10q10k10q10k.net

What changed in Paycom's 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of Paycom's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+414 added−429 removedSource: 10-K (2025-02-20) vs 10-K (2024-02-15)

Top changes in Paycom's 2024 10-K

414 paragraphs added · 429 removed · 335 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

108 edited+18 added−22 removed71 unchanged
Biggest changeBased on client research and feedback, the efficiencies in our system have produced faster turnaround times by as much as three days over our competitors’ offerings. Onboarding . Our onboarding application streamlines the hiring processes for employees of our clients by creating online checklists of tasks to be assigned to an employee or group of employees.
Biggest changeOur onboarding application streamlines the hiring processes for employees of our clients by creating online checklists of tasks to be assigned to an employee or group of employees. This process can begin even before a new hire’s first day on the job, helping the new hire be more productive on their first day. E-Verify ® .
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 talent acquisition, time and labor management, payroll, talent management and human resources (“HR”) management applications.
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.
Employees already manage all other components of their paychecks, including timecards, expenses, PTO requests and benefits; now they have the convenience within Paycom to process their own payroll, too. By guiding employees to access, view, manage, troubleshoot and approve their paycheck before payroll is submitted, HR can focus on more strategic endeavors. Payroll and Tax Management.
Employees already manage all other components of their paychecks, including timecards, expenses, PTO requests and benefits; now they have the convenience within Paycom to process their own payroll, too. By guiding employees to access, view, manage, troubleshoot and approve their paycheck before payroll is submitted, HR can focus on more strategic endeavors. Payroll and Payroll Tax Management.
Additionally, we provide our employees several opportunities to focus on physical, mental and financial wellness by maintaining a fully equipped on-site gym, 401(k) matching, an employee stock purchase plan, and paid vacation, holiday, family leave and sick leave, with numerous other benefits offered to our employees. Segment Information We operate in a single operating segment and a single reporting segment.
Additionally, we provide our employees several opportunities to focus on physical, mental and financial wellness by maintaining a fully equipped on-site gym, 401(k) matching, an employee stock purchase plan, and paid vacation, holiday, family leave and sick leave, with numerous other benefits offered to our employees. 16 Segment Information We operate in a single operating segment and a single reporting segment.
Benefits information and paid time-off accruals also give employees the ability to make informed decisions regarding their benefit selections and time-off requests. Employees can access our self-service software through any device with an internet connection or by downloading the Paycom app on the Google Play ® store and the App Store ® online store. 11 Compensation Budgeting .
Benefits information and paid time-off accruals also give employees the ability to make informed decisions regarding their benefit selections and time-off requests. Employees can access our self-service software through any device with an internet connection or by downloading the Paycom app on the Google Play ® store and the App Store ® online store. Compensation Budgeting .
Clients can filter through specifications according to their needs, use the advanced report writer to view visual data representations, such as charts and graphs, and build a detailed analysis of workforce and budget. Report Center provides insights on return on investment, overtime, payroll, job applications, salaries, compensation forecasting and more. 13 Enhanced ACA.
Clients can filter through specifications according to their needs, use the advanced report writer to view visual data representations, such as charts and graphs, and build a detailed analysis of workforce and budget. Report Center provides insights on return on investment, overtime, payroll, job applications, salaries, compensation forecasting and more. Enhanced ACA.
Benefit Enrollment Service. Our benefit enrollment service provides our clients with a dedicated coordinator to help make open enrollment even easier by developing tailored strategies and setting up plans and features within our benefits software offering. The coordinator helps reconcile enrollment and deductions to prepare the client for a successful first payroll of the new plan year. COBRA Administration .
Our benefit enrollment service provides our clients with a 10 dedicated coordinator to help make open enrollment even easier by developing tailored strategies and setting up plans and features within our benefits software offering. The coordinator helps reconcile enrollment and deductions to prepare the client for a successful first payroll of the new plan year. COBRA Administration .
Pricing is determined based on employee headcount and the number of applications utilized, enabling our clients to align HCM spending with their evolving HCM needs as compared to traditional HCM products that require clients to migrate to new software as they grow but retain fixed costs even if the client’s employee headcount shrinks.
Pricing is determined based on employee headcount and the number of applications utilized, enabling our clients to align HCM spending with their evolving HCM 6 needs as compared to traditional HCM products that require clients to migrate to new software as they grow but retain fixed costs even if the client’s employee headcount shrinks.
Enhanced Background Checks ® . Our background check application helps clients easily screen prospective new hires or employees. Employers can choose the specific service or package of services desired for each individual, including verification of education, employment, driving history, criminal history, and drug and health screening, among others.
Enhanced Background Checks ® . Our background check application helps clients easily screen prospective new hires or employees. Employers can choose the specific service or package of services desired for each individual, including verification of education, employment, driving history, criminal history, and drug and health screening, among others. Onboarding .
Our web time clock feature allows employees to clock in and out using their mobile device or any device with an internet connection, which automatically updates into the payroll application when approved, eliminating the need to manually calculate time sheets and re-key information into payroll systems. 9 Scheduling .
Our web time clock feature allows employees to clock in and out using their mobile device or any device with an internet connection, which automatically updates into the payroll application when approved, eliminating the need to manually calculate time sheets and re-key information into payroll systems. Scheduling .
Allowing employees to make changes directly to our database creates efficiencies for both the employer and employee. Today’s employees have little tolerance for complexity, and with our solution, employees have become accustomed to having a direct relationship with their HR database. This relationship is directly correlated with our single-database that is key to increasing usage.
Allowing employees to make changes directly to our database creates efficiencies for both the employer and employee. Today’s employees have little tolerance for complexity, and with our solution, employees have become accustomed to having a direct relationship with their HR data. This relationship is directly correlated with our single-database that is key to increasing usage.
This central repository for employee questions has a convenient dashboard, guided inquiry template, ability to attach documents and photos, and auto-saved responses for commonly asked questions. 12 Documents and Checklists. Our documents and checklists application is designed to manage employee files and allows employees to digitally sign and view company documents.
This central repository for employee questions has a convenient dashboard, guided inquiry template, ability to attach documents and photos, and auto-saved responses for commonly asked questions. Documents and Checklists. Our documents and checklists application is designed to manage employee files and allows employees to digitally sign and view company documents.
Our tax management tool helps clients handle their payroll taxes, deposits, regulatory correspondence and amendments, as well as assists with penalty and interest disputes. With this tool, Paycom also debits clients’ payroll taxes, deposits them on their due date and submits clients’ filings. 10 Vault Visa ® Payroll Card.
Our payroll tax management tool helps clients handle their payroll taxes, deposits, regulatory correspondence and amendments, as well as assists with penalty and interest disputes. With this tool, Paycom also debits clients’ payroll taxes, deposits them on their due date and submits clients’ filings. Vault Visa ® Payroll Card.
In addition, we also have a team of transition specialists whose job it is to ensure that the process is performed smoothly, data is collected properly and all relevant employees are fully trained on the system.
In addition, we also have a team of 13 transition specialists whose job it is to ensure that the process is performed smoothly, data is collected properly and all relevant employees are fully trained on the system.
Our garnishment administration application mitigates the risk of penalties and lawsuits from employees and agencies, allowing clients to handle communications with garnishment payees and agencies, as well as calculate and track garnishment payments. GL Concierge.
Our garnishment administration application mitigates the risk of penalties and lawsuits from employees and agencies, allowing clients to handle communications with garnishment payees and agencies, as well as calculate and track garnishment payments. 8 GL Concierge.
This application also provides employees with online enrollment and helps educate them by allowing them to view per-pay-period deduction amounts and preview how these deductions would affect their take-home pay, driving better informed enrollment decisions for greater employee satisfaction. Our benefits to carrier application automatically updates insurance carriers regarding benefit deduction amounts, address changes, termination of benefits and qualifying events.
This application also provides employees with online enrollment and helps educate them by allowing them to view per-pay-period deduction amounts and preview how these deductions would affect their take-home pay, driving better informed enrollment decisions for greater employee satisfaction. Our benefits to carrier functionality updates insurance carriers regarding benefit deduction amounts, address changes, termination of benefits and qualifying events.
The application’s enhanced career site analytics reveal which job boards and marketing efforts produce the best return on investment. It not only sends candidates automated job alerts to notify them of a client’s newly posted positions but also allows them to provide their availability up front to discuss potential job opportunities, thereby saving a step for recruiters. Candidate Tracker .
The application’s enhanced career site analytics reveal which job boards and marketing efforts produce the best return on investment. It not only sends candidates automated job alerts to notify them of a client’s newly posted positions but also allows them to provide their availability up front to discuss potential job opportunities, thereby saving a step for recruiters.
Our COBRA administration application helps protect employers from COBRA violations and the associated fines and penalties by automatically initiating compliance measures upon entry of qualifying events into the application. In addition to sending required correspondence, this application also tracks important dates, collects and remits premiums, and reports on all COBRA activity. Personnel Action Forms and Performance Discussion Forms .
Our COBRA administration application helps protect employers from COBRA violations and the associated fines and penalties by automatically initiating compliance measures upon entry of qualifying events into the application. In addition to sending required correspondence, this application also tracks important dates, collects and reimburses premiums, and reports on all COBRA activity. Personnel Action Forms and Performance Discussion Forms .
Our industry-first employee usage management analytics tool, Direct Data Exchange ® (DDX ® ), provides employers insights into efficiencies gained through employee usage of HR technology and generates a real-time estimate of the savings realized from that usage. We help clients reduce administrative and operational costs and better manage talent.
Our industry-first employee usage management analytics tool, Direct Data Exchange ® (DDX ® ), provides employers insights into efficiencies gained through employee usage of HR technology and generates a real-time estimate of the savings realized from that usage. We help clients reduce administrative and operational costs and better manage talent through automated processes.
Further, because some of our clients have establishments internationally, the Canadian Personal Information Protection and Electronic Documents Act (“PIPEDA”), Mexico’s Federal Law on the Protection of Personal Data held by Private Parties, and the European Union’s General Data Protection Regulation (“GDPR”) and other foreign data privacy laws may impact our processing of certain client and employee information.
Further, because some of our clients have international establishments, the Canadian Personal Information Protection and Electronic Documents Act (“PIPEDA”), Mexico’s Federal Law on the Protection of Personal Data held by Private Parties, and the European Union’s General Data Protection Regulation (“GDPR”) and other foreign data privacy laws may impact our processing of certain client and employee information.
Manager on-the-Go provides a seamless toggle between Manager on-the-Go, Employee Self-Service and Mileage Tracker. Direct Data Exchange. Our comprehensive management analytics tool gives employers insights into efficiencies gained through employee usage of HR technology and provides a real-time return on investment on that usage (based on findings by EY).
Manager on-the-Go provides a seamless toggle between Manager on-the-Go and Employee Self-Service. Direct Data Exchange. Our comprehensive management analytics tool gives employers insights into efficiencies gained through employee usage of HR technology and provides a real-time return on investment on that usage (based on findings by EY).
Our development and engineering teams, along with our employees, conceive new applications and enhancements, review requests, schedule development in order of priority and subsequently develop the applications or enhancements. Our new applications and enhancements are independently reviewed by the quality assurance team, in accordance with our software development process, before being fully implemented.
Our development and engineering teams conceive new applications and enhancements, review requests, schedule development in order of priority and subsequently develop the applications or enhancements. Our new applications and enhancements are independently reviewed by the quality assurance team, in accordance with our software development process, before being fully implemented.
Our Affordable Care Act (“ACA”) application provides clients with access to a dashboard that tracks employee count, employee status, health care plan affordability and ACA periods. Plus, it enables Paycom to file IRS Forms 1094/1095-B and/or -C. Clients using this application also have access to additional real-time compliance reports, alerts and historical data for audit trail purposes. Clue ® .
Our ACA application provides clients with access to a dashboard that tracks employee count, employee status, health care plan affordability and ACA periods. Plus, it enables Paycom to file IRS Forms 1094/1095-B and/or -C. Clients using this application also have access to additional real-time compliance reports, alerts and historical data for audit trail purposes. Clue ® .
Information contained on our website is not incorporated by reference into this Form 10-K. The SEC maintains a public website, www.sec.gov, which includes information about and the filings of issuers that file electronically with the SEC. 18
Information contained on our website is not incorporated by reference into this Form 10-K. The SEC maintains a public website, www.sec.gov, which includes information about and the filings of issuers that file electronically with the SEC. 17
A single database keeps our clients’ employee data consistent and enhances reporting capabilities by providing better accuracy and real-time insight. Benefits Administration/Benefits to Carrier . Our benefits administration application allows clients to customize benefit plan setup, deduction amounts, enrollment dates and new-hire waiting periods. Employers are provided census and reconciliation reports to ensure they do not overpay for benefits.
A single database keeps our clients’ employee data consistent and enhances reporting capabilities by providing better accuracy and real-time insight. Benefits Administration . Our benefits administration application allows clients to customize benefit plan setup, deduction amounts, enrollment dates and waiting periods. Employers are provided census and reconciliation reports to ensure they do not overpay for benefits.
Our sales force is comprised of field sales personnel, who are organized geographically, CRRs, who sell additional applications to existing clients, and our emerging markets representatives, who focus on businesses with fewer than 50 employees.
Our sales force is comprised of field sales personnel, who are organized geographically, CRRs, who sell additional applications to existing clients, and our emerging markets representatives, who focus on businesses with fewer than 65 employees.
In November 2022, we renewed a certification based on ISO 27701:2019 criteria, a standard for establishing, implementing, maintaining and continually improving a Privacy Information Management System (PIMS) published by ISO. This international standard for PIMS specifies PIMS-related requirements and provides guidance for Personally Identifiable Information (PII) controllers and PII processors holding responsibility and accountability for PII processing.
In November 2022, we renewed a certification based on ISO/IEC 27701:2019 criteria, a standard for establishing, implementing, maintaining and continually improving a Privacy Information Management System (“PIMS”) published by ISO. This international standard for PIMS specifies PIMS-related requirements and provides guidance for Personally Identifiable Information (“PII”) controllers and PII processors holding responsibility and accountability for PII processing.
Enhanced payroll grid functionality allows clients to automate and delegate payroll functions to accelerate the processes, giving clients repeatable, reliable payroll processing with additional controls. Our payroll application allows clients to customize the services to fit their specific needs. It can be accessed at any time to make changes, run payroll and generate custom reports.
Enhanced payroll functionality allows clients to automate and delegate payroll functions to accelerate the processes, giving clients repeatable, reliable payroll processing with additional controls. Our payroll application allows clients to configure the services to fit their specific needs. It can be accessed at any time to make changes, run payroll and generate custom reports.
Our marketing programs include: • Podcast episodes, webinars, blogs, white papers and infographics; • National and local television advertising campaigns, personalized direct mail campaigns, email campaigns, social and digital media campaigns, industry-specific advertising and tradeshow exhibiting; and • Search engine marketing methods that include site optimization and pay-per-click searches.
Our marketing programs include: • Podcasts, webinars, blogs, white papers and infographics; • National and local television advertising campaigns, personalized direct mail campaigns, email campaigns, social and digital media campaigns, industry-specific advertising and tradeshow exhibiting; and • Search engine marketing methods that include site optimization and pay-per-click searches.
Human Capital As of December 31, 2023, we employed 7,308 people, substantially all of whom are full-time employees. Our human capital objectives include attracting, developing and retaining the best talent in the industry. We have been recognized both locally and nationally for providing our employees with an excellent work environment.
Human Capital As of December 31, 2024, we employed 7,306 people, substantially all of whom are full-time employees. Our human capital objectives include attracting, developing and retaining the best talent in the industry. We have been recognized both locally and nationally for providing our employees with an excellent work environment.
Service specialists are assigned to specific clients and are trained across all of our applications, ensuring they provide comprehensive, expert-level service. Our client service is ISO 9001:2015 certified on the basis of its quality and consistency.
Service specialists are assigned to specific clients and are trained across all of our applications, ensuring they provide comprehensive, expert-level service. Our Quality Management System is ISO 9001:2015 certified on the basis of its quality and consistency.
After each payroll is processed and finalized, 401(k) reports are automatically created and delivered to the provider and the secure client inbox within 24 hours. Report Center. Our easy-to-use reporting software allows clients to create custom reports on HR data within our software.
After each payroll is processed and finalized, retirement plan reports are automatically created and delivered to the provider and the secure client inbox within 24 hours. Report Center. Our easy-to-use reporting software allows clients to create custom reports on HR data within our software.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports can be found on our investor relations website, free of charge, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports can be found on our investor relations website, free of charge, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”).
