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Paycom Software, Inc. Reports Fourth Quarter and Year-End 2023 Results

Full Year Revenues of $1,694 million, up 23% year-over-year

Full Year GAAP Net Income of $341 million, representing 20% of total revenues, or $5.88 per diluted share

Full Year Adjusted EBITDA of $719 million, representing 42% of total revenues

Fourth Quarter Revenues of $435 million, up 17% 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, 2023.

"I am proud of the way we closed 2023 with better-than-expected results, capping a year of outstanding product innovation and employee engagement," said Paycom's founder, Co-CEO and Chairman, Chad Richison. "Our goals for 2024 are primarily focused on three key areas: providing world-class service, solution automation, and client ROI achievement. Through the execution of these initiatives, we will be well-positioned for 2024 and beyond."

Financial Highlights for the Fourth Quarter of 2023

Total Revenues of $434.6 million represented a 17.3% increase compared to total revenues of $370.6 million in the same period last year. Recurring revenues of $427.3 million increased 17.4% from the comparable prior year period, and constituted 98.3% of total revenues.

GAAP Net Income was $81.8 million, or $1.43 per diluted share, compared to GAAP net income of $80.0 million, or $1.38 per diluted share, in the same period last year.

Non-GAAP Net Income1 was $110.2 million, or $1.93 per diluted share, compared to $100.2 million, or $1.73 per diluted share, in the same period last year.

Adjusted EBITDA1 was $176.6 million, compared to $163.9 million in the same period last year.

Cash and Cash Equivalents were $294.0 million as of December 31, 2023, compared to $400.7 million as of December 31, 2022. During the quarter ended December 31, 2023, Paycom paid $21.5 million in cash dividends and repurchased 1,192,351 shares of common stock for $212.9 million.

Total Debt was $0 as of December 31, 2023, compared to $29.0 million as of December 31, 2022.

Financial Highlights for the Full Year 2023

Total Revenues of $1,693.7 million represented a 23.2% increase compared to total revenues of $1,375.2 million last year. Recurring revenues of $1,665.0 million increased 23.2% from last year, and constituted 98.3% of total revenues.

GAAP Net Income was $340.8 million, or $5.88 per diluted share, compared to GAAP net income of $281.4 million, or $4.84 per diluted share, last year.

Non-GAAP Net Income1 was $449.5 million, or $7.75 per diluted share, compared to $357.2 million, or $6.14 per diluted share, last year.

Adjusted EBITDA1 was $719.3 million, compared to $579.7 million last year.

1Adjusted EBITDA, non-GAAP net income and non-GAAP net income per diluted share 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 multiple workplace awards, including Newsweek’s Greatest Workplaces for Parents and Families, Newsweek’s Greatest Workplaces for Diversity, Top Workplaces Oklahoma, and Top Workplaces Dallas/Fort Worth.

Paycom expanded globally with Global HCM and native payroll processing in Mexico and Canada.

Paycom released new products Everyday and GONE.

Total client count increased to 36,820 as of December 31, 2023, up 1% from the prior year-end. On a parent company grouping basis, client count as of December 31, 2023 increased to 19,481, up 2% from the prior year-end.

Annual revenue retention rate for the year ended December 31, 2023 was 90%2, down from 91% for the prior year.

Paycom stored data for over 6.8 million persons employed by its clients during the year ended December 31, 2023, up 5% year-over-year.

2During the year ended December 31, 2023, we modified the methodology for our annual revenue retention rate calculation. See the discussion below under the heading “Annual Revenue Retention Rate Calculation.”

Financial Outlook

Paycom provides the following expected financial guidance for the quarter ending March 31, 2024 and the year ending December 31, 2024.

Quarter Ending March 31, 2024:

Total Revenues in the range of $494 million to $497 million.

Adjusted EBITDA in the range of $218 million to $222 million.

Year Ending December 31, 2024:

Total Revenues in the range of $1.860 billion to $1.885 billion.

Adjusted EBITDA in the range of $720 million to $730 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. Accordingly, reconciliations of the forward-looking adjusted EBITDA ranges to net income, the forward-looking adjusted EBITDA margins to net income 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.

