Company Quick10K Filing
Paycom
Price206.40 EPS3
Shares58 P/E72
MCap12,054 P/FCF68
Net Debt-876 EBIT197
TEV11,178 TEV/EBIT57
TTM 2019-09-30, in MM, except price, ratios
10-Q 2021-03-31 Filed 2021-05-06
10-K 2020-12-31 Filed 2021-02-18
10-Q 2020-09-30 Filed 2020-11-05
10-Q 2020-06-30 Filed 2020-08-06
10-Q 2020-03-31 Filed 2020-04-30
10-K 2019-12-31 Filed 2020-02-13
10-Q 2019-09-30 Filed 2019-10-31
10-Q 2019-06-30 Filed 2019-08-01
10-Q 2019-03-31 Filed 2019-05-02
10-K 2018-12-31 Filed 2019-02-14
10-Q 2018-09-30 Filed 2018-11-01
10-Q 2018-06-30 Filed 2018-08-02
10-Q 2018-03-31 Filed 2018-05-03
10-K 2017-12-31 Filed 2018-02-14
10-Q 2017-09-30 Filed 2017-11-02
10-Q 2017-06-30 Filed 2017-08-02
10-Q 2017-03-31 Filed 2017-05-04
10-K 2016-12-31 Filed 2017-02-21
10-Q 2016-09-30 Filed 2016-11-03
10-Q 2016-06-30 Filed 2016-08-03
10-Q 2016-03-31 Filed 2016-05-05
10-K 2015-12-31 Filed 2016-02-22
10-Q 2015-09-30 Filed 2015-11-06
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-13
10-K 2014-12-31 Filed 2015-02-26
10-Q 2014-09-30 Filed 2014-11-07
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-21
8-K 2020-11-23
8-K 2020-11-04
8-K 2020-08-04
8-K 2020-06-05
8-K 2020-04-28
8-K 2020-04-27
8-K 2020-03-12
8-K 2020-02-05
8-K 2020-01-30
8-K 2019-10-29
8-K 2019-07-30
8-K 2019-04-30
8-K 2019-04-29
8-K 2019-04-15
8-K 2019-02-05
8-K 2019-01-17
8-K 2018-11-20
8-K 2018-10-30
8-K 2018-09-12
8-K 2018-07-30
8-K 2018-04-30
8-K 2018-04-27
8-K 2018-04-16
8-K 2018-02-20
8-K 2018-02-13
8-K 2018-02-12
8-K 2018-02-06
8-K 2018-01-26

PAYC 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 payc-ex311_7.htm
EX-31.2 payc-ex312_6.htm
EX-32.1 payc-ex321_8.htm

Paycom Earnings 2021-03-31

Balance SheetIncome StatementCash Flow
2.11.71.30.80.40.02014201620182020
Assets, Equity
0.20.10.10.0-0.0-0.12014201620182020
Rev, G Profit, Net Income
0.50.30.1-0.1-0.3-0.52014201620182020
Ops, Inv, Fin