We believe that as a result of our focus on client experience, we enjoy high client satisfaction as evidenced by an annual revenue retention rate of 90% and 91% for the years ended December 31, 2023 and 2022, respectively.
We believe that as a result of our focus on client experience, we enjoy high client satisfaction as evidenced by an annual revenue retention rate of 90% for the years ended December 31, 2024 and 2023.
Our scheduling application helps managers with employee scheduling through automated functionality that provides a seamless workflow with the payroll and time and attendance applications. This application allows clients to create and edit templates for different pay classes.
Our scheduling application helps managers with employee scheduling through automated functionality that provides a seamless workflow with the payroll and time and attendance applications. This application allows clients to create and edit templates for different Schedule Groups.
The demographic workforce data within the table below, including race and ethnicity, gender 17 and job categories, aligns with the EEO-1 Component 1 data collection reporting requirements outlined by the U.S. Equal Employment Opportunity Commission, where applicable. As of December 31, 2023 All Employees First/Mid Level Officials & Managers Executive/Sr.
The demographic workforce data within the table below, including race and ethnicity, gender and job categories, aligns with the EEO-1 Component 1 data collection reporting requirements outlined by the U.S. Equal Employment Opportunity Commission, where applicable, and includes U.S.-based employees only. As of December 31, 2024 All Employees First/Mid Level Officials & Managers Executive/Sr.
Item 1. B usiness Overview We are a leading provider of a comprehensive, cloud-based human capital management (“HCM”) solution delivered as Software-as-a-Service (“SaaS”). We provide functionality and data analytics that businesses need to manage the complete employment lifecycle, from recruitment to retirement.
Item 1. B usiness Overview We are a leading provider of a comprehensive, cloud-based HCM solution delivered as Software-as-a-Service (“SaaS”). We provide functionality and data analytics that businesses need to manage the complete employment lifecycle, from recruitment to retirement.
Clients can analyze results by the demographics of the workforce and compare how results change over time. 401(k) Reporting. Our 401(k) reporting tool simplifies the process of transferring sensitive employee data to clients’ 401(k) provider. It customizes, maps and automates plan reports to meet each provider’s unique specifications.
Clients can analyze results by the demographics of the workforce and compare how results change over time. Retirement Reporting. Our retirement reporting tool simplifies the process of transferring sensitive employee data to clients’ retirement plan providers. It customizes, maps and automates plan reports to meet each provider’s unique specifications.
Through our employee self-service technology, employees can view real-time HR information, including pay stubs, W-2s and benefits information, as well as manage their schedules and vacation time and update W-4 contact information. Employees can even do their own payroll with our industry-first Beti ® technology. Our mobile app makes it easier for employees to access their self-service information.
Through our employee self-service technology, employees can view real-time HR information, including pay stubs, payroll tax filing forms and benefits information, as well as manage their schedules and vacation time and update contact information. Employees can even do their own payroll with our industry-first Beti ® technology. Our mobile app makes it easier for employees to access their self-service information.
Tax Credits. Our tax credits application helps employers process and calculate the available federal tax credits associated with hiring employees who meet various qualifications, ensuring organizations opting into this service receive their share of government-appropriated funds. This application also prescreens candidates to determine who is eligible for tax credits. Time and Labor Management Time and Attendance .
Our tax credits application helps employers process and calculate the available federal tax credits associated with hiring employees who meet various qualifications, ensuring organizations opting into this service receive their share of government-appropriated funds. This application also prescreens candidates to determine who is eligible for tax credits. Talent Management Employee Self-Service.
Operating segments are defined as components of an enterprise about which separate financial information is regularly evaluated by the chief operating decision maker function (which is fulfilled by our Co-Chief Executive Officers) in deciding how to allocate resources and in assessing performance. Our Co-Chief Executive Officers allocate resources and assess performance based upon financial information at the consolidated level.
Operating segments are defined as components of an enterprise about which separate financial information is regularly evaluated by the chief operating decision maker 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.
Our competitors provide HCM solutions by various means. Although certain providers continue to deliver legacy enterprise software, many now offer cloud-based solutions, resulting in increased competition for clients seeking the greater flexibility and access to information provided by cloud-based offerings. Furthermore, the HCM industry has experienced an emergence of white label and embedded payroll offerings.
Although certain providers continue to deliver legacy enterprise software, most now offer cloud-based solutions, resulting in increased competition for clients seeking the greater flexibility and access to information provided by cloud-based offerings. Furthermore, the HCM industry has experienced an emergence of white label and embedded payroll offerings.
This one-on-one service is a key part of our client service model and helps to ensure we are delivering an industry-leading solution and maintaining high client satisfaction.
This one-on-one service is a key part of our client service model and helps to ensure we are delivering a differentiated solution and maintaining high client satisfaction.
Our SaaS solution reduces the time, risk, headcount and costs associated with installing and maintaining applications for on-premise products within the information technology (“IT”) infrastructure of our clients. Secure Cloud-Based Architecture Our cloud-based architecture allows our solution to be implemented remotely with minimal client interaction.
Our SaaS solution reduces the time, risk, headcount and costs associated with installing and maintaining applications for on-premises products within the IT infrastructure of our clients. Secure Cloud-Based Architecture Our cloud-based architecture allows our solution to be implemented remotely with minimal client interaction.
We also obtain third-party examinations relating to our internal controls over security and privacy in accordance with System and Organization Controls Report, II (“SOC 2”). Our SOC 2 examination is conducted every year and addresses, among other areas, internal controls around security, availability, processing integrity, confidentiality and privacy.
We also obtain third-party examinations relating to our internal controls over security and privacy in accordance with System and Organization Controls Report, II (“SOC 2”). Our SOC 2 examination is conducted every year and addresses, among other areas, internal controls around security, availability, and processing integrity. We publish SOC 1 reports semiannually and SOC 2 and SOC 3 reports annually.
The certification is valid until February 2026, with continuing assessments taking place annually. Intellectual Property We rely on a combination of copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish and protect our intellectual property rights.
The certification is valid until October 2025, with continuing assessments taking place annually. Intellectual Property We rely on a combination of copyrights, trademarks, service marks, trade secrets and contractual restrictions to establish and protect our intellectual property rights.
Each of these data centers is owned and managed by Paycom, and Paycom is the only tenant occupying the data centers. All of our critical systems are fully redundant and backed up at regular intervals to these facilities, and backups are monitored for success and failure status daily. Client data is backed up in real-time among the three data centers.
All of our critical systems are fully redundant and backed up at regular intervals to these facilities, and backups are monitored for success and failure status daily. Client data is backed up in real-time among the three data centers.
Level Officials & Managers Gender: Female 48.8 % 53.0 % 38.1 % Male 49.3 % 45.4 % 60.3 % Non-Binary 0.7 % 0.2 % — Not Specified 1.2 % 1.4 % 1.6 % Race and Ethnicity: American Indian or Alaskan Native 2.3 % 2.5 % — Asian 10.4 % 5.8 % 1.6 % Black or African American 9.2 % 2.9 % — Hispanic or Latino 10.6 % 3.7 % — Native Hawaiian or Pacific Islander 0.3 % 0.2 % — Two or more races 4.1 % 2.5 % — White 58.7 % 76.3 % 96.8 % Not Specified 4.4 % 6.1 % 1.6 % Training and Development Through the use of our Paycom learning tool, we empower our employees by providing tailored learning paths in areas such as leadership, diversity and inclusion, technical skills and compliance.
Level Officials & Managers Gender: Female 47.4 % 52.4 % 41.9 % Male 52.0 % 47.6 % 58.1 % Non-Binary 0.6 % — — Race and Ethnicity: American Indian or Alaskan Native 2.4 % 2.8 % — Asian 12.2 % 7.2 % 2.7 % Black or African American 8.0 % 4.2 % — Hispanic or Latino 11.1 % 6.1 % — Native Hawaiian or Pacific Islander 0.3 % 0.2 % — Two or more races 4.1 % 2.3 % — White 58.5 % 74.5 % 95.9 % Not Specified 3.4 % 2.7 % 1.4 % Training and Development Through the use of our Paycom learning tool, we empower our employees by providing tailored learning paths in areas such as leadership, inclusion, technical skills and compliance.
Paycom Pay eliminates the tedious, risky job of check reconciliation by issuing checks to our clients’ employees that clear from a Paycom bank account, thereby reducing the number of transactions on a client’s general ledger and simplifying bank statement balancing. Client Action Center ™ .
Paycom Pay eliminates the tedious, risky job of check reconciliation by issuing checks to our clients’ employees that clear from a Paycom bank account, thereby reducing the number of transactions on a client’s general ledger and simplifying bank statement balancing. Client Action Center . Client Action Center makes it easier for payroll administrators to act on banking and tax-related information.
Our Strategy for Growth Our strategy is to continue to establish our solution as the HCM industry standard by increasing our presence in existing markets and expanding into additional markets. We intend to continue to increase our domestic sales capacity and expand our offering to additional international markets.
Our Strategy for Growth Our strategy is to continue to establish our solution as the HCM industry standard by continuing to leverage our sales force productivity, penetrating existing markets and expanding into new markets. We intend to continue to increase our domestic sales capacity and expand our offering to additional international markets.
We publish SOC 1 reports semiannually and SOC 2 and SOC 3 reports annually. In April 2023, we renewed a certification based on ISO 9001:2015 criteria, a standard for the implementation of quality management processes published by ISO, covering our activities required to create and deliver our solution.
In April 2023, we renewed a certification based on ISO 9001:2015 criteria, a standard for the implementation of a Quality Management System published by ISO, covering our activities required to create and deliver our solution.
Client Action Center makes it easier for payroll administrators to act on banking and tax-related information. Clients receive a comprehensive view of the data they need to make informed, accurate decisions — all centralized in one intuitive dashboard. With the Paycom mobile app, they can access quick views of wires, tax accounts and access to specialists for assistance. Expense Management.
Clients receive a comprehensive view of the data they need to make informed, accurate decisions — all centralized in one intuitive dashboard. With the Paycom mobile app, they can access quick views of wires, tax accounts and access to specialists for assistance. Expense Management.
The widespread employee usage of our applications further integrates our solution into the administrative processes of our clients. Our solution also has the advantage of being built in-house by our highly trained and skilled team of software developers, thereby minimizing data integrity issues across applications.
Our solution also has the advantage of being built in-house by our highly trained and skilled team of software developers, thereby minimizing data integrity issues across applications.
We are also subject to certain federal, state, local and foreign regulations based on the products we offer. For example, as a result of our background screening application, Enhanced Background Checks, we are subject to the Fair Credit Reporting Act and other federal and state background reporting laws.
For example, as a result of our background screening application, Enhanced Background Checks, we are subject to the Fair Credit Reporting Act and other federal and state background reporting laws.
This team works closely with the client until the client is capable of managing our solution independently, at which time responsibility for the client relationship is transferred to our dedicated CRRs and service specialists.
This team works closely with the client until the client is capable of managing our solution independently, at which time responsibility for the client relationship is transferred to our dedicated CRRs and service specialists. Unlike certain of our competitors, we do not outsource any of our onboarding efforts.
We compete with companies such as Automatic Data Processing, Inc., Cornerstone OnDemand, Inc., Dayforce, Inc., Gusto, Inc., Intuit, Inc., Insperity, Inc., Oracle Corporation, Paychex, Inc., Paylocity Holding Corporation, Paycor HCM, Inc., People Center, Inc. d/b/a Rippling, SAP SE, ServiceNow, Inc., Ultimate Kronos Group, Workday, Inc., and other international, national, regional, and local providers.
We compete with companies such as Automatic Data Processing, Inc., Cornerstone OnDemand, Inc., Dayforce, Inc., Intuit, Inc., Insperity, Inc., Oracle Corporation, Paychex, Inc., Paylocity Holding Corporation, Paycor HCM, Inc., SAP SE, ServiceNow, Inc., Ultimate Kronos Group, Workday, Inc., and other international, national, regional, and local providers. Our competitors provide HCM solutions by various means.
The regulatory landscape related to generative AI and machine learning is rapidly evolving and is likely to remain uncertain for the foreseeable future. As we develop products that incorporate technologies such as generative AI and machine learning, we must comply with applicable laws and regulations.
The regulatory landscape related to generative AI and machine learning is rapidly evolving and is likely to remain uncertain for the foreseeable future. As we continue to develop and improve our services by incorporating technologies such as generative AI and machine learning, we must monitor and comply with these new applicable AI laws and regulations.
Through accurate tracking and management of employee payroll and other HR data, such information can be compiled for comprehensive and consistent reporting for our clients. 6 Data Analytics and Business Intelligence Our solution’s core system of record allows clients to strategically analyze comprehensive and accurate employee information to make informed business decisions based upon actionable, real-time analytics provided through our client dashboard.
Data Analytics and Business Intelligence Our solution’s core system of record allows clients to strategically analyze comprehensive and accurate employee information to make informed business decisions based upon actionable, real-time analytics provided through our client dashboard.
We are focusing our investments on the development of new applications, enhancements and learning courses that are responsive to the needs of our clients, which are garnered through ongoing client interaction and collaboration.
Our development efforts are performed exclusively in-house and are heavily based upon proactive research and client input. We are focusing our investments on the development of new applications, enhancements and learning courses that are responsive to the needs of our clients, which are garnered through ongoing client interaction and collaboration.
GONE facilitates faster decisions for employees and reduces the burden on managers and HR teams to handle disputes. After setup, decisions flow seamlessly and accurately into payroll. Managers can also view an online time-off calendar to easily monitor time-off requests.
It allows clients to set criteria to fairly and consistently auto-resolve requests, which helps employers remain adequately staffed. GONE facilitates faster decisions for employees and reduces the burden on managers and HR teams to handle disputes. After setup, decisions flow seamlessly and accurately into payroll. Managers can also view an online time-off calendar to easily monitor time-off requests.
We believe the HCM needs of most organizations are currently served by multiple providers in an attempt to replicate a comprehensive SaaS product. This approach often results in challenges with system integration and data integrity, low scalability, high costs and extended delivery times.
We believe the HCM needs of many organizations are currently served by multiple providers, which often results in challenges with system integration and data integrity, low scalability, high costs and extended delivery times.
The certification is valid until January 2026, with continuing assessments taking place annually. 16 In November 2022, we renewed a certification based on ISO/IEC 27001:2013 criteria, a security standard for Information Security Management Systems published by ISO covering our production, quality assurance and implementation environments.
In November 2022, we renewed a certification based on ISO/IEC 27001:2013 criteria, a security standard for Information Security Management Systems published by ISO covering our production, quality assurance and implementation environments.
Our Employee Self-Service ® tool allows employees to view the time off they have available, submit requests, view blackout dates and view the status of requests and any manager comments. Labor Allocation. Our labor allocation application simplifies the process of setting up and tracking employee hours based on the job the employee is working. Labor Management Reports/Push Reporting ® .
Our Employee Self-Service application allows employees to view the time off they have available, submit requests, view the status of requests and any manager comments, and view company holidays and blackout dates. Labor Allocation. Our labor allocation application simplifies the process of setting up and tracking employee hours and wages based on different categories, such as job or location.
This international standard for continuity management specifies requirements to plan, implement, operate and continually improve a documented management system to protect against, prepare for, respond to and recover from disruptive incidents when they arise.
This international standard for continuity management specifies requirements to plan, implement, operate and continually improve a documented management system to protect against, prepare for, respond to and recover from disruptive incidents when they arise. The certification is valid until January 2026, with continuing assessments taking place annually.
Beti (Better Employee Transaction Interface ™ ) is an industry-first technology that further automates and streamlines the payroll process by empowering employees to do their own payroll, which increases efficiencies and reduces errors.
We also offer native payroll in Canada, Mexico, the United Kingdom and Ireland, and intend to add native payroll in other countries. Payroll Beti. Beti (Better Employee Transaction Interface ® ) is an industry-first technology that further automates and streamlines the payroll process by empowering employees to do their own payroll, which increases efficiencies and reduces errors.
When opening a new sales office, we typically relocate a proven sales manager from an existing territory who then recruits a team of high-performing sales representatives. It typically takes a new sales office 24 months to reach maturity.
We have historically selected new locations based on potential client and employee demographics as well as business density. When opening a new sales office, we typically relocate a proven sales manager from an existing territory who then recruits a team of high-performing sales representatives. It typically takes a new sales office 24 months to reach maturity.
Many clients have subsequently deployed additional applications as they recognize the benefits of our comprehensive solution. Furthermore, with the launch of our Global HCM ™ solution and expansion of payroll services into certain international markets, such as Canada, Mexico and the United Kingdom, we have the opportunity to capture additional revenue from existing clients with international employees.
Furthermore, with the launch of our Global HCM ™ solution and expansion of payroll services into certain international markets, we have the opportunity to capture additional revenue from existing clients with international employees.
