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Paycom Software, Inc. Reports Fourth Quarter and Year-End 2022 Results

Full Year Revenues of $1,375 million, up 30% year-over-year

Full Year GAAP Net Income of $281 million, representing 20% of total revenues, or $4.84 per diluted share

Full Year Adjusted EBITDA of $580 million, representing 42% of total revenues

Fourth Quarter Revenues of $371 million, up 30% year-over-year

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 and year ended December 31, 2022.

“We delivered outstanding results in 2022, with accelerating revenue growth and strong margins, reflecting strong demand for our user-friendly solutions and attractive client return on investment,” said Paycom’s founder, chairman and CEO, Chad Richison. “Employees are doing their own payroll with Beti®, and that’s what is best for the employee and the employer. In 2023, we will continue to invest in innovation around the employee experience and automation to deliver more value to our clients.”

Financial Highlights for the Fourth Quarter of 2022

Total Revenues of $370.6 million represented a 30.0% increase compared to total revenues of $285.0 million in the same period last year. Recurring revenues of $364.0 million increased 30.0% from the comparable prior year period, and constituted 98.2% of total revenues.

GAAP Net Income was $80.0 million, or $1.38 per diluted share, compared to GAAP net income of $48.7 million, or $0.84 per diluted share, in the same period last year.

Non-GAAP Net Income1 was $100.2 million, or $1.73 per diluted share, compared to $64.4 million, or $1.11 per diluted share, in the same period last year.

Adjusted EBITDA1 was $163.9 million, compared to $109.6 million in the same period last year.

Cash and Cash Equivalents were $400.7 million as of December 31, 2022, compared to $278.0 million as of December 31, 2021.

Total Debt, Net was $29.0 million as of December 31, 2022, compared to $29.2 million as of December 31, 2021.

Financial Highlights for the Full Year 2022

Total Revenues of $1,375.2 million represented a 30.3% increase compared to total revenues of $1,055.5 million last year. Recurring revenues of $1,351.9 million increased 30.4% from last year, and constituted 98.3% of total revenues.

GAAP Net Income was $281.4 million, or $4.84 per diluted share, compared to GAAP net income of $196.0 million, or $3.37 per diluted share, last year.

Non-GAAP Net Income1 was $357.2 million, or $6.14 per diluted share, compared to $260.4 million, or $4.48 per diluted share, last year.

Adjusted EBITDA1 was $579.7 million, compared to $419.3 million last year.

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.

Business Highlights

Paycom earned a Top 25 ranking from Top Workplaces USA, and a Top Workplaces in Oklahoma award, its tenth-consecutive year on the list. Paycom was also named a Best Company for Women.

Total client count increased to 36,561 as of December 31, 2022, up 8% from the prior year-end. On a parent company grouping basis, client count as of December 31, 2022, increased to 19,081, up 8% from the prior year-end.

Annual revenue retention rate was 93% for the year ended December 31, 2022.

Paycom stored data for over 6.5 million persons employed by its clients during the year ended December 31, 2022, up 14.0% year-over-year.

Financial Outlook

Paycom provides the following expected financial guidance for the quarter ending March 31, 2023 and the year ending December 31, 2023.

Quarter Ending March 31, 2023:

Total Revenues in the range of $443 million to $445 million.

Adjusted EBITDA in the range of $210 million to $212 million.

Year Ending December 31, 2023:

Total Revenues in the range of $1.700 billion to $1.702 billion.

Adjusted EBITDA in the range of $700 million to $702 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, is not readily available due to uncertainty regarding, and the potential variability of, depreciation and amortization, interest expense, taxes, non-cash stock-based compensation expense and other items. Further, we have not reconciled the forward-looking adjusted gross margin 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 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 rate plus adjusted EBITDA margin, or the “Rule of 65”. 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 65” to a comparable GAAP measure without unreasonable effort.

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, adjusted EBITDA margin, “Rule of 65” and “Rule of 72”. 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, (viii) “Rule of 65” and “Rule of 72” each as revenue growth rate (expressed as a percentage) plus adjusted EBITDA margin (calculated as described in clause (vii)) and (ix) non-GAAP effective income tax rate as the provision for income taxes plus the income tax effect on non-GAAP adjustments divided by non-GAAP net income (calculated as described in clause (ii)) plus the provision for income taxes and the income tax effect on non-GAAP adjustments. 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, February 7, 2023, at 5:00 p.m. Eastern time to discuss its financial results. To access this call, dial (844) 200-6205 (domestic) or (929) 526-1599 (international) and provide 948754 as the access code. 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.

