First Quarter Revenues of $500 million, up 11% from the comparable prior year period

First Quarter GAAP Net Income of $247 million, representing 49% of total revenues, or $4.37 per diluted share

First Quarter Non-GAAP Net Income of $147 million, or $2.59 per diluted share

First Quarter Adjusted EBITDA of $230 million, representing 46% 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 March 31, 2024.

"Led by Beti and our differentiated product strategy, we continue to deliver value to businesses that leverage HCM automation, while simplifying the lives of employees and HR teams across the globe," said Paycom's founder, Co-CEO, President and Chairman, Chad Richison. "Throughout 2024, we remain focused on expanding our solution automation capabilities, increasing client ROI achievement and delivering world-class service across our organization. These pillars are expected to fuel our momentum for years to come."

Financial Highlights for the First Quarter of 2024

Total Revenues of $499.9 million represented a 10.7% increase compared to total revenues of $451.6 million in the same period last year. Recurring revenues of $491.9 million increased 10.7% from the comparable prior year period and constituted 98.4% of total revenues.

GAAP Net Income was $247.2 million, or $4.37 per diluted share, compared to GAAP net income of $119.3 million, or $2.06 per diluted share, in the same period last year. During the first quarter of 2024, GAAP net income included a benefit to general and administrative expenses of $117.5 million related to the forfeiture of the 2020 CEO performance award.

Non-GAAP Net Income¹ was $146.6 million, or $2.59 per diluted share, compared to $142.7 million, or $2.46 per diluted share, in the same period last year.

Adjusted EBITDA¹ was $229.5 million, compared to $220.5 million in the same period last year.

Cash and Cash Equivalents were $371.3 million as of March 31, 2024, compared to $294.0 million as of December 31, 2023. During the quarter ended March 31, 2024, Paycom paid $21.2 million in cash dividends and repurchased 15,681 shares of common stock for $3.1 million, in the aggregate.

Total Debt was $0 as of March 31, 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 June 30, 2024 and the year ending December 31, 2024.

Quarter Ending June 30, 2024:

Total Revenues in the range of $434 million to $438 million.

Adjusted EBITDA in the range of $151 million to $155 million.

Year Ending December 31, 2024:

Total Revenues in the range of $1.860 billion to $1.885 billion.

Adjusted EBITDA in the range of $720 million to $730 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, May 1, 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 420270 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 corporate headquarters and other 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)

	March 31, 2024			December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	371,325		$	294,025
Accounts receivable		19,997			16,442
Prepaid expenses		50,809			37,613
Inventory		1,807			1,383
Income tax receivable		—			18,391
Deferred contract costs		124,397			118,206
Current assets before funds held for clients		568,335			486,060
Funds held for clients		2,727,991			2,327,366
Total current assets		3,296,326			2,813,426
Property and equipment, net		520,182			498,197
Intangible assets, net		49,136			50,112
Goodwill		51,889			51,889
Long-term deferred contract costs		712,935			680,272
Other assets		102,796			103,643
Total assets	$	4,733,264		$	4,197,539
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	20,969		$	13,875
Income tax payable		17,282			—
Accrued commissions and bonuses		20,091			30,492
Accrued payroll and vacation		42,497			56,086
Deferred revenue		27,604			22,812
Accrued expenses and other current liabilities		85,438			83,302
Current liabilities before client funds obligation		213,881			206,567
Client funds obligation		2,728,431			2,328,076
Total current liabilities		2,942,312			2,534,643
Deferred income tax liabilities, net		133,454			143,750
Long-term deferred revenue		109,435			107,657
Other long-term liabilities		110,000			108,453
Total long-term liabilities		352,889			359,860
Total liabilities		3,295,201			2,894,503
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value (100,000 shares authorized, 62,719 and 62,675 shares issued at March 31, 2024 and December 31, 2023, respectively; 56,557 and 56,528 shares outstanding at March 31, 2024 and December 31, 2023, respectively)		627			627
Additional paid-in capital		634,818			724,493
Retained earnings		1,697,191			1,469,981
Accumulated other comprehensive earnings (loss)		(495	)		(1,039	)
Treasury stock, at cost (6,162 and 6,147 shares at March 31, 2024 and December 31, 2023, respectively)		(894,078	)		(891,026	)
Total stockholders' equity		1,438,063			1,303,036
Total liabilities and stockholders' equity	$	4,733,264		$	4,197,539

