10-Q 1 payc-20220930.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number: 001-36393

 

Paycom Software, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

80-0957485

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

 

 

 

7501 W. Memorial Road

Oklahoma City, Oklahoma

 

 

 

73142

 

(Address of principal executive offices)

 

 (Zip Code)

(405) 722-6900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.01 par value

 

PAYC

 

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of October 25, 2022, there were 60,020,369 shares of common stock, par value of $0.01 per share, outstanding, including 2,153,904 shares of restricted stock.

 

 


 

Paycom Software, Inc.

 

 

 

PART I – FINANCIAL INFORMATION

 

 

 

Item 1.

 

 

Financial Statements

 

3

 

 

 

Unaudited Consolidated Balance Sheets

 

3

 

 

 

Unaudited Consolidated Statements of Comprehensive Income

 

4

 

 

Unaudited Consolidated Statements of Stockholders’ Equity

 

5

 

 

 

Unaudited Consolidated Statements of Cash Flows

 

6

 

 

 

Notes to the Unaudited Consolidated Financial Statements

 

7

 

Item 2.

 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21

 

Item 3.

 

 

Quantitative and Qualitative Disclosures About Market Risk

 

33

 

Item 4.

 

 

Controls and Procedures

 

33

 

 

 

PART II – OTHER INFORMATION

 

 

 

Item 1.

 

 

Legal Proceedings

 

34

 

Item 1A.

 

 

Risk Factors

 

34

 

Item 2.

 

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

34

Item 5.

 

Other Information

 

34

 

Item 6.

 

 

Exhibits

 

36

 

Signatures

 

37

 

2


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Paycom Software, Inc.

Unaudited Consolidated Balance Sheets

(in thousands, except per share amounts)

 

 

 

 

September 30, 2022

 

 

December 31, 2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

317,163

 

 

$

277,978

 

Accounts receivable

 

 

14,896

 

 

 

9,490

 

Prepaid expenses

 

 

39,717

 

 

 

23,729

 

Inventory

 

 

1,471

 

 

 

1,131

 

Income tax receivable

 

 

15,168

 

 

 

16,413

 

Deferred contract costs

 

 

90,832

 

 

 

76,724

 

Current assets before funds held for clients

 

 

479,247

 

 

 

405,465

 

Funds held for clients

 

 

1,749,115

 

 

 

1,846,573

 

Total current assets

 

 

2,228,362

 

 

 

2,252,038

 

Property and equipment, net

 

 

383,860

 

 

 

348,953

 

Intangible assets, net

 

 

54,993

 

 

 

58,028

 

Goodwill

 

 

51,889

 

 

 

51,889

 

Long-term deferred contract costs

 

 

536,942

 

 

 

461,852

 

Other assets

 

 

58,524

 

 

 

42,385

 

Total assets

 

$

3,314,570

 

 

$

3,215,145

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

10,211

 

 

$

5,772

 

Accrued commissions and bonuses

 

 

19,037

 

 

 

22,357

 

Accrued payroll and vacation

 

 

36,069

 

 

 

34,259

 

Deferred revenue

 

 

19,546

 

 

 

16,277

 

Current portion of long-term debt

 

 

 

 

 

1,775

 

Accrued expenses and other current liabilities

 

 

58,797

 

 

 

63,397

 

Current liabilities before client funds obligation

 

 

143,660

 

 

 

143,837

 

Client funds obligation

 

 

1,754,095

 

 

 

1,846,573

 

Total current liabilities

 

 

1,897,755

 

 

 

1,990,410

 

Deferred income tax liabilities, net

 

 

139,368

 

 

 

145,504

 

Long-term deferred revenue

 

 

94,465

 

 

 

85,149

 

Net long-term debt, less current portion

 

 

29,000

 

 

 

27,380

 

Other long-term liabilities

 

 

77,602

 

 

 

72,988

 

Total long-term liabilities

 

 

340,435

 

 

 

331,021

 

Total liabilities

 

 

2,238,190

 

 

 

2,321,431

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.01 par value (100,000 shares authorized, 62,517 and 62,298 shares issued at September 30, 2022 and December 31, 2021, respectively; 57,867 and 58,012 shares outstanding at September 30, 2022 and December 31, 2021, respectively)

 

 

625

 

 

 

623

 

Additional paid-in capital

 

 

550,302

 

 

 

465,594

 

Retained earnings

 

 

1,117,017

 

 

 

915,579

 

Accumulated other comprehensive earnings (loss)

 

 

(3,813

)

 

 

 

Treasury stock, at cost (4,650 and 4,286 shares at September 30, 2022 and December 31, 2021, respectively)

 

 

(587,751

)

 

 

(488,082

)

Total stockholders’ equity

 

 

1,076,380

 

 

 

893,714

 

Total liabilities and stockholders’ equity

 

$

3,314,570

 

 

$

3,215,145

 

 

See accompanying notes to the unaudited consolidated financial statements.

3


 

Paycom Software, Inc.