payc-10q_20210331.htm
false Q1 0001590955 --12-31 2021-01-01 true true 2020-01-01 true true 2020-01-01 true true P9M P1Y P18Y P3Y9M18D P2Y6M 0001590955 2021-01-01 2021-03-31 xbrli:shares 0001590955 2021-04-27 iso4217:USD 0001590955 2021-03-31 0001590955 2020-12-31 iso4217:USD xbrli:shares 0001590955 payc:RecurringMember 2021-01-01 2021-03-31 0001590955 payc:RecurringMember 2020-01-01 2020-03-31 0001590955 payc:ImplementationAndOtherMember 2021-01-01 2021-03-31 0001590955 payc:ImplementationAndOtherMember 2020-01-01 2020-03-31 0001590955 2020-01-01 2020-03-31 0001590955 us-gaap:CommonStockMember 2019-12-31 0001590955 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001590955 us-gaap:RetainedEarningsMember 2019-12-31 0001590955 us-gaap:TreasuryStockMember 2019-12-31 0001590955 2019-12-31 0001590955 us-gaap:CommonStockMember 2020-01-01 2020-03-31 0001590955 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0001590955 us-gaap:TreasuryStockMember 2020-01-01 2020-03-31 0001590955 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0001590955 us-gaap:CommonStockMember 2020-03-31 0001590955 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001590955 us-gaap:RetainedEarningsMember 2020-03-31 0001590955 us-gaap:TreasuryStockMember 2020-03-31 0001590955 2020-03-31 0001590955 us-gaap:CommonStockMember 2020-12-31 0001590955 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001590955 us-gaap:RetainedEarningsMember 2020-12-31 0001590955 us-gaap:TreasuryStockMember 2020-12-31 0001590955 us-gaap:CommonStockMember 2021-01-01 2021-03-31 0001590955 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001590955 us-gaap:TreasuryStockMember 2021-01-01 2021-03-31 0001590955 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0001590955 us-gaap:CommonStockMember 2021-03-31 0001590955 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001590955 us-gaap:RetainedEarningsMember 2021-03-31 0001590955 us-gaap:TreasuryStockMember 2021-03-31 0001590955 us-gaap:PerformanceSharesMember 2021-01-01 2021-03-31 0001590955 us-gaap:AccountingStandardsUpdate201912Member 2021-03-31 0001590955 us-gaap:AccountingStandardsUpdate201815Member 2021-03-31 0001590955 us-gaap:AccountingStandardsUpdate201813Member 2021-03-31 0001590955 payc:StockRepurchasePlanMember srt:MaximumMember 2020-03-31 0001590955 payc:StockRepurchasePlanMember 2021-03-31 0001590955 payc:StockRepurchasePlanMember 2021-01-01 2021-03-31 0001590955 us-gaap:RestrictedStockMember 2021-01-01 2021-03-31 xbrli:pure 0001590955 2021-04-01 2021-03-31 0001590955 2022-01-01 2021-03-31 0001590955 2023-01-01 2021-03-31 0001590955 payc:CostsToObtainContractMember 2020-12-31 0001590955 payc:CostsToFulfillContractMember 2020-12-31 0001590955 payc:CostsToObtainContractMember 2019-12-31 0001590955 payc:CostsToFulfillContractMember 2019-12-31 0001590955 payc:CostsToObtainContractMember 2021-01-01 2021-03-31 0001590955 payc:CostsToFulfillContractMember 2021-01-01 2021-03-31 0001590955 payc:CostsToObtainContractMember 2020-01-01 2020-03-31 0001590955 payc:CostsToFulfillContractMember 2020-01-01 2020-03-31 0001590955 payc:CostsToObtainContractMember 2021-03-31 0001590955 payc:CostsToFulfillContractMember 2021-03-31 0001590955 payc:CostsToObtainContractMember 2020-03-31 0001590955 payc:CostsToFulfillContractMember 2020-03-31 0001590955 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2021-03-31 0001590955 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2020-12-31 0001590955 us-gaap:BuildingMember 2021-03-31 0001590955 us-gaap:BuildingMember 2020-12-31 0001590955 us-gaap:ComputerEquipmentMember 2021-03-31 0001590955 us-gaap:ComputerEquipmentMember 2020-12-31 0001590955 payc:RentalClocksMember 2021-03-31 0001590955 payc:RentalClocksMember 2020-12-31 0001590955 payc:FurnitureFixturesAndEquipmentMember 2021-03-31 0001590955 payc:FurnitureFixturesAndEquipmentMember 2020-12-31 0001590955 us-gaap:PropertyPlantAndEquipmentOtherTypesMember 2021-03-31 0001590955 us-gaap:PropertyPlantAndEquipmentOtherTypesMember 2020-12-31 0001590955 payc:PropertyAndEquipmentNetExcludingLandAndConstructionInProgressMember 2021-03-31 0001590955 payc:PropertyAndEquipmentNetExcludingLandAndConstructionInProgressMember 2020-12-31 0001590955 us-gaap:ConstructionInProgressMember 2021-03-31 0001590955 us-gaap:ConstructionInProgressMember 2020-12-31 0001590955 us-gaap:LandMember 2021-03-31 0001590955 us-gaap:LandMember 2020-12-31 0001590955 us-gaap:PropertyPlantAndEquipmentMember 2021-01-01 2021-03-31 0001590955 us-gaap:PropertyPlantAndEquipmentMember 2020-01-01 2020-03-31 0001590955 us-gaap:GoodwillMember 2021-03-31 0001590955 us-gaap:GoodwillMember 2020-12-31 0001590955 2020-01-01 2020-06-30 0001590955 payc:NetTermNoteToBankDueSeptemberSevenTwoThousandTwentyFiveMember 2021-03-31 0001590955 payc:NetTermNoteToBankDueSeptemberSevenTwoThousandTwentyFiveMember 2020-12-31 0001590955 payc:NetTermNoteToBankDueSeptemberSevenTwoThousandTwentyFiveMember 2021-01-01 2021-03-31 0001590955 payc:SeniorSecuredTermCreditAgreementMember us-gaap:LineOfCreditMember 2021-01-01 2021-03-31 0001590955 payc:SeniorSecuredTermCreditAgreementMember 2021-01-01 2021-03-31 0001590955 payc:SeniorSecuredTermCreditAgreementMember us-gaap:LineOfCreditMember us-gaap:PrimeRateMember 2021-01-01 2021-03-31 0001590955 payc:SeniorSecuredTermCreditAgreementMember us-gaap:LineOfCreditMember payc:AdjustedLondonInterbankOfferedRateMember 2021-01-01 2021-03-31 0001590955 payc:SeniorSecuredTermCreditAgreementMember us-gaap:LoansPayableMember 2021-03-31 0001590955 payc:SeniorSecuredTermCreditAgreementMember us-gaap:LoansPayableMember 2020-12-31 0001590955 payc:SeniorSecuredTermCreditAgreementMember srt:MinimumMember 2021-01-01 2021-03-31 0001590955 payc:SeniorSecuredTermCreditAgreementMember srt:MaximumMember 2021-01-01 2021-03-31 0001590955 payc:SecuredRevolvingLineOfCreditMember 2021-01-01 2021-03-31 0001590955 payc:SecuredRevolvingLineOfCreditMember 2021-03-31 0001590955 payc:SecuredRevolvingLineOfCreditMember us-gaap:BridgeLoanMember 2021-03-31 0001590955 payc:SecuredRevolvingLineOfCreditMember us-gaap:LetterOfCreditMember 2021-03-31 0001590955 payc:SecuredRevolvingLineOfCreditMember payc:FirstAmendmentToRevolvingCreditAgreementMember 2021-01-01 2021-03-31 0001590955 payc:SecuredRevolvingLineOfCreditMember payc:FirstAmendmentToRevolvingCreditAgreementMember 