Paycom Software, Inc. Reports Third Quarter 2020 Results

11/04/2020

Third Quarter Revenues of $196.5 million, up 12.3% from the comparable prior year period

Third Quarter GAAP Net Income of $27.5 million, representing 14.0% of total revenues, or $0.47 per diluted share

Third Quarter Non-GAAP Net Income of $40.6 million, or $0.70 per diluted share

Third Quarter Adjusted EBITDA of $67.5 million, representing 34.3% of total revenues

OKLAHOMA CITY--(BUSINESS WIRE)-- Paycom Software, Inc. (“Paycom,” “we” and “our”) (NYSE: PAYC), a leading provider of comprehensive, cloud-based human capital management software, today announced its financial results for the quarter ended September 30, 2020.

“We had an excellent third quarter and continue to see very strong demand for our differentiated solutions,” said Paycom’s founder and CEO, Chad Richison. “We are putting greater distance between our product’s value proposition and that of our competitors. We believe Paycom is the clear choice for those seeking a more efficient way to manage their Human Capital Management needs. With less than 5% market share today, we believe we have a long runway and are in a very good position to generate strong growth for years to come.”

Financial Highlights for the Third Quarter of 2020

Total Revenues of $196.5 million represented a 12.3% increase compared to total revenues of $175.0 million in the same period last year. Recurring revenues of $192.7 million increased 12.4% from the comparable prior year period, and constituted 98.0% of total revenues.

GAAP Net Income was $27.5 million, or $0.47 per diluted share, compared to GAAP net income of $39.2 million, or $0.67 per diluted share, in the same period last year.

Non-GAAP Net Income1was $40.6 million, or $0.70 per diluted share, compared to $41.1 million, or $0.70 per diluted share, in the same period last year.

Adjusted EBITDA1 was $67.5 million, compared to $66.6 million in the same period last year.

Cash and Cash Equivalents were $156.4 million as of September 30, 2020, compared to $133.7 million as of December 31, 2019.

Total Debt, Net was $31.3 million as of September 30, 2020, compared to $32.6 million as of December 31, 2019.

1 Adjusted EBITDA and non-GAAP net income are non-GAAP financial measures. Please see the discussion below under the heading "Use of Non-GAAP Financial Information" and the reconciliations at the end of this release for additional information concerning these and other non-GAAP financial measures.

Financial Outlook

Paycom provides the following expected financial guidance:

Quarter Ending December 31, 2020:

Total Revenues in the range of $212.0 million to $214.0 million.

Adjusted EBITDA in the range of $76.0 million to $78.0 million.

We have not reconciled the forward-looking adjusted EBITDA range presented above and discussed on the teleconference call to net income, nor the forward-looking adjusted EBITDA margin discussed on the teleconference call to net income margin, because applicable information for future periods, on which these reconciliations would be based, is not readily available due to uncertainty regarding, and the potential variability of, depreciation and amortization, interest expense, taxes, non-cash stock-based compensation expense, change in fair value of our interest rate swap and other items. Accordingly, reconciliations of the forward-looking adjusted EBITDA range to net income and forward-looking adjusted EBITDA margin to net income margin are not available at this time without unreasonable effort. During the teleconference call, we also refer to a forward-looking estimate of our implied revenue growth plus adjusted EBITDA margin for 2020, or the “Rule of 50.” Because we are unable to reconcile forward-looking adjusted EBITDA margin to net income margin without unreasonable effort, we are unable to reconcile “Rule of 50” to the most comparable GAAP measure without unreasonable effort.

Impact of the COVID-19 Pandemic

During the third quarter of 2020, we maintained the work-from-home arrangements implemented in March for the safety of our employees, while simultaneously ensuring our clients continued to receive the same level of service they have come to expect from our dedicated, one-on-one customer service model. As of September 30, 2020, 95% of our employees were working remotely. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees and clients. Although we currently have some insight with respect to the shorter-term effects of the COVID-19 pandemic to date, it is not possible at this time to estimate the full impact that the crisis could continue to have on our business and results of operations.

