Paycom Software, Inc 10-Q for FY2026 Q3
Paycom Software, Inc. (PAYC)
About this 10-Q
Paycom Software, Inc filed this 10-Q on November 5, 2026, covering the quarter ended September 30, 2026 (FY2026 Q3).
Paycom Software reported revenue of $543.8 million, up 10.2%, and operating income of $195.8 million, up 74.0% for the three months ended September 30, 2026. Nine-month net income increased 16.7% to $396.3 million. AI summary
Headline figures
Quarter ended September 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $543.8M
- up 10.2% from $493.3M a year earlier
- Net income
- $133.2M
- up 20.3% from net income of $110.7M a year earlier
- Diluted EPS
- $2.99
- up 52.6% from $1.96 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______ to ______
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) |
(Zip Code)
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of October 27, 2026, there were
Paycom Software, Inc.
Table of Contents
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Item 1. |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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32 |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 5. |
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33 |
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Item 6. |
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34 |
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35 |
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Paycom Software, Inc.
Unaudited Consolidated Balance Sheets
(in millions, except per share amounts)
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September 30, 2026 |
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December 31, 2025 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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Accounts receivable |
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Prepaid expenses |
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Inventory |
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Income tax receivable |
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Deferred contract costs |
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Current assets before funds held for clients |
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Funds held for clients |
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Total current assets |
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Property and equipment, net |
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Intangible assets, net |
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Goodwill |
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Long-term deferred contract costs |
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Operating lease right-of-use assets |
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Other assets |
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Total assets |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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Accrued commissions and bonuses |
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Accrued payroll and vacation |
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Deferred revenue |
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Operating lease liabilities |
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Accrued expenses and other current liabilities |
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Current liabilities before client funds obligation |
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Client funds obligation |
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Total current liabilities |
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Deferred income tax liabilities, net |
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Long-term deferred revenue |
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Long-term debt |
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Long-term operating lease liabilities |
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Other long-term liabilities |
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Total long-term liabilities |
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Total liabilities |
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(Note 12 “Commitments and Contingencies”) |
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Stockholders’ equity: |
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Common stock, $ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive earnings (loss) |
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Treasury stock, at cost ( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See accompanying notes to the unaudited consolidated financial statements.
3
Paycom Software, Inc.
Unaudited Consolidated Statements of Comprehensive Income
(in millions, except per share amounts)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2026 |
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2025 |
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2026 |
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2025 |
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Revenues |
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Recurring and other |
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$ |
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$ |
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Interest on funds held for clients |
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Total revenues |
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Cost of revenues |
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Operating expenses |
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Depreciation and amortization |
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Total cost of revenues |
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Administrative expenses |
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Sales and marketing |
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Research and development |
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General and administrative |
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Depreciation and amortization |
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Total administrative expenses |
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Total operating expenses |
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Operating income |
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Interest expense |
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Other income, net |
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Income before income taxes |
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Provision for income taxes |
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Net income |
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$ |
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$ |
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$ |
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Earnings per share, basic |
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$ |
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$ |
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Earnings per share, diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average shares outstanding: |
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Basic |
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Diluted |
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Comprehensive earnings: |
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Net income |
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$ |
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$ |
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Unrealized net gains (losses) on available-for-sale securities |
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Tax effect |
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Other comprehensive income (loss), net of tax |
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Comprehensive earnings |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes to the unaudited consolidated financial statements.
4
Paycom Software, Inc.
Unaudited Consolidated Statements of Stockholders’ Equity
(in millions, except per share amounts)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2026 |
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2025 |
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2026 |
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2025 |
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Common stock: |
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Balance at beginning of period |
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$ |
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$ |
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$ |
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Vesting of restricted stock |
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— |
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— |
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Balance at end of period |
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Additional paid-in capital: |
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Balance at beginning of period |
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Stock-based compensation |
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Employee stock purchase plan |
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Balance at end of period |
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Retained earnings: |
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Balance at beginning of period |
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Net income |
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Dividends declared(1) |
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Balance at end of period |
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Accumulated other comprehensive earnings (loss): |
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Balance at beginning of period |
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Other comprehensive earnings (loss), net of tax |
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Balance at end of period |
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Treasury stock: |
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Balance at beginning of period |
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( |
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( |
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Repurchases of common stock |
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Employee stock purchase plan |
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Balance at end of period |
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( |
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Total stockholders’ equity |
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$ |
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$ |
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$ |
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$ |
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2026 |
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2025 |
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2026 |
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2025 |
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Common stock: |
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Shares at beginning of period |
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Vesting of restricted stock |
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— |
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Shares at end of period |
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Treasury stock: |
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Shares at beginning of period |
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Repurchases of common stock |
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Employee stock purchase plan |
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— |
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Shares at end of period |
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Shares outstanding at end of period |
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See accompanying notes to the unaudited consolidated financial statements.
5
Paycom Software, Inc.
Unaudited Consolidated Statements of Cash Flows
(in millions)
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Nine Months Ended September 30, |
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2026 |
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2025 |
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Cash flows from operating activities |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Stock-based compensation expense |
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Amortization of debt issuance costs |
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Loss (gain) on disposition of property and equipment |
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Accretion of discount on available-for-sale securities |
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Non-cash marketing expense |
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Deferred income taxes, net |
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Gain on modification of naming rights agreement |
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Other |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
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Prepaid expenses |
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( |
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( |
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Inventory |
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( |
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( |
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Other assets |
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( |
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Deferred contract costs |
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( |
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( |
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Income taxes, net |
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Accounts payable |
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Accrued commissions and bonuses |
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( |
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Accrued payroll and vacation |
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Deferred revenue |
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Accrued expenses and other liabilities |
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Net change in operating right-of-use assets and operating lease liabilities |
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Net cash provided by operating activities |
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Cash flows from investing activities |
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Purchases of investments from funds held for clients |
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( |
) |
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Proceeds from the maturities of investments from funds held for clients |
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Purchases of property and equipment |
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( |
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Proceeds from sale of property and equipment |
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Net cash used in investing activities |
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Cash flows from financing activities |
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Proceeds from borrowings under credit facility |
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— |
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Payment of debt issuance costs |
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( |
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— |
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Payments on long-term debt |
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( |
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— |
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Repurchases of common stock |
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( |
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( |
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Withholding taxes paid related to net share settlements |
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( |
) |
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( |
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Dividends paid |
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( |
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Proceeds from employee stock purchase plan |
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Net change in client funds obligation |
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( |
) |
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( |
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Net cash used in financing activities |
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( |
) |
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( |
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Decrease in cash, cash equivalents, restricted cash and restricted cash equivalents |
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( |
) |
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( |
) |
Cash, cash equivalents, restricted cash and restricted cash equivalents |
|
|
|
|
|
|
||
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period |
|
$ |
|
|
$ |
|
||
See accompanying notes to the unaudited consolidated financial statements.
6
Paycom Software, Inc.
Unaudited Consolidated Statements of Cash Flows, continued
(in millions)
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash included in funds held for clients |
|
|
|
|
|
|
||
Total cash, cash equivalents, restricted cash and restricted cash equivalents, end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
||
Non-cash investing and financing activities: |
|
|
|
|
|
|
||
Purchases of property and equipment, accrued but not paid |
|
$ |
|
|
$ |
|
||
Stock-based compensation for capitalized software |
|
$ |
|
|
$ |
|
||
Right-of-use assets obtained in exchange for operating lease liabilities |
|
$ |
|
|
$ |
|
||
See accompanying notes to the unaudited consolidated financial statements.
7
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in millions, except per share and per unit amounts)
Paycom Software, Inc. (“Software”), together with its wholly owned subsidiaries (collectively, the “Company”), is a leading provider of a comprehensive, cloud-based human capital management (“HCM”) solution delivered as Software-as-a-Service. Unless we state otherwise or the context otherwise requires, the terms “we,” “our,” “us” and the “Company” refer to Software and its consolidated subsidiaries.
We provide functionality and data analytics that businesses need to manage the complete employment lifecycle, from recruitment to retirement. Our solution requires virtually no customization and is based on a core system of record maintained in a single database for all HCM functions, including payroll, talent acquisition, talent management, human resources (“HR”) management and time and labor management applications.
Our significant accounting policies are discussed in Note 2 “Summary of Significant Accounting Policies” in the notes to our audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2025 (the “Form 10-K”) filed with the Securities and Exchange Commission (“SEC”) on February 19, 2026.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements include the financial results of Software and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the SEC regarding interim financial statements that permit reduced disclosure for interim periods. Intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments of a normal recurring nature that are necessary for the fair presentation of our results for the interim periods presented. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes presented in the Form 10-K. The results of operations for the three and nine months ended September 30, 2026 are not necessarily indicative of the results expected for the full year.
In 2024, the Office of the Comptroller of the Currency (the “OCC”) issued final approval to Paycom National Trust Bank, National Association (the “Paycom National Trust Bank”), our wholly owned subsidiary, to operate as a national trust bank pursuant to the National Bank Act and relevant OCC regulations. The Paycom National Trust Bank is the primary trustee of Paycom Client Trust, our grantor trust (the “Client Trust”), which now holds substantially all client payroll and related funds and is responsible for the oversight and management of those client funds. We have determined that the Client Trust is a variable interest entity that meets the criteria established for consolidation in accordance with Accounting Standards Codification (“ASC”) 810. We are the sole beneficial owner of the Client Trust, and we have the power to direct its activities and a controlling financial interest in its economic performance.
Dollar amounts are presented in millions, except amounts per share. As a result, some amounts may not sum or recalculate exactly due to rounding. All percentages have been calculated using unrounded amounts.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates include income taxes, loss contingencies, the useful life of property and equipment and intangible assets, the life of our client relationships, the fair value of our stock-based awards and the fair value of our financial instruments, intangible assets and goodwill. These estimates are based on historical experience, where applicable, and other assumptions that management believes are reasonable under the circumstances. Actual results could materially differ from these estimates.
In the third quarter of 2025, we completed an assessment of the useful lives of our servers and network equipment. Based on this assessment, we increased the estimated useful lives of these assets from
Seasonality
Our revenues are seasonal in nature. Generally, we expect our first and fourth quarter recurring revenues to be higher than other quarters during the year because payroll tax filing forms and Affordable Care Act forms are typically processed in the first quarter, and unscheduled payroll runs (such as bonuses) for our clients are typically concentrated in the fourth quarter. In addition, these seasonal fluctuations in recurring revenues impact operating income. Historical results impacted by these seasonal trends should not be considered a reliable indicator of our future results of operations.