Employees can clock in and out at their desks with web-based time clocks or by using finger scans, badge-swipe or other types of hardware terminals in a single or multi-clock environment.
Clients can apply customized rules, use batch editing and use timecard management tools to manage complex time and attendance needs. Employees can clock in and out at their desks with web-based time clocks or by using finger scans, badge-swipe or other types of hardware terminals in a single or multi-clock environment.
We also have a number of registered and unregistered trademarks and will continue to evaluate the registration of additional trademarks as appropriate. We do not have any patents or patent applications pending. Seasonality Our revenues are seasonal in nature and generally we expect our first and fourth quarter revenues to be higher than other quarters during the year.
We have a number of registered and unregistered trademarks designed to protect our brand and goodwill, and we will continue to evaluate the registration of additional trademarks as appropriate. We do not have any patents or patent applications pending. Seasonality Our revenues are seasonal in nature.
Organizations can maintain and easily access a list of potential employees from a talent pool with real-time candidate, recruiter and manager retrieval while eliminating manual redundancies. Clients can also distribute job openings and reach a wider candidate audience with tools to reach unlimited postings on a network of free job boards and manage fee-based job board accounts.
Organizations can maintain and easily access a list of potential employees from a talent pool with real-time candidate, recruiter and manager retrieval while eliminating manual redundancies. Clients can also distribute job openings and reach a wider candidate audience with tools to automatically post jobs to their organization’s website, career sites and online job boards.
During 2023, our employees completed thousands of courses utilizing our Paycom learning tool. We provide our sales force with intensive training courses. Our unique training program includes instruction in accounting, business metrics, application features and tax matters relevant to our target market and we believe it fosters loyalty and helps maintain our corporate culture.
We provide our sales force with intensive training courses. Our unique training program includes instruction in accounting, business metrics, application features and tax matters relevant to our target market and we believe it fosters loyalty and helps maintain our corporate culture. Our training continues for our sales force through weekly strategy sessions and leadership development training.
Our applicant tracking application simplifies the recruiting processes needed to hire the most qualified employees. By using our comprehensive software, our clients can move candidates from the application process through new employee onboarding without re-keying data.
With this simplified process, accounting departments can generate mapped GL reports for direct import into various accounting software packages. Talent Acquisition Applicant Tracking. Our applicant tracking application simplifies the recruiting processes needed to hire the most qualified employees. By using our comprehensive software, our clients can move candidates from the application process through new employee onboarding without re-keying data.
We believe larger employers represent a substantial opportunity to increase our revenues per client, with limited incremental cost to us. To further capitalize on this opportunity, we intend to continue targeting larger businesses.
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, and we intend to continue targeting large businesses.
It also allows employees and managers access to their schedules at any time, and employees can approve, decline or swap their schedules and see what shifts are available for pickup. Email notifications are sent automatically to supervisors and employees when schedules are created, requests for shift exchanges are submitted or a shift change is approved or denied.
It also allows employees and managers access to their schedules at any time, and employees can approve, decline or swap their schedules and see what shifts are available for pickup.
In addition, as we enhance the global capabilities of our solution, our U.S.-based sales teams are expanding our reach into international markets by targeting global organizations with a U.S. presence.
In addition, as we continue to enhance the global capabilities of our solution, our U.S.-based sales teams are expanding our reach into international markets by targeting global organizations with a U.S. presence. Target Large Clients The average size of our clients has grown significantly as we have organically grown our operations and increased the number of applications we offer.
Our compensation budgeting application provides compensation and performance information in one system, providing clients valuable workforce insight to help manage and formulate salary budgets and establish merit-based compensation increases that automatically upload new rates to payroll once the merit increases are set.
Our compensation budgeting application provides compensation information, giving clients valuable workforce insight to help manage and formulate salary budgets and establish merit-based compensation increases that automatically upload new rates to payroll once the merit increases are set. Having payroll linked with performance reviews is instrumental for compensation budgeting, which rewards employees fairly while staying within budget. Performance Management .
Unlike certain of our competitors, we do not outsource any of our onboarding efforts. 15 Dedicated Service Specialists After completing the onboarding process, each client is assigned to a service specialist within a dedicated team. Clients can then contact their dedicated service specialist or a team member if any issues or questions arise.
Dedicated Service Specialists After completing the onboarding process, each client is assigned to a service specialist within a dedicated team. Clients can then contact their dedicated service specialist or a team member if any issues or questions arise. These specialists provide personalized service with a historical knowledge of the clients’ communicated business needs.
Our Applications and Tools Our HCM solution offers a full suite of applications and tools that generally fall within the following categories: talent acquisition, time and labor management, payroll, talent management and HR management.
Our Applications and Tools Our HCM solution offers a full suite of applications and tools that generally fall within the following categories: payroll, talent acquisition, talent management, HR management and time and labor management. 7 With Global HCM, a number of our HCM applications and tools are available in 15 languages and dialects and are accessible to users in more than 190 countries.
In addition, our core system of record helps clients minimize the risk of compliance errors due to inaccurate or missing information that results from maintaining multiple databases.
In addition, our core system of record helps clients minimize the risk of compliance errors due to inaccurate or missing 5 information that results from maintaining multiple databases. Through accurate tracking and management of employee payroll and other HR data, such information can be compiled for comprehensive and consistent reporting for our clients.
These specialists provide personalized service with a historical knowledge of the clients’ communicated business needs. In addition, our CRRs proactively contact our clients to ensure satisfaction with our solution and introduce additional applications. Expert Level Service Our service specialists are trained across all of our applications to ensure that they can provide comprehensive, expert-level service.
In addition, our CRRs proactively contact our clients to ensure satisfaction with our solution and introduce additional applications. Expert Level Service Our service specialists are trained across all of our applications to ensure that they can provide comprehensive, expert-level service. Our Quality Management System is ISO 9001:2015 certified and helps support our high client retention rate.

… 68 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

94 edited+22 added−13 removed152 unchanged
Biggest changeFurthermore, as we continue to use such new technologies in our own solution, developing, testing, and deploying resource-intensive AI systems will require additional investment and may increase our costs. There also may be real or perceived social harm, unfairness, or other outcomes that undermine public confidence in the use and deployment of AI.
Biggest changeIf new technologies emerge that are able to deliver HCM solutions at lower prices, more efficiently or more conveniently, such technologies could adversely impact our ability to compete. Furthermore, as we continue to use such new technologies in our own solution, developing, testing, and deploying resource-intensive AI systems will require additional investment and may increase our costs.
We rely on third-party couriers to deliver payroll checks and tax forms and on financial and accounting processing systems and various financial institutions to perform financial services in connection with our applications, such as providing automated clearing house (“ACH”) and wire transfers as part of our payroll and tax payment services and facilitating our Vault Visa Payroll Card.
We rely on third-party couriers to deliver payroll checks and tax forms and on financial and accounting processing systems and various financial institutions to perform financial services in connection with our applications, such as providing automated clearing house (“ACH”) and wire transfers as part of our payroll and payroll tax payment services and facilitating our Vault Visa ® Payroll Card.
Launching into international markets and doing business internationally involves a number of risks, including but not limited to: • multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits, and licenses; • failure to obtain and maintain regulatory approvals for the use of our products in various countries; • lack of brand recognition, including greater brand recognition of local or other global competitors who have more established operations in the markets we are seeking to enter; • lack of familiarity with local, regional or national politics, culture, economics, market conditions and commerce; • complexities and difficulties in obtaining protection for and enforcing our intellectual property rights; • difficulties in staffing and managing foreign operations; • financial risks, such as the impact of local and regional financial crises on demand for our products and exposure to foreign currency exchange rate fluctuations; • natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; • certain expenses including, among others, expenses for travel, translation and insurance; and • regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the U.S.
Launching into international markets and doing business internationally involves a number of risks, including but not limited to: • multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits, and licenses; • failure to obtain and maintain regulatory approvals for the use of our products in various countries; • lack of brand recognition, including greater brand recognition of local or other global competitors who have more established operations in the markets we are seeking to enter; • lack of familiarity with local, regional or national politics, culture, economics, market conditions and commerce; • complexities and difficulties in obtaining protection for and enforcing our intellectual property rights; • difficulties in staffing and managing foreign operations; 22 • financial risks, such as the impact of local and regional financial crises on demand for our products and exposure to foreign currency exchange rate fluctuations; • natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; • certain expenses including, among others, expenses for travel, translation and insurance; and • regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the U.S.
Although we do not currently have any outstanding indebtedness, pursuant to the Credit Agreement (as defined herein) that governs the Revolving Credit Facility, we may not, subject to certain exceptions: • create or permit the existence of additional liens on our assets; • incur additional debt; • change the nature of our business; • make investments in and acquisitions of (or acquisitions of substantially all of the assets of) any person; • permit certain fundamental changes, including a merger; • dispose of assets; • make any distributions during an event of default, or any other distributions in excess of $50 million in any fiscal year without demonstrating pro forma compliance with certain financial covenants; • enter into transactions with affiliates other than in the ordinary course of business on an arm’s-length basis; • enter into certain transactions, including swap agreements and sale and leaseback transactions; or 30 • pay dividends or distributions of our capital stock.
Although we do not currently have any outstanding indebtedness, pursuant to the Credit Agreement (as defined herein) that governs the Revolving Credit Facility, we may not, subject to certain exceptions: • create or permit the existence of additional liens on our assets; • incur additional debt; • change the nature of our business; • make investments in and acquisitions of (or acquisitions of substantially all of the assets of) any person; • permit certain fundamental changes, including a merger; • dispose of assets; • make any distributions during an event of default, or any other distributions in excess of $50 million in any fiscal year without demonstrating pro forma compliance with certain financial covenants; • enter into transactions with affiliates other than in the ordinary course of business on an arm’s-length basis; • enter into certain transactions, including swap agreements and sale and leaseback transactions; or • pay dividends or distributions of our capital stock.
Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or if no Court of Chancery located within the State of Delaware has jurisdiction, the Federal District Court for the District of Delaware) will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of Delaware law or our certificate of incorporation or our bylaws (as either may be amended from time to time) or any action asserting a claim against us or any of our directors, officers or other employees governed by the internal affairs doctrine.
Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or if no Court of Chancery located within the State of Delaware has jurisdiction, the Federal District Court for the District of Delaware) will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any 31 provision of Delaware law or our certificate of incorporation or our bylaws (as either may be amended from time to time) or any action asserting a claim against us or any of our directors, officers or other employees governed by the internal affairs doctrine.
Any defects in functionality or defects that cause interruptions in the availability of our applications could result in: • loss or delayed market acceptance and sales of our applications; • termination of service agreements or loss of clients; • credits, refunds or other liability to clients, including reimbursements for any fees or penalties assessed by regulatory agencies; • breach of contract, breach of warranty or indemnification claims against us, which may result in litigation; • diversion of development and service resources; • increased scrutiny of our solution from regulatory agencies; and • injury to our reputation.
Any defects in functionality or defects that cause interruptions in the availability of our applications could result in: • loss or delayed market acceptance and sales of our applications; • termination of service agreements or loss of clients; • credits, refunds or other liability to clients, including reimbursements for any fees or penalties assessed by regulatory agencies; • breach of contract, breach of warranty or indemnification claims against us, which may result in litigation; 20 • diversion of development and service resources; • increased scrutiny of our solution from regulatory agencies; and • injury to our reputation.
Certain of our competitors have in the past or may in the future: • adapt more rapidly to new or emerging technologies and changes in client requirements; • develop superior products or services, gain greater market acceptance and expand their product and service offerings more efficiently or rapidly; 20 • offer products and services that we may not offer individually or at all, or bundle products and services in a manner that provides them with a price advantage; • offer products that can be integrated with other software or systems, whereas our single software may not allow for such integration; • develop and implement control processes that drive internal efficiencies, resulting in a better client experience; • establish and maintain partnerships with third parties that enhance and expand their product offering to business clients and employees; • take advantage of acquisition and other opportunities for expansion more readily; • maintain a lower cost basis; • secure contractual terms and implement other client retention strategies that increase our costs to acquire new clients; • adopt more aggressive or desirable pricing policies; • devote greater resources to the promotion, marketing and sale of their products and services; and • devote greater resources to the research and development of their products and services.
Certain of our competitors have in the past or may in the future: • adapt more rapidly to new or emerging technologies and changes in client requirements; • develop superior products or services, gain greater market acceptance and expand their product and service offerings more efficiently or rapidly; 19 • offer products and services that we may not offer individually or at all, or bundle products and services in a manner that provides them with a price advantage; • offer products that can be integrated with other software or systems, whereas our single software may not allow for such integration; • develop and implement control processes that drive internal efficiencies, resulting in a better client experience; • establish and maintain partnerships with third parties that enhance and expand their product offering to business clients and employees; • take advantage of acquisition and other opportunities for expansion more readily; • maintain a lower cost basis; • secure contractual terms and implement other client retention strategies that increase our costs to acquire new clients; • adopt more aggressive or desirable pricing policies; • devote greater resources to the promotion, marketing and sale of their products and services; and • devote greater resources to the research and development of their products and services.
As we expand our operations outside the United States, our applications and services are or will be subject to additional laws governing data security and privacy in relevant jurisdictions, such as Canada’s PIPEDA and Mexico’s Federal Law on the Protection of Personal Data held by Private Parties, as well as the GDPR, which is applicable in the European Economic Area and the United Kingdom.
As we continue to expand our operations outside the United States, our applications and services are or will be subject to additional laws governing data security and privacy in relevant jurisdictions, such as Canada’s PIPEDA and Mexico’s Federal Law on the Protection of Personal Data held by Private Parties, as well as the GDPR, which is applicable in the European Economic Area and the United Kingdom.
Factors that may cause our financial results to fluctuate from period to period include, without limitation: • our ability to attract new clients or sell additional applications to our existing clients; • the number of new clients and their employees, as compared to the number of existing clients and their employees in a particular period; • the mix of clients between small, mid-sized and large organizations; • the extent to which we retain existing clients and the expansion or contraction of our relationships with them; • the mix of applications sold during a period; • changes in our pricing policies or those of our competitors; • seasonal factors affecting payroll processing, demand for our applications or potential clients’ purchasing decisions; • the amount and timing of operating expenses, including those related to the maintenance and expansion of our business, operations and infrastructure; • the timing and success of new applications introduced by us and the timing of expenses related to the development of new applications and technologies; • the timing and success of current and new competitive products and services offered by our competitors; • economic conditions affecting our clients, including their ability to outsource HCM solutions and hire employees; • changes in laws, regulations or policies affecting our clients’ legal obligations and, as a result, demand for certain applications; • changes in the competitive dynamics of our industry, including consolidation among competitors or clients; • our ability to manage our existing business and future growth, including expenses related to our data centers and the expansion of such data centers and the addition of new offices; • the effects and expenses of acquisition of third-party technologies or businesses and any potential future charges for impairment of goodwill resulting from those acquisitions; • business disruptions caused by widespread public health crises (such as the COVID-19 pandemic), natural disasters, such as tornadoes, hurricanes, fires, earthquakes and floods (including as a result of climate change), acts of war, terrorism, or other catastrophic events; • network outages or security breaches; and • general economic, industry and market conditions.
Factors that may cause our financial results to fluctuate from period to period include, without limitation: • our ability to attract new clients or sell additional applications to our existing clients; • the number of new clients and their employees, as compared to the number of existing clients and their employees in a particular period; • the mix of clients between small, mid-sized and large organizations; • the extent to which we retain existing clients and the expansion or contraction of our relationships with them; • the mix of applications sold during a period; • changes in our pricing policies or those of our competitors; • seasonal factors affecting payroll processing, demand for our applications or potential clients’ purchasing decisions; • the amount and timing of operating expenses, including those related to the maintenance and expansion of our business, operations and infrastructure; • the timing and success of new applications introduced by us and the timing of expenses related to the development of new applications and technologies; • the timing and success of current and new competitive products and services offered by our competitors; • economic conditions affecting our clients, including their ability to outsource HCM solutions and hire employees; • changes in laws, regulations or policies affecting our clients’ legal obligations and, as a result, demand for certain applications; • changes in the competitive dynamics of our industry, including consolidation among competitors or clients; • our ability to manage our existing business and future growth, including expenses related to our data centers and the expansion of such data centers and the addition of new offices; • the effects and expenses of acquisition of third-party technologies or businesses and any potential future charges for impairment of goodwill resulting from those acquisitions; • business disruptions caused by widespread public health crises, natural disasters, such as tornadoes, hurricanes, fires, earthquakes and floods (including as a result of climate change), acts of war, terrorism, or other catastrophic events; • network outages or security breaches; and • general economic, industry and market conditions.
