美国
证券交易委员会
华盛顿特区20549
表格
(标记一个)
根据1934年证券交易所法案第13或第15（d）条的季度报告。 |
截至2024年6月30日季度结束
或
根据1934年证券交易所法第13或第15（d）条的过渡报告 |
过渡期从______到_____。
委员会档案编号：
（依凭章程所载的完整登记名称）
(成立的州或其他地区) 成立或组织证明文件) |
|
（联邦税号） |
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(总部办公地址) |
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（邮政编码） |
(
(注册人电话号码，包括区号)
根据法案第12(b)条规定注册的证券：
每种类别的名称 |
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交易标的（s） |
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每个注册交易所的名称 |
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请勾选以下选项以表示申报人（1）已提交证券交易法1934年第13条或15(d)条所要求提交的所有报告，且在过去12个月中（或申报人需要提交此类报告的较短期间）已提交；（2）已受到过去90天内此类提交要求的限制。
请打勾号表明注册人是否根据《S-t条例405条规定（本章节232.405号）的规定，在过去12个月内（或注册人需要提交此类文件的更短期限内），已提交每个交互数据文件。
检查标记来指示登记主体是否为大型快速提交者、加速提交者、非加速提交者、小型报告公司或新兴成长公司。请查阅《交易所法》第120亿2条中有关“大型快速提交者”、“加速提交者”、“小型报告公司”和“新兴成长公司”的定义。
|
加速归档人 |
☐ |
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非加速提呈人 ☐ |
|
小型报告公司 |
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新兴成长型企业 |
如果一家新兴成长型公司，请勾选表明注册人是否选择不使用根据《交易所法》第13(a)条提供的任何新的或修订的财务会计准则的延长过渡期符合。 ☐
请勾选是否属于外壳公司（根据交易所法案第120亿2条的定义）。是 ☐ 没有
截至2024年10月22日，到期时有
Paycom Software, Inc.
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项目一。 |
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3 |
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项目二。 |
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20 |
第三项目。 |
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31 |
第四项。 |
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31 |
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项目一。 |
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32 |
项目 1A。 |
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项目二。 |
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第五项。 |
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第六项 |
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2
第一部分。财务AL资讯
项目一。金融伊亚尔声明
Paycom Software, Inc.
未经审核康索利达TED 资产负债表
（以千为单位，除每股金额外）
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2024年9月30日 |
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2023年12月31日 |
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资产 |
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流动资产: |
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现金及现金等价物 |
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$ |
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$ |
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应收帐款 |
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预付款项 |
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存货 |
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应付所得税款项 |
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延滞合同成本 |
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所有基金类型持有客户资产之前的流动资产 |
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所有基金类型 |
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全部流动资产 |
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物业及设备，扣除折旧后净值 |
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无形资产，扣除累计摊销 |
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商誉 |
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长期透支合同成本 |
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营运租赁权使用资产 |
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其他资产 |
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资产总额 |
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$ |
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$ |
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550,714 |
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流动负债： |
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应付账款 |
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$ |
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$ |
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应计佣金和奖金 |
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应计工资和休假 |
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逐步认列的收入 |
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营业租赁负债 |
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应计费用及其他流动负债 |
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客户资金义务前的流动负债 |
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客户资金义务 |
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流动负债合计 |
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and |
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长期递延收益 |
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长期经营租赁负债 |
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其他长期负债 |
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长期负债总额 |
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总负债 |
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股东权益： |
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0.01 |
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资本公积额额外增资 |
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保留收益 |
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其他综合收益（损失）累积额 |
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( |
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库存股（ |
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( |
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股东权益总额 |
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负债和股东权益总额 |
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$ |
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$ |
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请参阅未经审计的合并基本报表附注。
3
Paycom Software, Inc.
未经审核的综合收益综合表 综合收益综合损益表
（以千为单位，除每股金额外）
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截至9月30日的三个月 |
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截至9月30日的九个月 |
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2024 |
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2023 |
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2024 |
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2023 |
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收益 |
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循环 |
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$ |
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$ |
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$ |
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$ |
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实施和其他 |
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总收益 |
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销售成本 |
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营业费用 |
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折旧与摊提 |
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总营业成本 |
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管理费用 |
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销售和市场推广费用 |
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研发费用 |
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总务与行政 |
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折旧与摊提 |
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总管理费用 |
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营业费用总计 |
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营收 |
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利息费用 |
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( |
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其他收入（费用），净额 |
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税前收入 |
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所得税费用 |
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净利润 |
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$ |
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$ |
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$ |
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$ |
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每股基本收益 |
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$ |
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$ |
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$ |
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$ |
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每股收益，稀释 |
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$ |
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$ |
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$ |
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$ |
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加权平均股本数: |
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基础 |
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稀释 |
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综合盈利： |
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净利润 |
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$ |
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$ |
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$ |
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$ |
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可供出售证券未实现净收益 |
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截至2024年6月30日及2023年同期六个月，其他综合损益中累积额变动组成为： |
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( |
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( |
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( |
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其他综合收益，税后 |
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综合收益： |
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$ |
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$ |
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$ |
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$ |
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请参阅未经审计的合并基本报表附注。
4
Paycom Software, Inc.
未经审核的股东权益合并报表
（以千为单位）
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普通股 |
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额外 |
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保留 |
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累积其他 |
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库务股票 |
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总计 |
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股票 |
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金额 |
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已缴资本 |
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收入 |
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全面损失 |
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股票 |
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金额 |
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股东权益 |
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二零二二年十二月三十一日止余额 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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获得限制股票 |
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— |
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— |
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基于股票的补偿 |
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— |
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— |
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— |
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回购普通股 |
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— |
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净收入 |
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— |
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其他综合盈利（亏损），除税 |
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— |
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— |
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— |
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二零二三年三月三十一日止余额 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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获得限制股票 |
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( |
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— |
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— |
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基于股票的补偿 |
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回购普通股 |
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申报股息（$ |
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— |
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净收入 |
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其他综合盈利（亏损），除税 |
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— |
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二零二三年六月三十日止余额 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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获得限制股票 |
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— |
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基于股票的补偿 |
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回购普通股 |
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申报股息（$ |
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净收入 |
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其他综合盈利（亏损），除税 |
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二零二三年九月三十日止余额 |
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$ |
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$ |
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$ |
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$ |
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普通股 |
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额外的 |
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保留收益 |
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其他累积额 |
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库藏股 |
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总计 |
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股份 |
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金额 |
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实收资本 |
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累积盈余 |
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综合损益 |
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股份 |
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金额 |
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股东权益 |
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2023年12月31日余额 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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受限股股权发放 |
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— |
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股份报酬 |
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分派的股息 ($ |
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— |
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( |
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购回普通股 |
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— |
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— |
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— |
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— |
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— |
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净利润 |
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— |
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— |
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— |
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— |
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— |
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— |
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其他全面收益(损失)，税后净额 |
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— |
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— |
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— |
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— |
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— |
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2024年3月31日的余额 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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受限股股权发放 |
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— |
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— |
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— |
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股份报酬 |
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— |
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— |
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— |
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— |
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— |
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分派的股息 ($ |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
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购回普通股 |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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净利润 |
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— |
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— |
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— |
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— |
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— |
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— |
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其他全面收益(损失)，税后净额 |
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— |
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— |
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— |
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— |
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— |
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— |
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2024年6月30日的结余 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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受限股股权发放 |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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股份报酬 |
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— |
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— |
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— |
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分派的股息 ($ |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
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购回普通股 |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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净利润 |
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— |
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— |
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— |
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— |
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— |
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— |
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其他全面收益(损失)，税后净额 |
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— |
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— |
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— |
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— |
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— |
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— |
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2024年9月31日的余额 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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||||||
请见未经审计的合并财务报表附注。
5
Paycom Software, Inc.
未经审计的合并 S现金流量表
(以千为单位)
|
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截至9月30日的九个月 |
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|||||
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2024 |
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2023 |
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经营活动现金流量 |
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净利润 |
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$ |
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$ |
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调整净利润以计入经营活动现金流量: |
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折旧和摊销 |
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可供出售证券折价溢价 |
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( |
) |
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( |
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非现金营销费用 |
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处置物业和设备的收益 |
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( |
) |
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( |
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债务发行成本的摊销 |
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基于股票的薪酬费用 |
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( |
) |
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债务摊销损失 |
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— |
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递延所得税，净额 |
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( |
) |
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其他 |
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( |
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运营资产和负债的变化： |
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应收账款 |
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预付费用 |
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( |
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( |
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存货 |
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其他资产 |
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( |
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( |
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延期合同成本 |
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( |
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( |
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应付账款 |
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( |
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净所得税 |
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( |
) |
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应计佣金和奖金 |
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( |
) |
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( |
) |
应计工资薪金及带薪休息 |
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( |
) |
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( |
) |
递延收入 |
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经营使用权资产和经营租赁负债的净变动 |
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应计费用和其他流动负债 |
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经营活动产生的净现金流量 |
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投资活动现金流量 |
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从客户持有的基金购买投资 |
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( |
) |
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( |
) |
从客户持有的基金中获得投资收益 |
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购买物业和设备 |
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( |
) |
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( |
) |
出售房产和设备的收益 |
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投资活动产生的净现金流量 |
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( |
) |
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筹资活动现金流量 |
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回购普通股 |
|
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( |
) |
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( |
) |
与净股份结算相关的预扣税款 |
|
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( |
) |
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( |
) |
分红派息 |
|
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( |
) |
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( |
) |
客户资金义务的净变动 |
|
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( |
) |
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( |
) |
支付债务发行成本 |
|
|
— |
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( |
) |
融资活动所使用的净现金 |
|
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( |
) |
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( |
) |
现金、现金等价物、限制性现金及限制性现金等价物减少 |
|
|
( |
) |
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( |
) |
截至2019年3月31日的现金、现金等价物、受限现金和受限现金等价物 |
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现金、现金等价物、限制性现金和限制性现金等价物期初余额 |
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|
||
现金、现金等价物、限制性现金和限制性现金等价物期末余额 |
|
$ |
|
|
$ |
|
||
请见未经审计的合并财务报表附注。
6
Paycom Software, Inc.