8
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in millions, except per share and per unit amounts)
Segment Information
We operate in a operating segment and a reporting segment. Operating segments are defined as components of an enterprise about which separate financial information is regularly evaluated by the chief operating decision maker (“CODM”) function (which is fulfilled by our Chief Executive Officer) in deciding how to allocate resources and in assessing performance. Our Chief Executive Officer allocates resources and assesses performance based upon financial information at the consolidated level. See Note 14 “Segment Reporting” for additional information.
Funds Held for Clients and Client Funds Obligation
As part of our payroll and payroll tax filing services, we collect funds from our clients for employment taxes and payroll obligations, which we remit to the appropriate tax agencies and accounts designated by our clients. We typically invest these funds and earn interest income during the period between receipt and disbursement of such funds.
These investments are shown in our consolidated balance sheets as funds held for clients, and the associated liability for the employment taxes and payroll obligations is shown as client funds obligation. The liability is recorded in the accompanying consolidated balance sheets at the time we obtain the funds from clients. The client funds obligation represents liabilities that will be repaid within one year of the consolidated balance sheet date. We typically invest funds held for clients in money market funds, demand deposit accounts, certificates of deposit, commercial paper and U.S. Treasury securities. Short-term investments in instruments with an original maturity of three months or less are classified as cash and cash equivalents within funds held for clients in the consolidated balance sheets. Investments in instruments with an original maturity greater than three months are classified as available-for-sale securities and are also included within funds held for clients in the consolidated balance sheets. These available-for-sale securities are recorded at fair value, with the difference between the amortized cost and fair value of these available-for-sale securities recorded as unrealized net gains (losses) on available-for-sale securities and included within comprehensive earnings (loss) in the consolidated statements of comprehensive income.
Funds held for clients are classified as a current asset in the consolidated balance sheets because the funds are held solely to satisfy the client funds obligation. Additionally, the cash and cash equivalent portion of funds held for clients is classified as restricted cash and restricted cash equivalents and included in the reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents in the consolidated statements of cash flows.
We report the cash flows related to the purchases of investments from funds held for clients and the proceeds from the maturities of investments from funds held for clients on a gross basis in the cash flows from investing activities section of the consolidated statements of cash flows. Additionally, we report cash flows related to cash received from and paid on behalf of clients on a net basis within net change in client funds obligation in the cash flows from financing activities section of the consolidated statements of cash flows.
Stock Repurchase Plan
Our Board of Directors has authorized stock repurchase plans from time to time allowing for the repurchase of shares of our common stock in open market transactions at prevailing market prices, in privately negotiated transactions (including accelerated share repurchases) or by other means in accordance with federal securities laws, including Rule 10b5-1 programs. In July 2024, our Board of Directors authorized the repurchase of up to $
During the nine months ended September 30, 2026, we repurchased an aggregate of
Recently Issued Accounting Pronouncements
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”). ASU 2024-03 requires public business entities to disclose additional information about specific expense categories in the notes to the financial statements. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within
9
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in millions, except per share and per unit amounts)
fiscal years beginning after December 15, 2027, with early adoption permitted. The Company expects the adoption of this ASU to result in additional disclosures in the notes to its consolidated financial statements and does not expect the adoption to have a material impact on its consolidated results of operations, financial position or cash flows.
In September 2025, the FASB issued ASU No. 2025-06, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software” (“ASU 2025-06”). ASU 2025-06 removes references to software development stages and requires capitalization of software costs when management has committed to the software project and it is probable the software will be completed and perform its intended use. This ASU is effective for fiscal years beginning after December 15, 2027, and interim periods within those years, with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and related disclosures.
Revenues are recognized when control of the promised goods or services is transferred to our clients in an amount that reflects the consideration we expect to be entitled to for those goods or services. Substantially all of our revenues are derived from contracts with clients. Sales and other applicable taxes are excluded from revenues.
Recurring and Other Revenues
Recurring revenues are derived primarily from our payroll, talent acquisition, talent management, HR management and time and labor management applications, fees charged for form filings and delivery of client payroll checks and reports, and revenues associated with background checks and income and employment verification services. For a description of our applications, refer to Part I, Item 1, “Business,” in the Form 10-K.
We consider our commitment in our client contracts to be a series of distinct services that together constitute a single performance obligation that is generally satisfied over time and recognized during each client’s payroll period. The agreed-upon fee is variable consideration that is determined by client usage, billed and collected as part of our processing of the client’s payroll. The client’s use of our applications routinely fluctuates based upon factors that include the number of payrolls run and changes in the client’s employee population. These usage-based fluctuations do not change our core performance obligation to stand ready to provide the client with services over the contractual term. Collectability is reasonably assured as fees are generally collected through an automated clearing house as part of the client’s payroll cycle or through direct wire transfer, which minimizes default risk.
We consider the total price charged to a client in a given period to be indicative of the standalone selling price, as the total amount charged is within a reasonable range of prices typically charged for our goods and services for comparable classes of client groups, which we periodically assess for price adjustments.
Client contracts associated with these revenues vary in duration, ranging from month-to-month arrangements to contracts containing longer committed terms. Substantially all recurring revenue contracts contain consideration that is variable and allocated entirely to a wholly unsatisfied promise to transfer a series of distinct services that forms a single performance obligation. Accordingly, we have elected the practical expedient under ASC 606 and therefore do not disclose the amount of the transaction price allocated to the remaining performance obligations associated with those contracts.
Other revenues consist of nonrefundable implementation fees, which are charged upfront to new clients to offset the expense of new client set-up, as well as revenues from the sale of time clocks as part of our time and attendance application. These revenues represent distinct performance obligations from our recurring services. The implementation fee charged to our clients results in an implied performance obligation in the form of a material right to the client related to the client’s option to renew at the end of the contract period. The implementation fee is typically collected upon contract inception and is deferred and recognized ratably over the period in which the client benefits from the material right (currently estimated to be 10 years). We perform an annual analysis of client retention data to support this estimate, and changes in the estimate could materially affect the timing and amount of revenue recognized from these fees.
Revenues from the sale of time clocks are recognized when control is transferred to the client upon delivery of the product. We estimate the standalone selling price for the time clocks by maximizing the use of observable inputs such as our specific pricing practices for time clocks.
For additional information, see Note 14 “Segment Reporting.”
10
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in millions, except per share and per unit amounts)
Interest on Funds Held for Clients
Interest income on funds held for clients is earned on funds that are collected from clients in advance of either the applicable due date for payroll tax submissions or the applicable disbursement date for employee payment services. The interest earned on these funds is included in revenues in the consolidated statements of comprehensive income as the collection, holding, and remittance of these funds are essential components of providing these services.
Contract Balances
The timing of revenue recognition for recurring services is consistent with the invoicing of clients as they both occur during the respective client payroll period for which the services are provided. Therefore, we generally do not recognize a contract asset or liability resulting from the timing of revenue recognition and invoicing.
Changes in deferred revenue for the three and nine months ended September 30, 2026 and 2025 were as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Balance, beginning of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Recognition of revenue included in beginning of period balance |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Contract balance, net of revenue recognized during the period |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance, end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Assets Recognized from the Costs to Obtain and Costs to Fulfill Revenue Contracts
We recognize an asset for the incremental costs of obtaining a contract with a client if we expect the amortization period to exceed one year. We also recognize an asset for costs to fulfill a contract when such costs are specifically identifiable, generate or enhance resources used to satisfy future performance obligations, and are expected to be recovered. We have determined that substantially all costs related to implementation activities meet the capitalization criteria under ASC 340-40.
The assets related to both costs to obtain and costs to fulfill contracts with clients are accounted for utilizing a portfolio approach and are capitalized and amortized ratably over the expected period of benefit, which we have determined to be the estimated life of the client relationship of 10 years, primarily because we incur no new costs to obtain or fulfill a contract upon renewal. Additional commission costs incurred when existing clients purchase additional applications relate solely to those applications and are not associated with contract renewals. Furthermore, additional fulfillment costs associated with the implementation of additional applications for existing clients are generally minimal. A change in our client life estimate could have a material impact on the timing and amounts recognized as amortization expense.
The assets related to both costs to obtain and costs to fulfill contracts with clients are presented as deferred contract costs in the accompanying consolidated balance sheets. Amortization expense related to costs to obtain and costs to fulfill contracts is included in sales and marketing expenses and general and administrative expenses in the accompanying consolidated statements of comprehensive income. We regularly review our assets recognized from the costs to obtain and costs to fulfill client contracts for potential impairment and did not recognize an impairment loss during the nine months ended September 30, 2026 or 2025.
11
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in millions, except per share and per unit amounts)
The following tables present the asset balances and related amortization expense for these contract costs:
|
|
As of and for the Three Months Ended September 30, 2026 |
|
|||||||||||||
|
|
Beginning |
|
|
Capitalization |
|
|
Amortization |
|
|
Ending |
|
||||
Costs to obtain a contract |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Costs to fulfill a contract |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
As of and for the Three Months Ended September 30, 2025 |
|
|||||||||||||
|
|
Beginning |
|
|
Capitalization |
|
|
Amortization |
|
|
Ending |
|
||||
Costs to obtain a contract |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Costs to fulfill a contract |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
As of and for the Nine Months Ended September 30, 2026 |
|
|||||||||||||
|
|
Beginning |
|
|
Capitalization |
|
|
Amortization |
|
|
Ending |
|
||||
Costs to obtain a contract |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Costs to fulfill a contract |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
As of and for the Nine Months Ended September 30, 2025 |
|
|||||||||||||
|
|
Beginning |
|
|
Capitalization |
|
|
Amortization |
|
|
Ending |
|
||||
Costs to obtain a contract |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Costs to fulfill a contract |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Property and equipment and accumulated depreciation and amortization were as follows:
|
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||
Property and equipment |
|
|
|
|
|
|
||
Software and capitalized software development costs |
|
$ |
|
|
$ |
|
||
Buildings |
|
|
|
|
|
|
||
Computer equipment |
|
|
|
|
|
|
||
Rental clocks |
|
|
|
|
|
|
||
Furniture, fixtures and equipment |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less: accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
Land |
|
|
|
|
|
|
||
Property and equipment, net |
|
$ |
|
|
$ |
|
||
We capitalize software development costs related to software developed or obtained for internal use in accordance with ASC 350-40. For the three and nine months ended September 30, 2026, we capitalized $
Rental clocks included in property and equipment, net in the consolidated balance sheets, represent time clocks issued to clients under month-to-month operating leases. As such, these items are transferred from inventory to property and equipment and depreciated over their estimated useful lives.