For example, numerous state and local authorities have implemented “ban the box” and “fair chance” hiring laws that limit or prohibit employers from inquiring or using a candidate’s criminal history to make employment decisions and many of these authorities have in recent years amended these laws to increase the restrictions on the use of such information.
For example, numerous 28 state and local authorities have implemented “ban the box” and “fair chance” hiring laws that limit or prohibit employers from inquiring or using a candidate’s criminal history to make employment decisions, and many of these authorities have in recent years amended these laws to increase the restrictions on the use of such information.
Additionally, our responses to any union 28 organizing efforts could negatively impact perception of our brand and have adverse effects on our business, including on our financial results. These responses could also expose us to legal risk, causing us to incur costs related to defending legal and regulatory actions, potential penalties and restrictions or reputational harm.
Additionally, our responses to any union organizing efforts could negatively impact perception of our brand and have adverse effects on our business, including on our financial results. These responses could also expose us to legal risk, causing us to incur costs related to defending legal and regulatory actions, potential penalties and restrictions or reputational harm.
Our results of operations, including our revenues, costs of revenues, administrative expenses, operating income, cash flow and deferred revenue, may vary significantly in the future, and the results of any one period should not be relied upon as an indication of 29 future performance. Fluctuations in our financial results may negatively impact the value of our common stock.
Our results of operations, including our revenues, costs of revenues, administrative expenses, operating income, cash flow and deferred revenue, may vary significantly in the future, and the results of any one period should not be relied upon as an indication of future performance. Fluctuations in our financial results may negatively impact the value of our common stock.
In addition, global and regional macroeconomic developments, such as 32 increased unemployment, decreased income, uncertainty related to future economic activity, reduced access to credit, increased interest rates, inflation, volatility in capital markets, and decreased liquidity, among other possible factors, could negatively affect our ability to conduct business.
In addition, global and regional macroeconomic developments, such as increased unemployment, decreased income, uncertainty related to future economic activity, reduced access to credit, increased interest rates, inflation, volatility in capital markets, and decreased liquidity, among other possible factors, could negatively affect our ability to conduct business.
Because of our inexperience with international operations, we 23 cannot ensure that our expansion into international markets will be successful, and the impact of such expansion may adversely affect our business, operating results or financial condition. Our business depends in part on the success of our relationships with third parties.
Because of our inexperience with international operations, we cannot ensure that our expansion into international markets will be successful, and the impact of such expansion may adversely affect our business, operating results or financial condition. Our business depends in part on the success of our relationships with third parties.
Our business depends on our ability to satisfy our clients, both with respect to our applications and the technical support provided to help our clients use the applications that address the needs of their businesses. We use our in-house deployment personnel to implement and configure our solution and provide support to our clients.
Furthermore, our business depends on our ability to satisfy our clients, both with respect to our applications and the technical support provided to help our clients use the applications that address the needs of their businesses. We use our in-house deployment personnel to implement and configure our solution and provide support to our clients.
The GLBA is enforced under the authority of the Federal Trade Commission and requires our payment card services to adhere to a privacy notice and take certain measures to protect related personal information from unauthorized use and threats to data security.
Notably, the GLBA is enforced under the authority of the Federal Trade Commission and requires our payment card services to adhere to a privacy notice and take certain measures to protect related personal information from unauthorized use and threats to data security.
The failure to develop enhancements to our applications for, or that incorporate, technologies such as natural language processing, AI, machine learning, and blockchain may impact our ability to increase the efficiency of and reduce costs associated with our clients’ operations.
The failure to develop enhancements to our applications for, or that incorporate, technologies such as natural language processing, AI, and machine learning may impact our ability to increase the efficiency of and reduce costs associated with our clients’ operations.
New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time (possibly with retroactive effect), and could be applied solely or disproportionately to services and applications provided over the internet.
New income, 27 sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time (possibly with retroactive effect), and could be applied solely or disproportionately to services and applications provided over the internet.
These forms are typically processed in the first quarter of the year and, as a result, positively impact first quarter recurring revenues. In addition, unscheduled payroll runs at the end of the year (such as bonuses) have a positive impact on our recurring revenues in the fourth quarter.
These forms are typically processed in the first quarter of the year and, as a result, positively impact first quarter recurring revenues. In addition, unscheduled payroll runs at the end of the year (such as bonuses) have a positive impact on our recurring 29 revenues in the fourth quarter.
Furthermore, identifying and recruiting qualified personnel and training them in the use of our applications requires significant time, expense and attention, and it can take a 22 substantial amount of time before our employees are fully trained and productive.
Furthermore, identifying and recruiting qualified personnel and training them in the use of our applications requires significant time, expense and attention, and it can take a substantial amount of time before our employees are fully trained and productive.
In the future, we may experience issues with our computing and communications infrastructure or data centers caused by the following factors: • human error; • telecommunications failures or outages from third-party providers; • computer viruses or cyber-attacks; • break-ins or other security breaches; 19 • acts of terrorism, sabotage, intentional acts of vandalism or other misconduct; • tornadoes, fires, earthquakes, hurricanes, floods and other natural disasters; • power loss; and • other unforeseen interruptions or damages.
In the future, we may experience issues with our computing and communications infrastructure or data centers caused by the following factors: • human error; • telecommunications failures or outages from third-party providers; • computer viruses or cyber-attacks; 18 • break-ins or other security breaches; • acts of terrorism, sabotage, intentional acts of vandalism or other misconduct; • tornadoes, fires, earthquakes, hurricanes, floods and other natural disasters; • power loss; and • other unforeseen interruptions or damages.
In addition, to continue to execute our growth strategy, we must also attract and retain qualified sales, marketing and operational personnel capable of supporting a larger and more diverse client base.
In addition, to continue to execute our growth strategy, we must also attract and retain 21 qualified sales, marketing and operational personnel capable of supporting a larger and more diverse client base.
We face potential liability from individuals, classes of individuals, clients or regulatory bodies for claims based on the nature, content or accuracy of our background check services and the information we use and report.
Furthermore, we face potential liability from individuals, classes of individuals, clients or regulatory bodies for claims based on the nature, content or accuracy of our background check services and the information we use and report.
Should other U.S. state, U.S. federal, or foreign regulators make a determination that we have operated as an unlicensed money services business, money transmitter, or payment services provider, we could be subject to civil and criminal fines, penalties, costs of registration, legal fees, reputational damage or other negative consequences, all of which may have an adverse effect on our business operating results or financial condition.
Should other U.S. state, U.S. federal, or foreign regulators make a determination that we have operated as an unlicensed money services business, money transmitter, or payment services provider, we could be subject to civil and criminal fines, penalties, costs of registration, legal fees, reputational damage or other negative consequences, any of which may have an adverse effect on our business operating results or financial condition.
Newly-passed legislative and regulatory initiatives may adversely affect the ability of our clients to process, handle, store, use and transmit demographic and personal information from their employees, which could reduce demand for our solution. In addition to government regulation, privacy advocates and industry groups may propose and adopt new and different self-regulatory standards.
Newly-passed legislative and regulatory initiatives may adversely affect the ability of our clients to process, handle, store, use and transmit demographic and personal information from their employees, which could reduce demand for our services. In addition to government regulation, privacy advocates and industry groups may propose and adopt new and different self-regulatory standards.
However, we may be 24 unaware of the intellectual property rights of others that may cover, or may be alleged to cover, some or all of our solution, applications or brands.
However, we may be unaware of the intellectual property rights of others that may cover, or may be alleged to cover, some or all of our solution, applications or brands.
These enactments could adversely affect our sales activity, due to the inherent cost increase the taxes would represent, and ultimately could adversely affect our business, operating results or financial condition. Each state has different rules and regulations governing sales and use taxes, and these rules and regulations are subject to varying interpretations that change over time.
These enactments could adversely affect our sales activity, due to the inherent cost increase the taxes would represent, and ultimately could adversely affect our business, operating results or financial condition. Each jurisdiction has different rules and regulations governing sales and use taxes, and these rules and regulations are subject to varying interpretations that change over time.
Additionally, because certain of our clients rely on government resources to fund their operations, a prolonged government shutdown may affect such clients’ ability to make timely payments to us, which could adversely affect our operations results or financial condition. Item 1B. Unresolve d Staff Comments None. 33
Additionally, because certain of our clients rely on government resources to fund their operations, a prolonged government shutdown may affect such clients’ ability to make timely payments to us, which could adversely affect our operations results or financial condition. Item 1B. Unresolve d Staff Comments None. 32
Our payment of dividends, as well as the rate at which we pay dividends, are solely at the discretion of our Board of Directors. Further, dividend payments, if any, are subject to our financial results and the availability of statutory surplus. These factors could result in a change to our recently adopted dividend policy.
Our payment of dividends, as well as the rate at which we pay dividends, are solely at the discretion of our Board of Directors. Further, dividend payments, if any, are subject to our financial results and the availability of statutory surplus. These factors could result in a change to our dividend policy.
In addition, 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, stepping down to 3.25 to 1.0 as of December 31, 2024 and 3.0 to 1.0 as of December 31, 2025, and thereafter.
In addition, 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 3.25 to 1.0, stepping down to 3.0 to 1.0 as of December 31, 2025, and thereafter.
In addition, HCM spending levels may not increase following any recovery. Further, as part of our payroll and tax filing application, we collect and then remit client funds to taxing authorities and accounts designated by our clients.
In addition, HCM spending levels may not increase following any recovery. Further, as part of our payroll and payroll tax filing services, we collect and then remit client funds to taxing authorities and accounts designated by our clients.
Any defects in our applications could adversely affect our reputation, impair our ability to sell our applications in the future and result in significant costs to us. The costs incurred in correcting any application defects may be substantial and could adversely affect our business, operating results or financial condition.
Any defects in our applications could adversely affect our reputation, impair our ability to sell our applications in the future and result in significant costs to us. The costs incurred to correct any application defects may be substantial and could adversely affect our business, operating results or financial condition.
We also face potential liability from our clients, and possibly third parties, in the event we fail to report information, particularly criminal records or other potentially negative information, or wrongly report such information.
We also face potential liability from our clients, and possibly third parties, in the event we fail to report information, particularly wage and earnings information, criminal records or other potentially negative information, or wrongly report such information.
Government could adversely affect our ability to receive U.S. Government contracts and our future operating performance, and could result in financial or reputational harm. In addition, federal, state and foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the internet as a commercial medium.
Government could adversely affect our ability to receive U.S. Government contracts and could result in financial or reputational harm. 25 In addition, federal, state and foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the internet as a commercial medium.
Our applications and services are subject to various complex laws and regulations on the federal, state, local, and foreign levels, including those governing data security and privacy, which have become significant issues globally. The regulatory framework for privacy issues is rapidly evolving and is likely to remain uncertain for the foreseeable future.
Our applications and services are subject to various complex laws and regulations on the federal, state, local, and foreign levels, including those governing data security and privacy, which have become significant compliance issues globally. The regulatory framework for privacy of personal data is rapidly evolving and is likely to remain uncertain for the foreseeable future.
We cannot ensure that we will not be subject to sales and use taxes or related penalties for past sales in states where we currently believe no such taxes are required.
We cannot ensure that we will not be subject to sales and use taxes or related penalties for past sales in jurisdictions where we currently believe no such taxes are required.
As a vendor of services, we are ordinarily held responsible by taxing authorities for collecting and paying any applicable sales or other similar taxes. Additionally, the application of federal, state and local tax laws to services provided electronically like ours is evolving.
As a vendor of services, we are ordinarily held responsible by taxing authorities for collecting and paying any applicable sales or other similar taxes. Additionally, the application of tax laws to services provided electronically like ours is evolving.
We have adopted an anti-money laundering compliance program to mitigate the risk of our application being used for illegal or illicit activity and to help detect and prevent fraud. Our AML compliance program is designed to foster trust in our application and services.
We have adopted an AML compliance program to mitigate the risk of our application being used for illegal or illicit activity and to help detect and prevent fraud. Our AML compliance program is designed to foster trust in our application and services.
Risks Related to Our Business If our security measures are breached, or unauthorized access to our clients’ or their employees’ or potential employees’ sensitive data is otherwise obtained, our solution may not be perceived as being secure, clients may reduce the use of or stop using our solution, our ability to attract new clients may be harmed and we may incur significant liabilities.
Risks Related to Our Business If our security measures are breached, or unauthorized access to sensitive data is otherwise obtained, our solution may not be perceived as being secure, clients may reduce the use of or stop using our solution, our ability to attract new clients may be harmed and we may incur significant liabilities.
Failure to comply with data protection and privacy laws and regulations could result in regulatory scrutiny and increased exposure to the risk of litigation or the imposition of consent orders or civil and criminal penalties, including fines, which could have an adverse effect on our results of operations or financial condition.
Failure to comply with data protection and privacy laws and regulations could result in regulatory scrutiny and increased exposure to the risk of litigation or the imposition of consent orders, injunctions against data processing or data exporting, or civil and criminal penalties, including fines, which could have an adverse effect on our results of operations or financial condition.
From time to time, we have been subject to claims and lawsuits by current and potential employees of our clients, alleging that we provided to our clients inaccurate or improper information that negatively affected the clients’ hiring decisions.
From time to time, we have been subject to claims and lawsuits by current and potential employees of our clients, alleging that we provided to our clients inaccurate or improper information that negatively affected the clients.
It is also possible that, notwithstanding the forum selection clause included in our certificate of incorporation, a court could rule that such a provision is inapplicable or unenforceable. We may not continue to pay dividends or to pay dividends at the same rate as announced in May 2023.
It is also possible that, notwithstanding the forum selection clause included in our certificate of incorporation, a court could rule that such a provision is inapplicable or unenforceable. We may not continue to pay dividends at the same rate or at all.
In addition, because our Beti technology is designed to eliminate payroll errors that lead to billable corrections and unscheduled payroll runs, we have experienced and expect to continue to experience a reduction in these activities that would otherwise generate additional revenue for us.
In addition, because our Beti technology is designed to eliminate payroll errors that lead to billable corrections and unscheduled payroll runs, we have experienced a reduction in these activities that would historically otherwise generate additional revenue for us.
The loss of the services of a significant number of employees could be disruptive to our development efforts, which may adversely affect our business by causing us to lose clients, increase operating expenses or divert management’s attention to recruit replacements for the departed employees. Our business and operations are experiencing rapid growth and organizational change.
The loss of the services of a significant number of employees could be disruptive to our development efforts, which may adversely affect our business by causing us to lose clients, increase operating expenses or divert management’s attention to recruit replacements for the departed employees. Our business and operations have experienced significant growth and organizational change.
Consequently, we are subject to extensive, evolving and often complex laws and governmental regulations, such as the Fair Credit Reporting Act (the “FCRA”), the Drivers’ Privacy Protection Act, state consumer reporting agency laws, state licensing and registration requirements, and various other foreign, federal, state and local laws and regulations.
Consequently, we are subject to extensive, evolving and often complex laws and governmental regulations, such as the FCRA, the Drivers’ Privacy Protection Act, state consumer reporting agency laws, state licensing and registration requirements, and various other foreign, federal, state and local laws and regulations.
Foreign Corrupt Practices Act, its books and records provisions or its anti-bribery provisions. Our expansion into international markets requires significant resources and management attention and subjects us to regulatory, economic and political risks that differ from those in the United States.
Foreign Corrupt Practices Act, its books and records provisions or its anti-bribery provisions, as well as similar laws in foreign jurisdictions. Our expansion into international markets requires significant resources and management attention and subjects us to regulatory, economic and political risks that differ from those in the United States.
In the United States, these include numerous state-level consumer privacy laws, beginning with California’s CCPA, the IBIPA, rules and regulations promulgated under the authority of the Federal Trade Commission, the Health Insurance Portability and Accountability Act of 1996, the Family Medical Leave Act of 1993, the ACA, the Financial Services Modernization Act of 1999 (the “GLBA”), federal and state labor and employment laws, state data breach notification laws, and state cybersecurity laws, such as the New York Stop Hacks and Improve Electronic Data Security (SHIELD) Act.
In the United States, these include numerous state-level consumer privacy laws, such as California’s CCPA and Texas’ Data Privacy and Security Act, Illinois’ IBIPA, rules and regulations promulgated under the authority of the Federal Trade Commission, the Health Insurance Portability and Accountability Act of 1996, the Family Medical Leave Act of 1993, the ACA, the Financial Services Modernization Act of 1999 (the “GLBA”), the Fair Credit Reporting Act (“FCRA”), federal and state labor and employment laws, state data breach notification laws, and state cybersecurity laws such as the New York Stop Hacks and Improve Electronic Data Security (SHIELD) Act.
