, basic

 

$

0.52

 

 

$

0.48

 

 

$

2.55

 

 

$

2.07

 

Non-cash stock-based compensation expense

 

 

0.50

 

 

 

0.34

 

 

 

1.32

 

 

 

0.98

 

Change in fair value of interest rate swap

 

 

—

 

 

 

—

 

 

 

(0.01

)

 

 

0.03

 

Income tax effect on non-GAAP adjustments

 

 

(0.10

)

 

 

(0.12

)

 

 

(0.47

)

 

 

(0.40

)

Non-GAAP net income per share, basic

 

$

0.92

 

 

$

0.70

 

 

$

3.39

 

 

$

2.68

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Earnings per share to non-GAAP net income per share, diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share, diluted

 

$

0.52

 

 

$

0.47

 

 

$

2.53

 

 

$

2.04

 

Non-cash stock-based compensation expense

 

 

0.50

 

 

 

0.34

 

 

 

1.31

 

 

 

0.97

 

Change in fair value of interest rate swap

 

 

—

 

 

 

—

 

 

 

(0.01

)

 

 

0.03

 

Income tax effect on non-GAAP adjustments

 

 

(0.10

)

 

 

(0.11

)

 

 

(0.46

)

 

 

(0.39

)

Non-GAAP net income per share, diluted

 

$

0.92

 

 

$

0.70

 

 

$

3.37

 

 

$

2.65

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Adjusted gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

256,194

 

 

$

196,532

 

 

$

770,538

 

 

$

620,487

 

Less: Total cost of revenues

 

 

(42,680

)

 

 

(30,912

)

 

 

(115,363

)

 

 

(90,516

)

Total gross profit

 

 

213,514

 

 

 

165,620

 

 

 

655,175

 

 

 

529,971

 

Plus: Non-cash stock-based compensation expense

 

 

1,256

 

 

 

1,227

 

 

 

3,381

 

 

 

4,158

 

Total adjusted gross profit

 

$

214,770

 

 

$

166,847

 

 

$

658,556

 

 

$

534,129

 

Gross margin

 

 

83.3

%

 

 

84.3

%

 

 

85.0

%

 

 

85.4

%

Adjusted gross margin

 

 

83.8

%

 

 

84.9

%

 

 

85.5

%

 

 

86.1

%

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Adjusted sales and marketing expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing expenses

 

$

69,745

 

 

$

62,146

 

 

$

200,485

 

 

$

173,228

 

Less: Non-cash stock-based compensation expense

 

 

(3,417

)

 

 

(3,829

)

 

 

(10,567

)

 

 

(10,795

)

Adjusted sales and marketing expenses

 

$

66,328

 

 

$

58,317

 

 

$

189,918

 

 

$

162,433

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

256,194

 

 

$

196,532

 

 

$

770,538

 

 

$

620,487

 

Sales and marketing expenses as a % of revenues

 

 

27.2

%

 

 

31.6

%

 

 

26.0

%

 

 

27.9

%

Adjusted sales and marketing expenses as a % of revenues

 

 

25.9

%

 

 

29.7

%

 

 

24.6

%

 

 

26.2

%

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Adjusted total administrative expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total administrative expenses

 

$

170,209

 

 

$

131,584

 

 

$

470,234

 

 

$

380,095

 

Less: Non-cash stock-based compensation expense

 

 

(27,735

)

 

 

(18,275

)

 

 

(72,983

)

 

 

(52,373

)

Adjusted total administrative expenses

 

$

142,474

 

 

$

113,309

 

 

$

397,251

 

 

$

327,722

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

256,194

 

 

$

196,532

 

 

$

770,538

 

 

$

620,487

 

Total administrative expenses as a % of revenues

 

 

66.4

%

 

 

67.0

%

 

 

61.0

%

 

 

61.3

%

Adjusted total administrative expenses as a % of revenues

 

 

55.6

%

 

 

57.7

%

 

 

51.6

%

 

 

52.8

%

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Adjusted research and development expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

$

31,077

 

 

$

21,772

 

 

$

84,012

 

 

$

65,171

 

Less: Non-cash stock-based compensation expense

 

 

(1,827

)

 

 

(2,115

)

 

 

(5,394

)

 

 

(7,270

)

Adjusted research and development expenses

 

$

29,250

 

 

$

19,657

 

 

$

78,618

 

 

$

57,901

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

256,194

 

 

$

196,532

 

 

$

770,538

 

 

$

620,487

 

Research and development expenses as a % of revenues

 

 

12.1

%

 

 

11.1

%

 

 

10.9

%

 

 

10.5

%

Adjusted research and development expenses as a % of revenues

 

 

11.4

%

 

 

10.0

%

 

 

10.2

%

 

 

9.3

%

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Total research and development costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capitalized research and development costs

 

$

13,157

 

 

$

11,727

 

 

$

39,160

 

 

$

32,448

 

Research and development expenses

 

 

31,077

 

 

 

21,772

 

 

 

84,012

 

 

 

65,171

 

Total research and development costs

 

$

44,234

 

 

$

33,499

 

 

$

123,172

 

 

$

97,619

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

256,194

 

 

$

196,532

 

 

$

770,538

 

 

$

620,487

 

Total research and development costs as a % of revenues

 

 

17.3

%

 

 

17.0

%

 

 

16.0

%

 

 

15.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted total research and development costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total research and development costs

 

$

44,234

 

 

$

33,499

 

 

$

123,172

 

 

$

97,619

 

Less: Capitalized non-cash stock-based compensation

 

 

(1,757

)

 

 

(1,566

)

 

 

(5,108

)

 

 

(5,284

)

Less: Non-cash stock-based compensation expense

 

 

(1,827

)

 

 

(2,115

)

 

 

(5,394

)

 

 

(7,270

)

Adjusted total research and development costs

 

$

40,650

 

 

$

29,818

 

 

$

112,670

 

 

$

85,065

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

256,194

 

 

$

196,532

 

 

$

770,538

 

 

$

620,487

 

Adjusted total research and development costs as a % of revenues

15.9

%

15.2

%

14.6

%

13.7

%

Paycom Software, Inc.

Unaudited Components of Non-Cash Stock-Based Compensation Expense

(in thousands)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Non-cash stock-based compensation expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

$

1,256

 

 

$

1,227

 

 

$

3,381

 

 

$

4,158

 

Sales and marketing

 

 

3,417

 

 

 

3,829

 

 

 

10,567

 

 

 

10,795

 

Research and development

 

 

1,827

 

 

 

2,115

 

 

 

5,394

 

 

 

7,270

 

General and administrative

 

 

22,491

 

 

 

12,331

 

 

 

57,022

 

 

 

34,308

 

Total non-cash stock-based compensation expense

 

$

28,991

 

 

$

19,502

 

 

$

76,364

 

 

$

56,531

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20211102006018/en/

Paycom Software, Inc. Investor Relations Contact: James Samford, 800-580-4505 investors@paycom.com