  • The COVID-19 pandemic has resulted in, and may continue to result in, headcount reductions across our client base. Because we charge our clients on a per-employee basis for certain services we provide, decreased headcount at our clients negatively impacted our recurring revenue in the third quarter of 2020, and we expect that our recurring revenue in future periods will continue to be negatively impacted by such headcount reductions until employment levels among our client base at the onset of the pandemic return to pre-pandemic levels.
  • Despite growth in the number of clients in our base, employee headcount reductions at our clients as well as clients electing to defer payment of their share of Social Security taxes under the CARES Act resulted in nominal growth in our average funds held for clients balance in the third quarter of 2020, relative to the third quarter of 2019. Significantly lower average interest rates in 2020 had a negative effect on interest earned on funds held for clients and, consequently, recurring revenue growth in the third quarter of 2020.
  • Our solution allows clients to seamlessly manage and communicate with their remote workforces. In the current work-from-home environment, our clients are recognizing the benefits of our focus on employee usage, as well as the strengths and advantages of our single database solution.
  • Our salesforce continues to conduct all meetings with current and prospective clients virtually. The shift from in-person to video conference and teleconference sales meetings represents a unique opportunity to meet virtually with a greater number of client prospects in a given day than through in-person meetings.

Use of Non-GAAP Financial Information

To supplement our financial information presented in accordance with generally accepted accounting principles in the United States (“GAAP”), we present certain non-GAAP financial measures in this press release and on the related teleconference call, including adjusted EBITDA, non-GAAP net income, adjusted gross profit, adjusted gross margin, adjusted sales and marketing expenses, adjusted total administrative expenses, adjusted research and development expenses and adjusted total research and development costs. Management uses these non-GAAP financial measures as supplemental measures to review and assess the performance of our core business operations and for planning purposes. We define (i) adjusted EBITDA as net income plus interest expense, taxes, depreciation and amortization, non-cash stock-based compensation expense, certain transaction expenses that are not core to our operations (if any) and the change in fair value of our interest rate swap, (ii) non-GAAP net income as net income plus non-cash stock-based compensation expense, certain transaction expenses that are not core to our operations (if any) and the change in fair value of our interest rate swap, all of which are adjusted for the effect of income taxes, (iii) adjusted gross profit as gross profit plus applicable non-cash stock-based compensation expense, (iv) adjusted gross margin as gross profit plus applicable non-cash stock-based compensation expense, divided by total revenues, (v) each adjusted expense item as the GAAP expense amount less applicable non-cash stock-based compensation expense, (vi) adjusted total research and development costs as total research and development costs (including the capitalized portion) less applicable non-cash stock-based compensation (including the capitalized portion), (vii) adjusted EBITDA margin as adjusted EBITDA (calculated as described in clause (i)) divided by total revenues and (viii) “Rule of 50” as revenue growth (expressed as a percentage) plus adjusted EBITDA margin (calculated as described in clause (vii)). The non-GAAP financial measures presented in this press release and discussed on the related teleconference call provide investors with greater transparency to the information used by management in its financial and operational decision-making. We believe these metrics are useful to investors because they facilitate comparisons of our core business operations across periods on a consistent basis, as well as comparisons with the results of peer companies, many of which use similar non-GAAP financial measures to supplement results under GAAP. In addition, adjusted EBITDA is a measure that provides useful information to management about the amount of cash available for reinvestment in our business, repurchasing common stock and other purposes. Management believes that the non-GAAP measures presented in this press release and discussed on the related teleconference call, when viewed in combination with our results prepared in accordance with GAAP, provide a more complete understanding of the factors and trends affecting our business and performance.

The non-GAAP financial measures presented in this press release and discussed on the related teleconference call are not measures of financial performance under GAAP and should not be considered a substitute for net income, gross profit, gross margin, research and development expenses, sales and marketing expenses, administrative expenses and total research and development costs. Non-GAAP financial measures have limitations as analytical tools, and when assessing our operating performance, you should not consider these non-GAAP financial measures in isolation, or as a substitute for the consolidated statements of income data prepared in accordance with GAAP. The non-GAAP financial measures that we present may not be comparable to similarly titled measures of other companies and other companies may not calculate such measures in the same manner as we do.

Conference Call Details:

In conjunction with this announcement, Paycom will host a conference call today, November 4, 2020, at 5:00 p.m. Eastern time to discuss its financial results. To access this call, dial (833) 233-4461 (domestic) or (647) 689-4140 (international) and announce Paycom as the conference name to the operator. A live webcast as well as the replay of the conference call will be available on the Investor Relations page of Paycom’s website at investors.paycom.com. A replay of this conference call can also be accessed by dialing (800) 585-8367 (domestic) or (416) 621-4642 (international) until November 11, 2020. The replay passcode is 5744927.

