Paycom Software Inc
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Information Technology : Software | Mid Cap Growth
Company profile

Paycom Software, Inc. is a provider of a cloud-based human capital management (HCM) software solution delivered as Software-as-a-Service (SaaS). The Company provides functionality and data analytics that businesses need to manage the complete employment life cycle from recruitment to retirement. The Company's applications streamline client processes and provide clients and their employees with the ability to directly access and manage administrative processes, including applications that identify candidates, on-board employees, manage time and labor, administer payroll deductions and benefits, manage performance, terminate employees and administer post-termination health benefits, such as COBRA. The Company's solution allows clients to analyze employee information to make business decisions. The Company's HCM solution offers a range of applications, including talent acquisition, time and labor management, payroll, talent management and human resources (HR) management.

Closing Price
$320.26
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Paycom Software, Inc. Reports First Quarter 2020 Results

4:06 pm ET April 28, 2020 (BusinessWire) Print

--First Quarter GAAP Net Income of $63.0 million, or 26% of total revenues, or $1.08 per diluted share

--First Quarter Adjusted EBITDA of $117.9 million, or 49% 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, 2020.

"I'm proud of our excellent first quarter results and the continued success we are having onboarding new clients," said Paycom's founder and CEO, Chad Richison. "Our value proposition has never been stronger and we continue to see increased demand for the Paycom solution. Our Paycom family members have done a great job focusing on delivering world-class service, rapidly developing software enhancements and continuing strong new client adds as we transition through this time period."

Financial Highlights for the First Quarter of 2020

Total Revenues of $242.4 million represented a 21% increase compared to total revenues of $199.9 million in the same period last year. Recurring revenues of $238.5 million also increased 21% from the comparable prior year period, and constituted 98% of total revenues.

GAAP Net Income was $63.0 million, or $1.08 per diluted share, compared to GAAP net income of $47.3 million, or $0.81 per diluted share, in the same period last year.

Non-GAAP Net Income(1) was $77.9 million, or $1.33 per diluted share, compared to $69.3 million, or $1.19 per diluted share, in the same period last year.

Adjusted EBITDA(1) was $117.9 million, compared to $103.3 million in the same period last year.

Cash and Cash Equivalents were $181.8 million as of March 31, 2020, compared to $133.7 million as of December 31, 2019.

Total Debt, Net was $32.2 million as of March 31, 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 is withdrawing its previously issued full-year 2020 guidance in light of macroeconomic uncertainties, particularly unemployment, arising from the current COVID-19 crisis.

"Our large market opportunity, profitable recurring business and attractive value proposition will help us mitigate the impact of headcount reductions across our client base," said Paycom's chief financial officer, Craig Boelte. "We continue to analyze the impact the pandemic is having on our client base and are hopeful to return to providing quarterly and full-year guidance once we have more visibility into the effects of the COVID-19 pandemic on the economy, specifically as unemployment numbers become more predictable."

Impact of the COVID-19 Pandemic

Beginning in February 2020, we took proactive measures to ensure the safety of our employees and shore up business continuity processes in light of the increasing risks from COVID-19. We have transitioned 98% of our workforce to a work-from-home model, while simultaneously ensuring our clients continue to receive the same level of service they have come to expect from our dedicated, one-on-one customer service model. Although we currently have some insight with respect to the shorter-term effects of the COVID-19 pandemic, it is not possible at this time to estimate the full impact that the crisis could have on our business. 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.

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, fluctuations in headcount at our clients will impact our results of operations in future periods. Significantly lower average interest rates in 2020, as well as slower growth in the average funds held for clients balance due to lower employee headcount at our clients and clients electing the Social Security tax deferral under the CARES Act, will have a negative effect on recurring revenue growth in future periods. Our solution allows clients to seamlessly manage and communicate with their remote workforces. In this new 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. We have temporarily halted business-related travel. The resulting shift from in-person to video conference and teleconference sales meetings represents a unique opportunity to meet 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) and (vii) adjusted EBITDA margin as adjusted EBITDA (calculated as described in clause (i)) divided by total revenues. 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, April 28, 2020, at 5:00 p.m. Eastern time to discuss its financial results. To access this call, dial (866) 362-4443 (domestic) or (412) 317-5229 (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 (877) 344-7529 (domestic) or (412) 317-0088 (international) until May 5, 2020. The replay passcode is 10141802.