12
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in millions, except per share and per unit amounts)
Depreciation and amortization expense for property and equipment was $
As of both September 30, 2026 and December 31, 2025, goodwill totaled $
In June 2021, in connection with our marketing initiatives, we purchased the naming rights to the downtown Oklahoma City arena that is currently home to the Oklahoma City Thunder National Basketball Association franchise. Under the terms of the naming rights agreement, we committed to make escalating annual sponsorship fee payments from 2021 to 2035.
In July 2025, the naming rights agreement was amended to provide, among other things, that the agreement and our obligation to make the previously disclosed annual sponsorship fee payments thereunder will terminate on the earlier of (i) September 30, 2028 or (ii) the date of the last event hosted or presented at the current arena (subject to earlier termination in certain limited circumstances), with a reduction in the sponsorship fee if the term of the agreement ends prior to September 30, 2028 and in certain other limited circumstances. As a result of the July 2025 amendment to the naming rights agreement, we recognized a $
The cost of the naming rights has been recorded as an intangible asset with an offsetting liability as of the date of the contract. The intangible asset is being amortized over the remainder of the agreement term on a straight-line basis. The difference between the present value of the offsetting liability and actual cash payments is being relieved through sales and marketing expense using the effective interest method over the remainder of the agreement term.
All of our intangible assets other than goodwill are considered to have definite lives and, as such, are subject to amortization. The following tables present the components of intangible assets within our consolidated balance sheets:
|
|
September 30, 2026 |
|
|||||||||||
|
|
Weighted Average Remaining Useful Life |
|
Gross |
|
|
Accumulated Amortization |
|
|
Net |
|
|||
|
|
(Years) |
|
|
|
|
|
|
|
|
|
|||
Intangibles: |
|
|
|
|
|
|
|
|
|
|
|
|||
Naming rights |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
December 31, 2025 |
|
|||||||||||
|
|
Weighted Average Remaining Useful Life |
|
Gross |
|
|
Accumulated Amortization |
|
|
Net |
|
|||
|
|
(Years) |
|
|
|
|
|
|
|
|
|
|||
Intangibles: |
|
|
|
|
|
|
|
|
|
|
|
|||
Naming rights |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Amortization of intangible assets for the three and nine months ended September 30, 2026, was $
Paycom Payroll, LLC (the “Borrower”), Software, and certain other subsidiaries of Software (collectively, the “Loan Parties”) are party to a credit agreement (as amended or amended and restated from time to time, the “Credit Agreement”) with JPMorgan Chase Bank, N.A. (the “Administrative Agent”), as a lender, the administrative agent, the swingline lender and the issuing bank, and the lenders from time to time party thereto (collectively with JPMorgan Chase Bank, N.A., the “Lenders”),
13
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in millions, except per share and per unit amounts)
which provides for a senior secured revolving credit facility (the “Revolving Credit Facility”) in the aggregate principal amount of up to $
The Credit Agreement includes a $
The proceeds of the loans and letters of credit under the Credit Agreement are to be used for ongoing working capital and general corporate purposes, including permitted acquisitions and share repurchases.
The Credit Agreement also permits the Borrower to request an incremental facility of up to an additional $
Borrowings under the Credit Agreement bear interest, at the Borrower’s election, at either (i) the Alternate Base Rate (“ABR”) plus an applicable margin or (ii) the term Secured Overnight Financing Rate (“Term SOFR Rate”) plus an applicable margin or, if the Term SOFR Rate is unavailable, the daily SOFR plus an applicable margin. The applicable margin is determined based on the Company’s consolidated leverage ratio and ranges from
We are required to pay a quarterly commitment fee on the unused portion of the Revolving Credit Facility. The applicable commitment fee rate is determined based on the Company’s consolidated leverage ratio and ranges from
Subject to certain conditions set forth in the Credit Agreement, we may borrow, prepay and reborrow under the Revolving Credit Facility and terminate or reduce the Lenders’ commitments at any time prior to the Scheduled Maturity Date.
The Credit Agreement requires us to maintain as of the end of each fiscal quarter a consolidated interest coverage ratio of not less than 3.0 to 1.0 and a consolidated leverage ratio of not greater than 3.5 to 1.0. In addition, certain Restricted Payments (as defined in the Credit Agreement), including dividend payments and share repurchases, are permitted if certain conditions are met. Restricted Payments that do not exceed $
The events of default under the Credit Agreement include, among others, payment defaults, breaches of covenants, defaults under the related loan documents, material misrepresentations, cross defaults with certain other material indebtedness, bankruptcy and insolvency events, judgment defaults, certain events related to plans subject to the Employee Retirement Income Security Act of 1974, as amended, invalidity of the Credit Agreement or the related loan documents and change in control events. The occurrence of an event of default could result in the acceleration of our obligations under the Credit Agreement, the requirement to post cash collateral with respect to letters of credit, the termination of the Lenders’ commitments and a
As of September 30, 2026, we were in compliance with these covenants.
As of September 30, 2026, there was $
14
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in millions, except per share and per unit amounts)
The tables below present our cash and cash equivalents, the funds held for clients cash and cash equivalents as well as the investments that were included within funds held for clients on the consolidated balance sheets:
|
|
September 30, 2026 |
|
|||||||||||||
Type of issue |
|
Amortized cost |
|
|
Gross unrealized gains |
|
|
Gross unrealized losses |
|
|
Fair value |
|
||||
Cash and cash equivalents |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Funds held for clients cash and cash equivalents |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Available-for-sale securities(1): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury securities |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Certificates of deposit |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Total cash, cash equivalents and investments |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
December 31, 2025 |
|
|||||||||||||
Type of issue |
|
Amortized cost |
|
|
Gross unrealized gains |
|
|
Gross unrealized losses |
|
|
Fair value |
|
||||
Cash and cash equivalents |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Funds held for clients cash and cash equivalents |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Available-for-sale securities(1): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury securities |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Certificates of deposit |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Total cash, cash equivalents and investments |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a period of less than and greater than 12 months as of September 30, 2026, were as follows:
|
|
September 30, 2026 |
|
|||||||||||||||||||||
|
|
Securities in unrealized loss position for less than 12 months |
|
|
Securities in unrealized loss position for greater than 12 months |
|
|
Total |
|
|||||||||||||||
Type of issue |
|
Gross unrealized losses |
|
|
Fair value |
|
|
Gross unrealized losses |
|
|
Fair value |
|
|
Gross unrealized losses |
|
|
Fair value |
|
||||||
U.S. Treasury securities |
|
$ |
( |
) |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
Certificates of deposit |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Total |
|
$ |
( |
) |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
There were
We did not make any reclassification adjustments out of accumulated other comprehensive income for realized gains or losses on the sale or maturity of available-for-sale securities for the nine months ended September 30, 2026 or 2025. There were
We regularly review the composition of our investment portfolio and did
15
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in millions, except per share and per unit amounts)
Expected maturities of available-for-sale securities at September 30, 2026 were as follows:
Expected maturity |
|
Amortized cost |
|
|
Fair value |
|
||
One year or less |
|
$ |
|
|
$ |
|
||
One year to five years |
|
|
|
|
|
|
||
Total available-for-sale securities |
|
$ |
|
|
$ |
|
||
Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, funds held for clients, client funds obligation and long-term debt. The carrying amount of cash and cash equivalents, accounts receivable, accounts payable, funds held for clients and client funds obligation approximates fair value. See Note 6 “Long-Term Debt” for discussion of the fair value of our debt.
Our corporate investments consist primarily of money market funds and demand deposit accounts and are classified as cash and cash equivalents on the consolidated balance sheets.
As discussed in Note 2 “Summary of Significant Accounting Policies”, we typically invest the funds held for clients in money market funds, demand deposit accounts, certificates of deposit, commercial paper and U.S. Treasury securities. Short-term investments in instruments with an original maturity of three months or less are classified as cash and cash equivalents within funds held for clients in the consolidated balance sheets. Investments in instruments with an original maturity greater than three months are classified as available-for-sale securities and are also included within funds held for clients in the consolidated balance sheets. These available-for-sale securities are recognized at fair value, with the difference between the amortized cost and fair value of these available-for-sale securities recorded as unrealized net gains (losses) within comprehensive earnings (loss) in our consolidated statements of comprehensive income. See Note 7 “Corporate Investments and Funds Held for Clients” for additional information.
The accounting standard for fair value measurements establishes a three-level fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Included in the following tables are the Company’s major categories of assets and liabilities measured at fair value on a recurring basis as of September 30, 2026 and December 31, 2025:
|
|
September 30, 2026 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury securities |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Certificates of deposit |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
December 31, 2025 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury securities |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Certificates of deposit |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
16
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in millions, except per share and per unit amounts)
Employees who meet eligibility requirements may participate in our employee savings plan (401(k) plan). Matching contributions were $
Eligible employees may participate in the Paycom Software, Inc. Employee Stock Purchase Plan (the “ESPP”), which allows employees to purchase shares of the Company’s common stock through payroll deductions at a price equal to
Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per share is computed in a similar manner to basic earnings per share after assuming the issuance of shares of common stock for all potentially dilutive equity incentive awards using the treasury stock method.
The following is a reconciliation of net income and the shares of common stock used in the computation of basic and diluted earnings per share:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic weighted average shares outstanding (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of unvested restricted stock and restricted stock units (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted weighted average shares outstanding (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company recognizes stock-based compensation expense related to awards of (i) restricted stock subject to time-based or no vesting conditions (“Time-Based Restricted Stock Awards”), (ii) restricted stock subject to market-based vesting conditions (“Market-Based Restricted Stock Awards”), (iii) restricted stock units subject to time-based vesting conditions (“RSUs”) and (iv) restricted stock units subject to performance-based vesting conditions (“PSUs”). During the three and nine months ended September 30, 2026, awards were granted pursuant to the Paycom Software, Inc. 2023 Long-Term Incentive Plan.
17
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in millions, except per share and per unit amounts)
The following table presents the non-cash stock-based compensation expense that is included within the specified line items in our consolidated statements of comprehensive income:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Non-cash stock-based compensation expense: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating expenses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total non-cash stock-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table presents the unrecognized compensation cost and the related weighted average recognition period associated with unvested equity incentive awards as of September 30, 2026:
|
|
Restricted Stock Awards |
|
|
Restricted Stock |
|
||
Unrecognized compensation cost |
|
$ |
|
|
$ |
|
||
Weighted average period for recognition (years) |
|
|
|
|
|
|
||
We capitalized stock-based compensation costs related to software developed for internal use of $
In May 2023, our Board of Directors adopted a dividend policy under which we intend to pay quarterly cash dividends on our common stock. All unvested equity incentive awards currently outstanding are entitled to receive dividends or dividend equivalents, provided that such dividends or dividend equivalents are withheld by the Company and distributed to the applicable holder upon the release of restrictions on such equity incentive awards (i.e., upon vesting).
