# EDGAR Filing Document

**Accession Number:** 0001590955
**File Stem:** 0000950170-23-001980
**Filing Date:** 2023-2
**Character Count:** 40327
**Document Hash:** 3f381901f7c54b63d42ba42c88afc1eb
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000950170-23-001980.hdr.sgml**: 20230207

**ACCESSION NUMBER**: 0000950170-23-001980

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 14

**CONFORMED PERIOD OF REPORT**: 20230207

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230207

**DATE AS OF CHANGE**: 20230207

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Paycom Software, Inc.
- **CENTRAL INDEX KEY:** 0001590955
- **STANDARD INDUSTRIAL CLASSIFICATION:** SERVICES-PREPACKAGED SOFTWARE [7372]
- **IRS NUMBER:** 800957485
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-36393
- **FILM NUMBER:** 23595066

**BUSINESS ADDRESS:**
- **STREET 1:** 7501 W. MEMORIAL ROAD
- **CITY:** OKLAHOMA CITY
- **STATE:** OK
- **ZIP:** 73142
- **BUSINESS PHONE:** (405) 722-6900

**MAIL ADDRESS:**
- **STREET 1:** 7501 W. MEMORIAL ROAD
- **CITY:** OKLAHOMA CITY
- **STATE:** OK
- **ZIP:** 73142

?xml version="1.0" encoding="ASCII"? 8-K

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

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**FORM** 8-K

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**CURRENT REPORT**

**Pursuant to Section 13 or 15(d) of**

**the Securities Exchange Act of 1934**

Date of Report (Date of Earliest Event Reported): **February 7, 2023**

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Paycom Software, Inc.

(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of incorporation) 001-36393(Commission File Number) 80-0957485(IRS Employer Identification No.)

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| | |
|:---|:---|
| 7501 W. Memorial Road**,** Oklahoma City**,** Oklahoma<br>(Address of principal executive offices) | 73142<br>(Zip Code)<br>|

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Registrant's telephone number, including area code: (405) 722-6900

**Not Applicable**

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

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| | | |
|:---|:---|:---|
| **Title of each class** | **Trading**<br>**Symbol(s)** | **Name of each exchange on which registered** |
| Common Stock, $0.01 par value | PAYC | New York Stock Exchange |

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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b–2 of the Securities Exchange Act of 1934 (§ 240.12b–2 of this chapter).

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. ☐

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**Item 2.02 Results of Operations and Financial Condition**

On February 7, 2023, Paycom Software, Inc. (the "**Company**") issued a press release announcing its financial results for the quarter and year ended December 31, 2022. A copy of the press release is furnished hereto as Exhibit 99.1 and is incorporated herein by reference. As previously announced, the Company will hold a conference call at 5:00 PM Eastern Time, on Tuesday, February 7, 2023, to discuss its financial results.

The information furnished pursuant to Item 2.02 (including Exhibit 99.1 hereto) shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "**Exchange Act**"), and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

**Item 9.01 Financial Statements and Exhibits.**

**(d) Exhibits**

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| | |
|:---|:---|
| **Exhibit<br>No.** | **Description of Exhibit** |
| 99.1 | [<u>Press release, dated February 7, 2023, issued by Paycom Software, Inc. (furnished pursuant to Item 2.02).</u>](payc-ex99_1.htm) |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document).  |

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**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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| | | |
|:---|:---|:---|
|  |  | **PAYCOM SOFTWARE, INC.** |
| Date: February 7, 2023 | By: | /s/ Craig E. Boelte |
|  | Name: | Craig E. Boelte |
|  | Title: | Chief Financial Officer |

---

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## Exhibit 99.1

**Exhibit 99.1**

**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

OKLAHOMA CITY – (BUSINESS WIRE) – 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."

**<u>Financial Highlights for the Fourth Quarter of 2022</u>**

**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 Income**<sup>1</sup> 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 EBITDA**<sup>1</sup> 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.

**<u>Financial Highlights for the Full Year 2022</u>**

**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 Income**<sup>1</sup> was $357.2 million, or $6.14 per diluted share, compared to $260.4 million, or $4.48 per diluted share, last year.

**Adjusted EBITDA**<sup>1</sup> was $579.7 million, compared to $419.3 million last year.

<sup>1</sup> 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.

**<u>Business Highlights</u>**

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.

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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.

**<u>Financial Outlook</u>**

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

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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 <u>investors.paycom.com</u>.

