Second Quarter Revenues of $438 million, up 9% from the comparable prior year period

Second Quarter GAAP Net Income of $68 million, representing 16% of total revenues, or $1.20 per diluted share

Second Quarter Non-GAAP Net Income of $92 million, or $1.62 per diluted share

Second Quarter Adjusted EBITDA of $160 million, representing 36% of total revenues

Paycom Software, Inc. ("Paycom," "we" and "our") (NYSE:PAYC), a leading provider of comprehensive, cloud-based human capital management software, today announced its financial results for the quarter ended June 30, 2024.

"During the second quarter, our outside sales team delivered solid performance with robust new logo adds, as we continue to sell the most automated solution on the market," said Paycom founder, CEO and chairman, Chad Richison. "We continue to extend our product lead as we eclipse the industry with even greater automation."

Financial Highlights for the Second Quarter of 2024

Total Revenues of $437.5 million represented a 9.1% increase compared to total revenues of $401.1 million in the same period last year. Recurring revenues of $430.4 million increased 9.1% from the comparable prior year period and constituted 98.4% of total revenues.

GAAP Net Income was $68.0 million, or $1.20 per diluted share, compared to GAAP net income of $64.5 million, or $1.11 per diluted share, in the same period last year.

Non-GAAP Net Income¹ was $91.8 million, or $1.62 per diluted share, compared to $94.3 million, or $1.62 per diluted share, in the same period last year.

Adjusted EBITDA¹ was $159.7 million, compared to $156.6 million in the same period last year.

Cash and Cash Equivalents were $346.5 million as of June 30, 2024, compared to $294.0 million as of December 31, 2023. During the quarter ended June 30, 2024, Paycom paid $21.2 million in cash dividends and repurchased 573,743 shares of common stock for $90.1 million, in the aggregate.

Total Debt was $0 as of June 30, 2024 and December 31, 2023.

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

Financial Outlook

Paycom provides the following expected financial guidance for the quarter ending September 30, 2024 and the year ending December 31, 2024.

Quarter Ending September 30, 2024:

Total Revenues in the range of $444 million to $449 million.

Adjusted EBITDA in the range of $155 million to $159 million.

Year Ending December 31, 2024:

Total Revenues in the range of $1.860 billion to $1.875 billion.

Adjusted EBITDA in the range of $727 million to $737 million.

We have not reconciled the forward-looking adjusted EBITDA ranges presented above and discussed on the teleconference call to net income, nor the forward-looking adjusted EBITDA margins and forward-looking non-GAAP effective income tax rate discussed on the teleconference call to comparable GAAP measures, because applicable information for future periods, on which these reconciliations would be based, is not readily available due to uncertainty regarding, and the potential variability of, depreciation and amortization, interest expense, taxes, non-cash stock-based compensation expense and other items. Accordingly, reconciliations of the forward-looking adjusted EBITDA ranges to net income, the forward-looking adjusted EBITDA margins to net income margin, and the forward-looking non-GAAP effective income tax rate to the GAAP effective income tax rate are not available at this time without unreasonable effort.

Use of Non-GAAP Financial Information

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

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

Conference Call Details

In conjunction with this announcement, Paycom will host a conference call today, July 31, 2024, at 5:00 p.m. Eastern time to discuss its financial results. To access this call, dial (833) 470-1428 (domestic) or (404) 975-4839 (international) and provide 399008 as the access code. A live webcast as well as the replay of the conference call will be available on the Investor Relations page of Paycom's website at investors.paycom.com.

About Paycom

For 25 years, Paycom Software, Inc. (NYSE:PAYC) has simplified businesses and the lives of their employees through easy-to-use HR and payroll technology to empower transparency through direct access to their data. And thanks to its industry-first solution, Beti^®, employees now do their own payroll and are guided to find and fix costly errors before payroll submission. From onboarding and benefits enrollment to talent management and more, Paycom's software streamlines processes, drives efficiencies and gives employees power over their own HR information, all in a single app. Recognized nationally for its technology and workplace culture, Paycom can now serve businesses of all sizes in the U.S. and internationally.