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 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. 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.                                                                                                                                                                                        
                                                                                                                                                                                    Consolidated Balance Sheets                                                                                                                                                                                     
                                                                                                                                                                             (in thousands, except per share amounts)                                                                                                                                                                               
                                                                                                                                                                                                                                             March 31, 2020                               December 31, 2019             
                                                                                                                                                                                                                                                          ----------------------------------------                                            ----------------------------------------
                                                                                                                                                                                                                                               (unaudited)                        
Assets                                                                                                                                                                                                                                                    
Current assets:                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                             $              181,827                        $              133,667  
   Cash and cash equivalents
                                                                                                                                                                                                                                                           8,059                      9,298  
   Accounts receivable
                                                                                                                                                                                                                                                          17,853                     13,561  
   Prepaid expenses
                                                                                                                                                                                                                                                             930                      1,158  
   Inventory
                                                                                                                                                                                                                                                  --                      4,020  
   Income tax receivable
                                                                                                                                                                                                                                                          50,513                     46,618  
   Deferred contract costs
                                                                                                                                                                                                                                                          -------------------- --------------------                                           -------------------- --------------------
                                                                                                                                                                                                                                                            259,182                    208,322  
      Current assets before funds held for clients
                                                                                                                                                                                                                                                       1,392,379                  1,662,778  
   Funds held for clients
                                                                                                                                                                                                                                                          -------------------- --------------------                                           -------------------- --------------------
                                                                                                                                                                                                                                                             1,651,561                  1,871,100  
         Total current assets
Property and equipment, net                                                                                                                                                                                                                                      254,423                    238,458  
Goodwill                                                                                                                                                                                                                                                       51,889                     51,889  
Long-term deferred contract costs                                                                                                                                                                                                                                316,768                    292,134  
Other assets                                                                                                                                                                                                                                                      35,084                     33,336  
                                                                                                                                                                                                                                                          -------------------- --------------------                                           -------------------- --------------------
                                                                                                                                                                                                                                                                   $            2,309,725                        $            2,486,917  
         Total assets
                                                                                                                                                                                                                                                          ==================== ====================                                           ==================== ====================
Liabilities and Stockholders' Equity                                                                                                                                                                                                                           
Current liabilities:                                                                                                                                                                                                                                           
                                                                                                                                                                                                                                                             $                5,694                        $                5,051  
   Accounts payable
                                                                                                                                                                                                                                                          15,953             --  
   Income tax payable
                                                                                                                                                                                                                                                           5,662                     12,343  
   Accrued commissions and bonuses
                                                                                                                                                                                                                                                          21,159                     14,870  
   Accrued payroll and vacation
                                                                                                                                                                                                                                                          11,660                     11,105  
   Deferred revenue
                                                                                                                                                                                                                                                           1,775                      1,775  
   Current portion of long-term debt
                                                                                                                                                                                                                                                          43,633                     45,600  
   Accrued expenses and other current liabilities
                                                                                                                                                                                                                                                          -------------------- --------------------                                           -------------------- --------------------
                                                                                                                                                                                                                                                            105,536                     90,744  
      Current liabilities before client funds obligation