About Paycom

As a leader in payroll and HR technology, Oklahoma City-based Paycom redefines the human capital management industry by allowing companies to effectively navigate a rapidly changing business environment. Its cloud-based software solution is based on a core system of record maintained in a single database for all human capital management functions, providing the functionality that businesses need to manage the complete employment lifecycle, from recruitment to retirement. Paycom has the ability to serve businesses of all sizes and in every industry. As one of the leading human capital management providers, Paycom serves clients in all 50 states from offices across the country.

Forward-Looking Statements

Certain statements in this press release are, and certain statements on the related teleconference call may be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are any statements that refer to Paycom’s estimated or anticipated results, other non-historical facts or future events and include, but are not limited to, statements regarding our business strategy; anticipated future operating results and operating expenses, cash flows, capital resources, dividends and liquidity; trends, opportunities and risks affecting our business, industry and financial results; future expansion or growth plans and potential for future growth; our ability to attract new clients to purchase our solution; our ability to retain clients and induce them to purchase additional applications; our ability to accurately forecast future revenues and appropriately plan our expenses; market acceptance of our solution and applications; our expectations regarding future revenues generated by certain applications; our ability to attract and retain qualified employees and key personnel; future regulatory, judicial and legislative changes; how certain factors affecting our performance correlate to improvement or deterioration in the labor market; our plan to open additional sales offices and our ability to effectively execute such plan; the sufficiency of our existing cash and cash equivalents to meet our working capital and capital expenditure needs over the next 12 months; the timeline for construction of our new Texas operations facility; our plans regarding our capital expenditures and investment activity as our business grows, including with respect to our new Texas operations facility and research and development; our plans to repurchase shares of our common stock through a stock repurchase plan; our expected income tax rate for future periods; and the impact of the novel coronavirus (COVID-19) pandemic on our business, results of operations, cash flows, financial condition and liquidity. In addition, forward-looking statements also consist of statements involving trend analyses and statements including such words as “anticipate,” “believe,” “could,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “should,” “will,” “would,” and similar expressions or the negative of such terms or other comparable terminology. These forward-looking statements speak only as of the date hereof and are subject to business and economic risks. As such, our actual results could differ materially from those set forth in the forward-looking statements as a result of the factors discussed in our filings with the Securities and Exchange Commission, including but not limited to those discussed in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. We do not undertake any obligation to update or revise the forward-looking statements to reflect events or circumstances that exist after the date on which such statements were made, except to the extent required by law.

Paycom Software, Inc.

 

Unaudited Consolidated Balance Sheets

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2020

 

 

December 31, 2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

156,398

 

 

$

133,667

 

Accounts receivable

 

 

12,355

 

 

 

9,298

 

Prepaid expenses

 

 

20,757

 

 

 

13,561

 

Inventory

 

 

924

 

 

 

1,158

 

Income tax receivable

 

 

9,280

 

 

 

4,020

 

Deferred contract costs

 

 

56,245

 

 

 

46,618

 

Current assets before funds held for clients

 

 

255,959

 

 

 

208,322

 

Funds held for clients

 

 

1,522,357

 

 

 

1,662,778

 

Total current assets

 

 

1,778,316

 

 

 

1,871,100

 

Property and equipment, net

 

 

275,624

 

 

 

238,458

 

Goodwill

 

 

51,889

 

 

 

51,889

 

Long-term deferred contract costs

 

 

342,436

 

 

 

292,134

 

Other assets

 

 

36,934

 

 

 

33,336

 

Total assets

 

$

2,485,199

 

 

$

2,486,917

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

9,237

 

 

$

5,051

 

Accrued commissions and bonuses

 

 

7,940

 

 

 

12,343

 

Accrued payroll and vacation

 

 

27,722

 

 

 

14,870

 

Deferred revenue

 

 

13,887

 

 

 

11,105

 

Current portion of long-term debt

 

 

1,775

 

 

 

1,775

 

Accrued expenses and other current liabilities

 

 

44,883

 

 

 

45,600

 

Current liabilities before client funds obligation

 