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 and non-GAAP effective income tax rate. 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), the change in fair value of our interest rate swap (if any) and any loss on the extinguishment of debt, (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), the change in fair value of our interest rate swap (if any) and any loss on the extinguishment of debt, all of which are adjusted for the effect of income taxes, (iii) adjusted gross profit as gross profit plus applicable non-cash stock-based compensation expense, (iv) adjusted gross margin as gross profit plus applicable non-cash stock-based compensation expense, divided by total revenues, (v) each adjusted expense item as the GAAP expense amount less applicable non-cash stock-based compensation expense, (vi) adjusted total research and development costs as total research and development costs (including the capitalized portion) less applicable non-cash stock-based compensation (including the capitalized portion), (vii) adjusted EBITDA margin as adjusted EBITDA (calculated as described in clause (i)) divided by total revenues, and (viii) 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, paying dividends, 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, total research and development costs and GAAP effective income tax rate. 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.

Annual Revenue Retention Rate Calculation

Historically, we calculated annual revenue retention rate as total revenues minus revenue attrition, divided by total revenues. Revenue attrition is equal to the actual recurring fees paid by clients during the 12 months preceding the respective dates on which they last processed payroll with us. Throughout 2023, as we increased our engagement efforts with clients and our efforts to reduce attrition, it was important for us to identify revenue attrition more quickly. In July 2023, we implemented operational changes related to how we mobilize our services department to manage relationships with clients that have missed a payroll, as well as a contemporaneous change to our standard services agreement. These strategic operational and contractual changes accelerate the point at which a client is deemed “lost” for purposes of our annual revenue retention rate calculation. Further, we are now excluding interest earned on funds held for clients from the calculation, which has been immaterial to date. Based on the new methodology, the annual revenue retention rates for the years ended December 31, 2023, 2022 and 2021 were 90%, 91% and 94%, respectively, with losses concentrated primarily among smaller clients. These changes to the annual revenue retention rate calculation had no impact on reported financial results. We believe these increased engagement efforts and operational changes contributed to an increase in the revenue retention rate in the month of January 2024 compared to the same period in the prior year.

Conference Call Details

In conjunction with this announcement, Paycom will host a conference call today, February 7, 2024, at 5:00 p.m. Eastern time to discuss its financial results. To access this call, dial (833) 470-1428 (domestic) or (404) 975-4839 (international) and provide 791144 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 25 years, Paycom Software, Inc. (NYSE:PAYC) has simplified businesses and the lives of their employees through easy-to-use HR and payroll technology to empower transparency through direct access to their data. And thanks to its industry-first solution, Beti®, employees now do their own payroll and are guided to find and fix costly errors before payroll submission. From onboarding and benefits enrollment to talent management and more, Paycom’s software streamlines processes, drives efficiencies and gives employees power over their own HR information, all in a single app. Recognized nationally for its technology and workplace culture, Paycom can now serve businesses of all sizes in the U.S. and internationally.

Forward-Looking Statements

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; competition; trends, opportunities and risks affecting our business, industry and financial results; future expansion or growth plans and potential for future growth, including internationally; 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; the return on investment for users of our solutions; 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 pay cash dividends; 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 are based only on information currently available to us, speak only as of the date hereof and are subject to business and economic risks. As such, our actual results could differ materially from those set forth in the forward-looking statements as a result of the factors discussed in our filings with the Securities and Exchange Commission, including but not limited to those discussed in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. We do not undertake any obligation to update or revise the forward-looking statements to reflect events that occur 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, 2023

 

December 31, 2022

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

294,025

 

 

$

400,730

 

Accounts receivable

 

 

16,442

 

 

 

22,843

 

Prepaid expenses

 

 

37,613

 

 

 

34,056

 

Inventory

 

 

1,383

 

 

 

1,607

 

Income tax receivable

 

 

18,391

 

 

 

5,583

 

Deferred contract costs

 

 

118,206

 

 

 

96,378

 

Current assets before funds held for clients

 

 

486,060

 

 

 

561,197

 

Funds held for clients

 

 

2,327,366

 

 

 

2,202,975

 

Total current assets

 

 

2,813,426

 

 

 

2,764,172

 

Property and equipment, net

 

 

498,197

 

 

 

402,448

 