2021-03-31 0001590955 payc:SecuredRevolvingLineOfCreditMember us-gaap:PrimeRateMember 2021-01-01 2021-03-31 0001590955 payc:SecuredRevolvingLineOfCreditMember payc:AdjustedLondonInterbankOfferedRateMember 2021-01-01 2021-03-31 0001590955 srt:MinimumMember payc:SecuredRevolvingLineOfCreditMember 2021-01-01 2021-03-31 0001590955 srt:MaximumMember payc:SecuredRevolvingLineOfCreditMember 2021-01-01 2021-03-31 0001590955 us-gaap:InterestRateSwapMember 2021-01-01 2021-03-31 0001590955 us-gaap:InterestRateSwapMember 2021-03-31 0001590955 us-gaap:InterestRateSwapMember 2020-01-01 2020-03-31 0001590955 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CommercialPaperMember us-gaap:FairValueInputsLevel2Member 2021-03-31 0001590955 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CommercialPaperMember 2021-03-31 0001590955 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CertificatesOfDepositMember us-gaap:FairValueInputsLevel2Member 2021-03-31 0001590955 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CertificatesOfDepositMember 2021-03-31 0001590955 us-gaap:InterestRateSwapMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-03-31 0001590955 us-gaap:InterestRateSwapMember us-gaap:FairValueMeasurementsRecurringMember 2021-03-31 0001590955 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CommercialPaperMember 2020-12-31 0001590955 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CommercialPaperMember 2020-12-31 0001590955 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CertificatesOfDepositMember 2020-12-31 0001590955 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CertificatesOfDepositMember 2020-12-31 0001590955 us-gaap:InterestRateSwapMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2020-12-31 0001590955 us-gaap:InterestRateSwapMember us-gaap:FairValueMeasurementsRecurringMember 2020-12-31 0001590955 payc:OneHundredPercentMatchForPercentOfParticipantsContributionMember 2021-01-01 2021-03-31 0001590955 payc:FiftyPercentageOfMatchingContributionMember 2021-01-01 2021-03-31 0001590955 srt:MinimumMember payc:FiftyPercentageOfMatchingContributionMember 2021-01-01 2021-03-31 0001590955 srt:MaximumMember payc:FiftyPercentageOfMatchingContributionMember 2021-01-01 2021-03-31 0001590955 srt:MaximumMember 2021-01-01 2021-03-31 0001590955 payc:AfterTwoYearsOfEmploymentMember 2021-01-01 2021-03-31 0001590955 us-gaap:EmployeeStockMember 2021-03-31 0001590955 us-gaap:EmployeeStockMember 2021-01-01 2021-03-31 0001590955 us-gaap:EmployeeStockMember 2020-01-01 2020-03-31 0001590955 payc:LongTermIncentivePlanMember us-gaap:RestrictedStockMember payc:NonExecutiveEmployeesMember 2021-01-01 2021-03-31 0001590955 payc:LongTermIncentivePlanMember payc:MarketBasedVestingMember us-gaap:RestrictedStockMember payc:NonExecutiveEmployeesMember 2021-01-01 2021-03-31 0001590955 payc:LongTermIncentivePlanMember payc:TimeBasedVestingMember us-gaap:RestrictedStockMember payc:NonExecutiveEmployeesMember 2021-01-01 2021-03-31 0001590955 payc:ShareBasedCompensationAwardVWAPEqualsOrExceedsFiveTwentyPerShareMember us-gaap:RestrictedStockMember payc:NonExecutiveEmployeesMember 2021-01-01 2021-03-31 0001590955 payc:ShareBasedCompensationAwardVWAPEqualsOrExceedsSixHundredPerShareMember us-gaap:RestrictedStockMember payc:NonExecutiveEmployeesMember 2021-01-01 2021-03-31 0001590955 us-gaap:ShareBasedCompensationAwardTrancheOneMember us-gaap:RestrictedStockMember payc:NonExecutiveEmployeesMember 2021-01-01 2021-03-31 0001590955 us-gaap:ShareBasedCompensationAwardTrancheTwoMember us-gaap:RestrictedStockMember payc:NonExecutiveEmployeesMember 2021-01-01 2021-03-31 0001590955 us-gaap:ShareBasedCompensationAwardTrancheThreeMember us-gaap:RestrictedStockMember payc:NonExecutiveEmployeesMember 2021-01-01 2021-03-31 0001590955 payc:ShareBasedCompensationAwardTrancheFourMember us-gaap:RestrictedStockMember payc:NonExecutiveEmployeesMember 2021-01-01 2021-03-31 0001590955 payc:TimeBasedRestrictedStockAwardsMember 2020-12-31 0001590955 payc:MarketBasedRestrictedSharesMember 2020-12-31 0001590955 payc:TimeBasedRestrictedStockAwardsMember 2021-01-01 2021-03-31 0001590955 payc:MarketBasedRestrictedSharesMember 2021-01-01 2021-03-31 0001590955 payc:TimeBasedRestrictedStockAwardsMember 2021-03-31 0001590955 payc:MarketBasedRestrictedSharesMember 2021-03-31 0001590955 payc:LongTermIncentivePlanMember srt:ExecutiveOfficerMember us-gaap:PerformanceSharesMember 2021-02-28 0001590955 payc:LongTermIncentivePlanMember srt:MaximumMember srt:ExecutiveOfficerMember us-gaap:PerformanceSharesMember 2021-02-28 0001590955 payc:LongTermIncentivePlanMember us-gaap:PerformanceSharesMember payc:TwoYearPerformancePeriodMember 2021-02-01 2021-02-28 0001590955 payc:LongTermIncentivePlanMember us-gaap:PerformanceSharesMember payc:ThreeYearPerformancePeriodMember 2021-02-01 2021-02-28 payc:TradingDay 0001590955 us-gaap:PerformanceSharesMember payc:LongTermIncentivePlanMember 2021-02-01 2021-02-28 payc:Company 0001590955 us-gaap:PerformanceSharesMember 2021-03-31 0001590955 us-gaap:PerformanceSharesMember srt:MaximumMember 2021-01-01 2021-03-31 0001590955 payc:RestrictedStockAwardsAndPSUAwardsMember 2021-01-01 2021-03-31 0001590955 payc:RestrictedStockAwardsAndPSUAwardsMember 2020-01-01 2020-03-31 0001590955 us-gaap:RestrictedStockMember 2021-03-31 0001590955 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2021-01-01 2021-03-31 0001590955 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2020-01-01 2020-03-31 payc:Client 0001590955 us-gaap:SubsequentEventMember payc:ChiefSalesOfficerHollyFaurotMember 2021-04-02 0001590955 us-gaap:SubsequentEventMember payc:ChiefSalesOfficerHollyFaurotMember 2021-04-02 2021-04-02 0001590955 us-gaap:SubsequentEventMember payc:NonExecutiveEmployeesMember us-gaap:RestrictedStockMember payc:LongTermIncentivePlanMember payc:TimeBasedSharesMember 2021-04-27 2021-04-27 0001590955 payc:NonExecutiveEmployeesMember us-gaap:RestrictedStockMember payc:LongTermIncentivePlanMember payc:TimeBasedSharesMember 2021-01-01 2021-03-31 0001590955 us-gaap:SubsequentEventMember payc:NonEmployeeMembersMember us-gaap:RestrictedStockMember payc:LongTermIncentivePlanMember 2021-05-03 2021-05-03 0001590955 payc:NonEmployeeMembersMember us-gaap:RestrictedStockMember payc:LongTermIncentivePlanMember 2021-01-01 2021-03-31