 

105,444

 

 

 

90,744

 

Client funds obligation

 

 

1,522,357

 

 

 

1,662,778

 

Total current liabilities

 

 

1,627,801

 

 

 

1,753,522

 

Deferred income tax liabilities, net

 

 

102,421

 

 

 

91,217

 

Long-term deferred revenue

 

 

71,500

 

 

 

65,139

 

Net long-term debt, less current portion

 

 

29,554

 

 

 

30,858

 

Other long-term liabilities

 

 

21,524

 

 

 

19,553

 

Total long-term liabilities

 

 

224,999

 

 

 

206,767

 

Total liabilities

 

 

1,852,800

 

 

 

1,960,289

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock, $0.01 par value (100,000 shares authorized, 61,639 and 61,350 shares issued at September 30, 2020 and December 31, 2019, respectively; 57,605 and 57,660 shares outstanding at September 30, 2020 and December 31, 2019, respectively)

 

 

616

 

 

 

613

 

Additional paid-in capital

 

 

322,321

 

 

 

257,501

 

Retained earnings

 

 

695,252

 

 

 

576,166

 

Treasury stock, at cost (4,034 and 3,689 shares at September 30, 2020 and December 31, 2019, respectively)

 

 

(385,790

)

 

 

(307,652

)

Total stockholders' equity

 

 

632,399

 

 

 

526,628

 

Total liabilities and stockholders' equity

 

$

2,485,199

 

 

$

2,486,917

 

Paycom Software, Inc.

 

Unaudited Consolidated Statements of Income

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

 

 

2020

 

 

 

2019

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring

 

$

192,664

 

 

$

171,405

 

 

$

609,109

 

 

$

534,267

 

Implementation and other

 

 

3,868

 

 

 

3,601

 

 

 

11,378

 

 

 

9,995

 

Total revenues

 

 

196,532

 

 

 

175,006

 

 

 

620,487

 

 

 

544,262

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

24,278

 

 

 

21,088

 

 

 

71,651

 

 

 

66,153

 

Depreciation and amortization

 

 

6,634

 

 

 

5,304

 

 

 

18,865

 

 

 

14,796

 

Total cost of revenues

 

 

30,912

 

 

 

26,392

 

 

 

90,516

 

 

 

80,949

 

Administrative expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

62,146

 

 

 

47,060

 

 

 

173,228

 

 

 

128,280

 

Research and development

 

 

21,772

 

 

 

19,605

 

 

 

65,171

 

 

 

54,869

 

General and administrative

 

 

40,516

 

 

 

25,728

 

 

 

121,487

 

 

 

98,386

 

Depreciation and amortization

 

 

7,150

 

 

 

5,665

 

 

 

20,209

 

 

 

15,848

 

Total administrative expenses

 

 

131,584

 

 

 

98,058

 

 

 

380,095

 

 

 

297,383

 

Total operating expenses

 

 

162,496

 

 

 

124,450

 

 

 

470,611

 

 

 

378,332

 

Operating income

 

 

34,036

 

 

 

50,556

 

 

 

149,876

 

 

 

165,930

 

Interest expense

 

 

 

 

 

(260

)

 

 

(19

)

 

 

(794

)

Other income (expense), net

 

 

246

 

 

 

195

 

 

 

(522

)

 

 

(168

)

Income before income taxes

 

 

34,282

 

 

 

50,491

 

 

 

149,335

 

 

 

164,968

 

Provision for income taxes

 

 

6,800

 

 

 

11,339

 

 

 

30,249

 

 

 

29,772

 

Net income

 

$

27,482

 

 

$

39,152

 

 

$

119,086

 

 

$

135,196

 

Earnings per share, basic

 

$

0.48

 

 

$

0.68

 

 

$

2.07

 

 

$

2.35

 

Earnings per share, diluted

 

$

0.47

 

 

$

0.67

 

 

$

2.04

 

 

$

2.31

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

57,603

 

 

 

57,654

 

 

 

57,609

 

 

 

57,528

 

Diluted

 

 

58,171

 

 

 

58,383

 

 

 

58,312

 

 

 

58,403

 

Paycom Software, Inc.