                                                                                                                                                                                                                                                       1,392,379                  1,662,778  
   Client funds obligation
                                                                                                                                                                                                                                                          -------------------- --------------------                                           -------------------- --------------------
                                                                                                                                                                                                                                                             1,497,915                  1,753,522  
         Total current liabilities
Deferred income tax liabilities, net                                                                                                                                                                                                                              92,609                     91,217  
Long-term deferred revenue                                                                                                                                                                                                                                        66,795                     65,139  
Net long-term debt, less current portion                                                                                                                                                                                                                          30,423                     30,858  
Other long-term liabilities                                                                                                                                                                                                                                       22,195                     19,553  
                                                                                                                                                                                                                                                          -------------------- --------------------                                           -------------------- --------------------
                                                                                                                                                                                                                                                               212,022                    206,767  
         Total long-term liabilities
                                                                                                                                                                                                                                                          -------------------- --------------------                                           -------------------- --------------------
                                                                                                                                                                                                                                                             1,709,937                  1,960,289  
         Total liabilities
                                                                                                                                                                                                                                                          -------------------- --------------------                                           -------------------- --------------------
Commitments and contingencies                                                                                                                                                                                                                                  
Stockholders' equity:                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                                             614                        613  
   Common stock, $0.01 par value (100,000 shares authorized, 61,352 and 61,350 shares issued at March 31, 2020 and December 31, 2019, respectively; 57,622 and 57,660 shares outstanding at March 31, 2020 and December 31, 2019, respectively)
                                                                                                                                                                                                                                                         275,813                    257,501  
   Additional paid-in capital
                                                                                                                                                                                                                                                         639,181                    576,166  
   Retained earnings
                                                                                                                                                                                                                                                        (315,820 )                                    (307,652 )
   Treasury stock, at cost (3,730 and 3,689 shares at March 31, 2020 and December 31, 2019, respectively)
                                                                                                                                                                                                                                                          -------------------- --------------------                                           -------------------- --------------------
                                                                                                                                                                                                                                                               599,788                    526,628  
         Total stockholders' equity
                                                                                                                                                                                                                                                          -------------------- --------------------                                           -------------------- --------------------
                                                                                                                                                                                                                                                                   $            2,309,725                        $            2,486,917  
         Total liabilities and stockholders' equity
                                                                                                                                                                                                                                                          ==================== ====================                                           ==================== ====================
                                                                                            Paycom Software, Inc.
                                                                                      Consolidated Statements of Income
                                                                                  (in thousands, except per share amounts)
                                                                                                 (unaudited)
                                                                     Three Months Ended March 31,                                                  
                                                          ------------------------------------------------------------------------------------------------------------------------
                                       2020                                          2019                    
                                                          ----------------------------------------                                            ----------------------------------------
Revenues                                            
Recurring                                                 $              238,495                        $              196,864  
Implementation and other                                3,873                      3,079  
                                                          -------------------- --------------------                                           -------------------- --------------------
                                                      242,368                    199,943  
   Total revenues
                                                          -------------------- --------------------                                           -------------------- --------------------
Cost of revenues                                    
Operating expenses                                     24,116                     24,776  
Depreciation and amortization                           5,930                      4,542  
                                                          -------------------- --------------------                                           -------------------- --------------------
                                                       30,046                     29,318  
   Total cost of revenues
                                                          -------------------- --------------------                                           -------------------- --------------------
Administrative expenses                             
Sales and marketing                                    55,018                     39,645  
Research and development                               21,621                     18,489  
General and administrative                             40,134                     45,198  
Depreciation and amortization                           6,285                      4,805  
                                                          -------------------- --------------------                                           -------------------- --------------------
                                                      123,058                    108,137  
   Total administrative expenses
                                                          -------------------- --------------------                                           -------------------- --------------------
                                                      153,104                    137,455  
      Total operating expenses
                                                          -------------------- --------------------                                           -------------------- --------------------
Operating income                                       89,264                     62,488  
Interest expense                                          (16 )                                        (276 )
Other income (expense), net                              (930 )                                        (100 )