We are required to test goodwill for impairment at least annually or earlier if events or changes in circumstances indicate the carrying value may not be recoverable. As of December 31, 2023, we had recorded a total of $51.9 million of goodwill and $50.1 million of other intangible assets, net.
We are required to test goodwill for impairment at least annually or earlier if events or changes in circumstances indicate the carrying value may not be recoverable. As of December 31, 2024, we had recorded a total of $51.9 million of goodwill and $46.2 million of other intangible assets, net.
If we identify material weaknesses in our internal control over financial reporting or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and/or we could become subject to investigations by the New York Stock Exchange (the “NYSE”), the SEC, or other regulatory authorities and the market price of our common stock could be negatively affected.
If we identify material weaknesses in our internal control over financial reporting or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and/or we could become subject to investigations by the New York Stock Exchange (the “NYSE”), the SEC, or other regulatory authorities, and the market price of our common stock could be negatively affected. 30 Our actual operating results may differ significantly from our guidance.
Our actual operating results may differ significantly from our guidance. We have released, and may continue to release, guidance in our earnings conference calls, earnings releases, or otherwise, regarding our future performance, which represents our estimates as of the date of release. This guidance, which includes forward-looking statements, has been and will be based on projections prepared by our management.
We have released, and may continue to release, guidance in our earnings conference calls, earnings releases, or otherwise, regarding our future performance, which represents our estimates as of the date of release. This guidance, which includes forward-looking statements, has been and will be based on projections prepared by our management.
Any actual or alleged noncompliance with applicable laws and regulations, or failure to meet client expectations with respect to the use of generative AI and machine learning, could result in negative publicity or harm to our reputation and subject us to investigations, claims or other remedies, and expose us to significant fines, penalties and other damages.
Any actual or alleged noncompliance with these new laws and regulations, or failure to meet client expectations with respect to the use of generative AI and machine learning, could also result in negative publicity or harm to our reputation, subject us to investigations and expose us to significant fines, penalties and other damages.
Further, bank regulators continue to impose additional and stricter requirements on banks to ensure they are meeting their Bank Secrecy Act/USA PATRIOT Act obligations, and banks are increasingly viewing money services businesses and third-party senders to be higher risk customers for money laundering.
Further, bank regulators continue to impose additional and stricter requirements on banks to ensure they are meeting their BSA obligations, and banks are increasingly viewing money services businesses and third-party senders to be higher risk customers for money laundering.
Our competitors provide HCM solutions by various means. Although certain providers continue to deliver legacy enterprise software, many now offer cloud-based solutions, resulting in increased competition for clients seeking the greater flexibility and access to information provided by cloud-based offerings. Furthermore, the HCM industry has experienced an emergence of white label and embedded payroll offerings.
Although certain providers continue to deliver legacy enterprise software, most now offer cloud-based solutions, resulting in increased competition for clients seeking the greater flexibility and access to information provided by cloud-based offerings. Furthermore, the HCM industry has experienced an emergence of white label and embedded payroll offerings.
Moreover, allegations of non-compliance, whether or not true, could be costly, time consuming, distracting to management, and cause reputational harm. 26 The landscape of privacy laws applicable to our various products and services is evolving quickly. The California Privacy Rights Act (“CPRA”), which expands upon the CCPA, went into effect in 2023.
Moreover, allegations of non-compliance with privacy laws, whether or not true, could be costly, time consuming, distracting to management, and cause reputational harm. The landscape of privacy laws applicable to our various products and services is evolving quickly. The CPRA, which expands upon the CCPA, went into effect in 2023.
HCM software is often targeted in cyber-attacks, including computer viruses, phishing attacks, malicious software programs and other information security breaches, which could result in unauthorized access to or release, gathering, monitoring, misuse, loss or destruction of our or our clients’ sensitive data or otherwise disrupt our or our clients’ business operations.
HCM software is often targeted, and we have been targeted, in cyber-attacks, including computer viruses, phishing attacks, malicious software programs (including distributed denial of services (DDoS) attacks) and other information security breaches, which could result in unauthorized access to or release, gathering, monitoring, misuse, loss or destruction of our or our clients’ sensitive data or otherwise disrupt our or our clients’ business operations.
We rely on a combination of copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish and to protect our intellectual property rights in the United States and in foreign jurisdictions. However, the steps we take to protect our intellectual property may be inadequate.
Our success is dependent in part upon our intellectual property. We rely on a combination of copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish and to protect our intellectual property rights in the United States and 23 in foreign jurisdictions. However, the steps we take to protect our intellectual property may be inadequate.
Furthermore, the impact of such macroeconomic developments may be exacerbated by the COVID-19 pandemic or geopolitical events such as the ongoing military conflict in Ukraine and the ongoing conflict between Israel and Hamas.
Furthermore, the impact of such macroeconomic developments may be exacerbated by geopolitical events such as the ongoing military conflict in Ukraine and the ongoing conflict between Israel and Hamas.
Similar lawsuits may be threatened or instituted against us from time to time, and we may incur damages and expenses resulting from lawsuits of this type, which could have a material adverse effect on our business, financial condition or results of operations. We are currently subject to employee-related legal proceedings in the ordinary course of business.
We may incur damages and expenses resulting from lawsuits of this type, which could have a material adverse effect on our business, financial condition or results of operations. We are currently subject to employee-related legal proceedings in the ordinary course of business.
As we continue to enhance our solution to serve clients located outside of the United States, our business is subject to risks associated with international operations. An element of our growth strategy is to expand our operations and client base and we have recently begun to expand our operations into markets outside of the United States.
As we continue to enhance our solution to serve clients located outside of the United States, our business is subject to risks associated with international operations. An element of our growth strategy is to expand our operations and client base, including in markets outside of the United States.
Our certificate of incorporation authorizes us to issue up to one hundred million shares of common stock and up to ten million shares of preferred stock with such rights and preferences as may be determined by our board of directors.
Our certificate of incorporation authorizes us to issue up to 100 million shares of common stock and up to 10 million shares of preferred stock with such rights and preferences as may be determined by our board of directors.
We review these rules and regulations periodically and, when we believe we are subject to sales and use taxes in a particular state, we may voluntarily engage state tax authorities in order to determine how to comply with that state’s rules and regulations.
We review these rules and regulations periodically and, when we believe we are subject to sales and use taxes in a particular jurisdiction, we may voluntarily engage the applicable tax authorities in order to determine how to comply with that jurisdiction’s rules and regulations.
If we are unsuccessful in establishing or maintaining our relationships with these third parties, our ability to compete in the marketplace or to grow our revenues could be impaired and our business, operating results or financial condition could be adversely affected.
If we are unsuccessful in establishing or maintaining our relationships with these third parties, or the services provided by third parties fail to meet our clients’ or client employees’ expectations, our ability to compete in the marketplace or to grow our revenues could be impaired and our business, operating results or financial condition could be adversely affected.
Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances set forth in this “Risk Factors” section in this Form 10-K could result in the actual operating results being different from our guidance, and the differences may be adverse and material. 31 Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.
Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances set forth in this “Risk Factors” section in this Form 10-K could result in the actual operating results being different from our guidance, and the differences may be adverse and material.
We believe that developing and maintaining widespread awareness of our brand in a cost-effective manner is critical to achieving widespread acceptance of our solution and is an important element in attracting new clients and retaining existing clients.
The failure to develop and maintain our brand cost-effectively could have an adverse effect on our business. We believe that developing and maintaining widespread awareness of our brand in a cost-effective manner is critical to achieving widespread acceptance of our solution and is an important element in attracting new clients and retaining existing clients.
If we inappropriately use open source software, we may be required to redesign our applications, discontinue the sale of our applications or take other remedial actions, which could adversely impact our business, operating results or financial condition.
If we inappropriately use open source software, we may be required to redesign our applications, discontinue the sale of our applications or take other remedial actions, which could adversely impact our business, operating results or financial condition. Our increasing focus on, and investments in, automation expose us to a number of risks.
Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board (“FASB”), the SEC and various bodies formed to promulgate and interpret appropriate accounting principles.
Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States. Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles.
We compete with companies such as Automatic Data Processing, Inc., Dayforce, Inc., Cornerstone OnDemand, Inc., Gusto, Inc., Intuit, Inc., Insperity, Inc., Oracle Corporation, Paychex, Inc., Paylocity Holding Corporation, Paycor HCM, Inc., People Center, Inc. d/b/a Rippling, SAP SE, ServiceNow, Inc., Ultimate Kronos Group, Workday, Inc., and other international, national, regional, and local providers.
We compete with companies such as Automatic Data Processing, Inc., Cornerstone OnDemand, Inc., Dayforce, Inc., Intuit, Inc., Insperity, Inc., Oracle Corporation, Paychex, Inc., Paylocity Holding Corporation, Paycor HCM, Inc., SAP SE, ServiceNow, Inc., Ultimate Kronos Group, Workday, Inc., and other international, national, regional, and local providers. Our competitors provide HCM solutions by various means.
As a result, our organizational structure and recording systems and procedures are becoming more complex as we improve our operational, financial and management controls. Our success depends, in part, on our ability to manage this growth and organizational change effectively. Moreover, our international expansion efforts are exacerbating many of these challenges.
Our success depends, in part, on our ability to manage this growth and organizational change effectively. Moreover, our international expansion efforts are exacerbating many of these challenges. To manage the effects of our growth, we must continue to improve our operational, financial and management controls and our reporting systems and procedures.
Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality technical support, could adversely affect client retention, our reputation, our ability to sell our applications to existing and prospective clients, and, as a result, our business, operating results or financial condition. 21 Further, our solution is inherently complex and may in the future contain, or develop, undetected defects or errors.
Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality technical support, could adversely affect client retention, our reputation, our ability to sell our applications to existing and prospective clients, and, as a result, our business, operating results or financial condition.
Any violation of applicable AML laws or regulations could limit certain of our business activities until they are satisfactorily remediated and could result in civil and criminal penalties, including fines, which could damage our reputation and have a materially adverse effect on our results of operations and financial condition. 27 We are registered as a “money services business” in multiple jurisdictions and intend to apply for money services business or payment services licenses in other jurisdictions as applicable.
Any violation of applicable AML laws or regulations could limit certain of our business activities until they are satisfactorily remediated and could result in civil and criminal penalties, including fines, which could damage our reputation and have a materially adverse effect on our results of operations and financial condition.
As we continue to pursue such new technologies, our failure to adequately address legal risks relating to the use of generative AI and machine learning in our applications could result in litigation regarding, among other things, intellectual property, privacy, employment, civil rights and other claims that could result in liability for the Company.
As we continue to pursue such new technologies, our failure to adequately address legal risks relating to the use of generative AI and machine learning in our applications could result in litigation or private action that could result in liability for the Company.
In addition, our policy may not cover all claims made against us, and defending a suit, regardless of its merit, could be costly and divert management’s attention.
Our errors and omissions insurance may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our policy may not cover all claims made against us, and defending a suit, regardless of its merit, could be costly and divert management’s attention.
In recent years, companies have been subject to lawsuits, including class action lawsuits, alleging violations of federal and state law regarding workplace and employment matters, overtime wage policies, discrimination and similar matters, some of which have resulted in the payment of meaningful damages by the defendants.
In recent years, we have been subject to threatened and filed lawsuits, including class action lawsuits, alleging violations of federal and state law regarding workplace and employment matters, overtime wage policies, discrimination and similar matters.
Moreover, changing regulatory requirements may make the introduction of new applications and enhancements more costly or more time-consuming than we currently anticipate or could prevent the introduction of new applications and enhancements by us altogether. 25 For example, a change in tax laws and regulations resulting in a decrease in the amount of taxes required to be withheld or accelerating the deadline to remit taxes to appropriate tax agencies would adversely impact our average balance of funds held for clients and, as a result, adversely impact the interest income we earn on such funds during the period between receipt and disbursement.
For example, a change in tax laws and regulations resulting in a decrease in the amount of taxes required to be withheld or accelerating the deadline to remit taxes to appropriate tax agencies would adversely impact our average balance of funds held for clients and, as a result, adversely impact the interest income we earn on such funds during the period between receipt and disbursement.
The CCPA and other state-level consumer privacy laws give consumers located in those states certain rights to be informed of, opt-out of, and request deletion of the personal information that we hold, similar to those rights provided by the European Union’s GDPR. The IBIPA includes a private right of action for persons who are aggrieved by violations of the IBIPA.
Many of these newer state-level consumer privacy laws give consumers located in those states certain rights to be informed of, opt-out of, and request deletion of the personal information that we hold, similar to those rights provided by the European Union’s GDPR.
If we fail to manage such growth and change effectively, we may be unable to execute our business plan, maintain high levels of service or adequately address competitive challenges.
If we fail to manage such growth and change effectively, we may be unable to execute our business plan, maintain high levels of service or adequately address competitive challenges. We have experienced, and may continue to experience, significant growth in our operations, which has placed, and may continue to place, significant demands on our management, operational and financial resources.
The market for HCM software is highly competitive, rapidly evolving and fragmented. If we are unable to compete effectively, our business, operating results or financial condition could be adversely affected. We expect competition to continue to intensify as new technologies and new market entrants emerge and increasingly aggressive pricing strategies persist.
The market in which we participate is highly competitive, and if we do not compete effectively, our business, operating results or financial condition could be adversely affected. The market for HCM software is highly competitive, rapidly evolving and fragmented. If we are unable to compete effectively, our business, operating results or financial condition could be adversely affected.
Virginia, Colorado, Connecticut and Utah recently enacted their own consumer data privacy statutes, many of which are modeled on the CCPA. New data privacy statutes are slated to go into effect later this year in Delaware, Indiana, Iowa, Montana, Oregon, Tennessee, and Texas.
Fourteen other states have now enacted their own consumer data privacy statutes, many of which are modeled on the CCPA. New data privacy statutes are slated to go into effect later this year in Delaware, Iowa, Nebraska, New Hampshire, and New Jersey.
Our solution involves the collection, storage and transmission of clients’ and their employees’ and potential employees’ confidential and proprietary information, including personal identifying information, as well as financial and payroll data.
Our solution involves the collection, storage and transmission of confidential and proprietary information belonging to our clients, their current, former and potential employees and, in certain cases, dependents and beneficiaries of clients’ current and former employees. This information includes personal identifying information, as well as financial and payroll data.
Our business, operating results or financial condition could be adversely affected if our clients are not satisfied with our deployment or technical support services, or if our solution fails to perform properly.
Our business, operating results or financial condition could be adversely affected if our solution fails to perform properly or our clients are not satisfied with our services. Our solution is inherently complex and may in the future contain, or develop, undetected defects or errors.

… 49 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

10 edited+1 added−2 removed20 unchanged
Biggest changeThe Director of IT Security also provides oversight for information security and privacy policies and controls, oversees compliance activities, and provides metrics and guidance to executive management regarding the program. The aforementioned leaders and teams have a breadth of experience and manage programs related to governance, risk, and compliance; data privacy and security; vulnerability management; security operations; and application security.
Biggest changeThe Director of IT Security is responsible for the growth and implementation of the information security and data privacy programs and oversees the operations of the information security team. The Director of IT Security also provides oversight for information security and privacy policies and controls, oversees compliance activities, and provides metrics and guidance to executive management regarding the program.
We also obtain third-party examinations relating to our internal controls over security and privacy in accordance with SOC 2. Our SOC 2 examination is conducted every year and addresses, among other areas, internal controls around security, availability, processing integrity, confidentiality and privacy. We publish SOC 1 reports semiannually and SOC 2 and SOC 3 reports annually.
We also obtain third-party examinations relating to our internal controls over security and privacy in accordance with SOC 2. Our SOC 2 examination is conducted every year and addresses, among other areas, internal controls around security, availability, and processing integrity. We publish SOC 1 reports semiannually and SOC 2 and SOC 3 reports annually.
Role of the Board of Directors The Board of Directors has delegated to the audit committee primary responsibility for overseeing enterprise risk management, including oversight of risks from cybersecurity threats. The audit committee receives quarterly reports and updates from our Chief Information Officer and Executive Vice President of IT and Information Security with respect to cybersecurity risk management.
Role of the Board of Directors The Board of Directors has delegated to the audit committee primary responsibility for overseeing enterprise risk management, including oversight of risks from cybersecurity threats. The audit committee receives quarterly reports and updates from our Chief Information Officer and Vice President of IT and Information Security with respect to cybersecurity risk management.