 

Unaudited Consolidated Statements of Cash Flows

 

(in thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

119,086

 

 

$

135,196

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

39,073

 

 

 

30,644

 

Accretion of discount on available-for-sale securities

 

 

(1,374

)

 

 

(646

)

Amortization of debt issuance costs

 

 

27

 

 

 

26

 

Stock-based compensation expense

 

 

56,531

 

 

 

41,122

 

Cash paid for derivative settlement

 

 

(424

)

 

 

(26

)

Loss on derivative

 

 

2,042

 

 

 

1,789

 

Deferred income taxes, net

 

 

11,204

 

 

 

15,715

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(3,057

)

 

 

805

 

Prepaid expenses

 

 

(7,196

)

 

 

(5,066

)

Inventory

 

 

32

 

 

 

(181

)

Other assets

 

 

(3,757

)

 

 

(2,367

)

Deferred contract costs

 

 

(56,922

)

 

 

(53,654

)

Accounts payable

 

 

4,491

 

 

 

(970

)

Income taxes, net

 

 

(5,260

)

 

 

(5,550

)

Accrued commissions and bonuses

 

 

(4,403

)

 

 

(2,239

)

Accrued payroll and vacation

 

 

12,853

 

 

 

6,931

 

Deferred revenue

 

 

9,143

 

 

 

8,714

 

Accrued expenses and other current liabilities

 

 

2,239

 

 

 

6,176

 

Net cash provided by operating activities

 

 

174,328

 

 

 

176,419

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchase of short-term investments from funds held for clients

 

 

(217,858

)

 

 

(61,268

)

Proceeds from maturities of short-term investments from funds held for clients

 

 

93,593

 

 

 

54,200

 

Purchases of property and equipment

 

 

(73,502

)

 

 

(71,080

)

Net cash used in investing activities

 

 

(197,767

)

 

 

(78,148

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Repurchases of common stock

 

 

(52,040

)

 

 

 

Withholding taxes paid related to net share settlements

 

 

(26,099

)

 

 

(42,229

)

Payments on long-term debt

 

 

(1,331

)

 

 

(1,331

)

Net change in client funds obligation

 

 

(140,421

)

 

 

(131,869

)

Payment of debt issuance costs

 

 

 

 

 

(16

)

Net cash used in financing activities

 

 

(219,891

)

 

 

(175,445

)

Decrease in cash, cash equivalents, restricted cash and restricted cash equivalents

 

 

(243,330

)

 

 

(77,174

)

Cash, cash equivalents, restricted cash and restricted cash equivalents

 

 

 

 

 

 

 

 

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

 

 

1,641,854

 

 

 

986,464

 

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

 

$

1,398,524

 

 

$

909,290

 

 

Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

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

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

156,398

 

 

$

108,127

 

Restricted cash included in funds held for clients

 

 

1,242,126

 

 

 

801,163

 

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

 

$

1,398,524

 

 

$

909,290

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment, accrued but not paid

 

$

2,707

 

 

$

2,190

 

Stock-based compensation for capitalized software

 

$

5,284

 

 

$

4,287

 

Right of use assets obtained in exchange for operating lease liabilities

 

$

9,323

 

 

$

9,924

 

 

Paycom Software, Inc.

Unaudited Reconciliations of GAAP to Non-GAAP Financial Measures

(in thousands, except per share amounts)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income to adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

27,482

 

 

$

39,152

 

 

$

119,086

 

 

$

135,196

 

Interest expense

 

 

 

 

 

260

 

 

 

19

 

 

 

794

 

Provision for income taxes

 

 

6,800

 

 

 

11,339

 

 

 

30,249

 

 

 

29,772

 

Depreciation and amortization

 

 

13,784

 

 

 

10,969

 

 

 

39,074

 

 

 

30,644

 

EBITDA

 

 

48,066

 

 

 

61,720

 

 

 

188,428

 

 

 

196,406

 

Non-cash stock-based compensation expense

 

 

19,502

 

 

 

4,454

 

 

 

56,531

 

 

 

41,122

 

Change in fair value of interest rate swap

 

 

(88

)

 

 

391

 

 

 

1,618

 

 

 

1,763

 

Adjusted EBITDA

 

$

67,480

 

 

$

66,565

 

 

$

246,577

 

 

$

239,291

 

Net income margin

 

 

14.0

%

 

 

22.4

%

 

 

19.2

%

 

 