未经审计的综合现金流量表，继续
(以千为单位)
|
|
截至9月30日的九个月 |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
现金、现金等价物、受限现金和受限现金等价物的调节 |
|
|
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|
||
现金及现金等价物 |
|
$ |
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$ |
|
||
受限现金包括客户持有的所有基金类型 |
|
|
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|
||
期末现金、现金等价物、受限现金和受限现金等价物总额 |
|
$ |
|
|
$ |
|
||
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|
||
补充现金流信息披露： |
|
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|
||
非现金投资和筹资活动: |
|
|
|
|
|
|
||
购置的资产和设备，但尚未支付的应计款 |
|
$ |
|
|
$ |
|
||
基于股票的补偿，用于资本化的软件 |
|
$ |
|
|
$ |
|
||
因经营租赁负债而获得的使用权资产 |
|
$ |
|
|
$ |
|
||
请见未经审计的合并财务报表附注。
7
Paycom Software, Inc.
未经审计的合并财务报表附注
（以千美元和千股为单位，除每股和每单位金额外）
Paycom 软件公司（“软件”），连同其全资子公司（统称为“公司”），是领先的综合性云端人力资本管理（“HCM”）解决方案提供商，以软件即服务的形式提供。除非我们另有说明或上下文另有要求，术语“我们”、“我们的”、“我们”和“公司”均指软件及其合并子公司。
我们提供企业管理完整就业生命周期所需的功能和数据分析，从招聘到养老。我们的解决方案几乎不需要定制，并且基于一个核心记录系统，该系统在单一数据库中维护所有人力资本管理功能，包括薪酬、人才获取、人才管理、人力资源（“HR”）管理以及时间和劳动管理应用程序。
我们的重要会计政策在2023年12月31日结束的年度报告的《备注2. 重要会计政策摘要》中进行了讨论（“表10-K”），该报告已于2024年2月15日提交给证券交易委员会（“SEC”）。
呈现基础
所附的未经审计的间接合并财务报表包括软件及其全资子公司的财务结果，并根据美国公认会计原则（“U.S. GAAP”）以及SEC关于间期财务报表的适用规则和法规准备，这些规则允许在间接期间减少披露。在合并中，相互公司之间的余额和交易已被消除。在管理层看来，所附的未经审计的合并财务报表包括了对公司在所提供间期公正表现所必要的所有调整。这些未经审计的合并财务报表应与公司的审计合并财务报表及《表10-K》中呈现的相关附注一起阅读。截止2024年9月30日的三个月和九个月的运营结果不一定预示全年的预期结果。
截至2024年9月30日的三个月内货币监理办公室（“OCC”）已最终批准Paycom national bank，我们的全资子公司，根据《国家银行法》和相关OCC法规作为国家信托银行运营。此外，公司还建立了一个授予人信托，该信托现在持有几乎所有客户的工资和相关资产。Paycom national bank担任授予人信托的受托人。我们已确定该信托是一个变量投资实体，符合根据ASC 810制定的合并标准。我们是该信托的主要受益人，拥有指挥其活动的权力及其经济表现的控制性财务利益。
使用估计
根据美国通用会计准则编制合并财务报表需要管理层进行估计和假设，这些估计和假设影响财务报表及附注中报告的金额。重要的估计包括所得税、损失或有支出、物业和设备及无形资产的使用寿命、我们与客户的关系的寿命、基于股票的奖励的公允价值以及我们金融工具、无形资产和商誉的公允价值。这些估计基于历史经验（如适用）和管理层认为在当时情况下合理的其他假设。实际结果可能与这些估计有重大差异。
季节性
我们的收入具有季节性特征。通常，我们期望第一季度和第四季度的经常性收入高于年度的其他季度，因为工资税申报表和可负担医疗法案表格通常在第一季度处理，而我们客户的非计划工资发放（例如奖金）通常集中在第四季度。此外，这些经常性收入的季节性波动影响营业收入。
客户持有的资金和客户资金责任
作为我们工资和税务申报服务的一部分，我们（i）收集客户资金以满足他们各自的工资和就业税义务，(ii) 将这些资金汇入由客户指定的账户和适当的税务机关（如适用），并（iii）管理客户的税务申报和与税务机关的任何相关通信。这些客户资金几乎全部存放在trust中。我们投资于客户持有的资金，并在收取和支出之间的时间段内获得这些资金的利息。
这些投资在我们的合并资产负债表中显示为客户持有的资金，与税务申报相关的责任显示为客户资金责任。该责任在我们
8
Paycom Software, Inc.
未经审计的合并财务报表附注
(以千美元和千股为单位，除每股和每单位金额外的表格)
从客户那里获取资金。客户资金义务表示将在合并资产负债表日一年内偿还的负债。我们通常将客户持有的资金投资于货币市场基金、活期存款账户、定期存款、商业票据和美国国债。在合并资产负债表中，原始到期少于三个月的短期投资被归类为现金及现金等价物。原始到期超过三个月的投资被归类为可供出售证券，并且也包括在合并资产负债表中客户持有的资金内。
这些可供出售证券按公允价值记录，摊销成本与公允价值之间的差额作为可供出售证券未实现净收益（损失）记录，并包括在合并综合收益表的综合收益（损失）中。客户持有的资金在合并资产负债表中被归类为流动资产，因为这些资金仅用于满足客户资金义务。此外，客户持有的资金被归类为限制性现金和限制性现金等价物，并在合并现金流量表的现金、现金等价物、限制性现金和限制性现金等价物的调节中呈现。
公司在合并现金流量表的投资活动部分以总额形式报告与从客户持有资金购买投资以及投资到期所产生的收益相关的现金流。此外，公司在合并现金流量表的融资活动部分的客户资金义务净变动内以净额形式报告与客户相关的现金流。
股票回购计划
在2016年5月，我们的董事会授权了一项股票回购计划，允许以市场价格在公开市场交易中回购我们普通股的股份，或通过私人协商交易及其他方式，按照联邦证券法，包括规则10b5-1计划。自股票回购计划首次获批以来，我们的董事会已不时修订、延续并授权新的股票回购计划。最近，在2024年7月，我们的董事会授权回购最多$
2024年9月30日结束的九个月内我们共回购了
最近发布的会计声明
在2023年11月，财务会计准则委员会（“FASB”）发布了会计准则更新（“ASU”）2023-07，章节报告（主题280）：可报告分部披露的改进（“ASU 2023-07”）。ASU 2023-07要求在年度和期间内增量披露与可报告分部和分部费用相关的信息，但不改变分部的定义、确定分部的方法或将经营分部汇总到可报告分部的标准。该ASU适用于于2023年12月15日后开始的财年及于2024年12月15日后开始的财年内的期间，允许提前采用。我们正在评估该ASU对我们的合并基本报表和披露的影响。
在2023年12月，FASB发布了ASU 2023-09，所得税（主题740）：所得税披露的改进。ASU 2023-09要求报告实体有效税率的分解信息，以及已支付所得税的信息。该ASU适用于于2024年12月15日后开始的财年，允许提前采用。我们正在评估该ASU对我们的合并基本报表和披露的影响。
营业收入是指在控制约定的商品或服务转移给我们的客户，且金额反映了我们预期获得的对这些商品或服务应有的考虑时确认。我们所有的营业收入几乎全来自与客户的合同。销售税和其他适用税款不计入营业收入。
循环营收
重复性收入主要来源于我们的工资单、人才招聘、人才管理、人力资源管理和时间与劳动管理应用程序，以及收取的表格申报和交付客户工资支票和报告的费用。工资
9
Paycom Software, Inc.
未经审计的合并财务报表附注
(以千美元和千股为单位，除每股和每单位金额外的表格)
包括Beti®、工资和税务管理、Vault、Everyday®、Paycom Pay®、客户行动中心™、费用管理、里程追踪器、补给管理和GL Concierge应用程序。人才招聘包括我们的申请人跟踪、候选人追踪、增强背景调查®、入职、E-Verify® 和税收抵免申请。人才管理包括我们的员工自助服务®、薪酬预算、绩效管理、职位管理、我的分析和Paycom学习应用程序。人力资源管理包括我们的Manager on-the-Go®、Direct Data Exchange®、在这里提问、文件和清单、政府与合规、福利管理/承运人福利、福利登记服务、COBRA管理、人事行动表和绩效讨论表、调查、增强版ACA和Clue® 应用程序。时间和劳动力管理包括时间和出勤、日程安排、GONE® 的休假申请、劳动力分配、劳动力管理报告/推送报告®、地理围栏/地理跟踪和Microfence™ 工具和应用程序。此外，借助 Global HCM™，我们的许多 HCm 应用程序和工具支持 15 种语言和方言，可供180多个国家的用户使用。
与经常性收入相关的绩效义务通常在每个客户的工资发放期内得到履行，商定的费用将作为我们处理客户工资单的一部分收取和收取。经常性收入在每个客户的工资周期处理结束时确认，届时向每位相应的工资客户开具账单。由于费用通常通过自动清算所作为客户工资周期的一部分收取，或者通过直接电汇收取，从而最大限度地降低了违约风险，因此可收取性是合理的。
几乎所有与这些收入相关的合同的合同期为一个月，这是因为我们和客户通常都有权单方面终止完全未履行的合同，而无需通过提前30天提供终止通知来补偿另一方。我们的薪资应用程序是我们解决方案的基础，我们所有的客户都必须使用此应用程序才能访问我们的其他应用程序。对于购买多个应用程序的客户，由于我们合同的短期性质，我们认为单独评估和确定每个应用程序是否可能代表其自身的个人履约义务没有意义，因为每个应用程序产生的收入将在同一个月内确认为核心薪资应用程序的收入。同样，我们认为单独确定每个应用程序的独立销售价格没有意义。我们认为，在给定时期内向客户收取的总价格是独立销售价格的指标，因为收取的总金额在合理的范围内，通常为同类客户群体收取的商品和服务收取的价格区间，我们会定期评估这些价格以进行价格调整。
为客户持有的资金的利息收入是通过在适用的工资税申报截止日或员工付款服务的适用支付日期之前向客户收取的资金赚取的。这些资金的利息收入包含在综合收益报表的经常性收入中，因为这些资金的收集、持有和汇款是提供这些服务的基本组成部分。
实施和其他收入
实施和其他收入包括不可退还的预付转换费，这些费用是向新客户收取的，以抵消新客户开设的费用以及作为我们的考勤和考勤应用程序一部分销售时钟的收入。尽管这些收入与我们的经常性收入有关，但它们代表着不同的绩效义务。
实施活动主要代表允许我们为客户履行未来绩效义务的管理活动，并不代表向客户转移的服务。但是，向我们的客户收取的不可退还的预付费用会导致隐含的履行义务，其形式是客户在每个合同期结束时选择续订的实质性权利。此外，鉴于合同中的所有其他服务均以代表独立销售价格的总价格出售，再加上预付费用与我们与客户签订的类似合同中收取的预付费用一致，客户续订合同期权的独立销售价格约为不可退还的预付费的美元金额。不可退还的预付费用通常在合同生效时收取，并在预计的受益期内按比例延期和按比例确认（即，预计客户寿命为10年）。
当产品交付后控制权移交给客户时，将确认销售时钟的收入。我们通过最大限度地使用可观察的输入（例如我们的时钟特定定价惯例）来估算时钟的独立销售价格。
合约余额
经常性服务的收入确认时间与客户开具发票的时间一致，因为它们都发生在提供服务的相应客户工资发放期内。因此，我们通常不确认因收入确认和开具发票的时间而产生的合同资产或负债。
10
Paycom Software, Inc.