Intangible assets, net

 

 

50,112

 

 

 

54,017

 

Goodwill

 

 

51,889

 

 

 

51,889

 

Long-term deferred contract costs

 

 

680,272

 

 

 

567,974

 

Other assets

 

 

103,643

 

 

 

62,013

 

Total assets

 

$

4,197,539

 

 

$

3,902,513

 

Liabilities and Stockholders’ Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

13,875

 

 

$

16,054

 

Accrued commissions and bonuses

 

 

30,492

 

 

 

28,439

 

Accrued payroll and vacation

 

 

56,086

 

 

 

45,023

 

Deferred revenue

 

 

22,812

 

 

 

19,825

 

Accrued expenses and other current liabilities

 

 

83,302

 

 

 

59,990

 

Current liabilities before client funds obligation

 

 

206,567

 

 

 

169,331

 

Client funds obligation

 

 

2,328,076

 

 

 

2,207,706

 

Total current liabilities

 

 

2,534,643

 

 

 

2,377,037

 

Deferred income tax liabilities, net

 

 

143,750

 

 

 

141,033

 

Long-term deferred revenue

 

 

107,657

 

 

 

97,591

 

Long-term debt

 

 

 

 

 

29,000

 

Other long-term liabilities

 

 

108,453

 

 

 

75,245

 

Total long-term liabilities

 

 

359,860

 

 

 

342,869

 

Total liabilities

 

 

2,894,503

 

 

 

2,719,906

 

Commitments and contingencies

 

 

 

 

Stockholders’ equity:

 

 

 

 

Common stock, $0.01 par value (100,000 shares authorized, 62,675 and 62,518 shares issued at December 31, 2023 and December 31, 2022, respectively; 56,528 and 57,867 shares outstanding at December 31, 2023 and December 31, 2022, respectively)

 

 

627

 

 

 

625

 

Additional paid-in capital

 

 

724,493

 

 

 

576,622

 

Retained earnings

 

 

1,469,981

 

 

 

1,196,968

 

Accumulated other comprehensive earnings (loss)

 

 

(1,039

)

 

 

(3,703

)

Treasury stock, at cost (6,147 and 4,651 shares at December 31, 2023 and December 31, 2022, respectively)

 

 

(891,026

)

 

 

(587,905

)

Total stockholders’ equity

 

 

1,303,036

 

 

 

1,182,607

 

Total liabilities and stockholders’ equity

 

$

4,197,539

 

 

$

3,902,513

 

 

Paycom Software, Inc.

Unaudited Consolidated Statements of Comprehensive Income

(in thousands, except per share amounts)

 

 

 

 

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

2023

 

2022

 

2023

 

2022

Revenues

 

 

 

 

 

 

 

 

Recurring

 

$

427,270

 

 

$

364,008

 

 

$

1,664,976

 

 

$

1,351,856

 

Implementation and other

 

 

7,325

 

 

 

6,600

 

 

 

28,698

 

 

 

23,362

 

Total revenues

 

 

434,595

 

 

 

370,608

 

 

 

1,693,674

 

 

 

1,375,218

 

Cost of revenues

 

 

 

 

 

 

 

 

Operating expenses

 

 

60,397

 

 

 

47,541

 

 

 

223,699

 

 

 

169,806

 

Depreciation and amortization

 

 

14,292

 

 

 

11,530

 

 

 

52,591

 

 

 

42,935

 

Total cost of revenues

 

 

74,689

 

 

 

59,071

 

 

 

276,290

 

 

 

212,741

 

Administrative expenses

 

 

 

 

 

 

 

 

Sales and marketing

 

 

106,446

 

 

 

92,727

 

 

 

417,617

 

 

 

346,561

 

Research and development

 

 

55,300

 

 

 

39,569

 

 

 

198,951

 

 

 

148,343

 

General and administrative

 

 

74,740

 

 

 

60,021

 

 

 

288,137

 

 

 

239,130

 

Depreciation and amortization

 

 

16,697

 

 

 

13,386

 

 

 

61,357

 

 

 

49,764

 

Total administrative expenses

 

 

253,183

 

 

 

205,703

 

 

 

966,062

 

 

 

783,798

 