**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.

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| | | |
|:---|:---|:---|
| **Paycom Software, Inc.** | **Paycom Software, Inc.** | **Paycom Software, Inc.** |
| **Unaudited Consolidated Balance Sheets** | **Unaudited Consolidated Balance Sheets** | **Unaudited Consolidated Balance Sheets** |
| (in thousands, except per share amounts) | (in thousands, except per share amounts) | (in thousands, except per share amounts) |
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| **Assets** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents | $400730 | $277978 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | 22843 | 9490 |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses | 34056 | 23729 |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventory | 1607 | 1131 |
| &nbsp;&nbsp;&nbsp;&nbsp;Income tax receivable | 5583 | 16413 |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred contract costs | 96378 | 76724 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current assets before funds held for clients | 561197 | 405465 |
| &nbsp;&nbsp;&nbsp;&nbsp;Funds held for clients | 2202975 | 1846573 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 2764172 | 2252038 |
| Property and equipment, net | 402448 | 348953 |
| Intangible assets, net | 54017 | 58028 |
| Goodwill | 51889 | 51889 |
| Long-term deferred contract costs | 567974 | 461852 |
| Other assets | 62013 | 42385 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $3902513 | $3215145 |
| **Liabilities and Stockholders' Equity** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | $16054 | $5772 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued commissions and bonuses | 28439 | 22357 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued payroll and vacation | 45023 | 34259 |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue | 19825 | 16277 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current portion of long-term debt |  | 1775 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses and other current liabilities | 59990 | 63397 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current liabilities before client funds obligation | 169331 | 143837 |
| &nbsp;&nbsp;&nbsp;&nbsp;Client funds obligation | 2207706 | 1846573 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 2377037 | 1990410 |
| Deferred income tax liabilities, net | 141033 | 145504 |
| Long-term deferred revenue | 97591 | 85149 |
| Net long-term debt, less current portion | 29000 | 27380 |
| Other long-term liabilities | 75245 | 72988 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total long-term liabilities | 342869 | 331021 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 2719906 | 2321431 |
| Commitments and contingencies |  |  |
| Stockholders' equity: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;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 |
| &nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital | 576622 | 465594 |
| &nbsp;&nbsp;&nbsp;&nbsp;Retained earnings | 1196968 | 915579 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive earnings (loss) | (3703) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Treasury stock, at cost (4,651 and 4,286 shares at December 31, 2022 and December 31, 2021, respectively) | (587905) | (488082) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' equity | 1182607 | 893714 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' equity | $3902513 | $3215145 |

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| | | | | |
|:---|:---|:---|:---|:---|
| **Paycom Software, Inc.** | **Paycom Software, Inc.** | **Paycom Software, Inc.** | **Paycom Software, Inc.** | **Paycom Software, Inc.** |
| **Unaudited Consolidated Statements of Comprehensive Income** | **Unaudited Consolidated Statements of Comprehensive Income** | **Unaudited Consolidated Statements of Comprehensive Income** | **Unaudited Consolidated Statements of Comprehensive Income** | **Unaudited Consolidated Statements of Comprehensive Income** |
| (in thousands, except per share amounts) | (in thousands, except per share amounts) | (in thousands, except per share amounts) | (in thousands, except per share amounts) | (in thousands, except per share amounts) |
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| **Revenues** |  |  |  |  |
| Recurring | $364008 | $280026 | $1351856 | $1036691 |
| Implementation and other | 6600 | 4960 | 23362 | 18833 |
| &nbsp;&nbsp;&nbsp;Total revenues | 370608 | 284986 | 1375218 | 1055524 |
| **Cost of revenues** |  |  |  |  |
| Operating expenses | 47541 | 37863 | 169806 | 130475 |
| Depreciation and amortization | 11530 | 8660 | 42935 | 31411 |
| &nbsp;&nbsp;&nbsp;Total cost of revenues | 59071 | 46523 | 212741 | 161886 |
| **Administrative expenses** |  |  |  |  |
| Sales and marketing | 92727 | 75509 | 346561 | 275994 |
| Research and development | 39569 | 34414 | 148343 | 118426 |
| General and administrative | 60021 | 49606 | 239130 | 209840 |
| Depreciation and amortization | 13386 | 10308 | 49764 | 35811 |
| &nbsp;&nbsp;&nbsp;Total administrative expenses | 205703 | 169837 | 783798 | 640071 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 264774 | 216360 | 996539 | 801957 |
| Operating income | 105834 | 68626 | 378679 | 253567 |
| Interest expense | (949) |  | (2536) |  |
| Other income (expense), net | 9104 | 1376 | 13435 | 2395 |
| Income before income taxes | 113989 | 70002 | 389578 | 255962 |
| Provision for income taxes | 34038 | 21315 | 108189 | 60002 |
| Net income | $79951 | $48687 | $281389 | $195960 |
| 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 | 57867 | 58007 | 57928 | 57885 |
| Diluted | 58037 | 58238 | 58175 | 58191 |
| **Comprehensive earnings (loss):** |  |  |  |  |
| Net income | $79951 | $48687 | $281389 | $195960 |
| Unrealized net gains (losses) on available-for-sale securities | 124 |  | (4757) |  |
| Tax effect | (14) |  | 1054 |  |
| Other comprehensive income (loss), net of tax | 110 |  | (3703) |  |
| Comprehensive earnings (loss) | $80061 | $48687 | $277686 | $195960 |