未经审计的合并财务报表附注
(以千美元和千股为单位，除每股和每单位金额外的表格)
递延营业收入的变动在 以下是截至2024年和2023年9月30日的三个月和九个月的租赁收入组成部分:
|
|
截至9月30日的三个月 |
|
|
截至9月30日的九个月 |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
期初余额 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
期初余额中包含的营业收入确认 |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
合同余额，扣除期间确认的营业收入 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
期末余额 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
从获得合同及履行营业收入合同的成本中确认的资产
如果我们预计摊销期将超过一年，我们将为获取客户合同的增量成本确认一项资产。我们还会为履行客户合同的成本确认一项资产，前提是这些成本可以明确识别，产生或增强用于满足未来履行义务的资源，并预计可以收回。我们已确定，与实施活动相关的所有成本基本上都是行政性质的，并且符合ASC 340-40下的资本化标准。这些资本化的履行成本主要涉及预期通过利润收回的前期直接成本，并增强我们满足未来履行义务的能力。
与获取及履行客户合同相关的所有板块资产是通过组合方式进行核算的，并在预期的收益期内按照比例资本化和摊销。我们确定的预期收益期为10年，预计客户关系的寿命。预期的收益期之所以被确定为预计的客户关系的寿命，主要是因为在合同续签时，我们并不会产生新的获取成本或履行成本。当现有客户购买额外的应用程序时，可能会产生额外的佣金成本；然而，这些佣金成本仅与购买的额外应用程序相关，而与合同续签无关。此外，现有客户购买额外应用程序时相关的额外履行成本因为我们的无缝单数据库平台而得以最小化。这些资产在附带的合并资产负债表中列示为递延合同成本。与获取和履行合同相关的摊销费用包括在附带的合并综合收益表中的销售和市场费用及一般和管理费用中。
11
Paycom Software, Inc.
未经审计的合并财务报表附注
(以千美元和千股为单位，除每股和每单位金额外的表格)
以下表格显示了资产余额以及与这些合同成本相关的摊销费用：
|
|
截至2024年9月30日三个月的资产余额和相关摊销费用为 |
|
|||||||||||||
|
|
期初 |
|
|
资本构成 |
|
|
|
|
|
结束 |
|
||||
|
|
资产负债表 |
|
|
成本 |
|
|
摊销 |
|
|
资产负债表 |
|
||||
获取合同的成本 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
履行合同的成本 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
截至2023年9月30日止三个月的情况及 |
|
|||||||||||||
|
|
期初 |
|
|
资本构成 |
|
|
|
|
|
结束 |
|
||||
|
|
资产负债表 |
|
|
成本 |
|
|
摊销 |
|
|
资产负债表 |
|
||||
获取合同的成本 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
履行合同的成本 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
截至2024年9月30日九个月的情况和情况 |
|
|||||||||||||
|
|
期初 |
|
|
资本构成 |
|
|
|
|
|
结束 |
|
||||
|
|
资产负债表 |
|
|
成本 |
|
|
摊销 |
|
|
资产负债表 |
|
||||
获得合同的成本 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
履行合同的成本 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
截至2023年9月30日止九个月为止 |
|
|||||||||||||
|
|
期初 |
|
|
资本构成 |
|
|
|
|
|
结束 |
|
||||
|
|
资产负债表 |
|
|
成本 |
|
|
摊销 |
|
|
资产负债表 |
|
||||
获得合同的成本 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
履行合同成本 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
固定资产和累计折旧及摊销情况如下：
|
|
2024年9月30日 |
|
|
2023年12月31日 |
|
||
物业及设备 |
|
|
|
|
|
|
||
软件和资本化的软件开发成本 |
|
$ |
|
|
$ |
|
||
建筑物 |
|
|
|
|
|
|
||
计算机设备 |
|
|
|
|
|
|
||
租赁时钟 |
|
|
|
|
|
|
||
家具 |
|
|
|
|
|
|
||
其他 |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
减：累计折旧与摊销 |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
建设中的工程 |
|
|
|
|
|
|
||
土地 |
|
|
|
|
|
|
||
物业和设备，净值 |
|
$ |
|
|
$ |
|
||
根据ASC 350-40的规定，我们对为内部使用而开发或获取的软件开发成本进行资本化。截至2024年9月30日止三个月和九个月，我们资本化了$
在资产负债表中包括的租赁时钟，净额中，代表向客户发放的月租操作租赁下的时间时钟。因此，这些项目从存货转移至固定资产，并按其估计使用寿命进行折旧。
在2023年11月21日之前偿还我们的债务之前，我们对施工中的有关负债产生的利息费用进行资本化。在截至2024年9月30日的三个月和九个月内，我们发生了$的利息费用。
12
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share and per unit amounts)
million, respectively,
Depreciation and amortization expense for property and equipment was $
As of both September 30, 2024 and December 31, 2023, goodwill was $
In connection with our marketing initiatives, we purchased the naming rights to the downtown Oklahoma City arena that is home to the Oklahoma City Thunder National Basketball Association franchise. Under the terms of the naming rights agreement, we committed to make payments escalating annually from $
All of our intangible assets other than goodwill are considered to have definite lives and, as such, are subject to amortization. The following tables present the components of intangible assets within our consolidated balance sheets:
|
|
September 30, 2024 |
|
|||||||||||
|
|
Weighted Average Remaining |
|
|
|
|
Accumulated |
|
|
|
|
|||
|
|
Useful Life |
|
Gross |
|
|
Amortization |
|
|
Net |
|
|||
|
|
(Years) |
|
|
|
|
|
|
|
|
|
|||
Intangibles: |
|
|
|
|
|
|
|
|
|
|
|
|||
Naming rights |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Total |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
December 31, 2023 |
|
|||||||||||
|
|
Weighted Average Remaining |
|
|
|
|
Accumulated |
|
|
|
|
|||
|
|
Useful Life |
|
Gross |
|
|
Amortization |
|
|
Net |
|
|||
|
|
(Years) |
|
|
|
|
|
|
|
|
|
|||
Intangibles: |
|
|
|
|
|
|
|
|
|
|
|
|||
Naming rights |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Total |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Amortization of intangible assets for each of the three-month periods ended September 30, 2024 and 2023 was $
On
The Credit Agreement initially provided for a senior secured revolving credit facility (the “Revolving Credit Facility”) in the aggregate principal amount of up to $
13
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share and per unit amounts)
Agreement also initially provided for a senior secured delayed draw term loan (the “Term Loan Facility”) in the aggregate amount of up to $
On the Facility Closing Date, we borrowed $
On
On November 21, 2023, we fully repaid the outstanding indebtedness under the Revolving Credit Facility. As of September 30, 2024, there was
Borrowings under the Credit Agreement bear interest at a rate per annum equal to (i) the Alternate Base Rate (“ABR”) plus an applicable margin (“ABR Loans”) or (ii) (x) the term Secured Overnight Financing Rate (“SOFR”) plus
Under the Credit Agreement, we are required to maintain as of the end of each fiscal quarter a consolidated interest coverage ratio of not less than 3.0 to 1.0 and a consolidated leverage ratio of not greater than 3.5 to 1.0, stepping down to 3.25 to 1.0 as of December 31, 2024 and 3.0 to 1.0 as of December 31, 2025, and thereafter. Additionally, the Credit Agreement contains customary affirmative and negative covenants, including covenants limiting our ability to, among other things, grant liens, incur debt, effect certain mergers, make investments, dispose of assets, enter into certain transactions, including swap agreements and sale and leaseback transactions, pay dividends or distributions on our capital stock, and enter into transactions with affiliates, in each case subject to customary exceptions. As of September 30, 2024, we were in compliance with these covenants. Our obligations under the Credit Agreement are secured by a senior security interest in all personal property of the Loan Parties.