Total operating expenses

 

 

327,872

 

 

 

264,774

 

 

 

1,242,352

 

 

 

996,539

 

Operating income

 

 

106,723

 

 

 

105,834

 

 

 

451,322

 

 

 

378,679

 

Interest expense

 

 

(266

)

 

 

(949

)

 

 

(1,927

)

 

 

(2,536

)

Other income (expense), net

 

 

5,455

 

 

 

9,104

 

 

 

23,004

 

 

 

13,435

 

Income before income taxes

 

 

111,912

 

 

 

113,989

 

 

 

472,399

 

 

 

389,578

 

Provision for income taxes

 

 

30,155

 

 

 

34,038

 

 

 

131,611

 

 

 

108,189

 

Net income

 

$

81,757

 

 

$

79,951

 

 

$

340,788

 

 

$

281,389

 

Earnings per share, basic

 

$

1.43

 

 

$

1.38

 

 

$

5.91

 

 

$

4.86

 

Earnings per share, diluted

 

$

1.43

 

 

$

1.38

 

 

$

5.88

 

 

$

4.84

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

57,229

 

 

 

57,867

 

 

 

57,707

 

 

 

57,928

 

Diluted

 

 

57,229

 

 

 

58,037

 

 

 

57,974

 

 

 

58,175

 

Comprehensive earnings (loss):

 

 

 

 

 

 

 

 

Net income

 

$

81,757

 

 

$

79,951

 

 

$

340,788

 

 

$

281,389

 

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

 

 

1,454

 

 

 

124

 

 

 

3,501

 

 

 

(4,757

)

Tax effect

 

 

(312

)

 

 

(14

)

 

 

(837

)

 

 

1,054

 

Other comprehensive income (loss), net of tax

 

 

1,142

 

 

 

110

 

 

 

2,664

 

 

 

(3,703

)

Comprehensive earnings (loss)

 

$

82,899

 

 

$

80,061

 

 

$

343,452

 

 

$

277,686

 

 

Paycom Software, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Year Ended December 31,

 

 

2023

 

2022

Cash flows from operating activities

 

 

 

 

Net income

 

$

340,788

 

 

$

281,389

 

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

 

 

 

 

Depreciation and amortization

 

 

113,948

 

 

 

92,699

 

Accretion of discount on available-for-sale securities

 

 

(520

)

 

 

(1,020

)

Non-cash marketing expense

 

 

1,658

 

 

 

1,734

 

Loss (Gain) on disposition of property and equipment

 

 

23

 

 

 

(150

)

Amortization of debt issuance costs

 

 

1,225

 

 

 

847

 

Stock-based compensation expense

 

 

129,806

 

 

 

94,898

 

Loss on extinguishment of debt

 

 

1,222

 

 

 

 

Cash paid for derivative settlement

 

 

 

 

 

205

 

Gain on derivative

 

 

 

 

 

(1,559

)

Deferred income taxes, net

 

 

2,557

 

 

 

(3,210

)

Other

 

 

122

 

 

 

(206

)

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

 

6,401

 

 

 

(13,353

)

Prepaid expenses

 

 

(6,617

)

 

 

(6,497

)

Inventory

 

 

224

 

 

 

(224

)

Other assets

 

 

(43,431

)

 

 

(13,907

)

Deferred contract costs

 

 

(127,657

)

 

 

(122,440

)

Accounts payable

 

 

(5,155

)

 

 

11,676

 

Income taxes, net

 

 

(12,808

)

 

 

10,830

 

Accrued commissions and bonuses

 

 

2,053

 

 

 

6,082

 

Accrued payroll and vacation

 

 

11,063

 

 

 

10,764

 

Deferred revenue

 

 

13,053

 

 

 

15,990

 

Accrued expenses and other current liabilities

 

 

57,082

 

 

 

555

 

Net cash provided by operating activities

 

 

485,037

 

 

 

365,103

 

Cash flows from investing activities

 

 

 

 

Purchases of investments from funds held for clients

 

 

(25,000

)

 

 

(268,718

)

Proceeds from investments from funds held for clients

 

 

25,000

 

 

 

382,230

 

Purchases of intangible assets

 

 

(4,244

)

 

 

(4,120

)