Forward-Looking Statements

Certain statements in this press release are, and certain statements on the related teleconference call may be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are any statements that refer to Paycom's estimated or anticipated results, other non-historical facts or future events and include, but are not limited to, statements regarding our business strategy; anticipated future operating results and operating expenses, cash flows, capital resources, dividends and liquidity; competition; trends, opportunities and risks affecting our business, industry and financial results; future expansion or growth plans and potential for future growth, including internationally; our ability to attract new clients to purchase our solution; our ability to retain clients and induce them to purchase additional applications; our ability to accurately forecast future revenues and appropriately plan our expenses; market acceptance of our solution and applications; our expectations regarding future revenues generated by certain applications; the return on investment for users of our 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; our plans to repurchase shares of our common stock through a stock repurchase plan; and our expected income tax rate for future periods. In addition, forward-looking statements also consist of statements involving trend analyses and statements including such words as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "should," "will," "would," and similar expressions or the negative of such terms or other comparable terminology. These forward-looking statements are based only on information currently available to us, speak only as of the date hereof and are subject to business and economic risks. As such, our actual results could differ materially from those set forth in the forward-looking statements as a result of the factors discussed in our filings with the Securities and Exchange Commission, including but not limited to those discussed in our most recent Annual Report on Form 10-K. We do not undertake any obligation to update or revise the forward-looking statements to reflect events that occur or circumstances that exist after the date on which such statements were made, except to the extent required by law.

Paycom Software, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except per share amounts)

	June 30, 2024			December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	346,456		$	294,025
Accounts receivable		20,034			16,442
Prepaid expenses		46,529			37,613
Inventory		1,415			1,383
Income tax receivable		—			18,391
Deferred contract costs		128,728			118,206
Current assets before funds held for clients		543,162			486,060
Funds held for clients		2,303,159			2,327,366
Total current assets		2,846,321			2,813,426
Property and equipment, net		531,884			498,197
Intangible assets, net		48,159			50,112
Goodwill		51,889			51,889
Long-term deferred contract costs		727,956			680,272
Other assets		106,535			103,643
Total assets	$	4,312,744		$	4,197,539
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	14,997		$	13,875
Income tax payable		10,281			—
Accrued commissions and bonuses		22,227			30,492
Accrued payroll and vacation		60,533			56,086
Deferred revenue		31,432			22,812
Accrued expenses and other current liabilities		84,215			83,302
Current liabilities before client funds obligation		223,685			206,567
Client funds obligation		2,303,198			2,328,076
Total current liabilities		2,526,883			2,534,643
Deferred income tax liabilities, net		136,213			143,750
Long-term deferred revenue		110,928			107,657
Other long-term liabilities		112,189			108,453
Total long-term liabilities		359,330			359,860
Total liabilities		2,886,213			2,894,503
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value (100,000 shares authorized, 62,887 and 62,675 shares issued at June 30, 2024 and December 31, 2023, respectively; 56,151 and 56,528 shares outstanding at June 30, 2024 and December 31, 2023, respectively)	629			627
Additional paid-in capital		667,197			724,493
Retained earnings		1,743,608			1,469,981
Accumulated other comprehensive earnings (loss)		(305	)		(1,039	)
Treasury stock, at cost (6,736 and 6,147 shares at June 30, 2024 and December 31, 2023, respectively)		(984,598	)		(891,026	)
Total stockholders' equity		1,426,531			1,303,036
Total liabilities and stockholders' equity	$	4,312,744		$	4,197,539

Paycom Software, Inc.
Unaudited Consolidated Statements of Comprehensive Income
(in thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Revenues
Recurring	$	430,400		$	394,522		$	922,296		$	838,943
Implementation and other		7,112			6,617			15,097			13,833
Total revenues		437,512			401,139			937,393			852,776
Cost of revenues
Operating expenses		67,451			54,617			131,121			107,702
Depreciation and amortization		16,433			12,811			31,394			24,958
Total cost of revenues		83,884			67,428			162,515			132,660
Administrative expenses
Sales and marketing		106,864			106,435			222,388			210,009
Research and development		62,371			49,118			112,880			91,787
General and administrative		70,072			75,965			21,968			141,570
Depreciation and amortization		19,181			14,927			36,688			29,052
Total administrative expenses		258,488			246,445			393,924			472,418
Total operating expenses		342,372			313,873			556,439			605,078
Operating income		95,140			87,266			380,954			247,698
Interest expense		(782	)		(602	)		(1,564	)		(1,439	)
Other income (expense), net		4,787			6,183			9,796			12,187
Income before income taxes		99,145			92,847			389,186			258,446
Provision for income taxes		31,175			28,331			74,029			74,634
Net income	$	67,970		$	64,516		$	315,157		$	183,812
Earnings per share, basic	$	1.20		$	1.11		$	5.58		$	3.17
Earnings per share, diluted	$	1.20		$	1.11		$	5.57		$	3.17
Weighted average shares outstanding:
Basic		56,451			57,920			56,499			57,895
Diluted		56,771			58,033			56,548			58,050
Comprehensive earnings:
Net income	$	67,970		$	64,516		$	315,157		$	183,812
Unrealized net gains on available-for-sale securities		318			(235	)		1,155			815
Tax effect		(128	)		95			(421	)		(105	)
Other comprehensive income, net of tax		190			(140	)		734			710
Comprehensive earnings:	$	68,160		$	64,376		$	315,891		$	184,522