In addition, reports related to activities and outcomes are provided to the audit committee on a quarterly basis. 34 Certifications and Audits We maintain the following ISO certifications related to our information systems: • ISO 22301:2019 (standard for implementing and managing an effective business continuity management system); • ISO/IEC 27001:2013 (security standard for information security management systems, covering our production, quality assurance and implementation environments); • ISO 27701:2019 (standard for establishing, implementing, maintaining and continually improving a privacy information management system); and • ISO 9001:2015 (standard for the implementation of quality management processes).
In addition, reports related to activities and outcomes are provided to the audit committee of the Board of Directors on a quarterly basis. 33 Certifications and Audits We maintain the following ISO certifications related to our information systems: • ISO 22301:2019 (standard for implementing and managing an effective business continuity management system); • ISO/IEC 27001:2013 (security standard for information security management systems, covering our production, quality assurance and implementation environments); • ISO/IEC 27701:2019 (standard for establishing, implementing, maintaining and continually improving a privacy information management system); and • ISO 9001:2015 (standard for the implementation of quality management processes).
Incident Response We maintain plans to address any cybersecurity incidents, including but not limited to Crisis Management Policies and Procedures, an Incident Response Plan, an Information Security Incident Management Policy and a Business Resiliency/Continuity Management Policy.
Incident Response We maintain plans to address any cybersecurity incidents, including but not limited to a Crisis Management Plan, an Incident Response Plan, an Information Security Incident Management Policy and a Business Resiliency Policy.
Our Executive Vice President of IT and Information Security has been with Paycom for over a decade and has worked in technology development, improvement, infrastructure, and security for over 25 years.
Our Vice President of IT and Information Security has been with Paycom for over a decade and has worked in technology development, improvement, infrastructure, and security for over 15 years. The Vice President of IT and Information Security is supported by our Director of IT Security, who has worked in technology development, improvement, infrastructure, and security for over a decade.
The Executive Vice President of IT and Information Security, who reports to our Chief Information Officer, is responsible for ensuring that both new implementations and ongoing operations comply with the policies, procedures, and guidelines of our information security program.
Our Chief Information Officer has been with Paycom since 2005 and has more than 30 years of IT and software development experience. The Vice President of IT and Information Security, who reports to our Chief Information Officer, is responsible for ensuring that both new implementations and ongoing operations comply with the policies, procedures, and guidelines of our information security program.
The Chief Information Officer is regularly informed about the latest developments in cybersecurity, including potential threats and innovative risk management techniques. This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. As discussed above, our information systems are routinely reviewed for compliance with information security policies and standards.
This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. As discussed above, our information systems are routinely reviewed for compliance with information security policies and standards. Outcomes of reviews and audits are reported to the Director of IT Security, Vice President of IT and Information Security, and the Chief Information Officer.
Outcomes of reviews and audits are reported to the Director of IT 35 Security, Executive Vice President of IT and Information Security, and the Chief Information Officer. Relevant information about security nonconformities, incidents, and events are reported to the working group described below and to the Board of Directors.
Relevant information about security 34 nonconformities, incidents, and events are reported to the working group described below and to the Board of Directors. As discussed above, the Chief Information Officer and Vice President of IT and Information Security report to the audit committee and the Board of Directors on cybersecurity matters at least quarterly.
As discussed above, the Chief Information Officer and Executive Vice President of IT and Information Security report to the audit committee and the Board of Directors on cybersecurity matters at least quarterly. In addition, we have established a working group composed of senior leaders from various departments, including operations, finance, IT, information security, audit, and legal.
In addition, we have established a working group composed of senior leaders from various departments, including operations, finance, IT, information security, internal audit, and legal.
Removed
Our Chief Information Officer has been with Paycom since 2005 and has more than 30 years of IT and software development experience.
Added
The aforementioned leaders and teams have a breadth of experience and manage programs related to governance, risk, and compliance; data privacy and security; vulnerability management; security operations; and application security. The Chief Information Officer is regularly informed about the latest developments in cybersecurity, including potential threats and innovative risk management techniques.
Removed
The Executive Vice President of IT and Information Security is supported by our Director of IT Security, who has worked in technology development, improvement, infrastructure, and security for over a decade. The Director of IT Security is responsible for the growth and implementation of the information security and data privacy programs and oversees the operations of the information security team.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed0 unchanged
Biggest changeIn addition to housing two fully redundant data centers at our corporate headquarters in Oklahoma City, we operate another fully redundant data center at our Grapevine facility. As of December 31, 2023, we lease offices in 28 states and in certain international locations.
Biggest changeIn addition to housing two fully redundant data centers at our corporate headquarters in Oklahoma City, we operate another fully redundant data center at our Grapevine facility. Furthermore, we have acquired a data center in Arizona, which we expect will be fully operational in mid-2025.
Item 2. P roperties Our corporate headquarters is an approximately 500,000-square-foot campus located on over 150 acres of Company-owned property in Oklahoma City, Oklahoma. We are currently constructing a 315,000-square-foot building at our Oklahoma City headquarters. We also have an operations facility on approximately 14 acres of Company-owned property in Grapevine, Texas.
Item 2. P roperties Our corporate headquarters is an approximately 815,000-square-foot campus located on over 150 acres of Company-owned property in Oklahoma City, Oklahoma. We also have an operations facility on approximately 14 acres of Company-owned property in Grapevine, Texas.
We believe that these facilities are suitable for our current operations and, upon the expiration of the terms of the leases, we believe we could renew these leases or find suitable space elsewhere on acceptable terms.
As of December 31, 2024, we lease offices in 29 states and in certain international locations. We believe that these facilities are suitable for our current operations and, upon the expiration of the terms of the leases, we believe we could renew these leases or find suitable space elsewhere on acceptable terms.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

5 edited+6 added−7 removed2 unchanged
Biggest changePlaintiffs claim they incurred losses based on materially false and misleading statements made by the defendants during the class period, which led plaintiffs to invest in Paycom securities. The plaintiffs are seeking remedies including, but not limited to, compensatory damages, reimbursement of out-of-pocket costs, and injunctive relief.
Biggest changeThe lead plaintiff is seeking remedies on behalf of the putative class that include, but are not limited to, compensatory damages, reimbursement of out-of-pocket costs, and injunctive relief. The Defendants filed their Motion to Dismiss Plaintiff’s Consolidated Complaint on September 6, 2024.
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 4. Mine Saf ety Disclosures None. 37 PART II
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. 35 Item 4. Mine Saf ety Disclosures None. 36 PART II
Paycom Software, Inc., et al., Case Number 5:24-CV-00014-J in the United States District Court for the Western District of Oklahoma; Schoenrock v. Paycom Software, Inc., et al., Case Number 5:24-CV-00012-F in the United States District Court for the Western District of Oklahoma; and Caloto v.
On April 23, 2024, the United States District Court for the Western District of Oklahoma (the “Western District Court”) consolidated three of these lawsuits (styled Ventrillo, et al. v. Paycom Software, Inc., et al., Case No. 5:23-cv-01019-F; Caloto, et al. v. Paycom Software, Inc., et al., Case No. 5:24-cv-00019-F; and Minarik, et al. v.
Chad Richison, et al., Case No. 1:24-cv-00046-UNA. 36 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.
The Western District Court has stayed all proceedings and deadlines in the Consolidated Derivative Action pending resolution of Defendants’ Motion to Dismiss in the Consolidated Securities Class Action. 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.
We believe we have substantial defenses in each matter and we intend to vigorously defend against the claims brought by plaintiffs in these lawsuits. On August 22, 2023, an individual on behalf of herself and her two minor children filed a class action lawsuit against our wholly owned subsidiary, Paycom Payroll, LLC, in the District Court of Oklahoma County.
We believe we have substantial defenses in each matter, and we intend to vigorously defend against the claims brought by plaintiffs in these lawsuits. Between November 2023 and January 2024, Company stockholders filed four federal securities lawsuits against the Company, Chad Richison, and Craig Boelte (the “Defendants”).
Removed
See Carmen Johnson et al. v. Paycom, No. CJ-2023-4763. The complaint relates to the previously disclosed cybersecurity incident involving a third-party vendor, MOVEit, and alleges claims and damages resulting from that matter, including claims for negligence, breach of implied contract, invasion of privacy, unjust enrichment and a request for declaratory and injunctive relief.
Added
Paycom Software, Inc., et al., Case No. 5:24-cv-00014-F) and dismissed for procedural reasons the fourth complaint (styled Schoenrock, et al. v. Paycom Software, Inc., et al., Case No. 5:24-cv-00012-F). The consolidated action is styled In re Paycom Software, Inc. Securities Litigation, Case No. 5:23-cv-01019-F (the “Consolidated Securities Class Action”).
Removed
On November 10, 2023, a stockholder filed a securities class action lawsuit against the Company, Chad Richison (in his capacity as Chief Executive Officer) and Craig Boelte (in his capacity as Chief Financial Officer), in the U.S.
Added
On July 8, 2024, the lead plaintiff filed an amended complaint in the Consolidated Securities Class Action on behalf of a class of acquirers of Company securities between February 8, 2022 and October 31, 2023.
Removed
District Court, Western District of Oklahoma, on behalf of a class of acquirers of Company securities between May 3, 2023 and November 1, 2023. See Angelo Ventrillo Jr. v. Paycom Software, Inc., et al., Case Number CIV-23-1019-F. Similar securities class action lawsuits, involving substantially similar allegations, have also been filed. See Minarik v.
Added
In the amended complaint, the lead plaintiff asserts claims under Section 10(b) and 20(a) of the Exchange Act, alleging that the Defendants made materially false and misleading statements and failed to disclose facts regarding the impact of Beti on the Company’s services and revenues.
Removed
Paycom Software, Inc., et al., Case Number 5:24-cv-00019-R in the United States District Court for the Southern District of New York (transferred to the Western District of Oklahoma on January 9, 2024). The plaintiffs are currently seeking consolidation, designation as lead plaintiff and certification as class representative under Rule 23 of the Federal Rules of Civil Procedure.
Added
The parties have fully briefed the Motion to Dismiss and are awaiting a decision from the Western District Court.
Removed
The plaintiffs have brought multiple claims, including for violations of the federal securities laws under the Exchange Act, on behalf of persons or entities who purchased or otherwise acquired publicly traded Paycom securities during a disputed class period.
Added
In January and May 2024, three derivative lawsuits were filed by Company stockholders against the Company and the members of the Board of Directors for purported breaches of fiduciary duties, aiding and abetting, unjust enrichment, and waste of corporate assets based on similar allegations as in the Consolidated Securities Class Action.
Removed
On January 12, 2024, a stockholder filed a stockholder derivative complaint in the U.S. District Court, District of Delaware, against the Company and the members of the Board of Directors, invoking the allegations set forth in the Ventrillo, Caloto, Schoenrock and Minarik lawsuits described above. The complaint alleges breaches of fiduciary duties and violations of federal law.
Added
On May 23, 2024, the three derivative actions were consolidated into one master case, styled In re Paycom Software, Inc. Stockholder Derivative Litigation, Case No. 5:24-cv-00240-F, in the Western District Court (the “Consolidated Derivative Action”). The plaintiffs seek to recover unspecified monetary damages on behalf of the Company.
Removed
The plaintiffs seek to recover unspecified monetary damages on behalf of the Company. See Chelsey Moon, Derivatively on Behalf of Nominal Defendant Paycom Software, Inc., v.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

12 edited+1 added−0 removed3 unchanged
Biggest changeDeclaration Date Record Date Payment Date Per Share Dividend Total Cash Dividends Paid (in thousands) (1) October 30, 2023 November 27, 2023 December 11, 2023 $ 0.375 $ 21,471 July 31, 2023 August 28, 2023 September 11, 2023 $ 0.375 $ 21,636 May 15, 2023 May 30, 2023 June 12, 2023 $ 0.375 $ 21,731 (1) 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 vesting of the award.
Biggest changeDeclaration Date Record Date Payment Date Per Share Dividend Total Cash Dividends Paid (in millions) (1) October 28, 2024 November 25, 2024 December 9, 2024 $ 0.375 $ 21.0 July 29, 2024 August 26, 2024 September 9, 2024 $ 0.375 $ 21.0 April 29, 2024 May 28, 2024 June 10, 2024 $ 0.375 $ 21.2 February 5, 2024 March 4, 2024 March 18, 2024 $ 0.375 $ 21.2 (1) 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 vesting of the award.
This number is based on the actual number of holders registered at such date and does not include holders whose shares are held in “street name” by brokers and other nominees. Dividends In May 2023, our Board of Directors adopted a dividend policy under which we intend to pay quarterly cash dividends on our common stock.
This number is based on the actual number of holders registered at such date and does not include holders whose shares are held in “street name” by brokers and other nominees. Dividends In May 2023, our Board of Directors adopted a dividend policy under which we intend to continue to pay quarterly cash dividends on our common stock.
The declaration, timing and amount of each quarterly cash dividend are subject to the discretion and 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 and are in compliance with applicable law.
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 and are in compliance with applicable law.
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. 38 Performance Graph Notwithstanding any statement to the contrary in any of our filings with the SEC, the following performance graph shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act or “soliciting material” under the Exchange Act and shall not be incorporated by reference into any such filings irrespective of any general incorporation language contained in such filing.
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. 37 Performance Graph Notwithstanding any statement to the contrary in any of our filings with the SEC, the following performance graph shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act or “soliciting material” under the Exchange Act and shall not be incorporated by reference into any such filings irrespective of any general incorporation language contained in such filing.
On June 7, 2022, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $550.0 million and extended the expiration 39 date to June 7, 2024.
On June 7, 2022, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $550.0 million and extended the expiration date to June 7, 2024.
The following graph compares the cumulative total stockholder return on our common stock with the cumulative total return of the S&P 500 Index and the S&P 500 Software & Services Index during the five-year period commencing on December 31, 2018 and ending on December 31, 2023.
The following graph compares the cumulative total stockholder return on our common stock with the cumulative total return of the S&P 500 Index and the S&P 500 Software & Services Index during the five-year period commencing on December 31, 2019 and ending on December 31, 2024.
Item 5. Market for Registrant’s Common Equi ty, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NYSE under the symbol “PAYC.” As of February 8, 2024, there were approximately 3,209 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equi ty, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NYSE under the symbol “PAYC.” As of February 11, 2025, there were approximately 3,200 holders of record of our common stock.
On February 5, 2024, our Board of Directors declared a quarterly cash dividend of $0.375 per share of common stock payable on March 18, 2024 to stockholders of record at the close of business on March 4, 2024.
On February 10, 2025, our Board of Directors declared a quarterly cash dividend of $0.375 per share of common stock payable on March 24, 2025 to stockholders of record at the close of business on March 10, 2025.
Purchases of Equity Securities The number of shares of common stock repurchased by us during the three months ended December 31, 2023 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 (1) October 1 - 31, 2023 (2) 27 $ 268.26 27 $ 1,012,011,000 November 1 - 30, 2023 (3) 708,197 $ 172.81 708,197 $ 889,625,000 December 1 - 31, 2023 (4) 484,127 $ 187.01 484,127 $ 799,088,000 Total 1,192,351 1,192,351 (1) Pursuant to a stock repurchase plan announced on November 20, 2018, we were authorized to purchase (in the aggregate) up to $150.0 million of our common stock in open market purchases, privately negotiated transactions or by other means.
Purchases of Equity Securities The number of shares of common stock repurchased by us during the three months ended December 31, 2024 is set forth below: Total Number of Shares Purchased Average Price Paid per Share (2) 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 (1)(2) October 1 - 31, 2024 (3) 1,087 $ 166.17 1,087 $ 1,486,052,000 November 1 - 30, 2024 (3) 30,737 $ 231.14 30,737 $ 1,478,947,000 December 1 - 31, 2024 — $ — — $ 1,478,947,000 Total 31,824 31,824 (1) Pursuant to a stock repurchase plan announced on November 20, 2018, we were authorized to purchase (in the aggregate) up to $150.0 million of our common stock in open market purchases, privately negotiated transactions or by other means.
(3) Includes 2,027 shares withheld to satisfy tax withholding for certain employees upon the vesting of equity incentive awards. (4) Includes 5,174 shares withheld to satisfy tax withholding for certain employees upon the vesting of equity incentive awards. Item 6. R eserved 40
(3) Consists of shares withheld to satisfy tax withholding obligations for certain employees upon the vesting of equity incentive awards. Item 6. R eserved 39
On August 15, 2022, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $1.1 billion and extended the expiration date to August 15, 2024. (2) Consists of shares withheld to satisfy tax withholding obligations for certain employees upon the vesting of equity incentive awards.
On August 15, 2022, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $1.1 billion and extended the 38 expiration date to August 15, 2024.
The following table summarizes dividend activity during 2023.
The following table summarizes quarterly dividends paid during 2024.