The following table summarizes restricted stock awards activity for the nine months ended September 30, 2026:
|
|
Time-Based |
|
|
Market-Based |
|
||||||||||
|
|
Shares |
|
|
Weighted Average |
|
|
Shares |
|
|
Weighted Average |
|
||||
|
|
(in thousands) |
|
|
(in dollars) |
|
|
(in thousands) |
|
|
(in dollars) |
|
||||
Unvested shares of restricted stock outstanding at December 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested |
|
|
( |
) |
|
$ |
|
|
|
( |
) |
|
$ |
|
||
Forfeited |
|
|
( |
) |
|
$ |
|
|
|
( |
) |
|
$ |
|
||
Unvested shares of restricted stock outstanding at September 30, 2026 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
18
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in millions, except per share and per unit amounts)
The following table summarizes restricted stock unit awards activity for the nine months ended September 30, 2026:
|
|
RSUs |
|
|
PSUs |
|
||||||||||
|
|
Units |
|
|
Weighted Average |
|
|
Units |
|
|
Weighted Average |
|
||||
|
|
(in thousands) |
|
|
(in dollars) |
|
|
(in thousands) |
|
|
(in dollars) |
|
||||
Unvested restricted stock units outstanding at December 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested |
|
|
( |
) |
|
$ |
|
|
|
( |
) |
|
$ |
|
||
Forfeited |
|
|
( |
) |
|
$ |
|
|
|
( |
) |
|
$ |
|
||
Unvested restricted stock units outstanding at September 30, 2026 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
We are involved in various legal proceedings in the ordinary course of business. Although we cannot predict the outcome of these proceedings, legal matters are subject to inherent uncertainties and there exists the possibility that the ultimate resolution of these matters could have a material adverse effect on our business, financial condition, results of operations and cash flows.
The Company’s effective income tax rate was
The Company conducts business as a operating segment, which is based upon the Company’s current organizational and management structure, as well as information used by the CODM to allocate resources. The Company derives revenues from clients by providing a cloud-based HCM solution delivered as Software-as-a-Service. Our payroll application is the foundation of our solution and is based on a core system of record to maintain a single database for all HCM functions. The Company derives revenue primarily in North America and manages the business activities on a consolidated basis. No individual client represents 10% or more of total revenues.
The accounting policies of the segment are the same as those described in Note 2 “Summary of Significant Accounting Policies”. The Company’s CODM is our .
The Company does not have any intra-entity sales or transfers.
19
Paycom Software, Inc.
Notes to the Unaudited Consolidated Financial Statements
(tabular dollars and shares in millions, except per share and per unit amounts)
The table below highlights the Company’s revenues, expenses and net income for our single reportable segment, which are consistent with amounts reported on the consolidated statements of comprehensive income for the three and nine months ended September 30, 2026 and 2025.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Recurring |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Implementation and other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest on funds held for clients |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total cost of revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Provision for income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with management’s perspective on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (i) the accompanying unaudited consolidated financial statements and notes thereto for the three and nine months ended September 30, 2026, (ii) the audited consolidated financial statements and notes thereto for the year ended December 31, 2025 included in our Annual Report on Form 10-K (the “Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on February 19, 2026 and (iii) the discussion under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Form 10-K. Except for certain information as of December 31, 2025, all amounts herein are unaudited. Unless we state otherwise or the context otherwise requires, the terms “we,” “us,” “our” and the “Company” refer to Paycom Software, Inc. and its consolidated subsidiaries. All amounts presented in tables, other than per share amounts, are in millions unless otherwise noted.
Special Note Regarding Forward-Looking Statements
The following discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are any statements that refer to our estimated or anticipated results, other non-historical facts or future events and include, but are not limited to, statements regarding our business strategy; anticipated future operating results and operating expenses, cash flows, capital resources, dividends and liquidity; competition; trends, opportunities and risks affecting our business, industry and financial results, including macroeconomic factors; 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, as well as how certain applications may impact client employee usage and client satisfaction; our ability to attract and retain qualified employees and key personnel; future regulatory, judicial and legislative changes; how the performance of certain of our offerings is sensitive to changes in the labor market; our plan to expand our sales capacity and our ability to effectively execute such plan; the sufficiency of our existing cash and cash equivalents to meet our working capital and capital expenditure needs over the next 12 months; our plans regarding our capital expenditures and investment activity as our business grows, including with respect to research and development and the expansion of our facilities; our plans to pay cash dividends; and our plans to repurchase shares of our common stock through a stock repurchase plan using cash and/or borrowings under our senior secured revolving credit facility (the “Revolving Credit Facility”). In addition, forward-looking statements also consist of statements involving trend analyses and statements including such words as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “should,” “will,” “would,” and similar expressions or the negative of such terms or other comparable terminology.
Forward-looking statements are neither historical facts nor assurances of future performance, and are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:
21
Forward-looking statements are based only on information currently available to us and speak only as of the date of this Form 10-Q. We do not undertake any obligation to update or revise the forward-looking statements to reflect events that occur or circumstances that exist after the date on which such statements were made, except to the extent required by law.
Overview
We are a leading provider of a comprehensive, cloud-based HCM solution delivered as Software-as-a-Service. We provide functionality and data analytics that businesses need to manage the complete employment lifecycle, from recruitment to retirement. Our solution requires virtually no customization and is based on a core system of record maintained in a single database for all HCM functions, including payroll, talent acquisition, talent management, human resources management and time and labor management applications. Our user-friendly software allows for easy adoption of our solution by employees, enabling self-management of their HCM activities in the cloud, which reduces the administrative burden on employers and increases employee productivity.
Substantially all of our revenues are generated from (i) fixed amounts charged per billing period plus a fee per employee or transaction processed and (ii) fixed amounts charged per billing period. Our billing period varies by client and is typically based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly. Over time, an increasing number of clients will be billed on a monthly basis for certain HCM applications and services, regardless of the client’s payroll cycle. We serve a diverse client base in terms of size and industry. Our revenues are primarily generated through our sales force that solicits new clients and our client relations representatives who sell additional applications to existing clients.
Our principal marketing efforts include national and local advertising campaigns, email campaigns, social and digital media campaigns, search engine marketing methods, sponsorships, tradeshows, print advertising and outbound marketing including personalized direct mail campaigns. In addition, we generate leads and build recognition of our brand and thought leadership with relevant and informative content, such as white papers, blogs, podcast episodes and webinars.
Throughout our history, we have built strong relationships with our clients. As the HCM needs of our clients evolve, we believe that we are well-positioned to expand the HCM spending of our clients, and we believe this opportunity is significant. To be successful, we must continue to demonstrate the operational and economic benefits of our solution, as well as effectively hire, train, motivate and retain qualified personnel.
Growth Outlook, Opportunities and Challenges
Our payroll application is the foundation of our solution, and all of our clients are required to utilize this application in order to access our other applications. Consequently, we have historically generated the majority of our revenues from our payroll applications, although our revenue mix has evolved and will continue to evolve as we develop and add new non-payroll applications to our solution.
We believe our strategy of focusing on incorporating AI and automation across our full solution is an important differentiator for attracting new clients and key to long-term client satisfaction and client retention. Our software vision is that people should not perform payroll-related and HCM-related tasks that systems can automate. We have designed our software so users do not have to be system experts or even need training to access information. For example, our industry-first command-driven AI engine, IWant™, provides an easy, automated avenue for seeking information about employee data without having to navigate through the software.
Our continued growth depends on attracting new clients by continuing to leverage our sales force productivity, penetrating existing markets and expanding into new markets, targeting a high degree of client employee usage across our solution, and introducing new applications to our existing client base. Client adoption of new applications and, historically, client employee usage of both new and existing applications have been significant factors in our recurring revenue growth. We
22
believe our ability to continue to develop new applications and to improve existing applications will enable us to increase recurring revenues in the future. In addition, we plan to expand our sales capacity in the future to grow our market presence.
The market for HCM software is highly competitive, rapidly evolving and fragmented. We expect competition to remain intense as new market entrants and disruptive technologies emerge and aggressive pricing and client retention strategies persist. These market pressures can directly affect our recurring revenue growth and our ability to attract and retain clients. We believe our long-term focused investments in automation, client ROI achievement, and world-class service can strengthen our recurring revenue growth and annual revenue retention rate.
Our target client size is organizations with 50 to 10,000 or more employees. While we continue to serve a diversified client base ranging from small businesses to organizations with many thousands of employees, the average size of our clients has grown significantly as we have organically grown our operations and increased the number of applications we offer. We believe larger employers, such as organizations with greater than 1,000 employees, represent a substantial opportunity to increase our revenues per client, with limited incremental cost to us. With our Global HCM solution and expansion of payroll services into certain international markets, we believe that our ability to serve organizations with international employees makes our solution more attractive to larger companies, many of which have a global presence. Because we charge our clients on a per employee basis for certain services we provide, any increase or decrease in the number of employees of our clients will have a positive or negative impact, respectively, on our results of operations. As a result, the performance of certain of our offerings is sensitive to changes in the labor market. In addition, a multitude of macroeconomic pressures, such as inflation and changes in interest rates, impact our clients’ hiring practices to varying degrees and, in turn, impact our revenues.
We believe the challenges of managing the ever-changing complexity of payroll and human resources will continue to drive companies to turn to outsourced providers for help with their HCM needs. The HCM industry historically has been driven, in part, by legislation and regulatory action, including COBRA, changes to the minimum wage laws or overtime rules, and legislation from federal, state or municipal taxation authorities.
We collect funds from clients in advance of either the applicable due date for payroll tax submissions or the applicable disbursement date for employee payment services. These collections from clients are typically disbursed from one to 30 days after receipt, with some funds being held for up to 120 days. We typically invest funds held for clients in money market funds, demand deposit accounts, certificates of deposit, commercial paper and U.S. Treasury securities until they are paid to the applicable tax or regulatory agencies or to client employees. As we introduce new applications, expand our client base and renew and expand relationships with existing clients, we expect our average funds held for clients balance and, accordingly, interest earned on funds held for clients, will increase; however, the amount of interest we earn is impacted by changes in interest rates.