About Paycom

For nearly 25 years, Paycom Software Inc. (NYSE:PAYC) has simplified businesses and the lives of their employees through easy-to-use HR and payroll technology to empower transparency and direct access to data. And thanks to its industry-first solution, Beti®, those employees now do their own payroll and are guided to find and fix costly errors before payroll submission. From onboarding and benefits enrollment to talent management and more, Paycom’s software streamlines processes, drives efficiencies and gives employees power over their own HR information, all in a single app. Named one of the World’s Most Innovative Companies by Fast Company and best employers in the U.S. by Top Workplaces, Paycom can serve businesses of all sizes and 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 plans regarding our capital expenditures and investment activity as our business grows, including with respect to research and development and the expansion of our corporate headquarters and other facilities; our plans to repurchase shares of our common stock through a stock repurchase plan; and our expected income tax rate for future periods. 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. 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)

 

 

 

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

400,730

 

 

$

277,978

 

Accounts receivable

 

 

22,843

 

 

 

9,490

 

Prepaid expenses

 

 

34,056

 

 

 

23,729

 

Inventory

 

 

1,607

 

 

 

1,131

 

Income tax receivable

 

 

5,583

 

 

 

16,413

 

Deferred contract costs

 

 

96,378

 

 

 

76,724

 

Current assets before funds held for clients

 

 

561,197

 

 

 

405,465

 

Funds held for clients

 

 

2,202,975

 

 

 

1,846,573

 

Total current assets

 

 

2,764,172

 

 

 

2,252,038

 

Property and equipment, net

 

 

402,448

 

 

 

348,953

 

Intangible assets, net

 

 

54,017

 

 

 

58,028

 

Goodwill

 

 

51,889

 

 

 

51,889

 

Long-term deferred contract costs

 

 

567,974

 

 

 

461,852

 

Other assets

 

 

62,013

 

 

 

42,385

 

Total assets

 

$

3,902,513

 

 

$

3,215,145

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

16,054

 

 

$

5,772

 

Accrued commissions and bonuses

 

 

28,439

 

 

 

22,357

 

Accrued payroll and vacation

 

 

45,023

 

 

 

34,259

 

Deferred revenue

 

 

19,825

 

 

 

16,277

 

Current portion of long-term debt

 

 

 

 

 

1,775

 

Accrued expenses and other current liabilities

 

 

59,990

 

 

 

63,397

 

Current liabilities before client funds obligation

 

 

169,331

 

 

 

143,837

 

Client funds obligation

 

 

2,207,706

 

 

 

1,846,573

 

Total current liabilities

 

 

2,377,037

 

 

 

1,990,410

 

Deferred income tax liabilities, net

 

 

141,033

 

 

 

145,504

 

Long-term deferred revenue

 

 

97,591

 

 

 

85,149

 

Net long-term debt, less current portion

 

 

29,000

 

 

 

27,380

 

Other long-term liabilities

 

 

75,245

 

 

 

72,988

 

Total long-term liabilities

 

 

342,869

 

 

 

331,021

 

Total liabilities

 

 

2,719,906

 

 

 

2,321,431

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.01 par value (100,000 shares authorized, 62,518 and 62,298 shares issued at December 31, 2022 and December 31, 2021, respectively; 57,867 and 58,012 shares outstanding at December 31, 2022 and December 31, 2021, respectively)

 

 

625

 

 

 

623

 

Additional paid-in capital

 

 

576,622

 

 

 

465,594

 

Retained earnings

 

 

1,196,968

 

 

 

915,579

 

Accumulated other comprehensive earnings (loss)

 

 

(3,703

)

 

 

 

Treasury stock, at cost (4,651 and 4,286 shares at December 31, 2022 and December 31, 2021, respectively)

 

 

(587,905

)

 

 

(488,082

)

Total stockholders’ equity

 

 

1,182,607

 

 

 

893,714

 

Total liabilities and stockholders’ equity

 

$

3,902,513

 

 

$

3,215,145

 

Paycom Software, Inc.