Purchases of property and equipment

 

 

(192,587

)

 

 

(132,678

)

Proceeds from sale of property and equipment

 

 

119

 

 

 

 

Net cash used in investing activities

 

 

(196,712

)

 

 

(23,286

)

Cash flows from financing activities

 

 

 

 

Proceeds from the issuance of debt

 

 

 

 

 

29,000

 

Repurchases of common stock

 

 

(286,618

)

 

 

(94,652

)

Withholding taxes paid related to net share settlements

 

 

(13,927

)

 

 

(5,171

)

Payments on long-term debt

 

 

(29,000

)

 

 

(29,287

)

Dividends paid

 

 

(64,838

)

 

 

 

Net change in client funds obligation

 

 

120,370

 

 

 

361,133

 

Payment of debt issuance costs

 

 

(647

)

 

 

(6,436

)

Net cash (used in) provided by financing activities

 

 

(274,660

)

 

 

254,587

 

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

 

 

13,665

 

 

 

596,404

 

Cash, cash equivalents, restricted cash and restricted cash equivalents

 

 

 

 

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

 

 

2,409,095

 

 

 

1,812,691

 

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

 

$

2,422,760

 

 

$

2,409,095

 

 

Paycom Software, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Year Ended December 31,

 

 

2023

 

2022

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

 

 

 

 

Cash and cash equivalents

 

$

294,025

 

$

400,730

Restricted cash included in funds held for clients

 

 

2,128,735

 

 

2,008,365

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

 

$

2,422,760

 

$

2,409,095

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

Cash paid for interest, net of amounts capitalized

 

$

985

 

$

507

Cash paid for income taxes

 

$

139,914

 

$

100,578

Non-cash investing and financing activities:

 

 

 

 

Purchases of property and equipment, accrued but not paid

 

$

9,025

 

$

5,899

Stock-based compensation for capitalized software

 

$

14,657

 

$

8,965

Right of use assets obtained in exchange for operating lease liabilities

 

$

50,315

 

$

21,467

 

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,

 

 

2023

 

2022

 

2023

 

2022

Net income to adjusted EBITDA:

 

 

 

 

 

 

 

 

Net income

 

$

81,757

 

 

$

79,951

 

 

$

340,788

 

 

$

281,389

 

Interest expense

 

 

266

 

 

 

949

 

 

 

1,927

 

 

 

2,536

 

Provision for income taxes

 

 

30,155

 

 

 

34,038

 

 

 

131,611

 

 

 

108,189

 

Depreciation and amortization

 

 

30,989

 

 

 

24,916

 

 

 

113,948

 

 

 

92,699

 

EBITDA

 

 

143,167

 

 

 

139,854

 

 

 

588,274

 

 

 

484,813

 

Non-cash stock-based compensation expense

 

 

33,423

 

 

 

24,083

 

 

 

129,806

 

 

 

94,898

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

1,222

 

 

 

 

Adjusted EBITDA

 

$

176,590

 

 

$

163,937

 

 

$

719,302

 

 

$

579,711

 

Net income margin

 

 

18.8

%

 

 

21.6

%

 

 

20.1

%

 

 

20.5

%

Adjusted EBITDA margin

 

 

40.6

%

 

 

44.2

%

 

 

42.5

%

 

 

42.2

%

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

2023

 

2022

 

2023

 

2022

Net income to non-GAAP net income:

 

 

 

 

 

 

 

 

Net income

 

$

81,757

 

 

$

79,951

 

 

$

340,788

 

 

$

281,389

 

Non-cash stock-based compensation expense

 

 

33,423

 

 

 

24,083

 

 

 

129,806

 

 

 

94,898

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

1,222

 

 

 

 

Income tax effect on non-GAAP adjustments

 

 

(4,984

)

 

 

(3,873

)

 

 

(22,331

)

 

 

(19,053

)

Non-GAAP net income

 

$

110,196

 

 

$

100,161

 

 

$

449,485

 

 

$

357,234

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

57,229

 

 

 

57,867

 

 

 

57,707

 

 

 

57,928

 

Diluted

 

 

57,229

 

 

 

58,037

 

 

 

57,974

 

 

 

58,175

 

 

 