Our revenues are seasonal in nature. Generally, we expect our first and fourth quarter recurring revenues to be higher than other quarters during the year because payroll tax filing forms and Affordable Care Act forms are typically processed in the first quarter, and unscheduled payroll runs (such as bonuses) for our clients are typically concentrated in the fourth quarter. In addition, these seasonal fluctuations in recurring revenues impact operating income.
Growing our business has resulted in, and may continue to result in, substantial investments in sales professionals, operating expenses, system development and programming costs (including those related to our full solution automation and AI initiatives) and general and administrative expenses. Historically, our revenue growth and geographic expansion have driven increases in (i) facility costs related to data centers, the expansion of our corporate headquarters, operations facilities and additional sales office leases and (ii) salaries and benefits and stock-based compensation expense. Automating our core business systems is creating new efficiencies that have led to reductions in headcount and, as a result, contributed to decreases in certain employee-related expenses during the three and nine months ended September 30, 2026, as compared to the prior year periods.
23
Results of Operations
The following table sets forth selected consolidated statements of income data and such data as a percentage of total revenues for each of the periods indicated, as well as period-over-period changes with respect to each line item:
|
|
Three Months Ended September 30, |
|
|
|
|
Nine Months Ended September 30, |
|
|
|
||||||||||||||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
% Change |
|
2026 |
|
|
2025 |
|
|
% Change |
||||||||||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Recurring and other |
|
$ |
519.3 |
|
|
|
95.5 |
% |
|
$ |
466.5 |
|
|
|
94.6 |
% |
|
11.3% |
|
$ |
1,568.5 |
|
|
|
95.2 |
% |
|
$ |
1,421.6 |
|
|
|
94.3 |
% |
|
10.3% |
Interest on funds held for clients |
|
|
24.5 |
|
|
|
4.5 |
% |
|
|
26.8 |
|
|
|
5.4 |
% |
|
-8.6% |
|
|
78.3 |
|
|
|
4.8 |
% |
|
|
85.8 |
|
|
|
5.7 |
% |
|
-8.7% |
Total revenues |
|
|
543.8 |
|
|
|
100.0 |
% |
|
|
493.3 |
|
|
|
100.0 |
% |
|
10.2% |
|
|
1,646.8 |
|
|
|
100.0 |
% |
|
|
1,507.4 |
|
|
|
100.0 |
% |
|
9.3% |
Cost of revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating expenses |
|
|
62.6 |
|
|
|
11.5 |
% |
|
|
64.1 |
|
|
|
13.0 |
% |
|
-2.2% |
|
|
190.1 |
|
|
|
11.5 |
% |
|
|
198.8 |
|
|
|
13.2 |
% |
|
-4.4% |
Depreciation and amortization |
|
|
24.6 |
|
|
|
4.5 |
% |
|
|
21.3 |
|
|
|
4.3 |
% |
|
15.3% |
|
|
73.5 |
|
|
|
4.5 |
% |
|
|
58.8 |
|
|
|
3.9 |
% |
|
25.1% |
Total cost of revenues |
|
|
87.2 |
|
|
|
16.0 |
% |
|
|
85.4 |
|
|
|
17.3 |
% |
|
2.1% |
|
|
263.6 |
|
|
|
16.0 |
% |
|
|
257.6 |
|
|
|
17.1 |
% |
|
2.4% |
Administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Sales and marketing |
|
|
108.0 |
|
|
|
19.9 |
% |
|
|
125.7 |
|
|
|
25.5 |
% |
|
-14.1% |
|
|
344.4 |
|
|
|
20.9 |
% |
|
|
352.6 |
|
|
|
23.4 |
% |
|
-2.3% |
Research and development |
|
|
38.5 |
|
|
|
7.1 |
% |
|
|
74.1 |
|
|
|
15.0 |
% |
|
-48.1% |
|
|
151.1 |
|
|
|
9.2 |
% |
|
|
211.2 |
|
|
|
14.0 |
% |
|
-28.4% |
General and administrative |
|
|
88.2 |
|
|
|
16.2 |
% |
|
|
71.9 |
|
|
|
14.6 |
% |
|
22.6% |
|
|
234.8 |
|
|
|
14.3 |
% |
|
|
207.8 |
|
|
|
13.8 |
% |
|
12.9% |
Depreciation and amortization |
|
|
26.1 |
|
|
|
4.8 |
% |
|
|
23.6 |
|
|
|
4.8 |
% |
|
10.8% |
|
|
78.4 |
|
|
|
4.8 |
% |
|
|
68.1 |
|
|
|
4.5 |
% |
|
15.2% |
Total administrative expenses |
|
|
260.8 |
|
|
|
48.0 |
% |
|
|
295.3 |
|
|
|
59.9 |
% |
|
-11.7% |
|
|
808.7 |
|
|
|
49.1 |
% |
|
|
839.7 |
|
|
|
55.7 |
% |
|
-3.7% |
Total operating expenses |
|
|
348.0 |
|
|
|
64.0 |
% |
|
|
380.7 |
|
|
|
77.2 |
% |
|
-8.6% |
|
|
1,072.3 |
|
|
|
65.1 |
% |
|
|
1,097.3 |
|
|
|
72.8 |
% |
|
-2.3% |
Operating income |
|
|
195.8 |
|
|
|
36.0 |
% |
|
|
112.6 |
|
|
|
22.8 |
% |
|
74.0% |
|
|
574.5 |
|
|
|
34.9 |
% |
|
|
410.1 |
|
|
|
27.2 |
% |
|
40.1% |
Interest expense |
|
|
(11.7 |
) |
|
|
-2.1 |
% |
|
|
(1.1 |
) |
|
|
-0.2 |
% |
|
959.8% |
|
|
(26.2 |
) |
|
|
-1.6 |
% |
|
|
(2.7 |
) |
|
|
-0.2 |
% |
|
885.5% |
Other income, net |
|
|
1.2 |
|
|
|
0.2 |
% |
|
|
41.3 |
|
|
|
8.4 |
% |
|
-97.2% |
|
|
9.1 |
|
|
|
0.6 |
% |
|
|
52.9 |
|
|
|
3.5 |
% |
|
-82.8% |
Income before income taxes |
|
|
185.3 |
|
|
|
34.1 |
% |
|
|
152.8 |
|
|
|
31.0 |
% |
|
21.3% |
|
|
557.5 |
|
|
|
33.9 |
% |
|
|
460.3 |
|
|
|
30.5 |
% |
|
21.1% |
Provision for income taxes |
|
|
52.1 |
|
|
|
9.6 |
% |
|
|
42.1 |
|
|
|
8.5 |
% |
|
23.9% |
|
|
161.2 |
|
|
|
9.8 |
% |
|
|
120.7 |
|
|
|
8.0 |
% |
|
33.5% |
Net income |
|
$ |
133.2 |
|
|
|
24.5 |
% |
|
$ |
110.7 |
|
|
|
22.4 |
% |
|
20.3% |
|
$ |
396.3 |
|
|
|
24.1 |
% |
|
$ |
339.6 |
|
|
|
22.5 |
% |
|
16.7% |
Revenues
Recurring and Other Revenues
The increase in recurring and other revenues for the three and nine months ended September 30, 2026 compared to the respective prior year periods was the result of the addition of new clients, increased revenue from sales of additional applications and services to existing clients, additions and increased usage of existing products and services, and the realization of pricing strategies. Client attrition, particularly among smaller clients, partially offset the favorable impact of these revenue drivers.
Interest on Funds Held for Clients
The impact of lower interest rates during the three and nine months ended September 30, 2026 compared to the three and nine months ended September 30, 2025 was partially offset by an increase in average funds held for client balances, but nonetheless resulted in decreased interest earned on funds held for clients for the three and nine months ended September 30, 2026 as compared to the prior year periods. The average daily balance of funds held for clients was $2.9 billion and $2.7 billion for the nine months ended September 30, 2026 and 2025, respectively.
Expenses
Cost of Revenues
During the three months ended September 30, 2026, operating expenses decreased from the comparable prior year period by $1.4 million, primarily due to a $4.7 million decrease in employee-related expenses attributable to lower headcount, partially offset by a $2.1 million increase in banking-related fees and increases in other categories of service costs, none of which were individually material. Depreciation and amortization expense increased $3.3 million from the comparable prior year period, primarily due to the development of additional technology and purchases of other fixed assets.
During the nine months ended September 30, 2026, operating expenses decreased from the comparable prior year period by $8.7 million, primarily due to a $17.4 million decrease in employee-related expenses attributable to lower headcount, partially offset by a $4.1 million increase in banking-related fees, a $1.1 million increase in shipping and supplies fees, and
24
increases in other categories of service costs, none of which were individually material. Depreciation and amortization expense increased $14.7 million from the comparable prior year period, primarily due to the development of additional technology and purchases of other fixed assets, partially offset by the immaterial impact of an increase in the estimated useful lives of servers and network equipment implemented at the beginning of the third quarter of 2025.
Administrative Expenses
Sales and Marketing
During the three months ended September 30, 2026, sales and marketing expenses decreased from the comparable prior year period by $17.7 million, primarily due to a $15.6 million decrease in marketing and advertising expenses and a $3.4 million decrease in employee-related expenses attributable to, among other things, lower headcount. These decreases were partially offset by increases in other categories of costs, none of which were individually material.
During the nine months ended September 30, 2026, sales and marketing expenses decreased from the comparable prior year period by $8.2 million, primarily due to a $5.7 million decrease in employee-related expenses attributable to, among other things, lower headcount and a $3.9 million decrease in marketing and advertising expenses. These decreases were partially offset by increases in other categories of costs, none of which were individually material.
Research and Development
During the three and nine months ended September 30, 2026, research and development expenses decreased from the comparable prior year periods primarily due to a decrease in employee-related expenses.
As a result of reduced headcount, research and development employee-related expenses have been lower in 2026 as compared to 2025. As is customary for our business, we expect fluctuations in research and development expenses as a percentage of revenue on a quarter-to-quarter basis due to seasonal revenue trends, the introduction of new products, the amount and timing of research and development costs that may be capitalized and the timing of onboarding new hires and restricted stock vesting events.