14
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share and per unit amounts)
The tables below present our cash and cash equivalents, the funds held for clients cash and cash equivalents as well as the investments that were included within funds held for clients on the consolidated balance sheets:
|
|
September 30, 2024 |
|
|||||||||||||
Type of issue |
|
Amortized cost |
|
|
Gross unrealized gains |
|
|
Gross unrealized losses |
|
|
Fair value |
|
||||
Cash and cash equivalents |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Funds held for clients cash and cash equivalents |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Available-for-sale securities(1): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. treasury securities |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Total investments |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
December 31, 2023 |
|
|||||||||||||
Type of issue |
|
Amortized cost |
|
|
Gross unrealized gains |
|
|
Gross unrealized losses |
|
|
Fair value |
|
||||
Cash and cash equivalents |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Funds held for clients cash and cash equivalents |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Available-for-sale securities(1): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Certificates of deposit |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
U.S. treasury securities |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Total investments |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
The unrealized gains and fair values of available-for-sale securities that have been in an unrealized gain position for a period of less than and greater than 12 months as of September 30, 2024, are as follows:
|
|
September 30, 2024 |
|
|||||||||||||||||||||
|
|
Securities in unrealized gain position for less than 12 months |
|
|
Securities in unrealized gain position for greater than 12 months |
|
|
Total |
|
|||||||||||||||
Type of issue |
|
Gross unrealized gains |
|
|
Fair value |
|
|
Gross unrealized gains |
|
|
Fair value |
|
|
Gross unrealized gains |
|
|
Fair value |
|
||||||
U.S. treasury securities |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||
The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a period of less than and greater than 12 months as of December 31, 2023, are as follows:
|
|
December 31, 2023 |
|
|||||||||||||||||||||
|
|
Securities in unrealized loss position for less than 12 months |
|
|
Securities in unrealized loss position for greater than 12 months |
|
|
Total |
|
|||||||||||||||
Type of issue |
|
Gross unrealized losses |
|
|
Fair value |
|
|
Gross unrealized losses |
|
|
Fair value |
|
|
Gross unrealized losses |
|
|
Fair value |
|
||||||
U.S. treasury securities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
We did not make any reclassification adjustments out of accumulated other comprehensive income for realized gains or losses on the sale or maturity of available-for-sale securities for the nine months ended September 30, 2024 or 2023. There were
We regularly review the composition of our investment portfolio and did
15
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share and per unit amounts)
Expected maturities of available-for-sale securities at September 30, 2024 are as follows:
Expected maturity |
|
Amortized cost |
|
|
Fair value |
|
||
One year to five years |
|
$ |
|
|
$ |
|
||
|
|
$ |
|
|
$ |
|
||
Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, funds held for clients and client funds obligation. The carrying amount of cash and cash equivalents, accounts receivable, accounts payable, funds held for clients and client funds obligation approximates fair value.
Our corporate investments consist primarily of money market funds and demand deposit accounts and are classified as cash and cash equivalents on the consolidated balance sheets.
As discussed in Note 2, we typically invest the funds held for clients in money market funds, demand deposit accounts, certificates of deposit, commercial paper and U.S. treasury securities. Short-term investments in instruments with an original maturity of less than three months are classified as cash and cash equivalents within funds held for clients in the consolidated balance sheets. Investments in instruments with an original maturity greater than three months are classified as available-for-sale securities and are also included within funds held for clients in the consolidated balance sheets. These available-for-sale securities are recognized at fair value, with the difference between the amortized cost and fair value of these available-for-sale securities recorded as unrealized net gains (losses) within comprehensive earnings (loss) in our consolidated statements of comprehensive income. See Note 7 for additional information.
The accounting standard for fair value measurements establishes a three-level fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Included in the following tables are the Company’s major categories of assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023:
|
|
September 30, 2024 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. treasury securities |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
December 31, 2023 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Certificates of deposit |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
U.S. treasury securities |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Employees over the age of
16
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share and per unit amounts)
The Paycom Software, Inc. Employee Stock Purchase Plan (the “ESPP”) has overlapping offering periods, with each offering period lasting approximately
Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed in a similar manner to basic earnings per share after assuming the issuance of shares of common stock for all potentially dilutive equity incentive awards.
The following is a reconciliation of net income and the shares of common stock used in the computation of basic and diluted earnings per share:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of unvested restricted stock and restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company recognizes stock-based compensation expense related to awards of (i) restricted stock subject to time-based or no vesting conditions (“Time-Based Restricted Stock Awards”), (ii) restricted stock subject to market-based vesting conditions (“Market-Based Restricted Stock Awards”), (iii) restricted stock units subject to time-based vesting conditions (“RSUs”) and (iv) restricted stock units subject to performance-based vesting conditions (“PSUs”). During the nine months ended September 30, 2024, awards were granted to executive officers, non-executive employees, non-employee directors and contractors pursuant to the Paycom Software, Inc. 2023 Long-Term Incentive Plan.
17
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share and per unit amounts)
The following table summarizes restricted stock awards activity for the nine months ended September 30, 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time-Based Restricted Stock Awards |
|
|
Market-Based Restricted Stock Awards |
|
||||||||||
|
Shares |
|
|
Weighted Average Grant Date Fair Value |
|
|
Shares |
|
|
Weighted Average Grant Date Fair Value |
|
||||
Unvested shares of restricted stock outstanding at December 31, 2023 |
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested |
|
( |
) |
|
$ |
|
|
|
— |
|
|
$ |
— |
|
|
Forfeited |
|
( |
) |
|
$ |
|
|
|
( |
)(1) |
|
$ |
|
||
Unvested shares of restricted stock outstanding at September 30, 2024 |
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The following table summarizes PSU and RSU activity for the nine months ended September 30, 2024:
|
|
RSUs |
|
|
PSUs |
|
||||||||||
|
|
Units |
|
|
Weighted Average |
|
|
Units |
|
|
Weighted Average |
|
||||
Unvested restricted stock units outstanding at December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested |
|
|
( |
) |
|
$ |
|
|
|
( |
) |
|
$ |
|
||
Forfeited |
|
|
( |
) |
|
$ |
|
|
|
( |
) |
|
$ |
|
||
Unvested restricted stock units outstanding at September 30, 2024(1) |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
For the nine months ended September 30, 2024, the Company recognized non-cash stock-based compensation expense, inclusive of forfeitures, that totaled a net benefit of $
The following table presents the non-cash stock-based compensation expense that is included within the specified line items in our consolidated statements of comprehensive income:
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Non-cash stock-based compensation expense: |
|
|
|
|
|
|
||
Operating expenses |
|
$ |
|
|
$ |
|
||
Sales and marketing |
|
|
|
|
|
|
||
Research and development |
|
|
|
|
|
|
||
General and administrative |
|
|
( |
) |
|
|
|
|
Total non-cash stock-based compensation expense |
|
$ |
( |
) |
|
$ |
|
|
18
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share and per unit amounts)
The following table presents the unrecognized compensation cost and the related weighted average recognition period associated with unvested restricted stock awards and unvested restricted stock unit awards (including RSUs and PSUs) as of September 30, 2024.
|
|
Restricted Stock |
|
|
Restricted Stock |
|
||
|
|
Awards |
|
|
Units |
|
||
Unrecognized compensation cost |
|
$ |
|
|
$ |
|
||
Weighted average period for recognition (years) |
|
|
|
|
|
|
||
We capitalized stock-based compensation costs related to software developed for internal use of $
In May 2023, our Board of Directors adopted a dividend policy under which we intend to pay quarterly cash dividends on our common stock. All unvested shares of restricted stock, RSUs and PSUs currently outstanding are entitled to receive dividends or dividend equivalents, provided that such dividends or dividend equivalents are withheld by the Company and distributed to the applicable holder upon the release of restrictions on such shares of restricted stock, RSUs or PSUs (i.e., upon vesting).
We are involved in various legal proceedings in the ordinary course of business. Although we cannot predict the outcome of these proceedings, legal matters are subject to inherent uncertainties, and there exists the possibility that the ultimate resolution of these matters could have a material adverse effect on our business, financial condition, results of operations and cash flows.
The Company’s effective income tax rate was
19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with management’s perspective on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (i) the accompanying unaudited consolidated financial statements and notes thereto for the three and nine months ended September 30, 2024, (ii) the audited consolidated financial statements and notes thereto for the year ended December 31, 2023 included in our Annual Report on Form 10-K (the “Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on February 15, 2024 and (iii) the discussion under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Form 10-K. Except for certain information as of December 31, 2023, all amounts herein are unaudited. Unless we state otherwise or the context otherwise requires, the terms “we,” “us,” “our” and the “Company” refer to Paycom Software, Inc. and its consolidated subsidiaries. All amounts presented in tables, other than per share amounts, are in thousands unless otherwise noted.
Special Note Regarding Forward-Looking Statements
The following discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are any statements that refer to our 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 solution; 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 facilities; our plans to pay cash dividends; and our plans to repurchase shares of our common stock through a stock repurchase plan. 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.
Forward-looking statements are neither historical facts nor assurances of future performance, and are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:
20
Forward-looking statements are based only on information currently available to us and speak only as of the date of this 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.
Overview
We are a leading provider of a comprehensive, cloud-based human capital management (“HCM”) solution delivered as Software-as-a-Service. We provide functionality and data analytics that businesses need to manage the complete employment lifecycle, from recruitment to retirement. Our solution requires virtually no customization and is based on a core system of record maintained in a single database for all HCM functions, including payroll, talent acquisition, talent management, human resources management and time and labor management applications. Our user-friendly software allows for easy adoption of our solution by employees, enabling self-management of their HCM activities in the cloud, which reduces the administrative burden on employers and increases employee productivity.
We generate revenues from (i) fixed amounts charged per billing period plus a fee per employee or transaction processed and (ii) fixed amounts charged per billing period. Our billing period varies by client based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly. We serve a diverse client base in terms of size and industry. None of our payroll and HCM clients constituted more than one-half of one percent of our revenues for the nine months ended September 30, 2024. Our revenues are primarily generated through our sales force that solicits new clients and our client relations representatives who sell new applications to existing clients.
Our continued growth depends on attracting new clients through further penetration of our existing markets and geographic expansion into new markets, targeting a high degree of client employee usage across our solution, and introducing new applications to our existing client base. We believe our ability to continue to develop new applications and to improve existing applications will enable us to increase revenues in the future, and the number of our new applications adopted by our clients has been a significant factor in our revenue growth. We plan to open additional sales offices in the future to further expand our market presence.
Our principal marketing efforts include national and local advertising campaigns, email campaigns, social and digital media campaigns, search engine marketing methods, sponsorships, tradeshows, print advertising and outbound marketing including personalized direct mail campaigns. In addition, we generate leads and build recognition of our brand and thought leadership with relevant and informative content, such as white papers, blogs, podcast episodes and webinars.
Throughout our history, we have built strong relationships with our clients. As the HCM needs of our clients evolve, we believe that we are well-positioned to expand the HCM spending of our clients, and we believe this opportunity is significant. To be successful, we must continue to demonstrate the operational and economic benefits of our solution, as well as effectively hire, train, motivate and retain qualified personnel.