 

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 March 31, 2021

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, including 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 April 27, 2021, there were 60,183,272 shares of common stock, par value of $0.01 per share, outstanding, including 2,390,286 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 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

 

18

 

Item 3.

 

 

Quantitative and Qualitative Disclosures About Market Risk

 

28

 

Item 4.

 

 

Controls and Procedures

 

28

 

 

 

PART II – OTHER INFORMATION

 

 

 

Item 1.

 

 

Legal Proceedings

 

29

 

Item 1A.

 

 

Risk Factors

 

29

 

Item 2.

 

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

29

 

Item 6.

 

 

Exhibits

 

30

 

Signatures

 

31

 

 

 

2


 

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

Paycom Software, Inc.

Unaudited Consolidated Balance Sheets

(in thousands, except per share amounts)

 

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

215,093

 

 

$

151,710

 

Accounts receivable

 

 

19,792

 

 

 

9,130

 

Prepaid expenses

 

 

24,109

 

 

 

17,854

 

Inventory

 

 

1,088

 

 

 

1,151

 

Income tax receivable

 

 

 

 

 

10,447

 

Deferred contract costs

 

 

64,441

 

 

 

60,819

 

Current assets before funds held for clients

 

 

324,523

 

 

 

251,111

 

Funds held for clients

 

 

2,299,684

 

 

 

1,613,494

 

Total current assets

 

 

2,624,207

 

 

 

1,864,605

 

Property and equipment, net

 

 

301,579

 

 

 

285,218

 

Goodwill

 

 

51,889

 

 

 

51,889

 

Long-term deferred contract costs

 

 

394,867

 

 

 

371,357

 

Other assets

 

 

34,231

 

 

 

34,843

 

Total assets

 

$

3,406,773

 

 

$

2,607,912

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

12,133

 

 

$

6,787

 

Income tax payable

 

 

12,977

 

 

 

 

Accrued commissions and bonuses

 

 

6,781

 

 

 

13,703

 

Accrued payroll and vacation

 

 

32,634

 

 

 

24,529

 

Deferred revenue

 

 

14,191

 

 

 

13,567

 

Current portion of long-term debt

 

 

1,775

 

 

 

1,775

 

Accrued expenses and other current liabilities

 

 

45,399

 

 

 

44,175

 

Current liabilities before client funds obligation

 

 

125,890

 