Expenditures for software developed or obtained for internal use are capitalized and amortized over a three-year period on a straight-line basis. The nature of the development projects underway during a particular period directly impacts the timing and extent of these capitalized expenditures and can affect the amount of research and development expenses in such period. The table below sets forth the amounts of capitalized and expensed research and development costs for the three and nine months ended September 30, 2026 and 2025:
|
|
Three Months Ended September 30, |
|
|
|
|
Nine Months Ended September 30, |
|
|
|||||||||||
|
|
2026 |
|
|
2025 |
|
|
% Change |
|
2026 |
|
|
2025 |
|
|
% Change |
||||
Expensed portion of research and development |
|
|
38.5 |
|
|
|
74.1 |
|
|
-48% |
|
|
151.1 |
|
|
|
211.2 |
|
|
-28% |
Capitalized portion of research and development |
|
|
17.4 |
|
|
|
43.5 |
|
|
-60% |
|
|
58.4 |
|
|
|
114.2 |
|
|
-49% |
Total research and development costs |
|
$ |
55.9 |
|
|
$ |
117.6 |
|
|
-52% |
|
$ |
209.5 |
|
|
$ |
325.4 |
|
|
-36% |
General and Administrative
During the three months ended September 30, 2026, general and administrative expenses increased $16.2 million from the comparable prior year period, primarily due to an $11.0 million charge related to a legal settlement, a $3.9 million increase in employee-related expenses, and a $3.0 million increase in technology and communications expenses, partially offset by decreases in other cost categories, none of which were individually material.
During the nine months ended September 30, 2026, general and administrative expenses increased $26.9 million from the comparable prior year period, primarily due to an $11.0 million charge related to a legal settlement, a $9.0 million increase in technology and communications expenses, and a $4.0 million increase in professional fees. The remainder of the increase was attributable to other cost categories, none of which were individually material.
25
Non-Cash Stock-Based Compensation Expense
The following table presents the non-cash stock-based compensation expense that is included within the specified line items in our consolidated statements of comprehensive income:
|
|
Three Months Ended September 30, |
|
|
|
|
Nine Months Ended September 30, |
|
|
|||||||||||
|
|
2026 |
|
|
2025 |
|
|
% Change |
|
2026 |
|
|
2025 |
|
|
% Change |
||||
Operating expenses |
|
$ |
2.1 |
|
|
$ |
3.4 |
|
|
-37% |
|
$ |
6.3 |
|
|
$ |
12.7 |
|
|
-50% |
Sales and marketing |
|
|
4.3 |
|
|
|
6.6 |
|
|
-35% |
|
|
12.2 |
|
|
|
19.1 |
|
|
-36% |
Research and development |
|
|
2.5 |
|
|
|
9.9 |
|
|
-75% |
|
|
3.4 |
|
|
|
29.4 |
|
|
-89% |
General and administrative |
|
|
11.4 |
|
|
|
11.2 |
|
|
2% |
|
|
30.1 |
|
|
|
30.6 |
|
|
-2% |
Total non-cash stock-based compensation expense |
|
$ |
20.3 |
|
|
$ |
31.1 |
|
|
-35% |
|
$ |
52.0 |
|
|
$ |
91.8 |
|
|
-43% |
Depreciation and Amortization
During the three months ended September 30, 2026, depreciation and amortization expense increased from the comparable prior year period primarily due to the development of additional technology and purchases of other fixed assets.
During the nine months ended September 30, 2026, depreciation and amortization expense increased from the comparable prior year period primarily due to the development of additional technology and purchases of other fixed assets, which was partially offset by the impact of an increase in the estimated useful lives of servers and network equipment implemented at the beginning of the third quarter of 2025.
Interest Expense
The increase in interest expense for the three and nine months ended September 30, 2026, as compared to the prior year periods, was primarily due to the timing and amount of borrowings outstanding under the Revolving Credit Facility.
Other Income, net
Other income, net decreased for the three and nine months ended September 30, 2026, as compared to the prior year periods, primarily due to the timing of gains related to the naming rights agreement. See Note 5, “Goodwill and Intangible Assets, Net,” for further discussion of these gains. For the three and nine months ended September 30, 2026, interest income earned on corporate funds was $2.1 million and $5.6 million, respectively, compared to $5.1 million and $15.4 million for the corresponding prior year periods. The decreases in other income, net were also attributable to losses on dispositions of property and equipment during the 2026 periods.
Provision for Income Taxes
The provision for income taxes is based on a current estimate of the annual effective income tax rate adjusted to reflect the impact of discrete items. Our effective income tax rate was 28.9% and 26.2% for the nine months ended September 30, 2026 and 2025, respectively. The higher effective tax rate for the nine months ended September 30, 2026 was primarily attributable to a decrease in excess tax benefits from stock-based compensation and reduced research and development credits.
Liquidity and Capital Resources
Our principal sources of capital and liquidity are our operating cash flow and cash and cash equivalents. Our cash and cash equivalents consist primarily of demand deposit accounts and money market funds. Additionally, we maintain a $2.125 billion Revolving Credit Facility, which can be accessed as needed to supplement our operating cash flow and cash balances.
We fund our operations primarily from cash flows generated from operations. Prior to 2026, we funded all ongoing capital expenditures, cash dividends and stock repurchases from available cash. During the nine months ended September 30, 2026, we borrowed $900.0 million under our Revolving Credit Facility to support our stock repurchase program and repaid $150.0 million of those borrowings. As of September 30, 2026, $750.0 million remained outstanding. We may determine that it is appropriate to fund future stock repurchases or other capital requirements in the future from a combination of available cash and additional borrowings under the Revolving Credit Facility. We believe our existing cash and cash equivalents, cash generated from operations and available sources of liquidity will be sufficient to maintain operations, make necessary capital expenditures, service debt, pay dividends and opportunistically repurchase shares for at least the next 12 months. In addition, based on our strong profitability and continued growth, we expect to meet our longer-term liquidity needs with cash flows from operations and, as needed, financing arrangements. To the extent we elect to finance our long-term liquidity needs, we believe that the potential financing capital available to us in the future will be sufficient.
Credit Agreement. We are party to a credit agreement (as amended or amended and restated from time to time, the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as a lender, the administrative agent, the swingline lender and the issuing bank, and the lenders from time to time party thereto (collectively with JPMorgan Chase Bank, N.A., the “Lenders”).
26
On April 23, 2026, the Credit Agreement was amended and restated and the aggregate commitments under the Revolving Credit Facility were increased to $2.125 billion. The Credit Agreement includes a $25.0 million sublimit for swingline loans and a $6.5 million sublimit for letters of credit. All loans under the Credit Agreement will mature on April 23, 2031 (the “Scheduled Maturity Date”). The Revolving Credit Facility provides for no scheduled principal amortization, with all outstanding borrowings due at the Scheduled Maturity Date. Borrowings under the Credit Agreement are secured by a senior security interest in all personal property of Paycom Payroll, LLC (the “Borrower”), the Company, and certain other subsidiaries of the Company. The proceeds of the loans and letters of credit under the Credit Agreement are to be used for ongoing working capital and general corporate purposes, including permitted acquisitions and share repurchases. The Credit Agreement also permits the Borrower to request an incremental facility of up to an additional $750.0 million, subject to obtaining additional lender commitments and satisfying certain conditions.
Borrowings under the Credit Agreement bear interest, at the Borrower’s election, at either (i) the Alternate Base Rate (“ABR”) plus an applicable margin or (ii) the term Secured Overnight Financing Rate (“Term SOFR Rate”) plus an applicable margin or, if the Term SOFR Rate is unavailable, the daily SOFR plus an applicable margin. The applicable margin is determined based on the Company’s consolidated leverage ratio and ranges from 0.25% to 1.00% for ABR borrowings and from 1.25% to 2.00% for SOFR-based borrowings.
We are required to pay a quarterly commitment fee on the unused portion of the Revolving Credit Facility. The applicable commitment fee rate is determined based on the Company’s consolidated leverage ratio and ranges from 0.20% to 0.275% per annum.
Under the Credit Agreement, we are required to maintain as of the end of each fiscal quarter a consolidated interest coverage ratio of not less than 3.0 to 1.0 and a consolidated leverage ratio of not greater than 3.5 to 1.0. In addition, certain Restricted Payments (as defined in the Credit Agreement), including dividend payments and share repurchases, are permitted if certain conditions are met. Restricted Payments that do not exceed $50.0 million in any fiscal year are permitted. In addition, Restricted Payments are permitted if immediately before and after giving pro forma effect to such Restricted Payment, our consolidated leverage ratio on a pro forma basis is less than 3.0 to 1.0.
The Credit Agreement contains customary affirmative and negative covenants, including covenants limiting our ability to, among other things, grant liens, incur debt, effect certain mergers, make investments, dispose of assets, enter into certain transactions (including swap agreements and sale and leaseback transactions), pay dividends or distributions on our capital stock and enter into transactions with affiliates, in each case subject to customary exceptions.
Subject to certain conditions set forth in the Credit Agreement, we may borrow, prepay and reborrow under the Revolving Credit Facility and terminate or reduce the Lenders’ commitments at any time prior to the Scheduled Maturity Date.
As of September 30, 2026, we were in compliance with these covenants.
Stock Repurchase Plan and Withholding Shares to Cover Taxes. Our Board of Directors has authorized stock repurchase plans from time to time allowing for the repurchase of shares of our common stock in open market transactions at prevailing market prices, in privately negotiated transactions (including accelerated share repurchases) or by other means in accordance with federal securities laws, including Rule 10b5-1 programs. In July 2024, our Board of Directors authorized the repurchase of up to $1.5 billion of our common stock. On March 5, 2026, the Board of Directors authorized the repurchase of up to an additional $200.0 million of shares of our common stock. On March 12, 2026, the Board of Directors replenished the stock repurchase plan such that the aggregate value of shares of common stock that could be repurchased under the stock repurchase plan was $750.0 million. On May 4, 2026, the Board of Directors approved a new stock repurchase plan authorizing the Company to repurchase up to $2.0 billion of shares of common stock. The new stock repurchase plan replaced the prior authorization and has no expiration date. As of September 30, 2026, there was $1,652.7 million available for repurchases under the stock repurchase plan. Our stock repurchase plan may be suspended or discontinued at any time. The actual timing, number and value of shares repurchased depends on a number of factors, including the market price of our common stock, general market and economic conditions, shares withheld for taxes associated with the vesting of equity incentive awards and other corporate considerations.
During the nine months ended September 30, 2026, we repurchased an aggregate of 10,960,280 shares of our common stock at an average cost of $128.56 per share, including 134,128 shares withheld to satisfy tax withholding obligations for certain individuals upon the vesting of equity incentive awards. Our payment of the taxes on behalf of those individuals resulted in an aggregate cash expenditure of $18.2 million. We deduct the value of such withheld shares from the amount available for future repurchases under our stock repurchase plan.