24.8

%

Adjusted EBITDA margin

 

 

34.3

%

 

 

38.0

%

 

 

39.7

%

 

 

44.0

%

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income to non-GAAP net income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

27,482

 

 

$

39,152

 

 

$

119,086

 

 

$

135,196

 

Non-cash stock-based compensation expense

 

 

19,502

 

 

 

4,454

 

 

 

56,531

 

 

 

41,122

 

Change in fair value of interest rate swap

 

 

(88

)

 

 

391

 

 

 

1,618

 

 

 

1,763

 

Income tax effect on non-GAAP adjustments

 

 

(6,332

)

 

 

(2,875

)

 

 

(22,802

)

 

 

(23,974

)

Non-GAAP net income

 

$

40,564

 

 

$

41,122

 

 

$

154,433

 

 

$

154,107

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

57,603

 

 

 

57,654

 

 

 

57,609

 

 

 

57,528

 

Diluted

 

 

58,171

 

 

 

58,383

 

 

 

58,312

 

 

 

58,403

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share, basic

 

$

0.48

 

 

$

0.68

 

 

$

2.07

 

 

$

2.35

 

Earnings per share, diluted

 

$

0.47

 

 

$

0.67

 

 

$

2.04

 

 

$

2.31

 

Non-GAAP net income per share, basic

 

$

0.70

 

 

$

0.71

 

 

$

2.68

 

 

$

2.68

 

Non-GAAP net income per share, diluted

 

$

0.70

 

 

$

0.70

 

 

$

2.65

 

 

$

2.64

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share, basic

 

$

0.48

 

 

$

0.68

 

 

$

2.07

 

 

$

2.35

 

Non-cash stock-based compensation expense

 

 

0.34

 

 

 

0.08

 

 

 

0.98

 

 

 

0.71

 

Change in fair value of interest rate swap

 

 

 

 

 

0.01

 

 

 

0.03

 

 

 

0.03

 

Income tax effect on non-GAAP adjustments

 

 

(0.12

)

 

 

(0.06

)

 

 

(0.40

)

 

 

(0.41

)

Non-GAAP net income per share, basic

 

$

0.70

 

 

$

0.71

 

 

$

2.68

 

 

$

2.68

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share, diluted

 

$

0.47

 

 

$

0.67

 

 

$

2.04

 

 

$

2.31

 

Non-cash stock-based compensation expense

 

 

0.34

 

 

 

0.08

 

 

 

0.97

 

 

 

0.70

 

Change in fair value of interest rate swap

 

 

 

 

 

0.01

 

 

 

0.03

 

 

 

0.03

 

Income tax effect on non-GAAP adjustments

 

 

(0.11

)

 

 

(0.06

)

 

 

(0.39

)

 

 

(0.40

)

Non-GAAP net income per share, diluted

 

$

0.70

 

 

$

0.70

 

 

$

2.65

 

 

$

2.64

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Adjusted gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

196,532

 

 

$

175,006

 

 

$

620,487

 

 

$

544,262

 

Less: Total cost of revenues

 

 

(30,912

)

 

 

(26,392

)

 

 

(90,516

)

 

 

(80,949

)

Total gross profit

 

 

165,620

 

 

 

148,614

 

 

 

529,971

 

 

 

463,313

 

Plus: Non-cash stock-based compensation expense

 

 

1,227

 

 

 

750

 

 

 

4,158

 

 

 

3,955

 

Total adjusted gross profit

 

$

166,847

 

 

$

149,364

 

 

$

534,129

 

 

$

467,268

 

Gross margin

 

 

84.3

%

 

 

84.9

%

 

 

85.4

%

 

 

85.1

%

Adjusted gross margin

 

 

84.9

%

 

 

85.3

%

 

 

86.1

%

 

 

85.9

%

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Adjusted sales and marketing expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing expenses

 

$

62,146

 

 

$

47,060

 

 

$

173,228

 

 

$

128,280

 

Less: Non-cash stock-based compensation expense

 

 

(3,829

)

 

 

(344

)

 

 

(10,795

)

 

 

(5,453

)

Adjusted sales and marketing expenses

 

$

58,317

 

 

$

46,716

 

 

$

162,433

 

 

$

122,827

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

196,532

 

 

$

175,006

 

 

$

620,487

 

 