 

 

104,536

 

Client funds obligation

 

 

2,299,684

 

 

 

1,613,494

 

Total current liabilities

 

 

2,425,574

 

 

 

1,718,030

 

Deferred income tax liabilities, net

 

 

115,336

 

 

 

112,598

 

Long-term deferred revenue

 

 

74,802

 

 

 

73,259

 

Net long-term debt, less current portion

 

 

28,684

 

 

 

29,119

 

Other long-term liabilities

 

 

16,901

 

 

 

19,263

 

Total long-term liabilities

 

 

235,723

 

 

 

234,239

 

Total liabilities

 

 

2,661,297

 

 

 

1,952,269

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock, $0.01 par value (100,000 shares authorized, 61,864 and 61,861 shares issued at March 31, 2021 and December 31, 2020, respectively; 57,741 and 57,739 shares outstanding at March 31, 2021 and December 31, 2020, respectively)

 

 

618

 

 

 

618

 

Additional paid-in capital

 

 

383,502

 

 

 

357,908

 

Retained earnings

 

 

784,235

 

 

 

719,619

 

Treasury stock, at cost (4,123 and 4,122 shares at March 31, 2021 and December 31, 2020, respectively)

 

 

(422,879

)

 

 

(422,502

)

Total stockholders' equity

 

 

745,476

 

 

 

655,643

 

Total liabilities and stockholders' equity

 

$

3,406,773

 

 

$

2,607,912

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

3


 

 

Paycom Software, Inc.

Unaudited Consolidated Statements of Income

(in thousands, except per share amounts)

 

 

 

 

Three Months Ended March 31,

 

 

 

 

2021

 

 

 

2020

 

Revenues

 

 

 

 

 

 

 

 

Recurring

 

$

267,774

 

 

$

238,495

 

Implementation and other

 

 

4,424

 

 

 

3,873

 

Total revenues

 

 

272,198

 

 

 

242,368

 

Cost of revenues

 

 

 

 

 

 

 

 

Operating expenses

 

 

29,073

 

 

 

24,116

 

Depreciation and amortization

 

 

7,200

 

 

 

5,930

 

Total cost of revenues

 

 

36,273

 

 

 

30,046

 

Administrative expenses

 

 

 

 

 

 

 

 

Sales and marketing

 

 

62,761

 

 

 

55,018

 

Research and development

 

 

24,711

 

 

 

21,621

 

General and administrative

 

 

46,191

 

 

 

40,134

 

Depreciation and amortization

 

 

7,716

 

 

 

6,285

 

Total administrative expenses

 

 

141,379

 

 

 

123,058

 

Total operating expenses

 

 

177,652

 

 

 

153,104

 

Operating income

 

 

94,546

 

 

 

89,264

 

Interest expense

 

 

 

 

 

(16

)

Other income (expense), net

 

 

629

 

 

 

(930

)

Income before income taxes

 

 

95,175

 

 

 

88,318

 

Provision for income taxes

 

 

30,559

 

 

 

25,303

 

Net income

 

$

64,616

 

 

$

63,015

 

Earnings per share, basic

 

$

1.12

 

 

$

1.09

 

Earnings per share, diluted

 

$

1.11

 

 

$

1.08

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

57,740

 

 

 

57,655

 

Diluted

 

 

58,394

 

 

 

58,440

 

 

 

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

 

 

Treasury Stock

 

 

Total

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Earnings

 

 

Shares

 

 

Amount

 

 

Stockholders' Equity

 

Balances at December 31, 2019

 

61,350

 

 

$

613

 

 

$

257,501

 

 

$

576,166

 

 

 

3,689

 

 

$

(307,652

)

 

$

526,628

 

Vesting of restricted stock

 

2

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

18,313

 

 

 

 

 

 

 

 

 

 

 

 

18,313

 

Repurchases of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

41

 

 

 

(8,168

)

 

 

(8,168

)

Net income

 

 

 

 

 

 

 

 

 

 

63,015

 

 

 

 

 

 

 

 

 

63,015

 

Balances at March 31, 2020

 

61,352

 

 

$

614

 

 

$

275,813

 

 

$

639,181

 

 

 

3,730

 

 

$

(315,820

)

 

$

599,788

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

Retained

 

 

Treasury Stock

 

 

Total

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Earnings

 

 

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

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 


5


 

 

Paycom Software, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

64,616

 

 

$

63,015

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

14,916

 

 

 

12,215

 

Accretion of discount on available-for-sale securities

 

 

(77

)

 

 

(467

)

Loss on disposition of property and equipment

 

 

132

 

 

 

 

Amortization of debt issuance costs

 

 

9

 

 

 

9

 

Stock-based compensation expense

 

 

23,581

 

 

 

15,811

 

Cash paid for derivative settlement

 

 

(232

)

 

 

(69

)

(Gain)/loss on derivative

 

 

(424

)

 

 

1,644

 

Deferred income taxes, net

 

 

2,738

 

 

 

1,392

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(10,662

)

 

 

1,239

 

Prepaid expenses

 

 

(6,255

)

 

 

(4,292

)

Inventory

 

 

(125

)

 

 

254

 

Other assets

 

 

559

 

 

 

(1,801

)