21
Growth Outlook, Opportunities and Challenges
As a result of our significant revenue growth and geographic expansion, we are presented with a variety of opportunities and challenges. Our payroll application is the foundation of our solution, and all of our clients are required to utilize this application in order to access our other applications. Consequently, we have historically generated the majority of our revenues from our payroll applications, although our revenue mix has evolved and will continue to evolve as we develop and add new non-payroll applications to our solution. We believe our strategy of focusing on automation and employee usage is an important differentiator for attracting new clients and is also key to long-term client satisfaction and client retention. For example, our industry-first Beti technology automates and streamlines the payroll process by empowering employees to do their own payroll. Client adoption of new applications and, historically, client employee usage of both new and existing applications have been significant factors in our revenue growth. Nonetheless, because Beti is designed to eliminate payroll errors that lead to billable corrections and unscheduled payroll runs, we have experienced a reduction in these activities that historically would otherwise generate additional revenue for us.
In order to increase revenues and continue to improve our operating results, we must also attract new clients. We intend to obtain new clients by continuing to leverage our sales force productivity, further penetrating markets where we currently have existing sales offices, and expanding into new markets.
The market for HCM software is highly competitive, rapidly evolving and fragmented. We expect competition to continue to intensify as new market entrants and disruptive technologies emerge and increasingly aggressive pricing and client retention strategies persist. These market pressures directly affect our revenue growth and our ability to attract and retain clients. Our revenue growth rate and annual revenue retention rate declined in 2023 and have remained under pressure throughout 2024. While these trends may continue in the near-term, our long-term focused investments in automation, client ROI achievement, and world-class service are designed to counteract these recent negative trends.
Historically, our target client size range has been organizations with 50 to 10,000 employees. In 2023, we expanded our target client size range to include organizations with more than 10,000 employees. While we continue to serve a diversified client base ranging in size from one employee to many thousands of employees, the average size of our clients has grown significantly as we have organically grown our operations and increased the number of applications we offer. We believe larger employers represent a substantial opportunity to increase our revenues per client, with limited incremental cost to us. Furthermore, with the launch of our Global HCM solution and expansion of payroll services into certain international markets, we expect that our ability to serve organizations with international employees makes our solution more attractive to larger companies, many of which have a global presence. Because we charge our clients on a per employee basis for certain services we provide, any increase or decrease in the number of employees of our clients will have a positive or negative impact, respectively, on our results of operations. A multitude of macroeconomic pressures, such as inflation and changes in interest rates, impact our clients’ hiring practices to varying degrees and, in turn, impact our revenues. Generally, we expect that changes in certain factors affecting our performance will correlate with improvement or deterioration in the labor market. For example, the performance of our pre-employment services offerings is sensitive to changes in hiring trends, and we believe it will reflect any slowdown in hiring among U.S. employers.
We collect funds from clients in advance of either the applicable due date for payroll tax submissions or the applicable disbursement date for employee payment services. Those collections from clients are typically disbursed from one to 30 days after receipt, with some funds being held for up to 120 days. We typically invest funds held for clients in money market funds, demand deposit accounts, U.S. treasury securities, certificates of deposit and commercial paper until they are paid to the applicable tax or regulatory agencies or to client employees. As we introduce new applications, expand our client base and renew and expand relationships with existing clients, we expect our average funds held for clients balance and, accordingly, interest earned on funds held for clients, will increase; however, the amount of interest we earn can be positively or negatively impacted by changes in interest rates.
Growing our business has resulted in, and will continue to result in, substantial investments in sales professionals, operating expenses, system development and programming costs and general and administrative expenses, which have increased and will continue to increase our expenses. Specifically, our revenue growth and geographic expansion drive increases in our employee headcount, which in turn precipitates increases in (i) salaries and benefits, (ii) stock-based compensation expense and (iii) facility costs related to the expansion of our corporate headquarters and operations facilities and additional sales office leases. Furthermore, execution of our international expansion strategy requires considerable investment. As a result of the factors described above, we have experienced and expect to continue to experience pressure on our margins as we hire to support growth.
We believe the challenges of managing the ever-changing complexity of payroll and human resources will continue to drive companies to turn to outsourced providers for help with their HCM needs. The HCM industry historically has been driven, in part, by legislation and regulatory action, including COBRA, changes to the minimum wage laws or overtime rules, and legislation from federal, state or municipal taxation authorities.
Our revenues are seasonal in nature. Generally, we expect our first and fourth quarter recurring revenues to be higher than other quarters during the year because payroll tax filing forms and Affordable Care Act forms are typically processed in the first quarter, and unscheduled payroll runs (such as bonuses) for our clients are typically concentrated in the fourth quarter. In addition, these seasonal fluctuations in recurring revenues impact operating income.
22
Results of Operations
The following table sets forth certain consolidated statements of comprehensive income data and such data as a percentage of total revenues for the periods presented:
|
|
Three Months Ended September 30, |
|
|
|
|
Nine Months Ended September 30, |
|
|
|
||||||||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
% Change |
|
2024 |
|
|
2023 |
|
|
% Change |
||||||||||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Recurring |
|
$ |
445,002 |
|
|
|
98.5 |
% |
|
$ |
398,763 |
|
|
|
98.1 |
% |
|
11.6% |
|
$ |
1,367,298 |
|
|
|
98.4 |
% |
|
$ |
1,237,706 |
|
|
|
98.3 |
% |
|
10.5% |
Implementation and other |
|
|
6,932 |
|
|
|
1.5 |
% |
|
|
7,540 |
|
|
|
1.9 |
% |
|
-8.1% |
|
|
22,029 |
|
|
|
1.6 |
% |
|
|
21,373 |
|
|
|
1.7 |
% |
|
3.1% |
Total revenues |
|
|
451,934 |
|
|
|
100.0 |
% |
|
|
406,303 |
|
|
|
100.0 |
% |
|
11.2% |
|
|
1,389,327 |
|
|
|
100.0 |
% |
|
|
1,259,079 |
|
|
|
100.0 |
% |
|
10.3% |
Cost of revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating expenses |
|
|
70,818 |
|
|
|
15.7 |
% |
|
|
55,600 |
|
|
|
13.7 |
% |
|
27.4% |
|
|
201,939 |
|
|
|
14.5 |
% |
|
|
163,302 |
|
|
|
13.0 |
% |
|
23.7% |
Depreciation and amortization |
|
|
17,535 |
|
|
|
3.8 |
% |
|
|
13,341 |
|
|
|
3.3 |
% |
|
31.4% |
|
|
48,929 |
|
|
|
3.6 |
% |
|
|
38,299 |
|
|
|
3.0 |
% |
|
27.8% |
Total cost of revenues |
|
|
88,353 |
|
|
|
19.5 |
% |
|
|
68,941 |
|
|
|
17.0 |
% |
|
28.2% |
|
|
250,868 |
|
|
|
18.1 |
% |
|
|
201,601 |
|
|
|
16.0 |
% |
|
24.4% |
Administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Sales and marketing |
|
|
104,477 |
|
|
|
23.1 |
% |
|
|
101,162 |
|
|
|
24.9 |
% |
|
3.3% |
|
|
326,865 |
|
|
|
23.5 |
% |
|
|
311,171 |
|
|
|
24.7 |
% |
|
5.0% |
Research and development |
|
|
63,047 |
|
|
|
14.0 |
% |
|
|
51,864 |
|
|
|
12.8 |
% |
|
21.6% |
|
|
175,927 |
|
|
|
12.7 |
% |
|
|
143,651 |
|
|
|
11.4 |
% |
|
22.5% |
General and administrative |
|
|
70,642 |
|
|
|
15.6 |
% |
|
|
71,827 |
|
|
|
17.7 |
% |
|
-1.6% |
|
|
92,610 |
|
|
|
6.7 |
% |
|
|
213,397 |
|
|
|
16.9 |
% |
|
-56.6% |
Depreciation and amortization |
|
|
20,541 |
|
|
|
4.5 |
% |
|
|
15,608 |
|
|
|
3.8 |
% |
|
31.6% |
|
|
57,229 |
|
|
|
4.1 |
% |
|
|
44,660 |
|
|
|
3.6 |
% |
|
28.1% |
Total administrative expenses |
|
|
258,707 |
|
|
|
57.2 |
% |
|
|
240,461 |
|
|
|
59.2 |
% |
|
7.6% |
|
|
652,631 |
|
|
|
47.0 |
% |
|
|
712,879 |
|
|
|
56.6 |
% |
|
-8.5% |
Total operating expenses |
|
|
347,060 |
|
|
|
76.8 |
% |
|
|
309,402 |
|
|
|
76.2 |
% |
|
12.2% |
|
|
903,499 |
|
|
|
65.0 |
% |
|
|
914,480 |
|
|
|
72.6 |
% |
|
-1.2% |
Operating income |
|
|
104,874 |
|
|
|
23.2 |
% |
|
|
96,901 |
|
|
|
23.8 |
% |
|
8.2% |
|
|
485,828 |
|
|
|
35.0 |
% |
|
|
344,599 |
|
|
|
27.4 |
% |
|
41.0% |
Interest expense |
|
|
(789 |
) |
|
|
-0.2 |
% |
|
|
(222 |
) |
|
|
-0.1 |
% |
|
255.4% |
|
|
(2,353 |
) |
|
|
-0.2 |
% |
|
|
(1,661 |
) |
|
|
-0.1 |
% |
|
41.7% |
Other income (expense), net |
|
|
4,229 |
|
|
|
1.0 |
% |
|
|
5,362 |
|
|
|
1.4 |
% |
|
-21.1% |
|
|
14,025 |
|
|
|
1.0 |
% |
|
|
17,549 |
|
|
|
1.3 |
% |
|
-20.1% |
Income before income taxes |
|
|
108,314 |
|
|
|
24.0 |
% |
|
|
102,041 |
|
|
|
25.1 |
% |
|
6.1% |
|
|
497,500 |
|
|
|
35.8 |
% |
|
|
360,487 |
|
|
|
28.6 |
% |
|
38.0% |
Provision for income taxes |
|
|
35,036 |
|
|
|
7.8 |
% |
|
|
26,822 |
|
|
|
6.6 |
% |
|
30.6% |
|
|
109,065 |
|
|
|
7.8 |
% |
|
|
101,456 |
|
|
|
8.0 |
% |
|
7.5% |
Net income |
|
$ |
73,278 |
|
|
|
16.2 |
% |
|
$ |
75,219 |
|
|
|
18.5 |
% |
|
-2.6% |
|
$ |
388,435 |
|
|
|
28.0 |
% |
|
$ |
259,031 |
|
|
|
20.6 |
% |
|
50.0% |
Revenues
The increase in recurring revenues for the three and nine months ended September 30, 2024 compared to the same periods in 2023 was the result of the addition of new clients in our target market range, increased revenue per client attributable to the realization of pricing strategies and the impact of new product and service offerings, and increased interest earned on funds held for clients. We believe that a decrease in the sale of additional applications to existing clients adversely affected the magnitude of the period-over-period increase in revenues for the nine months ended September 30, 2024. The increase in interest earned on funds held for clients was due to higher interest rates and a higher average funds held for clients balance during the three and nine months ended September 30, 2024, as compared to the same periods in 2023. The average daily balance of funds held for clients was $2.4 billion and $2.2 billion for the nine months ended September 30, 2024 and 2023, respectively.