$

544,262

 

Sales and marketing expenses as a % of revenues

 

 

31.6

%

 

 

26.9

%

 

 

27.9

%

 

 

23.6

%

Adjusted sales and marketing expenses as a % of revenues

 

 

29.7

%

 

 

26.7

%

 

 

26.2

%

 

 

22.6

%

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Adjusted total administrative expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total administrative expenses

 

$

131,584

 

 

$

98,058

 

 

$

380,095

 

 

$

297,383

 

Less: Non-cash stock-based compensation expense

 

 

(18,275

)

 

 

(3,704

)

 

 

(52,373

)

 

 

(37,167

)

Adjusted total administrative expenses

 

$

113,309

 

 

$

94,354

 

 

$

327,722

 

 

$

260,216

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

196,532

 

 

$

175,006

 

 

$

620,487

 

 

$

544,262

 

Total administrative expenses as a % of revenues

 

 

67.0

%

 

 

56.0

%

 

 

61.3

%

 

 

54.6

%

Adjusted total administrative expenses as a % of revenues

 

 

57.7

%

 

 

53.9

%

 

 

52.8

%

 

 

47.8

%

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Adjusted research and development expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

$

21,772

 

 

$

19,605

 

 

$

65,171

 

 

$

54,869

 

Less: Non-cash stock-based compensation expense

 

 

(2,115

)

 

 

(1,586

)

 

 

(7,270

)

 

 

(5,137

)

Adjusted research and development expenses

 

$

19,657

 

 

$

18,019

 

 

$

57,901

 

 

$

49,732

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

196,532

 

 

$

175,006

 

 

$

620,487

 

 

$

544,262

 

Research and development expenses as a % of revenues

 

 

11.1

%

 

 

11.2

%

 

 

10.5

%

 

 

10.1

%

Adjusted research and development expenses as a % of revenues

 

 

10.0

%

 

 

10.3

%

 

 

9.3

%

 

 

9.1

%

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Total research and development costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capitalized research and development costs

 

$

11,727

 

 

$

7,089

 

 

$

32,448

 

 

$

22,726

 

Research and development expenses

 

 

21,772

 

 

 

19,605

 

 

 

65,171

 

 

 

54,869

 

Total research and development costs

 

$

33,499

 

 

$

26,694

 

 

$

97,619

 

 

$

77,595

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

196,532

 

 

$

175,006

 

 

$

620,487

 

 

$

544,262

 

Total research and development costs as a % of revenues

 

 

17.0

%

 

 

15.3

%

 

 

15.7

%

 

 

14.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted total research and development costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total research and development costs

 

$

33,499

 

 

$

26,694

 

 

$

97,619

 

 

$

77,595

 

Less: Capitalized non-cash stock-based compensation

 

 

(1,566

)

 

 

(334

)

 

 

(5,284

)

 

 

(4,287

)

Less: Non-cash stock-based compensation expense

 

 

(2,115

)

 

 

(1,586

)

 

 

(7,270

)

 

 

(5,137

)

Adjusted total research and development costs

 

$

29,818

 

 

$

24,774

 

 

$

85,065

 

 

$

68,171

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

196,532

 

 

$

175,006

 

 

$

620,487

 

 

$

544,262

 

Adjusted total research and development costs as a % of revenues

 

 

15.2

%

 

 

14.2

%

 

 

13.7

%

 

 

12.5

%

 

Paycom Software, Inc.

Unaudited Components of Non-Cash Stock-Based Compensation Expense

(in thousands)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2020

 

Non-cash stock-based compensation expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

$

1,227

 

 

$

750

 

 

$

4,158

 

 

$

3,955

 

Sales and marketing

 

 

3,829

 

 

 

344

 

 

 

10,795

 

 

 

5,453

 

Research and development

 

 

2,115

 

 

 

1,586

 

 

 

7,270

 

 

 

5,137

 

General and administrative

 

 

12,331

 

 

 

1,774

 

 

 

34,308

 

 

 

26,577

 

Total non-cash stock-based compensation expense

 

$

19,502

 

 

$

4,454

 

 

$

56,531

 

 

$

41,122

 

 

Paycom Software, Inc.
Investor Relations Contact:
James Samford, 800-580-4505
investors@paycom.com

Source: Paycom Software, Inc.