Paycom Software, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)

	Six Months Ended June 30,
	2024			2023
Cash flows from operating activities
Net income	$	315,157		$	183,812
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		68,082			54,010
Accretion of discount on available-for-sale securities		(108	)		(253	)
Non-cash marketing expense		798			839
Loss (Gain) on disposition of property and equipment		12			(21	)
Amortization of debt issuance costs		552			620
Stock-based compensation expense		(69,670	)		63,185
Deferred income taxes, net		(7,798	)		1,706
Other		(161	)		111
Changes in operating assets and liabilities:
Accounts receivable		(3,592	)		6,650
Prepaid expenses		(8,345	)		(10,597	)
Inventory		431			336
Other assets		(3,445	)		(9,057	)
Deferred contract costs		(55,198	)		(62,489	)
Accounts payable		91			(10,277	)
Income taxes, net		28,672			3,645
Accrued commissions and bonuses		(8,265	)		(6,560	)
Accrued payroll and vacation		4,197			4,954
Deferred revenue		11,891			6,817
Accrued expenses and other current liabilities		7,431			24,560
Net cash provided by operating activities		280,732			251,991
Cash flows from investing activities
Purchases of investments from funds held for clients		—			(25,000	)
Proceeds from investments from funds held for clients		165,000			25,000
Purchases of property and equipment		(93,335	)		(83,422	)
Proceeds from sale of property and equipment		13			44
Net cash provided by (used in) investing activities		71,678			(83,378	)
Cash flows from financing activities
Repurchases of common stock		(80,761	)		—
Withholding taxes paid related to net share settlements		(12,410	)		(11,067	)
Dividends paid		(42,400	)		(21,731	)
Net change in client funds obligation		(24,878	)		(201,552	)
Net cash (used in) financing activities		(160,449	)		(234,350	)
Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents		191,961			(65,737	)
Cash, cash equivalents, restricted cash and restricted cash equivalents
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period		2,422,760			2,409,095
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period	$	2,614,721		$	2,343,358

Paycom Software, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)

	Six Months Ended June 30,
	2024		2023
Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents
Cash and cash equivalents	$	346,456	$	536,545
Restricted cash included in funds held for clients		2,268,265		1,806,813
Total cash, cash equivalents, restricted cash and restricted cash equivalents, end of period	$	2,614,721	$	2,343,358

Supplemental disclosures of cash flow information:
Non-cash investing and financing activities:
Purchases of property and equipment, accrued but not paid	$	8,507	$	11,968
Stock-based compensation for capitalized software	$	8,797	$	7,752
Right of use assets obtained in exchange for operating lease liabilities	$	11,933	$	16,341

Paycom Software, Inc.
Unaudited Reconciliations of GAAP to Non-GAAP Financial Measures
(in thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023				2024			2023
Net income to adjusted EBITDA:
Net income	$	67,970		$	64,516			$	315,157		$	183,812
Interest expense		782			602				1,564			1,439
Provision for income taxes		31,175			28,331				74,029			74,634
Depreciation and amortization		35,614			27,738				68,082			54,010
EBITDA		135,541			121,187				458,832			313,895
Non-cash stock-based compensation expense		24,120			35,366				(69,670	)		63,185
Adjusted EBITDA	$	159,661		$	156,553			$	389,162		$	377,080
Net income margin		15.5	%		16.1	%			33.6	%		21.6	%
Adjusted EBITDA margin		36.5	%		39.0	%			41.5	%		44.2	%

	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Net income to non-GAAP net income:
Net income	$	67,970		$	64,516		$	315,157		$	183,812
Non-cash stock-based compensation expense		24,120			35,366			(69,670	)		63,185
Income tax effect on non-GAAP adjustments		(255	)		(5,620	)		(7,004	)		(10,084	)
Non-GAAP net income	$	91,835		$	94,262		$	238,483		$	236,913

Weighted average shares outstanding:
Basic		56,451			57,920			56,499			57,895
Diluted		56,771			58,033			56,548			58,050

Earnings per share, basic	$	1.20		$	1.11		$	5.58		$	3.17
Earnings per share, diluted	$	1.20		$	1.11		$	5.57		$	3.17
Non-GAAP net income per share, basic	$	1.63		$	1.63		$	4.22		$	4.09
Non-GAAP net income per share, diluted	$	1.62		$	1.62		$	4.22		$	4.08

	Three Months Ended June 30,					Six Months Ended June 30,
	2024		2023			2024			2023
Earnings per share to non-GAAP net income per share, basic:
Earnings per share, basic	$	1.20	$	1.11		$	5.58		$	3.17
Non-cash stock-based compensation expense		0.43		0.61			(1.23	)		1.09
Income tax effect on non-GAAP adjustments		—		(0.09	)		(0.13	)		(0.17	)
Non-GAAP net income per share, basic	$	1.63	$	1.63		$	4.22		$	4.09