Dividends on Common Stock. In May 2023, our Board of Directors adopted a dividend policy under which we intend to pay quarterly cash dividends on our common stock.
27
The following table summarizes quarterly dividends paid during 2026:
Declaration Date |
|
Record Date |
|
Payment Date |
|
Per Share Dividend |
|
|
Total Cash Dividends Paid (in millions)(1) |
|
||
August 3, 2026 |
|
August 24, 2026 |
|
September 8, 2026 |
|
$ |
0.375 |
|
|
$ |
16.6 |
|
May 4, 2026 |
|
May 26, 2026 |
|
June 8, 2026 |
|
$ |
0.375 |
|
|
$ |
17.1 |
|
February 10, 2026 |
|
March 9, 2026 |
|
March 23, 2026 |
|
$ |
0.375 |
|
|
$ |
17.5 |
|
On November 2, 2026, our Board of Directors declared a quarterly cash dividend of $0.375 per share of common stock payable on December 7, 2026 to stockholders of record at the close of business on November 23, 2026.
The declaration, timing and amount of each quarterly cash dividend are subject to the approval of the Board of Directors, including a determination that the dividend policy and the declaration of dividends thereunder are in the best interests of our stockholders, are in compliance with applicable law and are permitted under the Credit Agreement. The Board of Directors retains the power to modify, suspend, or cancel the dividend policy in any manner and at any time that it may deem necessary or appropriate.
Cash Flow Analysis
Our cash flows from operating activities have historically been significantly impacted by profitability, implementation revenues received but deferred, our investment in sales and marketing to drive growth, and research and development. Our ability to meet future liquidity needs will be driven by our operating performance and the extent of continued investment in our operations. Failure to generate sufficient revenues and related cash flows could have a material adverse effect on our ability to meet our liquidity needs and achieve our business objectives.
Our capital expenditures will fluctuate based on our strategic initiatives. Depending on certain growth opportunities, we may choose to accelerate investments in sales and marketing, acquisitions, technology and services. Actual future capital requirements will depend on many factors, including our future revenues, cash from operating activities and the level of expenditures in all areas of our business.
In addition, we purchased the naming rights to the downtown Oklahoma City arena that is currently home to the Oklahoma City Thunder National Basketball Association franchise. Under the terms of the naming rights agreement, we committed to make escalating annual sponsorship fee payments from 2021 to 2035. The payments are due in the fourth quarter of each year. In July 2025, the naming rights agreement was amended to provide, among other things, that the agreement and our obligation to make the previously disclosed annual sponsorship fee payments thereunder will terminate on the earlier of (i) September 30, 2028 or (ii) the date of the last event hosted or presented at the current arena (subject to earlier termination in certain limited circumstances), with a reduction in the sponsorship fee if the term of the agreement ends prior to September 30, 2028 and in certain other limited circumstances. As a result of the July 2025 amendment to the naming rights agreement, we recognized a $35.6 million gain during the quarter ended September 30, 2025 with respect to the released portion of the liability. In March 2026, a contingency specified in the July 2025 amendment was met, resulting in a reduction in the annual sponsorship fee for the remainder of the amended agreement term. As a result, we recognized a $9.0 million gain during the three months ended March 31, 2026, which is included in other income, net in the consolidated statements of comprehensive income for the nine months ended September 30, 2026.
On July 4, 2025, H.R. 1, the “One Big Beautiful Bill Act” (the “OBBBA”) was signed into law, bringing significant amendments to the U.S. tax code. The OBBBA allows an immediate deduction for domestic research and development expenditures and reinstates 100% bonus depreciation. These provisions reduced our cash tax remittances during the second half of 2025 and the first nine months of 2026, which favorably impacted operating cash flows, and we expect they will continue to provide a benefit in future periods, although to a lesser extent.
As part of our payroll and payroll tax filing services, we collect funds from our clients for employment taxes and payroll obligations, which we remit to the appropriate tax agencies and accounts designated by our clients. We typically invest these funds in money market funds, demand deposit accounts, certificates of deposit, commercial paper and U.S. Treasury securities from which we earn interest income during the period between receipt and disbursement of such funds.
Our cash flows from investing and financing activities are influenced by the amount of funds held for clients, which can vary significantly from quarter to quarter. The balance of the funds we hold depends on our clients’ payroll calendars. As a result, the balance changes from period to period in alignment with the timing of each payroll cycle.
Our cash flows from financing activities are affected by the extent to which we use available cash to purchase shares of common stock under our stock repurchase plan as well as equity incentive award vesting events that result in net share
28
settlements and the Company paying withholding taxes on behalf of certain individuals. Our cash flows from financing activities are also impacted by borrowings. Additionally, we intend to continue to pay a quarterly cash dividend, subject to the discretion of the Board of Directors.
The following table summarizes the consolidated statements of cash flows for the nine months ended September 30, 2026 and 2025:
|
|
Nine Months Ended September 30, |
|
|
|
|||||
|
|
2026 |
|
|
2025 |
|
|
% Change |
||
Net cash provided by (used in): |
|
|
|
|
|
|
|
|
||
Operating activities |
|
$ |
613.9 |
|
|
$ |
482.8 |
|
|
27% |
Investing activities |
|
|
(76.4 |
) |
|
|
(659.2 |
) |
|
-88% |
Financing activities |
|
|
(1,959.4 |
) |
|
|
(2,168.2 |
) |
|
-10% |
Decrease in cash, cash equivalents, restricted cash and restricted cash equivalents |
|
$ |
(1,421.9 |
) |
|
$ |
(2,344.6 |
) |
|
-39% |
Operating Activities
Cash provided by operating activities for the nine months ended September 30, 2026 primarily consisted of payments received from our clients and interest earned on funds held for clients. Cash used in operating activities primarily consisted of personnel-related expenditures and other expenditures to support the growth and infrastructure of our business. These other expenditures included costs of operations, advertising and other sales and marketing efforts, information technology infrastructure development, product research and development and security and administrative costs. Compared to the nine months ended September 30, 2025, operating cash flows for the nine months ended September 30, 2026 benefited from favorable changes in working capital.
Investing Activities
Cash used in investing activities for the nine months ended September 30, 2026 decreased from the comparable prior year period, primarily due to a $253.9 million decrease in purchases of investments from funds held for clients, a $209.0 million increase in proceeds from the maturities of investments from funds held for clients, and a $120.0 million decrease in purchases of property and equipment.
Financing Activities
Cash used in financing activities for the nine months ended September 30, 2026 decreased from the comparable prior year period due to $900.0 million of borrowings under the Revolving Credit Facility, the impact of a $600.1 million change related to the client funds obligation, which reflects the timing of receipts from our clients and payments made on their behalf to employees and applicable taxing authorities, a $24.2 million decrease in withholding taxes paid related to net share settlement, an $11.9 million decrease in dividends paid due to fewer shares outstanding, and a $2.7 million increase in proceeds from the employee stock purchase plan. These decreases were partially offset by a $1,172.0 million increase in repurchases of common stock, a $150.0 million increase in payments on long-term debt, and an $8.1 million increase in the payment of debt issuance costs.
Contractual Obligations
Our principal commitments primarily consist of long-term debt, leases for office space and the naming rights agreement. For additional information regarding our naming rights agreement, leases, long-term debt, and our commitments and contingencies, see Note 4 “Goodwill and Intangible Assets, Net”, Note 5 “Leases”, Note 6 “Long-Term Debt” and Note 12 “Commitments and Contingencies” in the Form 10-K and Note 5 “Goodwill and Intangible Assets, Net”, Note 6 “Long-Term Debt” and Note 12 “Commitments and Contingencies” in the notes to our unaudited consolidated financial statements included elsewhere in this Form 10-Q.
Critical Accounting Policies and Estimates
Our consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. Estimates made in accordance with U.S. GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition are described below. On an ongoing basis, we evaluate our estimates and assumptions to ensure that management believes them to be reasonable under the then-current facts and circumstances. Actual amounts and results may materially differ from these estimates made by management under different assumptions and conditions.
29
Certain accounting policies that require significant management estimates, and are deemed critical to our results of operations or financial position, are discussed in the critical accounting policies and estimates section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K.
Non-GAAP Financial Measures
Management uses adjusted EBITDA and non-GAAP net income as supplemental measures to review and assess the performance of our core business operations and for planning purposes. We define (i) adjusted EBITDA as net income plus interest expense, taxes, depreciation and amortization, non-cash stock-based compensation expense, certain transaction expenses that are not core to our operations (if any) and any loss on the extinguishment of debt, less any gain on modification of the naming rights agreement, and (ii) non-GAAP net income as net income plus non-cash stock-based compensation expense, certain transaction expenses that are not core to our operations (if any) and any loss on the extinguishment of debt, less any gain on modification of the naming rights agreement, all of which are adjusted for the effect of income taxes. Adjusted EBITDA and non-GAAP net income are metrics that provide investors with greater transparency to the information used by management in its financial and operational decision-making. We believe these metrics are useful to investors because they facilitate comparisons of our core business operations across periods on a consistent basis, as well as comparisons with the results of peer companies, many of which use similar non-GAAP financial measures to supplement results under U.S. GAAP. In addition, adjusted EBITDA is a measure that provides useful information to management about the amount of cash available for reinvestment in our business, paying dividends, repurchasing common stock and other purposes. Management believes that the non-GAAP measures presented in this Form 10-Q, when viewed in combination with our results prepared in accordance with U.S. GAAP, provide a more complete understanding of the factors and trends affecting our business and performance.
Adjusted EBITDA and non-GAAP net income are not measures of financial performance under U.S. GAAP, and should not be considered a substitute for net income, which we consider to be the most directly comparable U.S. GAAP measure. Adjusted EBITDA and non-GAAP net income have limitations as analytical tools, and when assessing our operating performance, you should not consider adjusted EBITDA or non-GAAP net income in isolation, or as a substitute for net income or other consolidated statements of comprehensive income data prepared in accordance with U.S. GAAP. Adjusted EBITDA and non-GAAP net income may not be comparable to similarly titled measures of other companies, and other companies may not calculate such measures in the same manner as we do.