 

Unaudited Consolidated Statements of Comprehensive Income

 

(in thousands, except per share amounts)

 

 

 

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

 

$

364,008

 

 

$

280,026

 

 

$

1,351,856

 

 

$

1,036,691

 

Implementation and other

 

 

6,600

 

 

 

4,960

 

 

 

23,362

 

 

 

18,833

 

Total revenues

 

 

370,608

 

 

 

284,986

 

 

 

1,375,218

 

 

 

1,055,524

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

47,541

 

 

 

37,863

 

 

 

169,806

 

 

 

130,475

 

Depreciation and amortization

 

 

11,530

 

 

 

8,660

 

 

 

42,935

 

 

 

31,411

 

Total cost of revenues

 

 

59,071

 

 

 

46,523

 

 

 

212,741

 

 

 

161,886

 

Administrative expenses

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

92,727

 

 

 

75,509

 

 

 

346,561

 

 

 

275,994

 

Research and development

 

 

39,569

 

 

 

34,414

 

 

 

148,343

 

 

 

118,426

 

General and administrative

 

 

60,021

 

 

 

49,606

 

 

 

239,130

 

 

 

209,840

 

Depreciation and amortization

 

 

13,386

 

 

 

10,308

 

 

 

49,764

 

 

 

35,811

 

Total administrative expenses

 

 

205,703

 

 

 

169,837

 

 

 

783,798

 

 

 

640,071

 

Total operating expenses

 

 

264,774

 

 

 

216,360

 

 

 

996,539

 

 

 

801,957

 

Operating income

 

 

105,834

 

 

 

68,626

 

 

 

378,679

 

 

 

253,567

 

Interest expense

 

 

(949

)

 

 

 

 

 

(2,536

)

 

 

 

Other income (expense), net

 

 

9,104

 

 

 

1,376

 

 

 

13,435

 

 

 

2,395

 

Income before income taxes

 

 

113,989

 

 

 

70,002

 

 

 

389,578

 

 

 

255,962

 

Provision for income taxes

 

 

34,038

 

 

 

21,315

 

 

 

108,189

 

 

 

60,002

 

Net income

 

$

79,951

 

 

$

48,687

 

 

$

281,389

 

 

$

195,960

 

Earnings per share, basic

 

$

1.38

 

 

$

0.84

 

 

$

4.86

 

 

$

3.39

 

Earnings per share, diluted

 

$

1.38

 

 

$

0.84

 

 

$

4.84

 

 

$

3.37

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

57,867

 

 

 

58,007

 

 

 

57,928

 

 

 

57,885

 

Diluted

 

 

58,037

 

 

 

58,238

 

 

 

58,175

 

 

 

58,191

 

Comprehensive earnings (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

79,951

 

 

$

48,687

 

 

$

281,389

 

 

$

195,960

 

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

 

 

124

 

 

 

 

 

 

(4,757

)

 

 

 

Tax effect

 

 

(14

)

 

 

 

 

 

1,054

 

 

 

 

Other comprehensive income (loss), net of tax

 

 

110

 

 

 

 

 

 

(3,703

)

 

 

 

Comprehensive earnings (loss)

 

$

80,061

 

 

$

48,687

 

 

$

277,686

 

 

$

195,960

 

Paycom Software, Inc.

 

Unaudited Consolidated Statements of Cash Flows

 

(in thousands)

 

 

 

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

Net income

 

$

281,389

 

 

$

195,960

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

92,699

 

 

 

67,222

 

Accretion of discount on available-for-sale securities

 

 

(1,020

)

 

 

(452

)

Non-cash marketing expense

 

 

1,734

 

 

 

1,051

 

(Gain)/loss on disposition of property and equipment

 

 

(150

)

 

 

146

 

Amortization of debt issuance costs

 

 

847

 

 

 

36

 

Stock-based compensation expense

 

 

94,898

 

 

 

97,506

 

Cash paid for derivative settlement

 

 

205

 

 

 

(741

)

Gain on derivative

 

 

(1,559

)

 

 

(662

)

Deferred income taxes, net

 

 

(3,210

)

 

 

32,906

 

Other

 

 

(206

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(13,353

)

 

 

(360

)

Prepaid expenses

 

 

(6,497

)

 

 

(5,875

)