Implementation and other revenues are composed primarily of non-refundable upfront conversion fees, which are collected from new clients and are deferred and recognized ratably over the 10-year estimated life of our clients. The net decrease in implementation and other revenues for the three months ended September 30, 2024 compared to the same period in 2023 was primarily due to decreases in historic client access fees and revenues from the sale of time clocks, offsetting an increase in non-refundable upfront conversion fees recognized during the period. The increase in implementation and other revenues for the nine months ended September 30, 2024 compared to the same period in 2023 was primarily the result of an increase in non-refundable upfront conversion fees recognized during the period.
23
Expenses
Cost of Revenues
During the three months ended September 30, 2024, operating expenses increased from the comparable prior year period by $15.2 million, primarily due to an $8.9 million increase in employee-related expenses attributable to growth in the number of operating personnel, a $4.8 million increase in shipping and supplies fees and a $0.4 million increase in banking fees. Depreciation and amortization expense increased $4.2 million from the comparable prior year period, primarily due to the development of additional technology, purchases of other related fixed assets, and the impact of our corporate headquarters expansion that was placed into service in April 2024.
During the nine months ended September 30, 2024, operating expenses increased from the comparable prior year period by $38.6 million, primarily due to a $25.6 million increase in employee-related expenses attributable to growth in the number of operating personnel, a $7.3 million increase in shipping and supplies fees and a $3.0 million increase in banking fees. Depreciation and amortization expense increased $10.6 million from the comparable prior year period, primarily due to the development of additional technology, purchases of other related fixed assets, and the impact of our corporate headquarters expansion that was not in service in the prior year period.
Administrative Expenses
Sales and Marketing
During the three months ended September 30, 2024, sales and marketing expenses increased from the comparable prior year period by $3.3 million due to a $3.2 million increase in employee-related expenses, including commissions and bonuses and a $0.1 million increase in marketing and advertising expense.
During the nine months ended September 30, 2024, sales and marketing expenses increased from the comparable prior year period by $15.7 million due to a $21.6 million increase in employee-related expenses, including commissions and bonuses, which was partially offset by a $5.9 million decrease in marketing and advertising expense.
Research and Development
During the three and nine months ended September 30, 2024, research and development expenses increased from the comparable prior year periods due to increases in employee-related expenses of $11.2 million and $32.3 million, respectively.
As we continue the ongoing development of our platform and product offerings, we generally expect research and development expenses (exclusive of stock-based compensation) to continue to increase, particularly as we hire more personnel to support our growth. While we expect this trend to continue on an absolute dollar basis and as a percentage of total revenues, we also anticipate the rate of increase to decline over time as we leverage our growth and realize additional economies of scale. As is customary for our business, we also expect fluctuations in research and development expense as a percentage of revenue on a quarter-to-quarter basis due to seasonal revenue trends, the introduction of new products, the amount and timing of research and development costs that may be capitalized and the timing of onboarding new hires and restricted stock vesting events.
Expenditures for software developed or obtained for internal use are capitalized and amortized over a three-year period on a straight-line basis. The nature of the development projects underway during a particular period directly impacts the timing and extent of these capitalized expenditures and can affect the amount of research and development expenses in such period. The table below sets forth the amounts of capitalized and expensed research and development costs for the three and nine months ended September 30, 2024 and 2023:
|
|
Three Months Ended September 30, |
|
|
|
|
Nine Months Ended September 30, |
|
|
|||||||||||
|
|
2024 |
|
|
2023 |
|
|
% Change |
|
2024 |
|
|
2023 |
|
|
% Change |
||||
Capitalized portion of research and development |
|
$ |
33,362 |
|
|
$ |
26,578 |
|
|
26% |
|
$ |
94,394 |
|
|
$ |
70,809 |
|
|
33% |
Expensed portion of research and development |
|
|
63,047 |
|
|
|
51,864 |
|
|
22% |
|
|
175,927 |
|
|
|
143,651 |
|
|
22% |
Total research and development costs |
|
$ |
96,409 |
|
|
$ |
78,442 |
|
|
23% |
|
$ |
270,321 |
|
|
$ |
214,460 |
|
|
26% |
24
General and Administrative
During the three months ended September 30, 2024, general and administrative expenses decreased $1.2 million from the comparable prior year period due to a decrease in employee-related expenses of $1.5 million, which was partially offset by a $0.3 million increase in accounting and legal expenses.
During the nine months ended September 30, 2024, general and administrative expenses decreased $120.8 million from the comparable prior year period due to a $117.5 million reversal of previously recognized stock-based compensation expense related to the forfeiture of a restricted stock award (the “2020 CEO Performance Award”) upon Chad Richison’s transition to Co-Chief Executive Officer, a $1.9 million decrease in other employee-related expenses and a $1.4 million decrease in accounting and legal expenses.
Non-Cash Stock-Based Compensation Expense
The following table presents the non-cash stock-based compensation expense that is included within the specified line items in our consolidated statements of comprehensive income:
|
|
Three Months Ended September 30, |
|
|
|
|
Nine Months Ended September 30, |
|
|
|||||||||||
|
|
2024 |
|
|
2023 |
|
|
% Change |
|
2024 |
|
|
2023 |
|
|
% Change |
||||
Operating expenses |
|
$ |
3,873 |
|
|
$ |
2,868 |
|
|
35% |
|
$ |
11,027 |
|
|
$ |
8,606 |
|
|
28% |
Sales and marketing |
|
|
3,303 |
|
|
|
6,851 |
|
|
-52% |
|
|
13,599 |
|
|
|
18,367 |
|
|
-26% |
Research and development |
|
|
7,571 |
|
|
|
5,617 |
|
|
35% |
|
|
20,716 |
|
|
|
17,514 |
|
|
18% |
General and administrative |
|
|
9,409 |
|
|
|
17,862 |
|
|
-47% |
|
|
(90,856 |
) |
|
|
51,896 |
|
|
-275% |
Total non-cash stock-based compensation expense |
|
$ |
24,156 |
|
|
$ |
33,198 |
|
|
-27% |
|
$ |
(45,514 |
) |
|
$ |
96,383 |
|
|
-147% |
Depreciation and Amortization
During the three and nine months ended September 30, 2024, depreciation and amortization expense increased from the comparable prior year periods primarily due to the development of additional technology, purchases of other related fixed assets, and the impact of our corporate headquarters expansion that was placed into service in April 2024.
Interest Expense
The increases in interest expense for the three and nine months ended September 30, 2024, as compared to the prior year periods, were primarily due to the timing of our expansion project at our corporate headquarters, which resulted in a higher capitalization rate of interest in the comparable prior year periods.
Other Income (Expense), net
The decreases in other income (expense), net for the three and nine months ended September 30, 2024, as compared to the prior year periods, were primarily attributable to decreases in interest earned on our corporate funds due to lower cash balances. For the three and nine months ended September 30, 2024, we earned interest on our corporate funds of $4.2 million and $13.3 million, respectively. For the three and nine months ended September 30, 2023, we earned interest on our corporate funds of $6.5 million and $17.9 million, respectively.
Provision for Income Taxes
The provision for income taxes is based on a current estimate of the annual effective income tax rate adjusted to reflect the impact of discrete items. Our effective income tax rate was 21.9% and 28.1% for the nine months ended September 30, 2024 and 2023, respectively. The lower effective tax rate for the nine months ended September 30, 2024 was primarily attributable to the tax benefit related to the forfeiture of the 2020 CEO Performance Award in February 2024.
Liquidity and Capital Resources
Our principal sources of capital and liquidity are our operating cash flow and cash and cash equivalents. Our cash and cash equivalents consist primarily of demand deposit accounts and money market funds. Additionally, we maintain a $1.0 billion senior secured revolving credit facility (the “Revolving Credit Facility”), which can be accessed as needed to supplement our operating cash flow and cash balances. As of September 30, 2024, we did not have any outstanding borrowings under the Revolving Credit Facility.
We have historically funded our operations from cash flows generated from operations, cash from the sale of equity securities and debt financing. We are funding our ongoing capital expenditures from available cash. Further, to date, all cash dividends and purchases under our stock repurchase plan have been funded from available cash. We believe our existing cash and cash equivalents, cash generated from operations and available sources of liquidity will be sufficient to maintain operations, make necessary capital expenditures, pay dividends and opportunistically repurchase shares for at least the next 12 months. In addition, based on our strong
25
profitability and continued growth, we expect to meet our longer-term liquidity needs with cash flows from operations and, as needed, financing arrangements.
Credit Agreement. On July 29, 2022, we entered into a credit agreement (as amended from time to time, the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as a lender, swingline lender and issuing bank, the lenders from time to time party thereto (collectively with JPMorgan Chase Bank, N.A., the “Lenders”), and JPMorgan Chase Bank, N.A., as the administrative agent. The Credit Agreement provides for the Revolving Credit Facility in the aggregate principal amount of up to $1.0 billion. All loans under the Credit Agreement will mature on July 29, 2027 (the “Scheduled Maturity Date”). Subject to certain conditions set forth in the Credit Agreement, we may borrow, prepay and reborrow under the Revolving Credit Facility and terminate or reduce the Lenders’ commitments at any time prior to the Scheduled Maturity Date.