Deferred contract costs

 

 

(26,575

)

 

 

(27,630

)

Accounts payable

 

 

803

 

 

 

408

 

Income taxes, net

 

 

23,424

 

 

 

19,973

 

Accrued commissions and bonuses

 

 

(6,922

)

 

 

(6,681

)

Accrued payroll and vacation

 

 

8,105

 

 

 

6,289

 

Deferred revenue

 

 

2,167

 

 

 

2,211

 

Accrued expenses and other current liabilities

 

 

(321

)

 

 

(1,490

)

Net cash provided by operating activities

 

 

89,457

 

 

 

82,030

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchase of short-term investments from funds held for clients

 

 

(47,215

)

 

 

(177,903

)

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

 

 

80,000

 

 

 

20,000

 

Purchases of property and equipment

 

 

(25,330

)

 

 

(25,726

)

Net cash provided by (used in) investing activities

 

 

7,455

 

 

 

(183,629

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Repurchases of common stock

 

 

 

 

 

(7,998

)

Withholding taxes paid related to net share settlements

 

 

(377

)

 

 

(170

)

Payments on long-term debt

 

 

(444

)

 

 

(444

)

Net change in client funds obligation

 

 

686,190

 

 

 

(270,399

)

Net cash provided by (used in) financing activities

 

 

685,369

 

 

 

(279,011

)

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

 

 

782,281

 

 

 

(380,610

)

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

 

$

2,367,556

 

 

$

1,261,244

 

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

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

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

215,093

 

 

$

181,827

 

Restricted cash included in funds held for clients

 

 

2,152,463

 

 

 

1,079,417

 

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

 

$

2,367,556

 

 

$

1,261,244

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment, accrued but not paid

 

$

6,217

 

 

$

8,251

 

Stock-based compensation for capitalized software

 

$

1,456

 

 

$

1,601

 

Right of use assets obtained in exchange for operating lease liabilities

 

$

541

 

 

$

3,536

 

 

 

See accompanying notes to the unaudited consolidated financial statements. 

 

6


Paycom Software, Inc.

Notes to the Unaudited Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share amounts)

 

 

1.

ORGANIZATION AND DESCRIPTION OF BUSINESS

Paycom Software, Inc. (“Software”) and its wholly-owned subsidiaries (collectively, the “Company”) is a leading provider of a comprehensive, cloud-based human capital management (“HCM”) solution delivered as Software-as-a-Service. Unless we state otherwise or the context otherwise requires, the terms “we,” “our,” “us” and the “Company” refer to Software and its consolidated subsidiaries.  

We provide functionality and data analytics that businesses need to manage the complete employment lifecycle, from recruitment to retirement. Our solution requires virtually no customization and is based on a core system of record maintained in a single database for all HCM functions, including talent acquisition, time and labor management, payroll, talent management and human resources (“HR”) management applications.

 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our significant accounting policies are discussed in “Note 2. Summary of Significant Accounting Policies” in the notes to our audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2020 (the “Form 10-K”) filed with the Securities and Exchange Commission (“SEC”) on February 18, 2021.  

 

Basis of Presentation

The accompanying unaudited interim consolidated financial statements and notes have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the SEC regarding interim financial statements that permit reduced disclosure for interim periods. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes presented in the Form 10-K. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results expected for the full year.

 

Recently Adopted Accounting Pronouncements

In January 2021, we adopted Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes” (“ASU 2019-12”) utilizing the prospective transition method. The amendments in ASU 2019-12 eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income tax in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes. The adoption of this guidance did not have a material impact on our unaudited interim consolidated financial statements.

In January 2020, we adopted ASU No. 2018-15, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force)” (“ASU 2018-15”) utilizing the prospective transition method. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The adoption of this guidance did not have a material impact on our unaudited interim consolidated financial statements.

In January 2020, we adopted ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU No. 2018-13 modifies the disclosure requirements in Topic 820, “Fair Value Measurement,” based on the FASB Concepts Statement, “Conceptual Framework for Financial Reporting – Chapter 8: Notes to Financial Statements,” including consideration of costs and benefits. The adoption of ASU 2018-13 removed or modified disclosure requirements retrospectively to all periods presented, whereas any new requirements have been applied prospectively from the adoption date. The adoption of this guidance did not have a material impact on our unaudited interim consolidated financial statements. 

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates include income taxes, loss contingencies, the useful life of property and equipment, the life of our client relationships, the fair value of our stock-based awards and the fair value of our financial instruments and goodwill. These estimates are based on historical experience where applicable and other assumptions that management believes are reasonable under the circumstances. Actual results could materially differ from these estimates.

7


Paycom Software, Inc.

Notes to the Unaudited Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share amounts)

 

Seasonality

Our revenues are seasonal in nature. Recurring revenues include revenues relating to the annual processing of payroll forms, such as Form W-2, Form 1099, and Form 1095 and revenues from processing unscheduled payroll runs (such as bonuses) for our clients. As payroll forms are typically processed in the first quarter of the year, first quarter revenues and margins are generally higher than in subsequent quarters. These seasonal fluctuations in revenues can also have an impact on gross profits. Historical results impacted by these seasonal trends should not be considered a reliable indicator of our future results of operations.