Inventory

 

 

(224

)

 

 

481

 

Other assets

 

 

(13,907

)

 

 

(7,862

)

Deferred contract costs

 

 

(122,440

)

 

 

(103,356

)

Accounts payable

 

 

11,676

 

 

 

(660

)

Income taxes, net

 

 

10,830

 

 

 

(5,966

)

Accrued commissions and bonuses

 

 

6,082

 

 

 

8,654

 

Accrued payroll and vacation

 

 

10,764

 

 

 

9,730

 

Deferred revenue

 

 

15,990

 

 

 

14,600

 

Accrued expenses and other current liabilities

 

 

555

 

 

 

17,004

 

Net cash provided by operating activities

 

 

365,103

 

 

 

319,362

 

Cash flows from investing activities

 

 

 

 

 

 

Purchases of investments from funds held for clients

 

 

(268,718

)

 

 

(398,819

)

Proceeds from investments from funds held for clients

 

 

382,230

 

 

 

267,341

 

Purchases of intangible assets

 

 

(4,120

)

 

 

(5,500

)

Purchases of property and equipment

 

 

(132,678

)

 

 

(120,692

)

Net cash used in investing activities

 

 

(23,286

)

 

 

(257,670

)

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from the issuance of debt

 

 

29,000

 

 

 

 

Repurchases of common stock

 

 

(94,652

)

 

 

 

Withholding taxes paid related to net share settlements

 

 

(5,171

)

 

 

(65,580

)

Payments on long-term debt

 

 

(29,287

)

 

 

(1,775

)

Net change in client funds obligation

 

 

361,133

 

 

 

233,079

 

Payment of debt issuance costs

 

 

(6,436

)

 

 

 

Net cash provided by financing activities

 

 

254,587

 

 

 

165,724

 

Increase in cash, cash equivalents, restricted cash and restricted cash equivalents

 

 

596,404

 

 

 

227,416

 

Cash, cash equivalents, restricted cash and restricted cash equivalents

 

 

 

 

 

 

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

 

 

1,812,691

 

 

 

1,585,275

 

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

 

$

2,409,095

 

 

$

1,812,691

 

Paycom Software, Inc.

 

Unaudited Consolidated Statements of Cash Flows

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

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

 

 

 

 

 

 

Cash and cash equivalents

 

$

400,730

 

 

$

277,978

 

Restricted cash included in funds held for clients

 

 

2,008,365

 

 

 

1,534,713

 

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

 

$

2,409,095

 

 

$

1,812,691

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid for interest, net of amounts capitalized

 

$

507

 

 

$

2

 

Cash paid for income taxes

 

$

100,578

 

 

$

33,068

 

Non-cash investing and financing activities:

 

 

 

 

 

 

Purchases of property and equipment, accrued but not paid

 

$

5,899

 

 

$

7,581

 

Stock-based compensation for capitalized software

 

$

8,965

 

 

$

7,141

 

Right of use assets obtained in exchange for operating lease liabilities

 

$

21,467

 

 

$

14,141

 

Paycom Software, Inc.

Unaudited Reconciliations of GAAP to Non-GAAP Financial Measures

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income to adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

79,951

 

 

$

48,687

 

 

$

281,389

 

 

$

195,960

 

Interest expense

 

 

949

 

 

 

 

 

 

2,536

 

 

 

 

Provision for income taxes

 

 

34,038

 

 

 

21,315

 

 

 

108,189

 

 

 

60,002

 

Depreciation and amortization

 

 

24,916

 

 

 

18,968

 

 

 

92,699

 

 

 

67,222

 

EBITDA

 

 

139,854

 

 

 

88,970

 

 

 

484,813

 

 

 

323,184

 

Non-cash stock-based compensation expense

 

 

24,083

 

 

 

21,142

 

 

 

94,898

 

 

 

97,506

 

Change in fair value of interest rate swap

 

 

 

 

 

(540

)

 

 

 

 

 

(1,403

)

Adjusted EBITDA

 

$

163,937

 

 

$

109,572

 

 

$

579,711

 

 

$

419,287

 

Net income margin

 

 

21.6

%

 

 

17.1

%

 

 

20.5

%

 

 

18.6

%

Adjusted EBITDA margin

 

 

44.2

%

 

 