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| | | |
|:---|:---|:---|
| **Paycom Software, Inc.** | **Paycom Software, Inc.** | **Paycom Software, Inc.** |
| **Unaudited Consolidated Statements of Cash Flows** | **Unaudited Consolidated Statements of Cash Flows** | **Unaudited Consolidated Statements of Cash Flows** |
| (in thousands) | (in thousands) | (in thousands) |
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| **Cash flows from operating activities** |  |  |
| Net income | $281389 | $195960 |
| Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 92699 | 67222 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accretion of discount on available-for-sale securities | (1020) | (452) |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-cash marketing expense | 1734 | 1051 |
| &nbsp;&nbsp;&nbsp;&nbsp;(Gain)/loss on disposition of property and equipment | (150) | 146 |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of debt issuance costs | 847 | 36 |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation expense | 94898 | 97506 |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash paid for derivative settlement | 205 | (741) |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on derivative | (1559) | (662) |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes, net | (3210) | 32906 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other | (206) |  |
| Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | (13353) | (360) |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses | (6497) | (5875) |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventory | (224) | 481 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other assets | (13907) | (7862) |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred contract costs | (122440) | (103356) |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 11676 | (660) |
| &nbsp;&nbsp;&nbsp;&nbsp;Income taxes, net | 10830 | (5966) |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued commissions and bonuses | 6082 | 8654 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued payroll and vacation | 10764 | 9730 |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue | 15990 | 14600 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses and other current liabilities | 555 | 17004 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | 365103 | 319362 |
| **Cash flows from investing activities** |  |  |
| Purchases of investments from funds held for clients | (268718) | (398819) |
| Proceeds from investments from funds held for clients | 382230 | 267341 |
| Purchases of intangible assets | (4120) | (5500) |
| Purchases of property and equipment | (132678) | (120692) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities | (23286) | (257670) |
| **Cash flows from financing activities** |  |  |
| Proceeds from the issuance of debt | 29000 |  |
| Repurchases of common stock | (94652) |  |
| Withholding taxes paid related to net share settlements | (5171) | (65580) |
| Payments on long-term debt | (29287) | (1775) |
| Net change in client funds obligation | 361133 | 233079 |
| Payment of debt issuance costs | (6436) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities | 254587 | 165724 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in cash, cash equivalents, restricted cash and restricted cash equivalents | 596404 | 227416 |
| **Cash, cash equivalents, restricted cash and restricted cash equivalents** |  |  |
| Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period | 1812691 | 1585275 |
| Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period | $2409095 | $1812691 |

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| | | |
|:---|:---|:---|
| **Paycom Software, Inc.** | **Paycom Software, Inc.** | **Paycom Software, Inc.** |
| **Unaudited Consolidated Statements of Cash Flows** | **Unaudited Consolidated Statements of Cash Flows** | **Unaudited Consolidated Statements of Cash Flows** |
| (in thousands) | (in thousands) | (in thousands) |
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| **Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents** |  |  |
| Cash and cash equivalents | $400730 | $277978 |
| Restricted cash included in funds held for clients | 2008365 | 1534713 |
| Total cash, cash equivalents, restricted cash and restricted cash equivalents, end of period | $2409095 | $1812691 |
| **Supplemental disclosures of cash flow information:** |  |  |
| Cash paid for interest, net of amounts capitalized | $507 | $2 |
| Cash paid for income taxes | $100578 | $33068 |
| Non-cash investing and financing activities: |  |  |
| Purchases of property and equipment, accrued but not paid | $5899 | $7581 |
| Stock-based compensation for capitalized software | $8965 | $7141 |
| Right of use assets obtained in exchange for operating lease liabilities | $21467 | $14141 |

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**Paycom Software, Inc.**

**Unaudited Reconciliations of GAAP to Non-GAAP Financial Measures** 

(in thousands, except per share amounts)

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| **Net income to adjusted EBITDA:** |  |  |  |  |
| Net income | $79951 | $48687 | $281389 | $195960 |
| Interest expense | 949 |  | 2536 |  |
| Provision for income taxes | 34038 | 21315 | 108189 | 60002 |
| Depreciation and amortization | 24916 | 18968 | 92699 | 67222 |
| &nbsp;&nbsp;&nbsp;&nbsp;EBITDA | 139854 | 88970 | 484813 | 323184 |
| Non-cash stock-based compensation expense | 24083 | 21142 | 94898 | 97506 |
| Change in fair value of interest rate swap |  | (540) |  | (1403) |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjusted EBITDA | $163937 | $109572 | $579711 | $419287 |
| Net income margin | 21.6% | 17.1% | 20.5% | 18.6% |
| Adjusted EBITDA margin | 44.2% | 38.4% | 42.2% | 39.7% |