Employee Stock Purchase Plan

An award issued under the Paycom Software, Inc. Employee Stock Purchase Plan (the “ESPP”) is classified as a share-based liability and recognized at the fair value of the award. Expense is recognized, net of estimated forfeitures, on a straight-line basis over the requisite service period.

Funds Held for Clients and Client Funds Obligation

As part of our payroll and tax filing application, we (i) collect client funds to satisfy their respective federal, state and local employment tax obligations, (ii) remit such funds to the appropriate taxing authorities and accounts designated by our clients, and (iii) manage client tax filings and any related correspondence with taxing authorities. Amounts collected by us from clients for their federal, state and local employment taxes are invested by us, and we earn interest on these funds during the interval between receipt and disbursement.

These investments are shown in our consolidated balance sheets as funds held for clients, and the offsetting liability for the tax filings is shown as client funds obligation. The liability is recorded in the accompanying consolidated balance sheets at the time we obtain the funds from clients. The client funds obligation represents liabilities that will be repaid within one year of the consolidated balance sheet date. As of March 31, 2021 and December 31, 2020, the funds held for clients were invested in money market funds, demand deposit accounts, commercial paper with a maturity duration less than three months and certificates of deposit. Short-term investments in commercial paper and certificates of deposit with an original maturity duration greater than three months are classified as available-for-sale securities, and are also included within the funds held for clients line item in the consolidated balance sheets. These available-for-sale securities are recorded in the consolidated balance sheets at fair value, which approximates the amortized cost of the securities. Funds held for clients are classified as a current asset in the consolidated balance sheets because the funds are held solely to satisfy the client funds obligation.  

Stock Repurchase Plan

In May 2016, our Board of Directors authorized a stock repurchase plan allowing for the repurchase of shares of our common stock 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. Since the initial authorization of the stock repurchase plan, our Board of Directors has amended and extended and authorized new stock repurchase plans from time to time. Most recently, in March 2020, our Board of Directors authorized the repurchase of up to $250.0 million of our common stock. As of March 31, 2021, there was $134.9 million available for repurchases under our stock repurchase plan. Our stock repurchase plan may be suspended or discontinued at any time. The actual timing, number and value of shares repurchased depends on a number of factors, including the market price of our common stock, general market and economic conditions, shares withheld for taxes associated with the vesting of restricted stock and other corporate considerations. The current stock repurchase plan will expire on March 12, 2022.

During the three months ended March 31, 2021, we repurchased an aggregate of 919 shares of our common stock at an average cost of $410.07 per share, all of which were shares withheld to satisfy tax withholding obligations for certain employees upon the vesting of restricted stock.  

Recently Issued Accounting Pronouncements 

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-04, “Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 provides temporary optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. Our interest-bearing notes bear interest, at our option, at either (a) a prime rate plus 1.0% or (b) fluctuating interest rates based on LIBOR. If LIBOR ceases to exist, we may need to renegotiate our loan documents and we cannot predict what alternative index would be negotiated with our lenders. ASU 2020-04 is currently effective and upon adoption may be applied prospectively to contract modifications made on or before December 31, 2022. We are currently assessing the impact that this guidance will have on our consolidated financial statements.

In January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848) Scope” (“ASU 2021-01”), which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to

8


Paycom Software, Inc.

Notes to the Unaudited Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share amounts)

 

derivative instruments that are affected by the discounting transition. ASU 2021-01 amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. ASU 2021-01 is currently effective and upon adoption may be applied to contract modifications that change the interest rate used for margining, discounting, or contract price alignment retrospectively as of any date from the beginning of the interim period that includes March 12, 2020, or prospectively to new modifications from any date within the interim period that includes or is subsequent to January 7, 2021, up to the date that financial statements are available to be issued. We are currently assessing the impact that this guidance will have on our consolidated financial statements.

 

3.

REVENUE

Revenues are recognized when control of the promised goods or services is transferred to our clients in an amount that reflects the consideration we expect to be entitled to for those goods or services. Substantially all of our revenues are comprised of revenue from contracts with clients. Sales taxes and other applicable taxes are excluded from revenues.  

 

Recurring Revenues

Recurring revenues are derived primarily from our talent acquisition, time and labor management, payroll, talent management and HR management applications as well as fees charged for form filings and delivery of client payroll checks and reports. Talent acquisition includes our applicant tracking, candidate tracker, background check, on-boarding, e-verify and tax credit services applications. Time and labor management includes time and attendance, scheduling/schedule exchange, time-off requests, labor allocation, labor management reports/push reporting and geofencing/geotracking. Payroll includes our payroll and tax management, Paycom Pay®, expense management, garnishment management and GL Concierge applications. Talent management includes our employee self-service, compensation budgeting, performance management, executive dashboard and Paycom learning and course content applications. HR management includes our document and task management, government and compliance, benefits administration, benefit enrollment services, COBRA administration, personnel action forms, surveys and enhanced Affordable Care Act applications.

The performance obligations related to recurring revenues are satisfied during each client’s payroll period, with the agreed-upon fee being charged and collected as part of our processing of the client’s payroll. Recurring revenues are recognized at the conclusion of processing of each client’s payroll period, when each respective payroll client is billed. Collectability is reasonably assured as the fees are collected through an automated clearing house as part of the client’s payroll cycle or through direct wire transfer, which minimizes the default risk.

