U.S. markets open in 8 hours 23 minutes
  • S&P Futures

    4,271.50
    -9.50 (-0.22%)
     
  • Dow Futures

    33,649.00
    -69.00 (-0.20%)
     
  • Nasdaq Futures

    13,544.75
    -33.00 (-0.24%)
     
  • Russell 2000 Futures

    2,011.00
    -5.90 (-0.29%)
     
  • Crude Oil

    91.19
    -0.90 (-0.98%)
     
  • Gold

    1,809.90
    -5.60 (-0.31%)
     
  • Silver

    20.62
    -0.08 (-0.38%)
     
  • EUR/USD

    1.0254
    -0.0003 (-0.03%)
     
  • 10-Yr Bond

    2.8490
    0.0000 (0.00%)
     
  • Vix

    19.53
    -0.67 (-3.32%)
     
  • GBP/USD

    1.2120
    -0.0019 (-0.16%)
     
  • USD/JPY

    133.2100
    -0.2700 (-0.20%)
     
  • BTC-USD

    24,901.39
    +336.24 (+1.37%)
     
  • CMC Crypto 200

    593.44
    +22.16 (+3.88%)
     
  • FTSE 100

    7,500.89
    +34.98 (+0.47%)
     
  • Nikkei 225

    28,885.12
    +338.14 (+1.18%)
     

Paycom Software, Inc. Reports Second Quarter 2022 Results

  • Oops!
    Something went wrong.
    Please try again later.
·16 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

Second Quarter Revenues of $317 million, up 31% from the comparable prior year period

Second Quarter GAAP Net Income of $57 million, representing 18% of total revenues, or $0.99 per diluted share

Second Quarter Non-GAAP Net Income of $73 million, or $1.26 per diluted share

Second Quarter Adjusted EBITDA of $120 million, representing 38% of total revenues

OKLAHOMA CITY, August 02, 2022--(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 ended June 30, 2022.

"Our very strong second quarter results further illustrate the quality of the fundamentals of our business and the strong demand for our solutions," said Paycom’s founder and CEO, Chad Richison. "Companies win at payroll by having employees do it themselves, and with Beti, that is exactly what is happening."

Financial Highlights for the Second Quarter of 2022

Total Revenues of $316.9 million represented a 30.9% increase compared to total revenues of $242.1 million in the same period last year. Recurring revenues of $311.5 million increased 31.1% from the comparable prior year period, and constituted 98.3% of total revenues.

GAAP Net Income was $57.4 million, or $0.99 per diluted share, compared to GAAP net income of $52.3 million, or $0.90 per diluted share, in the same period last year.

Non-GAAP Net Income1 was $73.0 million, or $1.26 per diluted share, compared to $56.5 million, or $0.97 per diluted share, in the same period last year.

Adjusted EBITDA1 was $119.6 million, compared to $87.0 million in the same period last year.

Cash and Cash Equivalents were $279.0 million as of June 30, 2022, compared to $278.0 million as of December 31, 2021.

Total Debt, Net was $29.0 million as of June 30, 2022, compared to $29.2 million as of December 31, 2021.

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.

Financial Outlook

Paycom provides the following expected financial guidance for the quarter ending September 30, 2022 and the year ending December 31, 2022:

Quarter Ending September 30, 2022:

Total Revenues in the range of $327 million to $329 million.

Adjusted EBITDA in the range of $117 million to $119 million.

Year Ending December 31, 2022:

Total Revenues in the range of $1.354 billion to $1.356 billion.

Adjusted EBITDA in the range of $546 million to $548 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 discussed on the teleconference call to net income margin, 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, change in fair value of our interest rate swap and other items. Further, we have not reconciled the forward-looking adjusted gross margin range 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 and the forward-looking adjusted gross margin range to gross margin 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 and "Rule of 65". 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 and (viii) "Rule of 65" as revenue growth rate (expressed as a percentage) plus adjusted EBITDA margin (calculated as described in clause (vii)). 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, August 2, 2022, 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 874934 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

As a leader in payroll and HR technology, Oklahoma City-based Paycom redefines the human capital management industry by allowing companies to effectively navigate a rapidly changing business environment. Its cloud-based software solution is based on a core system of record maintained in a single database for all human capital management functions, providing the functionality that businesses need to manage the complete employment lifecycle, from recruitment to retirement. Paycom has the ability to serve businesses of all sizes and in every industry. As one of the leading human capital management providers, Paycom serves clients 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; the expected impact on our consolidated financial statements of new accounting pronouncements; our plans to repurchase shares of our common stock through a stock repurchase plan; our expected income tax rate for future periods; and the impact of the novel coronavirus (COVID-19) pandemic on our business, results of operations, cash flows, financial condition and liquidity. 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)

June 30, 2022

December 31, 2021

Assets

Current assets:

Cash and cash equivalents

$

279,039

$

277,978

Accounts receivable

20,078

9,490

Prepaid expenses

37,779

23,729

Inventory

1,647

1,131

Income tax receivable

220

16,413

Deferred contract costs

86,048

76,724

Current assets before funds held for clients

424,811

405,465

Funds held for clients

3,423,181

1,846,573

Total current assets

3,847,992

2,252,038

Property and equipment, net

374,940

348,953

Intangible assets, net

55,969

58,028

Goodwill

51,889

51,889

Long-term deferred contract costs

511,957

461,852

Other assets

48,956

42,385

Total assets

$

4,891,703

$

3,215,145

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

13,475

$

5,772

Accrued commissions and bonuses

14,798

22,357

Accrued payroll and vacation

41,802

34,259

Deferred revenue

17,920

16,277

Current portion of long-term debt

1,775

Accrued expenses and other current liabilities

54,904

63,397

Current liabilities before client funds obligation

142,899

143,837

Client funds obligation

3,425,573

1,846,573

Total current liabilities

3,568,472

1,990,410

Deferred income tax liabilities, net

135,282

145,504

Long-term deferred revenue

90,960

85,149

Net long-term debt, less current portion

29,000

27,380

Other long-term liabilities

73,850

72,988

Total long-term liabilities

329,092

331,021

Total liabilities

3,897,564

2,321,431

Commitments and contingencies

Stockholders’ equity:

Common stock, $0.01 par value (100,000 shares authorized, 62,514 and 62,298 shares issued at June 30, 2022 and December 31, 2021, respectively; 57,864 and 58,012 shares outstanding at June 30, 2022 and December 31, 2021, respectively)

625

623

Additional paid-in capital

517,777

465,594

Retained earnings

1,064,864

915,579

Accumulated other comprehensive earnings (loss)

(1,600

)

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

(587,527

)

(488,082

)

Total stockholders’ equity

994,139

893,714

Total liabilities and stockholders’ equity

$

4,891,703

$

3,215,145

Paycom Software, Inc.

Unaudited Consolidated Statements of Comprehensive Income

(in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Revenues

Recurring

$

311,534

$

237,585

$

659,698

$

505,359

Implementation and other

5,390

4,561

10,745

8,985

Total revenues

316,924

242,146

670,443

514,344

Cost of revenues

Operating expenses

39,604

28,773

78,096

57,846

Depreciation and amortization

10,478

7,637

20,470

14,837

Total cost of revenues

50,082

36,410

98,566

72,683

Administrative expenses

Sales and marketing

87,724

67,979

162,720

130,740

Research and development

36,803

28,224

68,408

52,935

General and administrative

57,912

54,063

118,416

100,254

Depreciation and amortization

12,090

8,380

23,753

16,096

Total administrative expenses

194,529

158,646

373,297

300,025

Total operating expenses

244,611

195,056

471,863

372,708

Operating income

72,313

47,090

198,580

141,636

Interest expense

(354

)

(569

)

Other income (expense), net

878

146

2,290

775

Income before income taxes

72,837

47,236

200,301

142,411

Provision for income taxes

15,482

(5,042

)

51,016

25,517

Net income

$

57,355

$

52,278

$

149,285

$

116,894

Earnings per share, basic

$

0.99

$

0.90

$

2.57

$

2.02

Earnings per share, diluted

$

0.99

$

0.90

$

2.57

$

2.01

Weighted average shares outstanding:

Basic

57,969

57,853

57,992

57,797

Diluted

58,067

58,092

58,186

58,135

Comprehensive earnings (loss):

Net income

$

57,355

$

52,278

$

149,285

$

116,894

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

(654

)

(2,176

)

Tax effect

173

576

Other comprehensive income (loss), net of tax

(481

)

(1,600

)

Comprehensive earnings (loss)

$

56,874

$

52,278

$

147,685

$

116,894

Paycom Software, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

Six Months Ended June 30,

2022

2021

Cash flows from operating activities

Net income

$

149,285

$

116,894

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

Depreciation and amortization

44,223

30,933

Accretion of discount on available-for-sale securities

(637

)

(183

)

Non-cash marketing expense

876

157

Loss on disposition of property and equipment

132

Amortization of debt issuance costs

167

18

Stock-based compensation expense

46,323

47,373

Cash paid for derivative settlement

(300

)

(418

)

Gain on derivative

(1,368

)

(287

)

Deferred income taxes, net

(9,646

)

6,485

Changes in operating assets and liabilities:

Accounts receivable

(10,588

)

(10,775

)

Prepaid expenses

(14,050

)

(14,430

)

Inventory

(1,166

)

80

Other assets

(5,308

)

1,631

Deferred contract costs

(57,746

)

(44,893

)

Accounts payable

7,655

2,267

Income taxes, net

16,193

2,450

Accrued commissions and bonuses

(7,559

)

(3,785

)

Accrued payroll and vacation

7,543

4,111

Deferred revenue

7,454

5,632

Accrued expenses and other current liabilities

(2,393

)

3,051

Net cash provided by operating activities

168,958

146,443

Cash flows from investing activities

Purchases of investments from funds held for clients

(233,789

)

(142,051

)

Proceeds from investments from funds held for clients

279,000

155,000

Purchases of property and equipment

(67,721

)

(62,732

)

Net cash used in investing activities

(22,510

)

(49,783

)

Cash flows from financing activities

Proceeds from issuance of debt

29,000

Repurchases of common stock

(94,652

)

Withholding taxes paid related to net share settlements

(4,793

)

(32,355

)

Payments on long-term debt

(29,287

)

(888

)

Net change in client funds obligation

1,579,000

411,878

Payment of debt issuance costs

(1,297

)

Net cash provided by financing activities

1,477,971

378,635

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

1,624,419

475,295

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

$

3,437,110

$

2,060,570

Paycom Software, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

Six Months Ended June 30,

2022

2021

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

Cash and cash equivalents

$

279,039

$

202,362

Restricted cash included in funds held for clients

3,158,071

1,858,208

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

$

3,437,110

$

2,060,570

Supplemental disclosures of cash flow information:

Non-cash investing and financing activities:

Purchases of property and equipment, accrued but not paid

$

3,831

$

7,131

Stock-based compensation for capitalized software

$

4,180

$

3,351

Right of use assets obtained in exchange for operating lease liabilities

$

7,940

$

1,572

Paycom Software, Inc.

Unaudited Reconciliations of GAAP to Non-GAAP Financial Measures

(in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Net income to adjusted EBITDA:

Net income

$

57,355

$

52,278

$

149,285

$

116,894

Interest expense

354

569

Provision for income taxes

15,482

(5,042

)

51,016

25,517

Depreciation and amortization