The following tables reconcile net income to adjusted EBITDA, net income to non-GAAP net income and earnings per share to non-GAAP net income per share on a basic and diluted basis:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Net income to adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
133.2 |
|
|
$ |
110.7 |
|
|
$ |
396.3 |
|
|
$ |
339.6 |
|
Interest expense |
|
|
11.7 |
|
|
|
1.1 |
|
|
|
26.2 |
|
|
|
2.7 |
|
Provision for income taxes |
|
|
52.1 |
|
|
|
42.1 |
|
|
|
161.2 |
|
|
|
120.7 |
|
Depreciation and amortization |
|
|
50.7 |
|
|
|
44.9 |
|
|
|
151.9 |
|
|
|
126.9 |
|
EBITDA |
|
|
247.7 |
|
|
|
198.9 |
|
|
|
735.5 |
|
|
|
589.8 |
|
Non-cash stock-based compensation expense |
|
|
20.3 |
|
|
|
31.1 |
|
|
|
52.0 |
|
|
|
91.8 |
|
Gain on modification of naming rights agreement |
|
|
— |
|
|
|
(35.6 |
) |
|
|
(9.0 |
) |
|
|
(35.6 |
) |
Adjusted EBITDA |
|
$ |
268.1 |
|
|
$ |
194.3 |
|
|
$ |
778.5 |
|
|
$ |
645.9 |
|
30
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Net income to non-GAAP net income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
133.2 |
|
|
$ |
110.7 |
|
|
$ |
396.3 |
|
|
$ |
339.6 |
|
Non-cash stock-based compensation expense |
|
|
20.3 |
|
|
|
31.1 |
|
|
|
52.0 |
|
|
|
91.8 |
|
Gain on modification of naming rights agreement |
|
|
— |
|
|
|
(35.6 |
) |
|
|
(9.0 |
) |
|
|
(35.6 |
) |
Income tax effect on non-GAAP adjustments |
|
|
(3.6 |
) |
|
|
3.4 |
|
|
|
(0.3 |
) |
|
|
(11.8 |
) |
Non-GAAP net income |
|
$ |
150.0 |
|
|
$ |
109.6 |
|
|
$ |
439.0 |
|
|
$ |
383.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
44.3 |
|
|
|
56.1 |
|
|
|
47.0 |
|
|
|
56.1 |
|
Diluted |
|
|
44.5 |
|
|
|
56.4 |
|
|
|
47.2 |
|
|
|
56.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share, basic |
|
$ |
3.01 |
|
|
$ |
1.97 |
|
|
$ |
8.42 |
|
|
$ |
6.06 |
|
Earnings per share, diluted |
|
$ |
2.99 |
|
|
$ |
1.96 |
|
|
$ |
8.40 |
|
|
$ |
6.02 |
|
Non-GAAP net income per share, basic |
|
$ |
3.38 |
|
|
$ |
1.95 |
|
|
$ |
9.33 |
|
|
$ |
6.85 |
|
Non-GAAP net income per share, diluted |
|
$ |
3.37 |
|
|
$ |
1.94 |
|
|
$ |
9.31 |
|
|
$ |
6.81 |
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Earnings per share to non-GAAP net income per share, basic: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share, basic |
|
$ |
3.01 |
|
|
$ |
1.97 |
|
|
$ |
8.42 |
|
|
$ |
6.06 |
|
Non-cash stock-based compensation expense |
|
|
0.46 |
|
|
|
0.55 |
|
|
|
1.11 |
|
|
|
1.64 |
|
Gain on modification of naming rights agreement |
|
|
— |
|
|
|
(0.64 |
) |
|
|
(0.19 |
) |
|
|
(0.64 |
) |
Income tax effect on non-GAAP adjustments |
|
|
(0.08 |
) |
|
|
0.06 |
|
|
|
(0.01 |
) |
|
|
(0.21 |
) |
Non-GAAP net income per share, basic |
|
$ |
3.38 |
|
|
$ |
1.95 |
|
|
$ |
9.33 |
|
|
$ |
6.85 |
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Earnings per share to non-GAAP net income per share, diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share, diluted |
|
$ |
2.99 |
|
|
$ |
1.96 |
|
|
$ |
8.40 |
|
|
$ |
6.02 |
|
Non-cash stock-based compensation expense |
|
|
0.46 |
|
|
|
0.55 |
|
|
|
1.10 |
|
|
|
1.63 |
|
Gain on modification of naming rights agreement |
|
|
— |
|
|
|
(0.63 |
) |
|
|
(0.19 |
) |
|
|
(0.63 |
) |
Income tax effect on non-GAAP adjustments |
|
|
(0.08 |
) |
|
|
0.06 |
|
|
|
(0.01 |
) |
|
|
(0.21 |
) |
Non-GAAP net income per share, diluted |
|
$ |
3.37 |
|
|
$ |
1.94 |
|
|
$ |
9.31 |
|
|
$ |
6.81 |
|
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Sensitivity
As of September 30, 2026, we had corporate cash and cash equivalents of $193.9 million and funds held for clients cash and cash equivalents of $3.5 billion. These amounts are invested primarily in demand deposit accounts and money market funds. We consider all highly liquid debt instruments with an original maturity of three months or less and SEC registered money market mutual funds to be cash equivalents. Additionally, we had $374.6 million of available-for-sale securities included within funds held for clients on the consolidated balance sheets. Our available-for-sale securities consisted of U.S. Treasury
31
securities with original maturities of two years or less and certificates of deposit. The primary objectives of our investing activities are capital preservation, liquidity, and, with respect to client funds, generating interest income while preserving principal. We do not invest for trading or speculative purposes.
Our investments are subject to interest rate risk. Rising interest rates generally reduce the market value of fixed-rate securities, while declining interest rates may reduce income earned on floating-rate investments. Accordingly, changes in interest rates could reduce future investment income or result in losses if securities are sold before maturity. Debt securities with original maturities greater than three months are classified as available-for-sale; and unrealized gains and losses resulting from changes in interest rates are not recognized in earnings unless securities are sold or credit losses are recognized. We have not recorded any credit losses on our portfolio.
As of September 30, 2026, a hypothetical 100 basis point increase or decrease in interest rates would have resulted in an approximately $22.4 million increase or decrease, respectively, in interest earned on funds held for clients over the ensuing 12-month period. There are no incremental costs of revenue associated with changes in interest earned on funds held for clients.
An immediate 100 basis point increase or decrease in interest rates would have decreased or increased, respectively, the aggregate market value of our available-for-sale securities by approximately $2.2 million as of September 30, 2026. These estimates are based on a sensitivity model measuring the effect of interest rate changes on market values.
As of September 30, 2026, we had $750.0 million of indebtedness outstanding under the Revolving Credit Facility. Because borrowings under the Revolving Credit Facility bear interest at floating rates, we are exposed to interest rate risk. A hypothetical 100 basis point change in applicable reference rates would have resulted in a $7.0 million change in interest expense over the ensuing 12-month period. See Note 6 “Long-Term Debt” for additional information.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, including our Chief Executive Officer and our Chief Financial Officer, evaluated, as of September 30, 2026, the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2026 to ensure that information required to be disclosed by us in this Form 10-Q is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
We believe, however, that a controls system, no matter how well designed and operated, can only provide reasonable assurance that the objectives of the controls systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, within a company have been detected.
Changes in Internal Control over Financial Reporting
There have been no material changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
32
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are involved in various disputes, claims, suits, investigations and legal proceedings arising in the ordinary course of business. “Part I, Item 3. Legal Proceedings” of the Form 10-K includes a discussion of legal proceedings. There have been no material changes from the information set forth in “Part I, Item 3. Legal Proceedings” of the Form 10-K. We believe that the resolution of current pending legal matters will not have a material adverse effect on our business, financial condition, results of operations or cash flows. Nonetheless, we cannot predict the outcome of these proceedings, as legal matters are subject to inherent uncertainties, and there exists the possibility that the ultimate resolution of these matters could have a material adverse effect on our business, financial condition, results of operations or cash flows.
Item 1A. Risk Factors
There have been no material changes from the information set forth in “Part I, Item 1A. Risk Factors” in the Form 10-K filed with the SEC on February 19, 2026.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The number of shares of common stock repurchased by us during the three months ended September 30, 2026 is set forth below.
|
|
Total Number of Shares Purchased |
|
|
Average Price Paid per Share |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) |
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
|
||||
July 1 - 31, 2026 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
1,655.5 |
|
August 1 - 31, 2026(2) |
|
|
8,980 |
|
|
$ |
173.82 |
|
|
|
8,980 |
|
|
$ |
1,653.9 |
|
September 1 - 30, 2026 |
|
|
5,785 |
|
|
$ |
215.02 |
|
|
|
5,785 |
|
|
$ |
1,652.7 |
|
Total |
|
|
14,765 |
|
|
|
|
|
|
14,765 |
|
|
|
|
||
Item 5. Other Information
Rule 10b5-1 Trading Arrangements
On
33
Item 6. Exhibits
The following exhibits are incorporated herein by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K):
Exhibit No. |
|
Description of Exhibit |
3.1 |
|
|
3.2 |
|
|
4.1 |
|
|
31.1* |
|
|
31.2* |
|
|
32.1** |
|
|
101.INS |
|
Inline XBRL Instance Document – the XBRL Instance Document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document. |
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbases Documents. |
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* Filed herewith.
** The certifications attached as Exhibit 32.1 are not deemed “filed” with the SEC and are not to be incorporated by reference into any filing of Paycom Software, Inc. under the Securities Act whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
PAYCOM SOFTWARE, INC. |
|
|
|
|
|
Date: |
November 5, 2026 |
By: |
/s/ Chad Richison |
|
|
|
Chad Richison |
|
|
|
Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
|
Date: |
November 5, 2026 |
By: |
/s/ Robert D. Foster |
|
|
|
Robert D. Foster |
|
|
|
Chief Financial Officer |
|
|
|
(Principal Accounting Officer and Principal Financial Officer) |
35
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a)/15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Chad Richison, certify that:
Date: |
November 5, 2026 |
By: |
/s/ Chad Richison |
|
|
|
Chad Richison |
|
|
|
Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a)/15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert D. Foster, certify that:
Date: |
November 5, 2026 |
By: |
/s/ Robert D. Foster |
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Robert D. Foster |
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Chief Financial Officer |
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(Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q for the quarter ended September 30, 2026 (the “Form 10-Q”) of Paycom Software, Inc. (the “Company”), the undersigned hereby certify in their capacities as Chief Executive Officer and Chief Financial Officer, respectively, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to their knowledge:
Date: |
November 5, 2026 |
By: |
/s/ Chad Richison |
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Chad Richison |
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Chief Executive Officer |
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(Principal Executive Officer) |
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Date: |
November 5, 2026 |
By: |
/s/ Robert D. Foster |
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Robert D. Foster |
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Chief Financial Officer |
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(Principal Financial Officer) |
The foregoing certifications are not deemed “filed” with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof, regardless of any general incorporation language contained in such filing.