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

	Three Months Ended March 31,
	2024			2023
Revenues
Recurring	$	491,896		$	444,421
Implementation and other		7,985			7,216
Total revenues		499,881			451,637
Cost of revenues
Operating expenses		63,670			53,085
Depreciation and amortization		14,961			12,147
Total cost of revenues		78,631			65,232
Administrative expenses
Sales and marketing		115,524			103,574
Research and development		50,509			42,669
General and administrative		(48,104	)		65,605
Depreciation and amortization		17,507			14,125
Total administrative expenses		135,436			225,973
Total operating expenses		214,067			291,205
Operating income		285,814			160,432
Interest expense		(782	)		(837	)
Other income (expense), net		5,009			6,004
Income before income taxes		290,041			165,599
Provision for income taxes		42,854			46,303
Net income	$	247,187		$	119,296
Earnings per share, basic	$	4.37		$	2.06
Earnings per share, diluted	$	4.37		$	2.06
Weighted average shares outstanding:
Basic		56,546			57,867
Diluted		56,552			57,991
Comprehensive earnings:
Net income	$	247,187		$	119,296
Unrealized net gains on available-for-sale securities		837			1,050
Tax effect		(293	)		(200	)
Other comprehensive income, net of tax		544			850
Comprehensive earnings	$	247,731		$	120,146

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

	Three Months Ended March 31,
	2024			2023
Cash flows from operating activities
Net income	$	247,187		$	119,296
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		32,468			26,272
Accretion of discount on available-for-sale securities		(73	)		(124	)
Non-cash marketing expense		398			418
Loss (Gain) on disposition of property and equipment		10			(13	)
Amortization of debt issuance costs		276			308
Stock-based compensation expense		(93,790	)		27,819
Deferred income taxes, net		(10,489	)		(1,650	)
Other		(100	)		78
Changes in operating assets and liabilities:
Accounts receivable		(3,555	)		5,041
Prepaid expenses		(13,888	)		(6,984	)
Inventory		182			385
Other assets		572			2,923
Deferred contract costs		(37,640	)		(38,519	)
Accounts payable		2,980			(4,645	)
Income taxes, net		35,673			24,933
Accrued commissions and bonuses		(10,401	)		(10,845	)
Accrued payroll and vacation		(13,636	)		(8,835	)
Deferred revenue		6,570			3,386
Accrued expenses and other current liabilities		5,892			6,859
Net cash provided by operating activities		148,636			146,103
Cash flows from investing activities
Purchases of investments from funds held for clients		—			(25,000	)
Proceeds from investments from funds held for clients		90,000			25,000
Purchases of property and equipment		(47,728	)		(40,618	)
Proceeds from sale of property and equipment		13			—
Net cash provided by (used in) investing activities		42,285			(40,618	)
Cash flows from financing activities
Withholding taxes paid related to net share settlements		(3,052	)		(626	)
Dividends paid		(21,209	)		—
Net change in client funds obligation		400,355			183,629
Net cash provided by financing activities		376,094			183,003
Increase in cash, cash equivalents, restricted cash and restricted cash equivalents		567,015			288,488
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	$	2,989,775		$	2,697,583

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

	Three Months Ended March 31,
	2024		2023
Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents
Cash and cash equivalents	$	371,325	$	505,590
Restricted cash included in funds held for clients		2,618,450		2,191,993
Total cash, cash equivalents, restricted cash and restricted cash equivalents, end of period	$	2,989,775	$	2,697,583

Supplemental disclosures of cash flow information:
Non-cash investing and financing activities:
Purchases of property and equipment, accrued but not paid	$	9,070	$	6,991
Stock-based compensation for capitalized software	$	3,589	$	3,597
Right of use assets obtained in exchange for operating lease liabilities	$	5,080	$	1,933

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

	Three Months Ended March 31,
	2024			2023
Net income to adjusted EBITDA:
Net income	$	247,187		$	119,296
Interest expense		782			837
Provision for income taxes		42,854			46,303
Depreciation and amortization		32,468			26,272
EBITDA		323,291			192,708
Non-cash stock-based compensation expense		(93,790	)		27,819
Adjusted EBITDA	$	229,501		$	220,527
Net income margin		49.4	%		26.4	%
Adjusted EBITDA margin		45.9	%		48.8	%