Added
On July 31, 2024, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $1.5 billion and extended the expiration date to August 15, 2026. (2) Exclusive of the impact of the one-percent excise tax under the Inflation Reduction Act of 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

95 edited+31 added−49 removed43 unchanged
Biggest changeYear Ended December 31, 2023 2022 % Change Revenues Recurring $ 1,664,976 98.3 % $ 1,351,856 98.3 % 23.2% Implementation and other 28,698 1.7 % 23,362 1.7 % 22.8% Total revenues 1,693,674 100.0 % 1,375,218 100.0 % 23.2% Cost of revenues Operating expenses 223,699 13.2 % 169,806 12.4 % 31.7% Depreciation and amortization 52,591 3.1 % 42,935 3.1 % 22.5% Total cost of revenues 276,290 16.3 % 212,741 15.5 % 29.9% Administrative expenses Sales and marketing 417,617 24.7 % 346,561 25.2 % 20.5% Research and development 198,951 11.7 % 148,343 10.8 % 34.1% General and administrative 288,137 17.0 % 239,130 17.4 % 20.5% Depreciation and amortization 61,357 3.6 % 49,764 3.6 % 23.3% Total administrative expenses 966,062 57.0 % 783,798 57.0 % 23.3% Total operating expenses 1,242,352 73.4 % 996,539 72.5 % 24.7% Operating income 451,322 26.6 % 378,679 27.5 % 19.2% Interest expense (1,927 ) -0.1 % (2,536 ) -0.2 % -24.0% Other income (expense), net 23,004 1.4 % 13,435 1.0 % 71.2% Income before income taxes 472,399 27.9 % 389,578 28.3 % 21.3% Provision for income taxes 131,611 7.8 % 108,189 7.8 % 21.6% Net income $ 340,788 20.1 % $ 281,389 20.5 % 21.1% Revenues The increase in total revenues for the year ended December 31, 2023 from the year ended December 31, 2022 was primarily the result of the addition of new clients in our target market range and productivity and efficiency gains across our sales offices, which were partially offset by a decrease in revenue generated by the sale of additional applications to our existing clients.
Biggest changeYear Ended December 31, 2024 2023 % Change Revenues Recurring and other $ 1,758.3 93.4 % $ 1,585.7 93.6 % 10.9% Interest on funds held for clients 124.9 6.6 % 108.0 6.4 % 15.7% Total revenues 1,883.2 100.0 % 1,693.7 100.0 % 11.2% Cost of revenues Operating expenses 267.4 14.2 % 223.7 13.2 % 19.5% Depreciation and amortization 67.2 3.6 % 52.6 3.1 % 27.8% Total cost of revenues 334.6 17.8 % 276.3 16.3 % 21.1% Administrative expenses Sales and marketing 434.4 23.1 % 417.6 24.7 % 4.0% Research and development 242.6 12.9 % 199.0 11.7 % 21.9% General and administrative 158.6 8.4 % 288.1 17.0 % -44.9% Depreciation and amortization 78.7 4.2 % 61.4 3.6 % 28.3% Total administrative expenses 914.3 48.6 % 966.1 57.0 % -5.4% Total operating expenses 1,248.9 66.3 % 1,242.4 73.4 % 0.5% Operating income 634.3 33.7 % 451.3 26.6 % 40.5% Interest expense (3.4 ) -0.2 % (1.9 ) -0.1 % 75.2% Other income (expense), net 18.1 1.0 % 23.0 1.4 % -21.3% Income before income taxes 649.0 34.5 % 472.4 27.9 % 37.4% Provision for income taxes 147.0 7.8 % 131.6 7.8 % 11.7% Net income $ 502.0 26.7 % $ 340.8 20.1 % 47.3% Revenues Recurring and Other Revenues The increase in recurring and other revenues for the year ended December 31, 2024 from the year ended December 31, 2023 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.
Our cash flows from financing activities are also 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 settlements and 49 the Company paying withholding taxes on behalf of certain employees.
Our cash flows from financing activities are also 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 settlements and the Company paying withholding taxes on behalf of certain employees.
When we calculate the number of clients based on parent company grouping at period end, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers (or, in certain circumstances, separate client codes), which often combines client accounts that are affiliated with the same parent organization.
When we calculate the number of clients based on parent company grouping at period end, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers (or, in certain circumstances, separate client 41 codes), which often combines client accounts that are affiliated with the same parent organization.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.” 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.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.” 46 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.
We recognize a valuation allowance to reduce deferred tax assets to the net amount we believe is more likely than not to be realized. 45 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 year-over-year changes with respect to each line item.
We recognize a valuation allowance to reduce deferred tax assets to the net amount we believe is more likely than not to be realized. 43 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 year-over-year changes with respect to each line item.
The interest earned on these funds is included in recurring revenues in the consolidated statements of comprehensive income, as the collection, holding, and remittance of these funds are essential components of providing these 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.
Research and development expenses consist primarily of employee-related expenses (including 44 non-cash stock-based compensation expenses) for our development staff, net of capitalized software costs for internally developed software.
Research and development expenses consist primarily of employee-related expenses (including non-cash stock-based compensation expenses) for our development staff, net of capitalized software costs for internally developed software.
All amounts presented in tables, other than per share amounts, are in thousands unless otherwise noted. Overview We are a leading provider of a comprehensive, cloud-based human capital management 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.
All amounts presented in tables, other than per share amounts, are in millions unless otherwise noted. Overview We are a leading provider of a comprehensive, cloud-based human capital management 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.
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, money market funds and certificates of deposit.
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.
Each outside sales team typically consists of a sales manager and approximately eight sales professionals. Certain larger metropolitan areas can support more than one sales team. We believe the number of sales teams is an indicator of potential revenues for future periods. • Annual Revenue Retention Rate .
Each outside sales team typically consists of a sales manager and approximately seven sales professionals. Certain larger metropolitan areas can support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods. • Annual Revenue Retention Rate .
On July 29, 2022 , we entered into a new credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as a lender, swingline lender and issuing bank, the lenders from time to time party thereto (collectively with JPMorgan Chase Bank, N.A., the “Lenders”), and JPMorgan Chase Bank, N.A., as the administrative agent.
On July 29, 2022, we entered into a credit agreement (as amended from time to time, the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as a lender, swingline lender and issuing bank, the lenders from time to time party thereto (collectively with JPMorgan Chase Bank, N.A., the “Lenders”), and JPMorgan Chase Bank, N.A., as the administrative agent.
Interest Expense Interest expense includes interest on our long-term debt and settlements related to an interest rate swap prior to the termination of the interest rate swap agreement on August 24, 2022. Prior to the repayment of our long-term debt in November 2023, we capitalized interest costs incurred for indebtedness related to construction in progress. See “Note 6.
Interest Expense Interest expense includes interest on our long-term debt and settlements related to an interest rate swap prior to the termination of the interest rate swap agreement on August 24, 2022. Prior to the repayment of our long-term debt in November 2023, we capitalized interest costs incurred for indebtedness related to construction in progress.
When applicable, our future operating lease obligations include payments due during any renewal period provided for in the lease where the lease imposes a penalty for failure to renew. Additional details on our leases, including the related future cash outflows, are included within “Note 5. Leases” in the notes to our consolidated financial statements included elsewhere within this Form 10-K.
When applicable, our future operating lease obligations include payments due during any renewal period provided for in the lease where the lease imposes a penalty for failure to renew. Additional details on our leases, including the related future cash outflows, are included within Note 5 “Leases” in the notes to our consolidated financial statements included elsewhere within this Form 10-K.
Cash used in operating activities primarily consisted of personnel-related expenditures to support the growth and infrastructure of our business. These payments included costs of operations, advertising and other sales and marketing efforts, IT infrastructure development, product research and development and security and administrative costs.
Cash used in operating activities primarily consisted of personnel-related expenditures to support the growth and infrastructure of our business. These payments included costs of operations, advertising and other sales and marketing efforts, information technology infrastructure development, product research and development and security and administrative costs.
Our payment of the taxes on behalf of those employees resulted in an aggregate cash expenditure of $13.9 million and, as such, we generally subtract the amounts attributable to such withheld shares from the aggregate amount available for future purchases under our stock repurchase plan. Dividends on Common Stock. For a discussion of our dividends, see “Item 5.
Our payment of the taxes on behalf of those employees resulted in an aggregate cash expenditure of $21.7 million and, as such, we generally subtract the amounts attributable to such withheld shares from the aggregate amount available for future purchases under our stock repurchase plan. Dividends on Common Stock. For a discussion of our dividends, see “Item 5.
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% for the years ended December 31, 2023 and 2022.
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 23% and 28% for the years ended December 31, 2024 and 2023.
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, such as our international expansion, directly impacts the timing and extent of these capitalized expenditures and can affect the amount of research and development expenses in such period.
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 contract period for substantially all contracts associated with these revenues is one month due to the fact that both we and the client have the unilateral right to terminate a wholly unperformed contract without compensating the other party by providing 30 days’ notice of termination.
The contract period for the majority of contracts associated with these revenues is one month due to the fact that both we and the client typically have the unilateral right to terminate a wholly unperformed contract without compensating the other party by providing 30 days’ notice of termination.
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.
Funds held for clients are amounts collected 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.
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 talent acquisition, time and labor management, payroll, talent management and human resources management applications.
Our solution requires virtually no customization and is based on a core system of record maintained in a single database for all human capital management (“HCM”) functions, including payroll, talent acquisition, talent management, human resources (“HR”) management and time and labor management applications.
We typically invest funds held for clients in money market funds, demand deposit accounts, certificates of deposit and commercial paper until they are paid to the applicable tax or regulatory agencies or to client employees.
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 part of our payroll and payroll tax filing services, we collect funds from our clients for employment taxes, which we remit to the appropriate tax agencies.
As part of our payroll and payroll tax filing services, we collect funds from our clients for employment taxes, which we remit to the appropriate tax agencies and accounts designated by our clients.
Furthermore, with the launch of our Global HCM solution and expansion of payroll services into certain international markets, such as Canada and Mexico, we expect that our ability to serve organizations with international employees makes our solution more attractive to larger companies, many of which have a global presence.
With the launch of our Global HCM solution and expansion of payroll services into certain international markets, we expect that our ability to serve organizations with international employees makes our solution more attractive to larger companies, many of which have a global presence.
We now calculate annual revenue retention rate for any 12-month period (a “Measurement Period”) as follows: Total Revenues – Interest Earned on Funds Held for Clients – TTM Revenue Attrition Total Revenues – Interest Earned on Funds Held for Clients The trailing 12-month value of revenue from clients lost during the Measurement Period (“TTM Revenue Attrition”) is equal to the actual recurring fees paid by such lost clients during the 12 months preceding the respective dates on which they last processed payroll with us.
We calculate annual revenue retention rate for any 12-month period (a “Measurement Period”) as follows: Recurring and Other Revenues – TTM Revenue Attrition Recurring and Other Revenues The trailing 12-month value of revenue from clients lost during the Measurement Period (“TTM Revenue Attrition”) is equal to the actual recurring fees paid by such lost clients during the 12 months preceding the respective dates on which they last processed payroll with us.
Research and development During the year ended December 31, 2023, research and development expenses increased $50.6 million from the prior year primarily due to an increase in employee-related expenses.
Research and development During the year ended December 31, 2024, research and development expenses increased $43.6 million from the prior year primarily due to an increase in employee-related expenses.
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, and therefore such balance changes from period to period in accordance with the timing of each payroll cycle.
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.
Sales and marketing expenses consist primarily of employee-related expenses for our direct sales and marketing staff (such as the amortization of commissions and bonuses and non-cash stock-based compensation expenses), marketing expenses and other related costs.
Administrative Expenses Administrative expenses consist of sales and marketing expenses, research and development expenses, general and administrative expenses and depreciation and amortization expenses. Sales and marketing expenses consist primarily of employee-related expenses for our direct sales and marketing staff (such as the amortization of commissions and bonuses and non-cash stock-based compensation expenses), marketing expenses and other related costs.
Specifically, our revenue growth and geographic expansion drive increases in our employee headcount, which in turn precipitates increases in (i) salaries and benefits, (ii) stock-based compensation expense and (iii) facility costs related to the expansion of our corporate headquarters and operations facilities and additional sales office leases.
Historically, our revenue growth and geographic expansion have driven increases in our employee headcount, which in turn precipitated increases in (i) salaries and benefits, (ii) stock-based compensation expense and (iii) facility costs related to the expansion of our corporate headquarters and operations facilities and additional sales office leases.
We track the number of our clients based on parent company grouping to provide an alternate measure of the size of our business and clients. • Sales Teams . We monitor our sales professionals by the number of sales teams at period end. CRRs and emerging markets representatives are counted as one sales team.
We track the number of our clients based on parent company grouping to provide an alternate measure of the size of our business and clients. • Sales Teams . We monitor our sales professionals by the number of sales teams at period end. For the purposes of this metric, CRRs and emerging markets representatives are considered one sales team.
For additional information regarding our naming rights agreement, leases, and our commitments and contingencies, see “Note 4. Goodwill and Intangible Assets, Net”, “Note 5. Leases” and “Note 13. Commitments and Contingencies”. We plan to continue to lease additional office space to support our growth. In addition, many of our existing lease agreements provide us with the option to renew.
For additional information regarding our naming rights agreement, leases, and our commitments and contingencies, see Note 4 “Goodwill and Intangible Assets, Net”, Note 5 “Leases” and Note 13” Commitments and Contingencies”. We plan to continue to lease additional office space to support our growth. In addition, many of our existing lease agreements provide us with the option to renew.
We are required to pay a quarterly commitment fee on the daily amount of the undrawn portion of the revolving commitments under the Revolving Credit Facility and, prior to its termination, a quarterly ticking fee on the daily amount of the undrawn portion of the Term Loan Facility, in each case at a rate per annum of (i) 0.20% if the Company’s consolidated leverage ratio is less than 1.0 to 1.0; (ii) 0.225% if the Company’s consolidated leverage ratio is greater than or equal to 1.0 to 1.0 but less than 2.0 to 1.0; (iii) 0.25% if the Company’s consolidated leverage ratio is greater than or equal to 2.0 to 1.0 but less than 3.0 to 1.0; or (iv) 0.275% if the Company’s consolidated leverage ratio is greater than or equal to 3.0 to 1.0.
We are required to pay a quarterly commitment fee on the daily amount of the undrawn portion of the revolving commitments under the Revolving Credit Facility at a rate per annum of (i) 0.20% if the Company’s consolidated leverage ratio is less than 1.0 to 1.0; (ii) 0.225% if the Company’s consolidated leverage ratio is greater than or equal to 1.0 to 1.0 but less than 2.0 to 1.0; (iii) 0.25% if the Company’s consolidated leverage ratio is greater than or equal to 2.0 to 1.0 but less than 3.0 to 1.0; or (iv) 0.275% if the Company’s consolidated leverage ratio is greater than or equal to 3.0 to 1.0.
Additionally, we maintain a $1.0 billion senior secured revolving credit facility (the “Revolving Credit Facility”), which can be accessed as needed to supplement our operating cash flow and cash balances. As of December 31, 2023, we did not have any outstanding borrowings under the Revolving Credit Facility.
Additionally, we maintain a $1.0 billion senior secured revolving credit facility (the “Revolving Credit Facility”), which can be accessed as needed to supplement our operating cash flow and cash balances. As of December 31, 2024, we did not have any outstanding borrowings under the Revolving Credit Facility. We fund our operations primarily from cash flows generated from operations.
While we continue to serve a diversified client base ranging in size from one employee to 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.
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.
Recurring revenues are recognized in the period services are rendered. Recurring revenues include revenues relating to the annual processing of payroll tax filing forms and ACA form filing requirements and revenues from processing unscheduled payroll runs (such as bonuses) for our clients.
Recurring revenues include revenues relating to the annual processing of payroll tax filing forms and ACA form filing requirements and revenues from processing unscheduled payroll runs (such as bonuses) for our clients.
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. The implementation of the Affordable Care Act (the “ACA”) is an example of legislation that has created demand in the HCM industry.
The HCM industry historically has been driven, in part, by legislation and regulatory action, including COBRA, the Affordable Care Act (“ACA”), changes to the minimum wage laws or overtime rules, and legislation from federal, state, or municipal taxation authorities.
GAAP and non-GAAP metrics discussed elsewhere in this Form 10-K, we also monitor the following metrics to evaluate our business, measure our performance and identify trends affecting our business: Year Ended December 31, 2023 2022 2021 Key performance indicators: Clients 36,820 36,561 33,875 Clients (based on parent company grouping) 19,481 19,081 17,703 Sales teams 55 55 51 Annual revenue retention rate (1) 90 % 91 % 94 % (1) As described below, during 2023, we modified the method by which we calculate annual revenue retention rate.