38.4

%

 

 

42.2

%

 

 

39.7

%

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income to non-GAAP net income:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

79,951

 

 

$

48,687

 

 

$

281,389

 

 

$

195,960

 

Non-cash stock-based compensation expense

 

 

24,083

 

 

 

21,142

 

 

 

94,898

 

 

 

97,506

 

Change in fair value of interest rate swap

 

 

 

 

 

(540

)

 

 

 

 

 

(1,403

)

Income tax effect on non-GAAP adjustments

 

 

(3,873

)

 

 

(4,854

)

 

 

(19,053

)

 

 

(31,652

)

Non-GAAP net income

 

$

100,161

 

 

$

64,435

 

 

$

357,234

 

 

$

260,411

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

57,867

 

 

 

58,007

 

 

 

57,928

 

 

 

57,885

 

Diluted

 

 

58,037

 

 

 

58,238

 

 

 

58,175

 

 

 

58,191

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share, basic

 

$

1.38

 

 

$

0.84

 

 

$

4.86

 

 

$

3.39

 

Earnings per share, diluted

 

$

1.38

 

 

$

0.84

 

 

$

4.84

 

 

$

3.37

 

Non-GAAP net income per share, basic

 

$

1.73

 

 

$

1.11

 

 

$

6.17

 

 

$

4.50

 

Non-GAAP net income per share, diluted

 

$

1.73

 

 

$

1.11

 

 

$

6.14

 

 

$

4.48

 

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share, basic

 

$

1.38

 

 

$

0.84

 

 

$

4.86

 

 

$

3.39

 

Non-cash stock-based compensation expense

 

 

0.42

 

 

 

0.36

 

 

 

1.64

 

 

 

1.68

 

Change in fair value of interest rate swap

 

 

 

 

 

(0.01

)

 

 

 

 

 

(0.02

)

Income tax effect on non-GAAP adjustments

 

 

(0.07

)

 

 

(0.08

)

 

 

(0.33

)

 

 

(0.55

)

Non-GAAP net income per share, basic

 

$

1.73

 

 

$

1.11

 

 

$

6.17

 

 

$

4.50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share, diluted

 

$

1.38

 

 

$

0.84

 

 

$

4.84

 

 

$

3.37

 

Non-cash stock-based compensation expense

 

 

0.41

 

 

 

0.36

 

 

 

1.63

 

 

 

1.68

 

Change in fair value of interest rate swap

 

 

 

 

 

(0.01

)

 

 

 

 

 

(0.02

)

Income tax effect on non-GAAP adjustments

 

 

(0.06

)

 

 

(0.08

)

 

 

(0.33

)

 

 

(0.55

)

Non-GAAP net income per share, diluted

 

$

1.73

 

 

$

1.11

 

 

$

6.14

 

 

$

4.48

 

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Adjusted gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

370,608

 

 

$

284,986

 

 

$

1,375,218

 

 

$

1,055,524

 

Less: Total cost of revenues

 

 

(59,071

)

 

 

(46,523

)

 

 

(212,741

)

 

 

(161,886

)

Total gross profit

 

 

311,537

 

 

 

238,463

 

 

 

1,162,477

 

 

 

893,638

 

Plus: Non-cash stock-based compensation expense

 

 

946

 

 

 

1,189

 

 

 

4,671

 

 

 

4,570

 

Total adjusted gross profit

 

$

312,483

 

 

$

239,652

 

 

$

1,167,148

 

 

$

898,208

 

Gross margin

 

 

84.1

%

 

 

83.7

%

 

 

84.5

%

 

 

84.7

%

Adjusted gross margin

 

 

84.3

%

 

 

84.1

%

 

 

84.9

%

 

 

85.1

%

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Adjusted sales and marketing expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing expenses

 

$

92,727

 

 

$

75,509

 

 

$

346,561

 

 

$

275,994

 

Less: Non-cash stock-based compensation expense

 

 

(5,473

)

 

 

(3,234

)

 

 

(18,659

)

 

 

(13,801

)

Adjusted sales and marketing expenses

 

$

87,254

 

 

$

72,275

 

 

$

327,902

 

 

$

262,193

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

370,608

 

 

$

284,986

 

 

$

1,375,218

 

 

$

1,055,524

 

Sales and marketing expenses as a % of revenues

 