 

 

 

 

 

 

 

Earnings per share, basic

 

$

1.43

 

 

$

1.38

 

 

$

5.91

 

 

$

4.86

 

Earnings per share, diluted

 

$

1.43

 

 

$

1.38

 

 

$

5.88

 

 

$

4.84

 

Non-GAAP net income per share, basic

 

$

1.93

 

 

$

1.73

 

 

$

7.79

 

 

$

6.17

 

Non-GAAP net income per share, diluted

 

$

1.93

 

 

$

1.73

 

 

$

7.75

 

 

$

6.14

 

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

2023

 

2022

 

2023

 

2022

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

 

 

 

 

 

 

 

 

Earnings per share, basic

 

$

1.43

 

 

$

1.38

 

 

$

5.91

 

 

$

4.86

 

Non-cash stock-based compensation expense

 

 

0.58

 

 

 

0.42

 

 

 

2.25

 

 

 

1.64

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

0.02

 

 

 

 

Income tax effect on non-GAAP adjustments

 

 

(0.08

)

 

 

(0.07

)

 

 

(0.39

)

 

 

(0.33

)

Non-GAAP net income per share, basic

 

$

1.93

 

 

$

1.73

 

 

$

7.79

 

 

$

6.17

 

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

2023

 

2022

 

2023

 

2022

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

 

 

 

 

 

 

 

 

Earnings per share, diluted

 

$

1.43

 

 

$

1.38

 

 

$

5.88

 

 

$

4.84

 

Non-cash stock-based compensation expense

 

 

0.58

 

 

 

0.41

 

 

 

2.24

 

 

 

1.63

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

0.02

 

 

 

 

Income tax effect on non-GAAP adjustments

 

 

(0.08

)

 

 

(0.06

)

 

 

(0.39

)

 

 

(0.33

)

Non-GAAP net income per share, diluted

 

$

1.93

 

 

$

1.73

 

 

$

7.75

 

 

$

6.14

 

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

2023

 

2022

 

2023

 

2022

Adjusted gross profit:

 

 

 

 

 

 

 

 

Total revenues

 

$

434,595

 

 

$

370,608

 

 

$

1,693,674

 

 

$

1,375,218

 

Less: Total cost of revenues

 

 

(74,689

)

 

 

(59,071

)

 

 

(276,290

)

 

 

(212,741

)

Total gross profit

 

 

359,906

 

 

 

311,537

 

 

 

1,417,384

 

 

 

1,162,477

 

Plus: Non-cash stock-based compensation expense

 

 

2,007

 

 

 

946

 

 

 

10,613

 

 

 

4,671

 

Total adjusted gross profit

 

$

361,913

 

 

$

312,483

 

 

$

1,427,997

 

 

$

1,167,148

 

Gross margin

 

 

82.8

%

 

 

84.1

%

 

 

83.7

%

 

 

84.5

%

Adjusted gross margin

 

 

83.3

%

 

 

84.3

%

 

 

84.3

%

 

 

84.9

%

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

2023

 

2022

 

2023

 

2022

Adjusted sales and marketing expenses:

 

 

 

 

 

 

 

 

Sales and marketing expenses

 

$

106,446

 

 

$

92,727

 

 

$

417,617

 

 

$

346,561

 

Less: Non-cash stock-based compensation expense

 

 

(5,503

)

 

 

(5,473

)

 

 

(23,870

)

 

 

(18,659

)

Adjusted sales and marketing expenses

 

$

100,943

 

 

$

87,254

 

 

$

393,747

 

 

$

327,902

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

434,595

 

 

$

370,608

 

 

$

1,693,674

 

 

$

1,375,218

 

Sales and marketing expenses as a % of revenues

 

 

24.5

%

 

 

25.0

%

 

 

24.7

%

 

 

25.2

%

Adjusted sales and marketing expenses as a % of revenues

 

 

23.2

%

 

 

23.5

%

 

 

23.2

%

 

 

23.8

%

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

2023

 

2022

 

2023

 

2022

Adjusted total administrative expenses:

 

 

 

 

 

 

 

 

Total administrative expenses

 

$

253,183

 

 

$

205,703

 

 

$

966,062

 

 

$

783,798

 