We are required to pay a quarterly commitment fee on the daily amount of the undrawn portion of the revolving commitments under the Revolving Credit Facility at a rate per annum of (i) 0.20% if the Company’s consolidated leverage ratio is less than 1.0 to 1.0; (ii) 0.225% if the Company’s consolidated leverage ratio is greater than or equal to 1.0 to 1.0 but less than 2.0 to 1.0; (iii) 0.25% if the Company’s consolidated leverage ratio is greater than or equal to 2.0 to 1.0 but less than 3.0 to 1.0; or (iv) 0.275% if the Company’s consolidated leverage ratio is greater than or equal to 3.0 to 1.0.
Under the Credit Agreement, we are required to maintain as of the end of each fiscal quarter a consolidated interest coverage ratio of not less than 3.0 to 1.0 and a consolidated leverage ratio of not greater than 3.5 to 1.0, stepping down to 3.25 to 1.0 as of December 31, 2024 and 3.0 to 1.0 as of December 31, 2025 and thereafter.
Stock Repurchase Plan and Withholding Shares to Cover Taxes. In May 2016, our Board of Directors authorized a stock repurchase plan allowing for the repurchase of shares of our common stock in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws, including Rule 10b5-1 programs. Since the initial authorization of the stock repurchase plan, our Board of Directors has amended and extended and authorized new stock repurchase plans from time to time. In August 2022, our Board of Directors authorized the repurchase of up to $1.1 billion of our common stock over a two-year period expiring on August 15, 2024. On July 29, 2024, our Board of Directors increased and extended the stock repurchase plan, such that $1.5 billion is available for repurchases through August 15, 2026. As of September 30, 2024, there was $1.49 billion available for repurchases under our stock repurchase plan. Our stock repurchase plan may be suspended or discontinued at any time. The actual timing, number and value of shares repurchased depends on a number of factors, including the market price of our common stock, general market and economic conditions, shares withheld for taxes associated with the vesting of equity incentive awards and other corporate considerations.
During the nine months ended September 30, 2024, we repurchased an aggregate of 892,669 shares of our common stock at an average cost of $153.70 per share, including 80,464 shares withheld to satisfy tax withholding obligations for certain employees upon the vesting of equity incentive awards. Our payment of the taxes on behalf of those employees resulted in an aggregate cash expenditure of $14.4 million and, as such, we generally subtract the amounts attributable to such withheld shares from the aggregate amount available for future purchases under our stock repurchase plan.
Dividends on Common Stock. In May 2023, our Board of Directors adopted a dividend policy under which we intend to pay quarterly cash dividends on our common stock.
The following table summarizes dividend activity during 2024.
Declaration Date |
|
Record Date |
|
Payment Date |
|
Per Share Dividend |
|
|
Total Cash Dividends Paid (in thousands)(1) |
|
||
July 29, 2024 |
|
August 26, 2024 |
|
September 9, 2024 |
|
$ |
0.375 |
|
|
$ |
20,956 |
|
April 29, 2024 |
|
May 28, 2024 |
|
June 10, 2024 |
|
$ |
0.375 |
|
|
$ |
21,191 |
|
February 5, 2024 |
|
March 4, 2024 |
|
March 18, 2024 |
|
$ |
0.375 |
|
|
$ |
21,209 |
|
On October 28, 2024, our Board of Directors declared a quarterly cash dividend of $0.375 per share of common stock payable on December 9, 2024 to stockholders of record at the close of business on November 25, 2024.
The declaration, timing and amount of each quarterly cash dividend are subject to the approval of the Board of Directors, including a determination that the dividend policy and the declaration of dividends thereunder are in the best interests of our stockholders and are in compliance with applicable law. The Board of Directors retains the power to modify, suspend, or cancel the dividend policy in any manner and at any time that it may deem necessary or appropriate.
26
Cash Flow Analysis
Our cash flows from operating activities have historically been significantly impacted by profitability, implementation revenues received but deferred, our investment in sales and marketing to drive growth, and research and development. Our ability to meet future liquidity needs will be driven by our operating performance and the extent of continued investment in our operations. Failure to generate sufficient revenues and related cash flows could have a material adverse effect on our ability to meet our liquidity needs and achieve our business objectives.
As our business grows, we expect our capital expenditures related to research and development and other strategic expansion activities to continue to increase. We completed an expansion of our corporate headquarters, which was placed into service in the second quarter of 2024. We anticipate that our capital expenditures in 2024 will be generally consistent with the prior year on a total dollar basis. Depending on certain growth opportunities, we may choose to accelerate investments in sales and marketing, acquisitions, technology and services. Actual future capital requirements will depend on many factors, including our future revenues, cash from operating activities and the level of expenditures in all areas of our business. In addition, we purchased the naming rights to the downtown Oklahoma City arena that is home to the Oklahoma City Thunder National Basketball Association franchise. Under the terms of the naming rights agreement, we committed to make payments escalating annually from $4.0 million in 2021 to $6.1 million in 2035. The payments are due in the fourth quarter of each year. Upon the conclusion of the initial term, the agreement may be extended upon the mutual agreement of both parties for an additional five-year period.
As part of our payroll and payroll tax filing services, we collect funds from our clients for employment taxes, which we remit to the appropriate tax agencies. We typically invest these funds in money market funds, demand deposit accounts, certificates of deposit, commercial paper and U.S. treasury securities from which we earn interest income during the period between receipt and disbursement of such funds.
Our cash flows from investing and financing activities are influenced by the amount of funds held for clients, which can vary significantly from quarter to quarter. The balance of the funds we hold depends on our clients’ payroll calendars and, therefore, such balance changes from period to period in accordance with the timing of each payroll cycle.
Our cash flows from financing activities are also affected by the extent to which we use available cash to purchase shares of common stock under our stock repurchase plan as well as equity incentive award vesting events that result in net share settlements and the Company paying withholding taxes on behalf of certain employees. Additionally, we intend to continue to pay a quarterly cash dividend, subject to the discretion of the Board of Directors.
The following table summarizes the consolidated statements of cash flows for the nine months ended September 30, 2024 and 2023:
|
|
Nine Months Ended September 30, |
|
|
|
|||||
|
|
2024 |
|
|
2023 |
|
|
% Change |
||
Net cash provided by (used in): |
|
|
|
|
|
|
|
|
||
Operating activities |
|
$ |
373,513 |
|
|
$ |
350,569 |
|
|
7% |
Investing activities |
|
|
33,538 |
|
|
|
(135,642 |
) |
|
-125% |
Financing activities |
|
|
(1,089,331 |
) |
|
|
(437,693 |
) |
|
149% |
Change in cash, cash equivalents, restricted cash and restricted cash equivalents |
|
$ |
(682,280 |
) |
|
$ |
(222,766 |
) |
|
206% |
Operating Activities
Cash provided by operating activities for the nine months ended September 30, 2024 primarily consisted of payments received from our clients and interest earned on funds held for clients. Cash used in operating activities primarily consisted of personnel-related expenditures to support the growth and infrastructure of our business. These payments included costs of operations, advertising and other sales and marketing efforts, IT infrastructure development, product research and development and security and administrative costs. Compared to the nine months ended September 30, 2023, our operating cash flows for the nine months ended September 30, 2024 were positively impacted by changes in working capital.
Investing Activities
Cash provided by investing activities for the nine months ended September 30, 2024 increased from the comparable prior year period due to a $175.0 million increase in proceeds from investments from funds held for clients and a $0.1 million decrease in purchases of investments from funds held for clients, which were partially offset by a $5.8 million increase in purchases of property and equipment and a $0.1 million decrease in proceeds from sale of property and equipment.
27
Financing Activities
Cash used in financing activities for the nine months ended September 30, 2024 increased from the comparable prior year period due to the impact of a $582.4 million change related to the client funds obligation, which is due to the timing of receipts from our clients and payments made to our clients’ employees and applicable taxing authorities on their behalf, a $47.8 million increase in repurchases of common stock, a $20.3 million increase in dividends paid and a $1.8 million increase in withholding taxes paid related to net share settlements. The increase in cash used in financing activities was partially offset by a $0.6 million decrease in payment of debt issuance costs.
Contractual Obligations
Our principal commitments primarily consist of leases for office space and the naming rights agreement. For additional information regarding our naming rights agreement, leases, and our commitments and contingencies, see “Note 4. Goodwill and Intangible Assets, Net”, “Note 5. Leases” and “Note 13. Commitments and Contingencies” in the Form 10-K and “Note 5. Goodwill and Intangible Assets, Net” and “Note 12. Commitments and Contingencies” in the notes to our unaudited consolidated financial statements included elsewhere in this Form 10-Q.
Critical Accounting Policies and Estimates
Our consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions to ensure that management believes them to be reasonable under the then-current facts and circumstances. Actual amounts and results may materially differ from these estimates made by management under different assumptions and conditions.
Certain accounting policies that require significant management estimates, and are deemed critical to our results of operations or financial position, are discussed in the critical accounting policies and estimates section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K. There have been no material changes to the critical accounting policies disclosed in the Form 10-K.
28
Non-GAAP Financial Measures
Management uses adjusted EBITDA and non-GAAP net income 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 any loss on the extinguishment of debt and (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 any loss on the extinguishment of debt, all of which are adjusted for the effect of income taxes. Adjusted EBITDA and non-GAAP net income are metrics that 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 U.S. 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 Form 10-Q, when viewed in combination with our results prepared in accordance with U.S. GAAP, provide a more complete understanding of the factors and trends affecting our business and performance.
Adjusted EBITDA and non-GAAP net income are not measures of financial performance under U.S. GAAP, and should not be considered a substitute for net income, which we consider to be the most directly comparable U.S. GAAP measure. Adjusted EBITDA and non-GAAP net income have limitations as analytical tools, and when assessing our operating performance, you should not consider adjusted EBITDA or non-GAAP net income in isolation, or as a substitute for net income or other consolidated statements of comprehensive income data prepared in accordance with U.S. GAAP. Adjusted EBITDA and non-GAAP net income 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.