	Three Months Ended March 31,
	2024			2023
Net income to non-GAAP net income:
Net income	$	247,187		$	119,296
Non-cash stock-based compensation expense		(93,790	)		27,819
Income tax effect on non-GAAP adjustments		(6,749	)		(4,464	)
Non-GAAP net income	$	146,648		$	142,651

Weighted average shares outstanding:
Basic		56,546			57,867
Diluted		56,552			57,991

Earnings per share, basic	$	4.37		$	2.06
Earnings per share, diluted	$	4.37		$	2.06
Non-GAAP net income per share, basic	$	2.59		$	2.47
Non-GAAP net income per share, diluted	$	2.59		$	2.46

	Three Months Ended March 31,
	2024			2023
Earnings per share to non-GAAP net income per share, basic:
Earnings per share, basic	$	4.37		$	2.06
Non-cash stock-based compensation expense		(1.66	)		0.48
Income tax effect on non-GAAP adjustments		(0.12	)		(0.07	)
Non-GAAP net income per share, basic	$	2.59		$	2.47

	Three Months Ended March 31,
	2024			2023
Earnings per share to non-GAAP net income per share, diluted:
Earnings per share, diluted	$	4.37		$	2.06
Non-cash stock-based compensation expense		(1.66	)		0.48
Income tax effect on non-GAAP adjustments		(0.12	)		(0.08	)
Non-GAAP net income per share, diluted	$	2.59		$	2.46

	Three Months Ended March 31,
	2024			2023
Adjusted gross profit:
Total revenues	$	499,881		$	451,637
Less: Total cost of revenues		(78,631	)		(65,232	)
Total gross profit		421,250			386,405
Plus: Non-cash stock-based compensation expense		2,991			2,385
Total adjusted gross profit	$	424,241		$	388,790
Gross margin		84.3	%		85.6	%
Adjusted gross margin		84.9	%		86.1	%

	Three Months Ended March 31,
	2024			2023
Adjusted sales and marketing expenses:
Sales and marketing expenses	$	115,524		$	103,574
Less: Non-cash stock-based compensation expense		(5,494	)		(5,476	)
Adjusted sales and marketing expenses	$	110,030		$	98,098

Total revenues	$	499,881		$	451,637
Sales and marketing expenses as a % of revenues		23.1	%		22.9	%
Adjusted sales and marketing expenses as a % of revenues		22.0	%		21.7	%

	Three Months Ended March 31,
	2024			2023
Adjusted total administrative expenses:
Total administrative expenses	$	135,436		$	225,973
Less: Non-cash stock-based compensation expense		96,781			(25,434	)
Adjusted total administrative expenses	$	232,217		$	200,539

Total revenues	$	499,881		$	451,637
Total administrative expenses as a % of revenues		27.1	%		50.0	%
Adjusted total administrative expenses as a % of revenues		46.5	%		44.4	%

	Three Months Ended March 31,
	2024			2023
Adjusted research and development expenses:
Research and development expenses	$	50,509		$	42,669
Less: Non-cash stock-based compensation expense		(5,370	)		(5,258	)
Adjusted research and development expenses	$	45,139		$	37,411

Total revenues	$	499,881		$	451,637
Research and development expenses as a % of revenues		10.1	%		9.4	%
Adjusted research and development expenses as a % of revenues		9.0	%		8.3	%

	Three Months Ended March 31,
	2024			2023
Total research and development costs:
Capitalized research and development costs	$	29,846		$	21,353
Research and development expenses		50,509			42,669
Total research and development costs	$	80,355		$	64,022

Total revenues	$	499,881		$	451,637
Total research and development costs as a % of revenues		16.1	%		14.2	%

Adjusted total research and development costs:
Total research and development costs	$	80,355		$	64,022
Less: Capitalized non-cash stock-based compensation		(3,589	)		(3,597	)
Less: Non-cash stock-based compensation expense		(5,370	)		(5,258	)
Adjusted total research and development costs	$	71,396		$	55,167

Total revenues	$	499,881		$	451,637
Adjusted total research and development costs as a % of revenues		14.3	%		12.2	%

Paycom Software, Inc. Unaudited Components of Non-Cash Stock-Based Compensation Expense (in thousands)
	Three Months Ended March 31,
	2024			2023
Non-cash stock-based compensation expense:
Operating expenses	$	2,991		$	2,385
Sales and marketing		5,494			5,476
Research and development		5,370			5,258
General and administrative		(107,645	)		14,700
Total non-cash stock-based compensation expense	$	(93,790	)	$	27,819

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