Unaudited Consolidated Statements of Comprehensive Income

(in thousands, except per share amounts)

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

 

$

328,150

 

 

$

251,306

 

 

$

987,848

 

 

$

756,665

 

Implementation and other

 

 

6,017

 

 

 

4,888

 

 

 

16,762

 

 

 

13,873

 

Total revenues

 

 

334,167

 

 

 

256,194

 

 

 

1,004,610

 

 

 

770,538

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

44,169

 

 

 

34,766

 

 

 

122,265

 

 

 

92,612

 

Depreciation and amortization

 

 

10,935

 

 

 

7,914

 

 

 

31,405

 

 

 

22,751

 

Total cost of revenues

 

 

55,104

 

 

 

42,680

 

 

 

153,670

 

 

 

115,363

 

Administrative expenses

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

91,114

 

 

 

69,745

 

 

 

253,834

 

 

 

200,485

 

Research and development

 

 

40,366

 

 

 

31,077

 

 

 

108,774

 

 

 

84,012

 

General and administrative

 

 

60,693

 

 

 

59,980

 

 

 

179,109

 

 

 

160,234

 

Depreciation and amortization

 

 

12,625

 

 

 

9,407

 

 

 

36,378

 

 

 

25,503

 

Total administrative expenses

 

 

204,798

 

 

 

170,209

 

 

 

578,095

 

 

 

470,234

 

Total operating expenses

 

 

259,902

 

 

 

212,889

 

 

 

731,765

 

 

 

585,597

 

Operating income

 

 

74,265

 

 

 

43,305

 

 

 

272,845

 

 

 

184,941

 

Interest expense

 

 

(1,018

)

 

 

 

 

 

(1,587

)

 

 

 

Other income (expense), net

 

 

2,041

 

 

 

244

 

 

 

4,331

 

 

 

1,019

 

Income before income taxes

 

 

75,288

 

 

 

43,549

 

 

 

275,589

 

 

 

185,960

 

Provision for income taxes

 

 

23,135

 

 

 

13,170

 

 

 

74,151

 

 

 

38,687

 

Net income

 

$

52,153

 

 

$

30,379

 

 

$

201,438

 

 

$

147,273

 

Earnings per share, basic

 

$

0.90

 

 

$

0.52

 

 

$

3.48

 

 

$

2.55

 

Earnings per share, diluted

 

$

0.90

 

 

$

0.52

 

 

$

3.46

 

 

$

2.53

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

57,865

 

 

 

57,935

 

 

 

57,949

 

 

 

57,843

 

Diluted

 

 

58,033

 

 

 

58,190

 

 

 

58,193

 

 

 

58,192

 

Comprehensive earnings (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

52,153

 

 

$

30,379

 

 

$

201,438

 

 

$

147,273

 

Unrealized net gains (losses) on available-for-sale securities

 

 

(2,705

)

 

 

 

 

 

(4,881

)

 

 

 

Tax effect

 

 

492

 

 

 

 

 

 

1,068

 

 

 

 

Other comprehensive income (loss), net of tax

 

 

(2,213

)

 

 

 

 

 

(3,813

)

 

 

 

Comprehensive earnings (loss)

 

$

49,940

 

 

$

30,379

 

 

$

197,625

 

 

$

147,273

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

4


 

Paycom Software, Inc.

Unaudited Consolidated Statements of Stockholders’ Equity

(in thousands)

 

 

Common Stock

 

 

Additional

 

 

Retained

 

 

Accumulated Other

 

 

Treasury Stock

 

 

Total

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Earnings

 

 

Comprehensive Loss

 

 

Shares

 

 

Amount

 

 

Stockholders’ Equity

 

Balances at December 31, 2020

 

61,861

 

 

$

618

 

 

$

357,908

 

 

$

719,619

 

 

$

 

 

 

4,122

 

 

$

(422,502

)

 

$

655,643

 

Vesting of restricted stock

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

25,594

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,594

 

Repurchases of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

(377

)

 

 

(377

)

Net income

 

 

 

 

 

 

 

 

 

 

64,616

 

 

 

 

 

 

 

 

 

 

 

 

64,616

 

Balances at March 31, 2021

 

61,864

 

 

$

618

 

 

$

383,502

 

 

$

784,235

 

 

$

 

 

 

4,123

 

 

$

(422,879

)

 

$

745,476

 

Vesting of restricted stock

 

271

 

 

 

3

 

 

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

26,480

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26,480

 

Repurchases of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

94

 

 

 

(31,978

)

 

 

(31,978

)

Net income

 

 

 

 

 

 

 

 

 

 

52,278

 

 

 

 

 

 

 

 

 

 

 

 

52,278

 

Balances at June 30, 2021

 

62,135

 

 

$

621

 

 

$

409,979

 

 

$

836,513

 

 

$

 

 

 

4,217

 

 

$

(454,857

)

 

$

792,256

 

Vesting of restricted stock

 

140

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

31,501

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31,501

 

Repurchases of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

61

 

 

 

(28,795

)

 

 

(28,795

)

Net income

 

 

 

 

 

 

 

 

 

 

30,379

 

 

 

 

 

 

 

 

 

 

 

 

30,379

 

Balances at September 30, 2021

 

62,275

 

 

$

622

 

 

$

441,479

 

 

$

866,892

 

 

$

 

 

 

4,278

 

 

$

(483,652

)

 

$

825,341

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

Retained

 

 

Accumulated Other

 

 

Treasury Stock

 

 

Total

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Earnings

 

 

Comprehensive Loss

 

 

Shares

 

 

Amount

 

 

Stockholders’ Equity

 

Balances at December 31, 2021

 

62,298

 

 

$

623

 

 

$

465,594

 

 

$

915,579