 

25.0

%

 

 

26.5

%

 

 

25.2

%

 

 

26.1

%

Adjusted sales and marketing expenses as a % of revenues

 

 

23.5

%

 

 

25.4

%

 

 

23.8

%

 

 

24.8

%

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Adjusted total administrative expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Total administrative expenses

 

$

205,703

 

 

$

169,837

 

 

$

783,798

 

 

$

640,071

 

Less: Non-cash stock-based compensation expense

 

 

(23,137

)

 

 

(19,953

)

 

 

(90,227

)

 

 

(92,936

)

Adjusted total administrative expenses

 

$

182,566

 

 

$

149,884

 

 

$

693,571

 

 

$

547,135

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

370,608

 

 

$

284,986

 

 

$

1,375,218

 

 

$

1,055,524

 

Total administrative expenses as a % of revenues

 

 

55.5

%

 

 

59.6

%

 

 

57.0

%

 

 

60.6

%

Adjusted total administrative expenses as a % of revenues

 

 

49.3

%

 

 

52.6

%

 

 

50.4

%

 

 

51.8

%

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Adjusted research and development expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

$

39,569

 

 

$

34,414

 

 

$

148,343

 

 

$

118,426

 

Less: Non-cash stock-based compensation expense

 

 

(2,948

)

 

 

(2,133

)

 

 

(11,063

)

 

 

(7,527

)

Adjusted research and development expenses

 

$

36,621

 

 

$

32,281

 

 

$

137,280

 

 

$

110,899

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

370,608

 

 

$

284,986

 

 

$

1,375,218

 

 

$

1,055,524

 

Research and development expenses as a % of revenues

 

 

10.7

%

 

 

12.1

%

 

 

10.8

%

 

 

11.2

%

Adjusted research and development expenses as a % of revenues

 

 

9.9

%

 

 

11.3

%

 

 

10.0

%

 

 

10.5

%

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Total research and development costs:

 

 

 

 

 

 

 

 

 

 

 

 

Capitalized research and development costs

 

$

17,572

 

 

$

13,716

 

 

$

66,407

 

 

$

52,876

 

Research and development expenses

 

 

39,569

 

 

 

34,414

 

 

 

148,343

 

 

 

118,426

 

Total research and development costs

 

$

57,141

 

 

$

48,130

 

 

$

214,750

 

 

$

171,302

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

370,608

 

 

$

284,986

 

 

$

1,375,218

 

 

$

1,055,524

 

Total research and development costs as a % of revenues

 

 

15.4

%

 

 

16.9

%

 

 

15.6

%

 

 

16.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted total research and development costs:

 

 

 

 

 

 

 

 

 

 

 

 

Total research and development costs

 

$

57,141

 

 

$

48,130

 

 

$

214,750

 

 

$

171,302

 

Less: Capitalized non-cash stock-based compensation

 

 

(2,420

)

 

 

(2,033

)

 

 

(8,965

)

 

 

(7,141

)

Less: Non-cash stock-based compensation expense

 

 

(2,948

)

 

 

(2,133

)

 

 

(11,063

)

 

 

(7,527

)

Adjusted total research and development costs

 

$

51,773

 

 

$

43,964

 

 

$

194,722

 

 

$

156,634

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

370,608

 

 

$

284,986

 

 

$

1,375,218

 

 

$

1,055,524

 

Adjusted total research and development costs as a % of revenues

 

 

14.0

%

 

 

15.4

%

 

 

14.2

%

 

 

14.8

%

Paycom Software, Inc.

Unaudited Components of Non-Cash Stock-Based Compensation Expense

(in thousands)

 

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Non-cash stock-based compensation expense:

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

$

946

 

 

$

1,189

 

 

$

4,671

 

 

$

4,570

 

Sales and marketing

 

 

5,473

 

 

 

3,234

 

 

 

18,659

 

 

 

13,801

 

Research and development

 

 

2,948

 

 

 

2,133

 

 

 

11,063

 

 

 

7,527

 

General and administrative

 

 

14,716

 

 

 

14,586

 

 

 

60,505

 

 

 

71,608

 

Total non-cash stock-based compensation expense

 

$

24,083

 

 

$

21,142

 

 

$

94,898

 

 

$

97,506

 

 

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