	Three Months Ended June 30,					Six Months Ended June 30,
	2024		2023			2024			2023
Earnings per share to non-GAAP net income per share, diluted:
Earnings per share, diluted	$	1.20	$	1.11		$	5.57		$	3.17
Non-cash stock-based compensation expense		0.42		0.61			(1.23	)		1.09
Income tax effect on non-GAAP adjustments		—		(0.10	)		(0.12	)		(0.18	)
Non-GAAP net income per share, diluted	$	1.62	$	1.62		$	4.22		$	4.08

	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Adjusted gross profit:
Total revenues	$	437,512		$	401,139		$	937,393		$	852,776
Less: Total cost of revenues		(83,884	)		(67,428	)		(162,515	)		(132,660	)
Total gross profit		353,628			333,711			774,878			720,116
Plus: Non-cash stock-based compensation expense		4,163			3,353			7,154			5,738
Total adjusted gross profit	$	357,791		$	337,064		$	782,032		$	725,854
Gross margin		80.8	%		83.2	%		82.7	%		84.4	%
Adjusted gross margin		81.8	%		84.0	%		83.4	%		85.1	%

	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Adjusted sales and marketing expenses:
Sales and marketing expenses	$	106,864		$	106,435		$	222,388		$	210,009
Less: Non-cash stock-based compensation expense		(4,802	)		(6,040	)		(10,296	)		(11,516	)
Adjusted sales and marketing expenses	$	102,062		$	100,395		$	212,092		$	198,493

Total revenues	$	437,512		$	401,139		$	937,393		$	852,776
Sales and marketing expenses as a % of revenues		24.4	%		26.5	%		23.7	%		24.6	%
Adjusted sales and marketing expenses as a % of revenues		23.3	%		25.0	%		22.6	%		23.3	%

	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Adjusted total administrative expenses:
Total administrative expenses	$	258,488		$	246,445		$	393,924		$	472,418
Less: Non-cash stock-based compensation expense		(19,957	)		(32,013	)		76,824			(57,447	)
Adjusted total administrative expenses	$	238,531		$	214,432		$	470,748		$	414,971

Total revenues	$	437,512		$	401,139		$	937,393		$	852,776
Total administrative expenses as a % of revenues		59.1	%		61.4	%		42.0	%		55.4	%
Adjusted total administrative expenses as a % of revenues		54.5	%		53.5	%		50.2	%		48.7	%

	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Adjusted research and development expenses:
Research and development expenses	$	62,371		$	49,118		$	112,880		$	91,787
Less: Non-cash stock-based compensation expense		(7,775	)		(6,639	)		(13,145	)		(11,897	)
Adjusted research and development expenses	$	54,596		$	42,479		$	99,735		$	79,890

Total revenues	$	437,512		$	401,139		$	937,393		$	852,776
Research and development expenses as a % of revenues		14.3	%		12.2	%		12.0	%		10.8	%
Adjusted research and development expenses as a % of revenues		12.5	%		10.6	%		10.6	%		9.4	%

	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Total research and development costs:
Capitalized research and development costs	$	31,186		$	22,878		$	61,032		$	44,231
Research and development expenses		62,371			49,118			112,880			91,787
Total research and development costs	$	93,557		$	71,996		$	173,912		$	136,018

Total revenues	$	437,512		$	401,139		$	937,393		$	852,776
Total research and development costs as a % of revenues		21.4	%		17.9	%		18.6	%		16.0	%

Adjusted total research and development costs:
Total research and development costs	$	93,557		$	71,996		$	173,912		$	136,018
Less: Capitalized non-cash stock-based compensation		(5,208	)		(4,155	)		(8,797	)		(7,752	)
Less: Non-cash stock-based compensation expense		(7,775	)		(6,639	)		(13,145	)		(11,897	)
Adjusted total research and development costs	$	80,574		$	61,202		$	151,970		$	116,369

Total revenues	$	437,512		$	401,139		$	937,393		$	852,776
Adjusted total research and development costs as a % of revenues		18.4	%		15.3	%		16.2	%		13.6	%

Paycom Software, Inc.
Unaudited Components of Non-Cash Stock-Based Compensation Expense
(in thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024			2023
Non-cash stock-based compensation expense:
Operating expenses	$	4,163	$	3,353	$	7,154		$	5,738
Sales and marketing		4,802		6,040		10,296			11,516
Research and development		7,775		6,639		13,145			11,897
General and administrative		7,380		19,334		(100,265	)		34,034
Total non-cash stock-based compensation expense	$	24,120	$	35,366	$	(69,670	)	$	63,185

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Paycom Software, Inc. Reports Second Quarter 2024 Results