The following tables reconcile net income to adjusted EBITDA, net income to non-GAAP net income and earnings per share to non-GAAP net income per share on a basic and diluted basis:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net income to adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
73,278 |
|
|
$ |
75,219 |
|
|
$ |
388,435 |
|
|
$ |
259,031 |
|
Interest expense |
|
|
789 |
|
|
|
222 |
|
|
|
2,353 |
|
|
|
1,661 |
|
Provision for income taxes |
|
|
35,036 |
|
|
|
26,822 |
|
|
|
109,065 |
|
|
|
101,456 |
|
Depreciation and amortization |
|
|
38,076 |
|
|
|
28,949 |
|
|
|
106,158 |
|
|
|
82,959 |
|
EBITDA |
|
|
147,179 |
|
|
|
131,212 |
|
|
|
606,011 |
|
|
|
445,107 |
|
Non-cash stock-based compensation expense |
|
|
24,156 |
|
|
|
33,198 |
|
|
|
(45,514 |
) |
|
|
96,383 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
1,222 |
|
|
|
— |
|
|
|
1,222 |
|
Adjusted EBITDA |
|
$ |
171,335 |
|
|
$ |
165,632 |
|
|
$ |
560,497 |
|
|
$ |
542,712 |
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net income to non-GAAP net income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
73,278 |
|
|
$ |
75,219 |
|
|
$ |
388,435 |
|
|
$ |
259,031 |
|
Non-cash stock-based compensation expense |
|
|
24,156 |
|
|
|
33,198 |
|
|
|
(45,514 |
) |
|
|
96,383 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
1,222 |
|
|
|
— |
|
|
|
1,222 |
|
Income tax effect on non-GAAP adjustments |
|
|
(4,016 |
) |
|
|
(7,263 |
) |
|
|
(11,020 |
) |
|
|
(17,347 |
) |
Non-GAAP net income |
|
$ |
93,418 |
|
|
$ |
102,376 |
|
|
$ |
331,901 |
|
|
$ |
339,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
55,929 |
|
|
|
57,825 |
|
|
|
56,307 |
|
|
|
57,871 |
|
Diluted |
|
|
55,964 |
|
|
|
57,966 |
|
|
|
56,365 |
|
|
|
58,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share, basic |
|
$ |
1.31 |
|
|
$ |
1.30 |
|
|
$ |
6.90 |
|
|
$ |
4.48 |
|
Earnings per share, diluted |
|
$ |
1.31 |
|
|
$ |
1.30 |
|
|
$ |
6.89 |
|
|
$ |
4.46 |
|
Non-GAAP net income per share, basic |
|
$ |
1.67 |
|
|
$ |
1.77 |
|
|
$ |
5.89 |
|
|
$ |
5.86 |
|
Non-GAAP net income per share, diluted |
|
$ |
1.67 |
|
|
$ |
1.77 |
|
|
$ |
5.89 |
|
|
$ |
5.84 |
|
29
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Earnings per share to non-GAAP net income per share, basic: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share, basic |
|
$ |
1.31 |
|
|
$ |
1.30 |
|
|
$ |
6.90 |
|
|
$ |
4.48 |
|
Non-cash stock-based compensation expense |
|
|
0.43 |
|
|
|
0.57 |
|
|
|
(0.81 |
) |
|
|
1.67 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
0.02 |
|
|
|
— |
|
|
|
0.02 |
|
Income tax effect on non-GAAP adjustments |
|
|
(0.07 |
) |
|
|
(0.12 |
) |
|
|
(0.20 |
) |
|
|
(0.31 |
) |
Non-GAAP net income per share, basic |
|
$ |
1.67 |
|
|
$ |
1.77 |
|
|
$ |
5.89 |
|
|
$ |
5.86 |
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Earnings per share to non-GAAP net income per share, diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share, diluted |
|
$ |
1.31 |
|
|
$ |
1.30 |
|
|
$ |
6.89 |
|
|
$ |
4.46 |
|
Non-cash stock-based compensation expense |
|
|
0.43 |
|
|
|
0.57 |
|
|
|
(0.81 |
) |
|
|
1.66 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
0.02 |
|
|
|
— |
|
|
|
0.02 |
|
Income tax effect on non-GAAP adjustments |
|
|
(0.07 |
) |
|
|
(0.12 |
) |
|
|
(0.19 |
) |
|
|
(0.30 |
) |
Non-GAAP net income per share, diluted |
|
$ |
1.67 |
|
|
$ |
1.77 |
|
|
$ |
5.89 |
|
|
$ |
5.84 |
|
30
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Sensitivity
As of September 30, 2024, we had corporate cash and cash equivalents totaling $325.8 million and funds held for clients cash and cash equivalents totaling $1.4 billion. These amounts are invested primarily in demand deposit accounts and money market funds. We consider all highly liquid debt instruments with an original maturity of three months or less and SEC-registered money market mutual funds to be cash equivalents. Additionally, we had available-for-sale securities totaling $24.9 million included within funds held for clients on the consolidated balance sheets as of September 30, 2024. Our available-for-sale securities consisted of a U.S. treasury security with an original maturity of two years. The primary objectives of our investing activities are capital preservation, meeting our liquidity needs and, with respect to investing client funds, generating interest income while maintaining the safety of principal. We do not enter into investments for trading or speculative purposes.
Our investments are subject to market risk due to changes in interest rates. The market value of fixed rate securities may be adversely affected due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates, or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. We classify all debt securities as available-for-sale and, as a result, no gains or losses are recognized due to changes in interest rates until such securities are sold or decreases in fair value are determined to be nonrecoverable. To date, we have not recorded any credit impairment losses on our portfolio.
As of September 30, 2024, a hypothetical increase or decrease in interest rates of 100 basis points would result in an approximately $22.9 million increase or decrease, respectively, in interest earned on funds held for clients over the ensuing 12-month period. Interest earned on funds held for clients is included in recurring revenues in the consolidated statements of comprehensive income. There are no incremental costs of revenue associated with changes in interest earned on funds held for clients.
An immediate increase in interest rates of 100 basis points would have resulted in a $0.1 million reduction in the aggregate market value of our U.S. treasury security as of September 30, 2024. An immediate decrease in interest rates of 100 basis points would have resulted in a $0.1 million increase in the aggregate market value of our U.S. treasury security as of September 30, 2024. These estimates are based on a sensitivity model that measures market value changes when changes in interest rates occur.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, including our Chief Executive Officer and our Chief Financial Officer, evaluated, as of September 30, 2024, the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2024 to ensure that information required to be disclosed by us in this Form 10-Q is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
We believe, however, that a controls system, no matter how well designed and operated, can only provide reasonable assurance that the objectives of the controls systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, within a company have been detected.
Changes in Internal Control over Financial Reporting
There have been no material changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
31
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are involved in various disputes, claims, suits, investigations and legal proceedings arising in the ordinary course of business. “Item 3. Legal Proceedings” of the Form 10-K includes a discussion of legal proceedings. There have been no material changes from the information set forth in “Item 3. Legal Proceedings” of the Form 10-K. We believe that the resolution of current pending legal matters will not have a material adverse effect on our business, financial condition, results of operations or cash flows. Nonetheless, we cannot predict the outcome of these proceedings, as legal matters are subject to inherent uncertainties, and there exists the possibility that the ultimate resolution of these matters could have a material adverse effect on our business, financial condition, results of operations or cash flows.
Item 1A. Risk Factors
There have been no material changes from the information set forth in “Item 1A. Risk Factors” in the Form 10-K filed with the SEC on February 15, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The number of shares of common stock repurchased by us during the three months ended September 30, 2024 is set forth below.
|
|
Total Number of Shares Purchased |
|
|
Average Price Paid per Share(2) |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) |
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(1)(2) |
|
||||
July 1 - 31, 2024 |
|
|
216,263 |
|
|
$ |
140.01 |
|
|
|
216,263 |
|
|
$ |
1,500,000,000 |
|
August 1 - 31, 2024(3) |
|
|
86,635 |
|
|
$ |
158.23 |
|
|
|
86,635 |
|
|
$ |
1,486,292,000 |
|
September 1 - 30, 2024(4) |
|
|
347 |
|
|
$ |
169.09 |
|
|
|
347 |
|
|
$ |
1,486,233,000 |
|
Total |
|
|
303,245 |
|
|
|
|
|
|
303,245 |
|
|
|
|
||
Item 5. Other Information
Rule 10b5-1 Trading Arrangements
During the quarter ended September 30, 2024, no director or officer (as defined in Rule 16a-1(f) of the Exchange Act) of the Company
32
Amended and Restated Bylaws
On October 28, 2024, our Board of Directors amended and restated the Company’s existing amended and restated bylaws (as so amended and restated, the “Amended and Restated Bylaws”), effective immediately. The amendments contained in the Amended and Restated Bylaws:
The foregoing summary of the Amended and Restated Bylaws does not purport to be complete and is qualified in its entirety by reference to the full text of the Amended and Restated Bylaws, a copy of which is attached hereto as Exhibit 3.2 and is incorporated herein by reference.
33
Item 6. Exhibits
The following exhibits are incorporated herein by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K):
Exhibit No. |
|
Description |
|
|
|
3.1 |
|
|
|
|
|
3.2* |
|
|
|
|
|
4.1 |
|
|
|
|
|
31.1* |
|
|
|
|
|
31.2* |
|
|
|
|
|
32.1** |
|
|
|
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document – the XBRL Instance Document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbases Documents. |
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
+ Management contract or compensatory plan or arrangement.
* Filed herewith.
** The certifications attached as Exhibit 32.1 are not deemed “filed” with the SEC and are not to be incorporated by reference into any filing of Paycom Software, Inc. under the Securities Act whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
PAYCOM SOFTWARE, INC. |
|
|
|
|
Date: October 31, 2024 |
By: |
/s/ Chad Richison |
|
|
Chad Richison |
|
|
President and Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
|
|
Date: October 31, 2024 |
By: |
/s/ Craig E. Boelte |
|
|
Craig E. Boelte |
|
|
Chief Financial Officer |
|
|
(Principal Accounting Officer and Principal Financial Officer) |
35