                                                          -------------------- --------------------                                           -------------------- --------------------
Income before income taxes                             88,318                     62,112  
Provision for income taxes                             25,303                     14,830  
                                                          -------------------- --------------------                                           -------------------- --------------------
Net income                                                $               63,015                        $               47,282  
                                                          ==================== ====================                                           ==================== ====================
Earnings per share, basic                                 $                 1.09                        $                 0.82  
Earnings per share, diluted                               $                 1.08                        $                 0.81  
Weighted average shares outstanding:                
Basic                                                  57,655                     57,357  
Diluted                                                58,440                     58,316  
                                                                                                                   Paycom Software, Inc.                                                                                                                    
                                                                                                           Consolidated Statements of Cash Flows                                                                                                            
                                                                                                                      (in thousands)                                                                                                                        
                                                                                                                        (unaudited)                                                                                                                         
                                                                                                                                        Three Months Ended March 31,                                                  
                                                                                                                             ------------------------------------------------------------------------------------------------------------------------
                                                                                                          2020                                          2019                    
                                                                                                                             ----------------------------------------                                            ----------------------------------------
Cash flows from operating activities                                                                                   
Net income                                                                                                                   $               63,015                        $               47,282  
Adjustments to reconcile net income to net cash provided by operating activities:                                      
                                                                                                                          12,215                      9,347  
   Depreciation and amortization
                                                                                                                            (467 )                                        (165 )
   Accretion of discount on available-for-sale securities
                                                                                                                               9                          9  
   Amortization of debt issuance costs
                                                                                                                          15,811                     31,071  
   Stock-based compensation expense
                                                                                                                             (69 )                                          (1 )
   Cash paid for derivative settlement
                                                                                                                           1,644                        540  
   Loss on derivative
                                                                                                                           1,392                      3,722  
   Deferred income taxes, net
Changes in operating assets and liabilities:                                                                           
                                                                                                                           1,239                       (421 )
   Accounts receivable
                                                                                                                          (4,292 )                                      (1,498 )
   Prepaid expenses
                                                                                                                             254                        (11 )
   Inventory
                                                                                                                          (1,801 )                                        (702 )
   Other assets
                                                                                                                         (27,630 )                                     (23,414 )
   Deferred contract costs
                                                                                                                             408                     (1,251 )
   Accounts payable
                                                                                                                          19,973                      7,488  
   Income taxes, net
                                                                                                                          (6,681 )                                      (6,118 )
   Accrued commissions and bonuses
                                                                                                                           6,289                      3,765  
   Accrued payroll and vacation
                                                                                                                           2,211                      2,860  
   Deferred revenue
                                                                                                                          (1,490 )                                       7,923  
   Accrued expenses and other current liabilities
                                                                                                                             -------------------- --------------------                                           -------------------- --------------------
                                                                                                                          82,030                     80,426  
         Net cash provided by operating activities
                                                                                                                             -------------------- --------------------                                           -------------------- --------------------
Cash flows from investing activities                                                                                   
Purchase of short-term investments from funds held for clients                                                          (177,903 )                                     (16,800 )
Proceeds from maturities of short-term investments from funds held for clients                                            20,000                     14,500  
Purchases of property and equipment                                                                                      (25,726 )                                     (14,889 )
                                                                                                                             -------------------- --------------------                                           -------------------- --------------------
                                                                                                                        (183,629 )                                     (17,189 )
         Net cash used in investing activities
                                                                                                                             -------------------- --------------------                                           -------------------- --------------------
Cash flows from financing activities                                                                                   
Repurchases of common stock                                                                                               (7,998 )                              --  
Withholding taxes paid related to net share settlements                                                                     (170 )                                     (19,669 )
Payments on long-term debt                                                                                                  (444 )                                        (444 )
Net change in client funds obligation                                                                                   (270,399 )                                     437,678  
                                                                                                                             -------------------- --------------------                                           -------------------- --------------------
                                                                                                                        (279,011 )                                     417,565  
         Net cash (used in) provided by financing activities
                                                                                                                             -------------------- --------------------                                           -------------------- --------------------
                                                                                                                        (380,610 )                                     480,802  
         (Decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents
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                                       $            1,261,244                        $            1,467,266  
                                                                                                                             ==================== ====================                                           ==================== ====================
                                                                                                    