Less: Non-cash stock-based compensation expense

 

 

(31,416

)

 

 

(23,137

)

 

 

(119,193

)

 

 

(90,227

)

Adjusted total administrative expenses

 

$

221,767

 

 

$

182,566

 

 

$

846,869

 

 

$

693,571

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

434,595

 

 

$

370,608

 

 

$

1,693,674

 

 

$

1,375,218

 

Total administrative expenses as a % of revenues

 

 

58.3

%

 

 

55.5

%

 

 

57.0

%

 

 

57.0

%

Adjusted total administrative expenses as a % of revenues

 

 

51.0

%

 

 

49.3

%

 

 

50.0

%

 

 

50.4

%

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

2023

 

2022

 

2023

 

2022

Adjusted research and development expenses:

 

 

 

 

 

 

 

 

Research and development expenses

 

$

55,300

 

 

$

39,569

 

 

$

198,951

 

 

$

148,343

 

Less: Non-cash stock-based compensation expense

 

 

(4,759

)

 

 

(2,948

)

 

 

(22,273

)

 

 

(11,063

)

Adjusted research and development expenses

 

$

50,541

 

 

$

36,621

 

 

$

176,678

 

 

$

137,280

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

434,595

 

 

$

370,608

 

 

$

1,693,674

 

 

$

1,375,218

 

Research and development expenses as a % of revenues

 

 

12.7

%

 

 

10.7

%

 

 

11.7

%

 

 

10.8

%

Adjusted research and development expenses as a % of revenues

 

 

11.6

%

 

 

9.9

%

 

 

10.4

%

 

 

10.0

%

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

2023

 

2022

 

2023

 

2022

Total research and development costs:

 

 

 

 

 

 

 

 

Capitalized research and development costs

 

$

25,935

 

 

$

17,572

 

 

$

96,744

 

 

$

66,407

 

Research and development expenses

 

 

55,300

 

 

 

39,569

 

 

 

198,951

 

 

 

148,343

 

Total research and development costs

 

$

81,235

 

 

$

57,141

 

 

$

295,695

 

 

$

214,750

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

434,595

 

 

$

370,608

 

 

$

1,693,674

 

 

$

1,375,218

 

Total research and development costs as a % of revenues

 

 

18.7

%

 

 

15.4

%

 

 

17.5

%

 

 

15.6

%

 

 

 

 

 

 

 

 

 

Adjusted total research and development costs:

 

 

 

 

 

 

 

 

Total research and development costs

 

$

81,235

 

 

$

57,141

 

 

$

295,695

 

 

$

214,750

 

Less: Capitalized non-cash stock-based compensation

 

 

(3,128

)

 

 

(2,420

)

 

 

(14,657

)

 

 

(8,965

)

Less: Non-cash stock-based compensation expense

 

 

(4,759

)

 

 

(2,948

)

 

 

(22,273

)

 

 

(11,063

)

Adjusted total research and development costs

 

$

73,348

 

 

$

51,773

 

 

$

258,765

 

 

$

194,722

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

434,595

 

 

$

370,608

 

 

$

1,693,674

 

 

$

1,375,218

 

Adjusted total research and development costs as a % of revenues

 

 

16.9

%

 

 

14.0

%

 

 

15.3

%

 

 

14.2

%

 

Paycom Software, Inc.

Unaudited Components of Non-Cash Stock-Based Compensation Expense

(in thousands)

 

 

 

 

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

2023

 

2022

 

2023

 

2022

Non-cash stock-based compensation expense:

 

 

 

 

 

 

 

 

Operating expenses

 

$

2,007

 

$

946

 

$

10,613

 

$

4,671

Sales and marketing

 

 

5,503

 

 

5,473

 

 

23,870

 

 

18,659

Research and development

 

 

4,759

 

 

2,948

 

 

22,273

 

 

11,063

General and administrative

 

 

21,154

 

 

14,716

 

 

73,050

 

 

60,505

Total non-cash stock-based compensation expense

 

$

33,423

 

$

24,083

 

$

129,806

 

$

94,898

 

Contacts

Paycom Software, Inc.

Investor Relations Contact:

James Samford, 800-580-4505

investors@paycom.com

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