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| **Net income to non-GAAP net income:** |  |  |  |  |
| Net income | $79951 | $48687 | $281389 | $195960 |
| Non-cash stock-based compensation expense | 24083 | 21142 | 94898 | 97506 |
| Change in fair value of interest rate swap |  | (540) |  | (1403) |
| Income tax effect on non-GAAP adjustments | (3873) | (4854) | (19053) | (31652) |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-GAAP net income | $100161 | $64435 | $357234 | $260411 |
| Weighted average shares outstanding: |  |  |  |  |
| Basic | 57867 | 58007 | 57928 | 57885 |
| Diluted | 58037 | 58238 | 58175 | 58191 |
| 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 |

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Year 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,** | **Three Months Ended December 31,** | **Year 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,** | **Three Months Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| **Adjusted gross profit:** |  |  |  |  |
| Total revenues | $370608 | $284986 | $1375218 | $1055524 |
| Less: Total cost of revenues | (59071) | (46523) | (212741) | (161886) |
| Total gross profit | 311537 | 238463 | 1162477 | 893638 |
| Plus: Non-cash stock-based compensation expense | 946 | 1189 | 4671 | 4570 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total adjusted gross profit | $312483 | $239652 | $1167148 | $898208 |
| Gross margin | 84.1% | 83.7% | 84.5% | 84.7% |
| Adjusted gross margin | 84.3% | 84.1% | 84.9% | 85.1% |

---

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| **Adjusted sales and marketing expenses:** |  |  |  |  |
| Sales and marketing expenses | $92727 | $75509 | $346561 | $275994 |
| Less: Non-cash stock-based compensation expense | (5473) | (3234) | (18659) | (13801) |
| Adjusted sales and marketing expenses | $87254 | $72275 | $327902 | $262193 |
| Total revenues | $370608 | $284986 | $1375218 | $1055524 |
| 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% |

---

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| **Adjusted total administrative expenses:** |  |  |  |  |
| Total administrative expenses | $205703 | $169837 | $783798 | $640071 |
| Less: Non-cash stock-based compensation expense | (23137) | (19953) | (90227) | (92936) |
| Adjusted total administrative expenses | $182566 | $149884 | $693571 | $547135 |
| Total revenues | $370608 | $284986 | $1375218 | $1055524 |
| 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% |

---

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| **Adjusted research and development expenses:** |  |  |  |  |
| Research and development expenses | $39569 | $34414 | $148343 | $118426 |
| Less: Non-cash stock-based compensation expense | (2948) | (2133) | (11063) | (7527) |
| Adjusted research and development expenses | $36621 | $32281 | $137280 | $110899 |
| Total revenues | $370608 | $284986 | $1375218 | $1055524 |
| 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% |

---

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| **Total research and development costs:** |  |  |  |  |
| Capitalized research and development costs | $17572 | $13716 | $66407 | $52876 |
| Research and development expenses | 39569 | 34414 | 148343 | 118426 |
| Total research and development costs | $57141 | $48130 | $214750 | $171302 |
| Total revenues | $370608 | $284986 | $1375218 | $1055524 |
| 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 | $57141 | $48130 | $214750 | $171302 |
| Less: Capitalized non-cash stock-based compensation | (2420) | (2033) | (8965) | (7141) |
| Less: Non-cash stock-based compensation expense | (2948) | (2133) | (11063) | (7527) |
| Adjusted total research and development costs | $51773 | $43964 | $194722 | $156634 |
| Total revenues | $370608 | $284986 | $1375218 | $1055524 |
| Adjusted total research and development costs as a % of revenues | 14.0% | 15.4% | 14.2% | 14.8% |

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**Paycom Software, Inc.**

**Unaudited Components of Non-Cash Stock-Based Compensation Expense** 

(in thousands)

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| **Non-cash stock-based compensation expense:** |  |  |  |  |
| Operating expenses | $946 | $1189 | $4671 | $4570 |
| Sales and marketing | 5473 | 3234 | 18659 | 13801 |
| Research and development | 2948 | 2133 | 11063 | 7527 |
| General and administrative | 14716 | 14586 | 60505 | 71608 |
| Total non-cash stock-based compensation expense | $24083 | $21142 | $94898 | $97506 |

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![img87395786_0.jpg](img87395786_0.jpg)

**Contact**

Paycom Software, Inc.

Investor Relations Contact:

James Samford, 800-580-4505

<u>investors@paycom.com</u>

Source: Paycom Software, Inc.

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