                                                                                                                                        Three Months Ended March 31,                                                  
                                                                                                                             ------------------------------------------------------------------------------------------------------------------------
                                                                                                          2020                                          2019                    
                                                                                                                             ----------------------------------------                                            ----------------------------------------
Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents                              
Cash and cash equivalents                                                                                                    $              181,827                        $               91,307  
Restricted cash included in funds held for clients                                                                     1,079,417                  1,375,959  
                                                                                                                             -------------------- --------------------                                           -------------------- --------------------
Total cash, cash equivalents, restricted cash and restricted cash equivalents, end of period                                 $            1,261,244                        $            1,467,266  
                                                                                                                             ==================== ====================                                           ==================== ====================
                                                                                                    
Supplemental disclosures of cash flow information:                                                                     
Non-cash investing and financing activities:                                                                           
Purchases of property and equipment, accrued but not paid                                                                    $                8,251                        $                3,384  
Stock-based compensation for capitalized software                                                                            $                1,601                        $                3,329  
                                                                                               Paycom Software, Inc.
                                                                              Reconciliations of GAAP to Non-GAAP Financial Measures
                                                                                     (in thousands, except per share amounts)
                                                                                                    (unaudited)
                                                                           Three Months Ended March 31,                                                  
                                                                ------------------------------------------------------------------------------------------------------------------------
                                             2020                                          2019                    
                                                                ----------------------------------------                                            ----------------------------------------
Net income to adjusted EBITDA:                            
Net income                                                      $               63,015                        $               47,282  
Interest expense                                                 16                        276  
Provision for income taxes                                   25,303                     14,830  
Depreciation and amortization                                12,215                      9,347  
                                                                -------------------- --------------------                                           -------------------- --------------------
                                                            100,549                     71,735  
      EBITDA
Non-cash stock-based compensation expense                    15,811                     31,071  
Change in fair value of interest rate swap                    1,575                        539  
                                                                -------------------- --------------------                                           -------------------- --------------------
                                                                $              117,935                        $              103,345  
      Adjusted EBITDA
                                                                ==================== ====================                                           ==================== ====================
Net income margin                                              26.0 %                                        23.6 %
                                                                           Three Months Ended March 31,                                                  
                                                                ------------------------------------------------------------------------------------------------------------------------
                                             2020                                          2019                    
                                                                ----------------------------------------                                            ----------------------------------------
Net income to non-GAAP net income:                        
Net income                                                      $               63,015                        $               47,282  
Non-cash stock-based compensation expense                    15,811                     31,071  
Change in fair value of interest rate swap                    1,575                        539  
Income tax effect on non-GAAP adjustments                    (2,473 )                                      (9,642 )
                                                                -------------------- --------------------                                           -------------------- --------------------
                                                                $               77,928                        $               69,250  
      Non-GAAP net income
                                                                ==================== ====================                                           ==================== ====================
Earnings per share, basic                                       $                 1.09                        $                 0.82  
Earnings per share, diluted                                     $                 1.08                        $                 0.81  
Non-GAAP net income per share, basic                            $                 1.35                        $                 1.21  
Non-GAAP net income per share, diluted                          $                 1.33                        $                 1.19  
Weighted average shares outstanding:                      
Basic                                                        57,655                     57,357  
                                                                                            Three Months Ended March 31,                                                  
                                                                                 ------------------------------------------------------------------------------------------------------------------------
                                                              2020                                          2019                    
                                                                                 ----------------------------------------                                            ----------------------------------------
Earnings per share to non-GAAP net income per share, basic:                
Earnings per share, basic                                                        $                 1.09                        $                 0.82  
Non-cash stock-based compensation expense                                       0.27                       0.54  
Change in fair value of interest rate swap                                      0.03                       0.01  
Income tax effect on non-GAAP adjustments                                      (0.04 )                                       (0.16 )
                                                                                 -------------------- --------------------                                           -------------------- --------------------
                                                                                              Three Months Ended March 31,                                                  
                                                                                   ------------------------------------------------------------------------------------------------------------------------
                                                                2020                                          2019                    
                                                                                   ----------------------------------------                                            ----------------------------------------
Earnings per share to non-GAAP net income per share, diluted:                
Earnings per share, diluted                                                        $                 1.08                        $                 0.81  
Non-cash stock-based compensation expense                                         0.27                       0.53  
Change in fair value of interest rate swap                                        0.03                       0.01  
Income tax effect on non-GAAP adjustments                                        (0.05 )                                       (0.16 )
                                                                                   -------------------- --------------------                                           -------------------- --------------------
Non-GAAP net income per share, diluted                                             $                 1.33                        $                 1.19  
                                                                                   ==================== ====================                                           ==================== ====================
                                                                                Three Months Ended March 31,                                                  
                                                                     ------------------------------------------------------------------------------------------------------------------------
                                                  2020                                          2019                    
                                                                     ----------------------------------------                                            ----------------------------------------
Adjusted gross profit:                                         
Total revenues                                                       $              242,368                        $              199,943  
Less: Total cost of revenues                                     (30,046 )                                     (29,318 )
                                                                     -------------------- --------------------                                           -------------------- --------------------
Total gross profit                                               212,322                    170,625  
Plus: Non-cash stock-based compensation expense                    1,198                      2,896  
                                                                     -------------------- --------------------                                           -------------------- --------------------
                                                                     $              213,520                        $              173,521  
      Total adjusted gross profit
                                                                     ==================== ====================                                           ==================== ====================
Gross margin                                                        87.6 %                                        85.3 %
Adjusted gross margin                                               88.1 %                                        86.8 %
                                                                                         Three Months Ended March 31,                                                  
                                                                              ------------------------------------------------------------------------------------------------------------------------
                                                           2020                                          2019                    
                                                                              ----------------------------------------                                            ----------------------------------------
Adjusted sales and marketing expenses:                                  
Sales and marketing expenses                                                  $               55,018                        $               39,645  
Less: Non-cash stock-based compensation expense                            (3,165 )                                      (2,583 )
                                                                              -------------------- --------------------                                           -------------------- --------------------
Adjusted sales and marketing expenses                                         $               51,853                        $               37,062  
                                                                              ==================== ====================                                           ==================== ====================
                                                     