The contract period for substantially all contracts associated with these revenues is one month due to the fact that both we and the client have the unilateral right to terminate a wholly unperformed contract without compensating the other party by providing 30 days’ notice of termination. Our payroll application is the foundation of our solution, and all of our clients are required to utilize this application in order to access our other applications. For clients who purchase multiple applications, due to the short-term nature of our contracts, we do not believe it is meaningful to separately assess and identify whether or not each application potentially represents its own, individual, performance obligation as the revenue generated from each application is recognized within the same month as the revenue from the core payroll application. Similarly, we do not believe it is meaningful to individually determine the standalone selling price for each application. We consider the total price charged to a client in a given period to be indicative of the standalone selling price, as the total amount charged is within a reasonable range of prices typically charged for our goods and services for comparable classes of client groups.  

Implementation and Other Revenues

Implementation and other revenues consist of nonrefundable upfront conversion fees which are charged to new clients to offset the expense of new client set-up as well as revenues from the sale of time clocks as part of our employee time and attendance services. Although these revenues are related to our recurring revenues, they represent distinct performance obligations.

9


Paycom Software, Inc.

Notes to the Unaudited Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share amounts)

 

Implementation activities primarily represent administrative activities that allow us to fulfill future performance obligations for our clients and do not represent services transferred to the client. However, the nonrefundable upfront fee charged to our clients results in an implied performance obligation in the form of a material right to the client related to the client’s option to renew at the end of each 30-day contract period. Further, given that all other services within the contract are sold at a total price indicative of the standalone selling price, coupled with the fact that the upfront fees are consistent with upfront fees charged in similar contracts that we have with clients, the standalone selling price of the client’s option to renew the contract approximates the dollar amount of the nonrefundable upfront fee. The nonrefundable upfront fee is typically included on the client’s first invoice, and is deferred and recognized ratably over the estimated renewal period (i.e., ten-year estimated client life).

Revenues from the sale of time clocks are recognized when control is transferred to the client upon delivery of the product. We estimate the standalone selling price for the time clocks by maximizing the use of observable inputs such as our specific pricing practices for time clocks.  

Contract Balances

The timing of revenue recognition for recurring services is consistent with the invoicing of clients as they both occur during the respective client payroll period for which the services are provided. Therefore, we do not recognize a contract asset or liability resulting from the timing of revenue recognition and invoicing.

Changes in deferred revenue related to material right performance obligations as of March 31, 2021 and 2020 were as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Balance, beginning of period

 

$

86,826

 

 

$

76,244

 

Deferral of revenue

 

 

6,962

 

 

 

5,885

 

Recognition of unearned revenue

 

 

(4,795

)

 

 

(3,674

)

Balance, end of period

 

$

88,993

 

 

$

78,455

 

 

We expect to recognize $10.7 million of deferred revenue related to material right performance obligations in the remainder of 2021, $13.5 million of such deferred revenue in 2022, and $64.8 million of such deferred revenue thereafter.

Assets Recognized from the Costs to Obtain and Costs to Fulfill Revenue Contracts

We recognize an asset for the incremental costs of obtaining a contract with a client if we expect the amortization period to be longer than one year. We also recognize an asset for the costs to fulfill a contract with a client if such costs are specifically identifiable, generate or enhance resources used to satisfy future performance obligations, and are expected to be recovered. We have determined that substantially all costs related to implementation activities are administrative in nature and also meet the capitalization criteria under ASC 340-40. These capitalized costs to fulfill principally relate to upfront direct costs that are expected to be recovered through margin and that enhance our ability to satisfy future performance obligations.  

The assets related to both costs to obtain, and costs to fulfill, contracts with clients are accounted for utilizing a portfolio approach, and are capitalized and amortized over the expected period of benefit, which we have determined to be the estimated client relationship of ten years. The expected period of benefit has been determined to be the estimated life of the client relationship primarily because we incur no new costs to obtain, or costs to fulfill, a contract upon renewal of such contract. Additional commission costs may be incurred when an existing client purchases additional applications; however, these commission costs relate solely to the additional applications purchased and are not related to contract renewal. Furthermore, additional fulfillment costs associated with existing clients purchasing additional applications are minimized by our seamless single-database platform. These assets are presented as deferred contract costs in the accompanying consolidated balance sheets. Amortization expense related to costs to obtain and costs to fulfill a contract are included in the “sales and marketing” and “general and administrative” line items in the accompanying consolidated statements of income.

 

10


Paycom Software, Inc.

Notes to the Unaudited Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share amounts)

 

 

The following tables present the asset balances and related amortization expense for these contract costs:

 

 

 

As of and for the Three Months Ended March 31, 2021

 

 

 

Beginning

 

 

Capitalization

 

 

 

 

 

 

Ending

 

 

 

Balance

 

 

of Costs

 

 

Amortization

 

 

Balance

 

Costs to obtain a contract

 

$

232,583

 

 

$

20,541

 

 

$

(8,785

)

 

$

244,339

 

Costs to fulfill a contract

 

$

199,593

 

 

$

22,178

 

 

$

(6,802

)

 

$

214,969