Total revenues                                                                $              242,368                        $              199,943  
Sales and marketing expenses as a % of revenues                              22.7 %                                        19.8 %
Adjusted sales and marketing expenses as a % of revenues                     21.4 %                                        18.5 %
                                                                                          Three Months Ended March 31,                                                  
                                                                               ------------------------------------------------------------------------------------------------------------------------
                                                            2020                                          2019                    
                                                                               ----------------------------------------                                            ----------------------------------------
Adjusted total administrative expenses:                                  
Total administrative expenses                                                  $              123,058                        $              108,137  
Less: Non-cash stock-based compensation expense                            (14,613 )                                     (28,175 )
                                                                               -------------------- --------------------                                           -------------------- --------------------
Adjusted total administrative expenses                                         $              108,445                        $               79,962  
                                                                               ==================== ====================                                           ==================== ====================
                                                      
Total revenues                                                                 $              242,368                        $              199,943  
Total administrative expenses as a % of revenues                              50.8 %                                        54.1 %
Adjusted total administrative expenses as a % of revenues                     44.7 %                                        40.0 %
                                                                                               Three Months Ended March 31                                                  
                                                                                   ------------------------------------------------------------------------------------------------------------------------
                                                                2020                                          2019                    
                                                                                   ----------------------------------------                                            ----------------------------------------
Adjusted research and development expenses:                                  
Research and development expenses                                                  $               21,621                        $               18,489  
Less: Non-cash stock-based compensation expense                                 (2,171 )                                      (3,046 )
                                                                                   -------------------- --------------------                                           -------------------- --------------------
Adjusted research and development expenses                                         $               19,450                        $               15,443  
                                                                                   ==================== ====================                                           ==================== ====================
                                                          
Total revenues                                                                     $              242,368                        $              199,943  
Research and development expenses as a % of revenues                               8.9 %                                         9.2 %
Adjusted research and development expenses as a % of revenues                      8.0 %                                         7.7 %
                                                                                                 Three Months Ended March 31,                                                  
                                                                                      ------------------------------------------------------------------------------------------------------------------------
                                                                   2020                                          2019                    
                                                                                      ----------------------------------------                                            ----------------------------------------
Total research and development costs:                                           
Capitalized research and development costs                                            $                9,746                        $                8,940  
Research and development expenses                                                  21,621                     18,489  
                                                                                      -------------------- --------------------                                           -------------------- --------------------
                                                                                      $               31,367                        $               27,429  
      Total research and development costs
                                                             
Total revenues                                                                        $              242,368                        $              199,943  
Total research and development costs as a % of revenues                              12.9 %                                        13.7 %
                                                             
Adjusted total research and development costs:                                  
Total research and development costs                                                  $               31,367                        $               27,429  
Less: Capitalized non-cash stock-based compensation                                (1,601 )                                      (3,329 )
Less: Non-cash stock-based compensation expense                                    (2,171 )                                      (3,046 )
                                                                                      -------------------- --------------------                                           -------------------- --------------------
Adjusted total research and development costs                                         $               27,595                        $               21,054  
                                                             
Total revenues                                                                        $              242,368                        $              199,943  
Adjusted total research and development costs as a % of revenues                     11.4 %                                        10.5 %
                                                                                                  Paycom Software, Inc.
                                                                                 Components of Non-Cash Stock-Based Compensation Expense
                                                                                                     (in thousands)
                                                                                                       (unaudited)
                                                                                Three Months Ended March 31,                                                  
                                                                     ------------------------------------------------------------------------------------------------------------------------
                                                  2020                                          2019                    
                                                                     ----------------------------------------                                            ----------------------------------------
Non-cash stock-based compensation expense:                     
Operating expenses                                                   $                1,198                        $                2,896  
Sales and marketing                                                3,165                      2,583  
Research and development                                           2,171                      3,046  
General and administrative                                         9,277                     22,546  
                                                                     -------------------- --------------------                                           -------------------- --------------------
Total non-cash stock-based compensation expense                      $               15,811                        $               31,071  
                                                                     ==================== ====================                                           ==================== ====================

View source version on businesswire.com: https://www.businesswire.com/news/home/20200428005883/en/

SOURCE: Paycom Software, Inc.

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

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