GAAP and non-GAAP metrics discussed elsewhere in this Form 10-K, we also monitor the following metrics to evaluate our business, measure our performance and identify trends affecting our business: Year Ended December 31, 2024 2023 2022 Key performance indicators: Clients 37,543 36,820 36,561 Clients (based on parent company grouping) 19,422 19,481 19,081 Sales teams 58 55 55 Annual revenue retention rate (1) 90 % 90 % 91 % (1) During 2023, we modified the method by which we calculate annual revenue retention rate.
Additionally, as a result of the termination of the Term Loan Facility (as defined below), we incurred a loss on the extinguishment of debt of $1.2 million in the year ended December 31, 2023, which consisted of the write-off of unamortized debt issuance costs. See “Note 6. Long-Term Debt” for additional information.
Additionally, as a result of the termination of the Term Loan Facility (as defined in Note 6 “Long-Term Debt”), we incurred a loss on the extinguishment of debt of $1.2 million in the year ended December 31, 2023, which consisted of the write-off of unamortized debt issuance costs.
Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 16, 2023, for a presentation of the amounts for the year ended December 31, 2021.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 15, 2024 , for a presentation of the amounts for the year ended December 31, 2022.
Stock Repurchase Plan and Withholding Shares to Cover Taxes. In May 2016, our Board of Directors authorized a stock repurchase plan allowing for the repurchase of shares of our common stock in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws, including Rule 10b5-1 programs.
In August 2022, our Board of Directors authorized a stock repurchase plan allowing for the repurchase up to $1.1 billion of shares of our common stock in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws, including Rule 10b5-1 programs.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 16, 2023 , for a discussion of results for the year ended December 31, 2021, including a discussion of the changes in our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on February 15, 2024 , for a discussion of results for the year ended December 31, 2022, including a discussion of the changes in our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
We believe our ability to continue to develop new applications and to improve existing applications will enable us to increase revenues in the future, and the number of our new applications adopted by our clients has been a significant factor in our revenue growth. We plan to open additional sales offices in the future to further expand our market presence.
We believe our ability to continue to develop new applications and to improve existing applications will enable us to increase revenues in the future, and the number of our new applications adopted by our 40 clients has been a significant factor in our revenue growth.
The average daily balance of funds held for clients was $2.2 million and $2.0 million the years ended December 31, 2023 and 2022, respectively.
The average daily balance of funds held for clients was $2.4 billion and $2.2 billion the years ended December 31, 2024 and 2023, respectively.
Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods. During the year ended December 31, 2023, we modified the method by which we calculate annual revenue retention rate.
Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods.
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. The current stock repurchase plan will expire on August 15, 2024.
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.
Amounts for 2022 and 2021 have been recast to reflect the new methodology. • Clients. When we calculate the number of clients at period end, we treat client accounts with separate taxpayer identification numbers (or, in certain circumstances, separate client codes) as separate clients, which often separates client accounts that are affiliated with the same parent organization.
The 2022 annual revenue retention rate has been recast to conform to the methodology described below. • Clients. When we calculate the number of clients at period end, we treat client accounts with separate taxpayer identification numbers (or, in certain circumstances, separate client codes) as separate clients, which often separates client accounts that are affiliated with the same parent organization.
During the year ended December 31, 2023, we repurchased an aggregate of 1,495,752 shares of our common stock at an average cost of $200.93 per share, including 51,119 shares withheld to satisfy tax withholding obligations for certain employees upon the vesting of equity incentive awards.
During the year ended December 31, 2024, we repurchased an aggregate of 924,493 shares of our common stock at an average cost of $156.29 per share, including 112,288 shares withheld to satisfy tax withholding obligations for certain employees upon the vesting of equity incentive awards.
Recurring revenues are recognized at the conclusion of processing of each client’s payroll period, when each respective payroll client is billed. Collectability is reasonably assured as the fees are generally collected through an automated clearing house as part of the client’s payroll cycle or through direct wire transfer, which minimizes the default risk.
Collectability is reasonably assured as the fees are generally collected through an automated clearing house as part of the client’s payroll cycle or through direct wire transfer, which minimizes the default risk.
Recurring Revenues Recurring revenues are derived primarily from our talent acquisition, time and labor management, payroll, talent management and HR management applications as well as fees charged for form filings and delivery of client payroll checks and reports.
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.
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. 52 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.
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.
However, the nonrefundable upfront 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 each 30-day contract period.
Although these revenues are related to our recurring revenues, they represent distinct performance obligations. The nonrefundable upfront 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.
These costs include employee-related expenses (including non-cash stock-based compensation expenses) and other expenses related to client support, bank charges for processing ACH transactions, certain implementation expenses, delivery charges and paper costs. They also include our cost for time clocks sold and ongoing technology and support costs related to our systems.
Cost of Revenues Cost of revenues consists of expenses related to hosting and supporting our applications, hardware costs, systems support and technology and depreciation and amortization. These costs include employee-related expenses (including non-cash stock-based compensation expenses) and other expenses related to client support, bank charges for processing ACH transactions, certain implementation expenses, delivery charges and paper costs.
Our continued growth depends on attracting new clients through further penetration of our existing markets and geographic expansion into new markets, targeting a high degree of client employee usage across our solution, and introducing new applications to our existing client base.
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.
HR management includes our Manager on-the-Go, Direct Data Exchange, Ask Here, Documents and Checklists, Government and Compliance, Benefits Administration/Benefits to Carrier, Benefit Enrollment Service, COBRA Administration, Personnel Action Forms and Performance Discussion Forms, Surveys, Enhanced ACA and Clue applications.
HR management includes our Manager on-the-Go, Direct Data Exchange, Ask Here, Documents and Checklists, Government and Compliance, Benefits Administration, COBRA Administration, Personnel Action Forms and Performance Discussion Forms, Paycom Surveys, Enhanced ACA and Clue applications. Time and labor management includes Time and Attendance, Scheduling, Time-Off Requests featuring GONE, and Labor Allocation applications.
Recent Accounting Pronouncements Refer to Note 2 in the notes to the consolidated financial statements for a full description of recent accounting pronouncements. 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.
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.
Payroll includes Beti, Payroll and Tax Management, Vault, Everyday, Paycom Pay, Client Action Center, Expense Management, Mileage Tracker/FAVR, Garnishment Administration and GL Concierge applications. Talent management includes our Employee Self-Service, Compensation Budgeting, Performance Management, Position Management, My Analytics and Paycom Learning applications.
Payroll includes Beti, Payroll and Payroll Tax Management, Vault, Everyday, Paycom Pay, Client Action Center, Expense Management, Garnishment Administration and GL Concierge applications. Talent acquisition includes our Applicant Tracking, Enhanced Background Checks, Onboarding, E-Verify and Tax Credits applications. Talent management includes our Employee Self-Service, Compensation Budgeting, Performance Management, Position Management and Paycom Learning applications.
Compared to the year ended December 31, 2022, our operating cash flows for the year ended December 31, 2023 were positively impacted by the growth of our business.
Compared to the year ended December 31, 2023, our operating cash flows for the year ended December 31, 2024 were positively impacted by changes in working capital.
Financing Activities Cash used in financing activities for the year ended December 31, 2023 increased from the prior year primarily due to the impact of a $240.8 million change related to the client funds obligation, which is due to the timing of receipts from our clients and payments made to our clients’ employees and applicable taxing authorities on their behalf, a $192.0 million increase in common stock repurchases, the payment of $64.8 million in cash dividends, a $29.0 million decrease in proceeds from the issuance of debt, and a $8.8 million increase in withholding taxes paid related to net share settlements.
Financing Activities Cash provided by financing activities for the year ended December 31, 2024 increased from the prior year due to the impact of a $1,217.2 million change related to the client funds obligation, which is due to the timing of receipts from our clients and payments 47 made to our clients’ employees and applicable taxing authorities on their behalf, a $163.8 million decrease in repurchases of common stock, a $29.0 million decrease in payments on long-term debt, and a $0.7 million decrease in payment of debt issuance costs.
Nonetheless, because Beti is designed to eliminate payroll errors that lead to billable corrections and 41 unscheduled payroll runs, we have experienced and expect to continue to experience a reduction in these activities that would otherwise generate additional revenue for us. In order to increase revenues and continue to improve our operating results, we must also attract new clients.
Nonetheless, because Beti is designed to eliminate payroll errors that lead to billable corrections and unscheduled payroll runs, we have experienced a reduction in these activities that historically would otherwise generate additional revenue for us.
Long-Term Debt” for discussion of the repayment of our debt.
See Note 6 “Long-Term Debt” for discussion of the repayment of our debt.
Substantially all of our revenues are revenues from contracts with clients. Sales and other applicable taxes are excluded from revenues. Recurring revenues are derived primarily from our talent acquisition, time and labor management, payroll, talent management and HR management applications as well as fees charged for form filings and delivery of client payroll checks and reports.
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.
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. We generate revenues 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 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.
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, stepping down to 3.25 to 1.0 as of December 31, 2024 and 3.0 to 1.0 as of December 31, 2025 and thereafter. 48 On July 29, 2022, we borrowed $29.0 million under the Revolving Credit Facility to repay the outstanding indebtedness under our prior credit facility, along with accrued interest, expenses and fees.
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 3.25 to 1.0, stepping down to 3.0 to 1.0 as of December 31, 2025 and thereafter.
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.
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. 48 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 fees generally range from 10% to 30% of the annualized value of the transaction. Implementation revenues are recognized as deferred revenue and amortized into income over the life of the client, which is estimated to be ten years, and other revenues are recognized upon shipment of time clocks.
Non-refundable implementation fees are charged to new clients at contract inception. These fees generally range from 10% to 30% of the annualized value of the transaction. Implementation fees are deferred and recognized as revenue over the life of the client, which is estimated to be 10 years.
We believe larger employers represent a substantial opportunity to increase our revenues per client, with limited incremental cost to us. 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.
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.
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: Year Ended December 31, 2023 2022 % Change Operating expenses $ 10,613 $ 4,671 127% Sales and marketing 23,870 18,659 28% Research and development 22,273 11,063 101% General and administrative 73,050 60,505 21% Total non-cash stock-based compensation expense $ 129,806 $ 94,898 37% Depreciation and Amortization During the year ended December 31, 2023, depreciation and amortization expense increased from the prior year primarily due to the development of additional technology and purchases of other related fixed assets.
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: Year Ended December 31, 2024 2023 % Change Operating expenses $ 13.5 $ 10.6 27% Sales and marketing 19.0 23.9 -21% Research and development 26.3 22.3 18% General and administrative (81.7 ) 73.0 -212% Total non-cash stock-based compensation expense $ (22.9 ) $ 129.8 -118% Depreciation and Amortization During the year ended December 31, 2024, depreciation and amortization expense increased from the prior year period primarily due to the development of additional technology, purchases of other related fixed assets, and the impact of our corporate headquarters expansion that was placed into service in April 2024.
The following table summarizes the consolidated statements of cash flows for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 % Change Net cash provided by (used in): Operating activities $ 485,037 $ 365,103 33% Investing activities (196,712 ) (23,286 ) 745% Financing activities (274,660 ) 254,587 -208% Change in cash, cash equivalents, restricted cash and restricted cash equivalents $ 13,665 $ 596,404 -98% Operating Activities Cash provided by operating activities for the year ended December 31, 2023 primarily consisted of payments received from our clients and interest earned on funds held for clients.
The following table summarizes the consolidated statements of cash flows for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 % Change Net cash provided by (used in): Operating activities $ 533.9 $ 485.0 10% Investing activities (22.2 ) (196.7 ) -89% Financing activities 1,108.3 (274.6 ) -504% Change in cash, cash equivalents, restricted cash and restricted cash equivalents $ 1,620.0 $ 13.7 11725% Operating Activities Cash provided by operating activities for the year ended December 31, 2024 primarily consisted of payments received from our clients and interest earned on funds held for clients.
Additionally, rising interest rates and a higher average funds held for clients balance during year ended December 31, 2023 as compared to the year ended December 31, 2022, resulted in increased interest earned on funds held for clients, which had a positive impact on recurring revenue.
Interest on Funds Held For Clients Higher interest rates and an increase in average funds held for client balances, resulted in increased interest earned on funds held for clients for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
The increase in cash used in financing activities was partially offset by a $0.3 million decrease in payments on long-term debt and a $5.8 million decrease in payment of debt issuance costs. Contractual Obligations Our principal commitments primarily consist of leases for office space and the naming rights agreement.
The increase in cash provided by financing activities was partially offset by a $20.0 million increase in dividends paid and a $7.8 million increase in withholding taxes paid related to net share settlements. Contractual Obligations Our principal commitments primarily consist of leases for office space and the naming rights agreement.
We expect our revenues to increase as we introduce new applications, expand our client base and renew and expand relationships with existing clients. As a percentage of total revenues, we expect our mix of recurring revenues, and implementation and other revenues to remain relatively constant.
Components of Results of Operations Sources of Revenues Revenues consist of recurring and other revenues, and interest on funds held for clients. We expect our revenues to increase as we introduce new applications, expand our client base and renew and expand relationships with existing clients.
Year Ended December 31, 2023 2022 Net income to adjusted EBITDA: Net income $ 340,788 $ 281,389 Interest expense 1,927 2,536 Provision for income taxes 131,611 108,189 Depreciation and amortization 113,948 92,699 EBITDA 588,274 484,813 Non-cash stock-based compensation expense 129,806 94,898 Loss on extinguishment of debt 1,222 — Adjusted EBITDA $ 719,302 $ 579,711 Year Ended December 31, 2023 2022 Net income to non-GAAP net income: Net income $ 340,788 $ 281,389 Non-cash stock-based compensation expense 129,806 94,898 Loss on extinguishment of debt 1,222 — Income tax effect on non-GAAP adjustments (22,331 ) (19,053 ) Non-GAAP net income $ 449,485 $ 357,234 Weighted average shares outstanding: Basic 57,707 57,928 Diluted 57,974 58,175 Earnings per share, basic $ 5.91 $ 4.86 Earnings per share, diluted $ 5.88 $ 4.84 Non-GAAP net income per share, basic $ 7.79 $ 6.17 Non-GAAP net income per share, diluted $ 7.75 $ 6.14 Year Ended December 31, 2023 2022 Earnings per share to non-GAAP net income per share, basic: Earnings per share, basic $ 5.91 $ 4.86 Non-cash stock-based compensation expense 2.25 1.64 Loss on extinguishment of debt 0.02 — Income tax effect on non-GAAP adjustments (0.39 ) (0.33 ) Non-GAAP net income per share, basic $ 7.79 $ 6.17 Year Ended December 31, 2023 2022 Earnings per share to non-GAAP net income per share, diluted: Earnings per share, diluted $ 5.88 $ 4.84 Non-cash stock-based compensation expense 2.24 1.63 Loss on extinguishment of debt 0.02 — Income tax effect on non-GAAP adjustments (0.39 ) (0.33 ) Non-GAAP net income per share, diluted $ 7.75 $ 6.14 53
Year Ended December 31, 2024 2023 Net income to adjusted EBITDA: Net income $ 502.0 $ 340.8 Interest expense 3.4 1.9 Provision for income taxes 147.0 131.6 Depreciation and amortization 145.9 114.0 EBITDA 798.3 588.3 Non-cash stock-based compensation expense (22.9 ) 129.8 Loss on extinguishment of debt — 1.2 Adjusted EBITDA $ 775.4 $ 719.3 50 Year Ended December 31, 2024 2023 Net income to non-GAAP net income: Net income $ 502.0 $ 340.8 Non-cash stock-based compensation expense (22.9 ) 129.8 Loss on extinguishment of debt — 1.2 Income tax effect on non-GAAP adjustments (17.1 ) (22.3 ) Non-GAAP net income $ 462.0 $ 449.5 Weighted average shares outstanding: Basic 56.2 57.7 Diluted 56.3 58.0 Earnings per share, basic $ 8.93 $ 5.91 Earnings per share, diluted $ 8.92 $ 5.88 Non-GAAP net income per share, basic $ 8.22 $ 7.79 Non-GAAP net income per share, diluted $ 8.21 $ 7.75 Year Ended December 31, 2024 2023 Earnings per share to non-GAAP net income per share, basic: Earnings per share, basic $ 8.93 $ 5.91 Non-cash stock-based compensation expense (0.41 ) 2.25 Loss on extinguishment of debt — 0.02 Income tax effect on non-GAAP adjustments (0.30 ) (0.39 ) Non-GAAP net income per share, basic $ 8.22 $ 7.79 Year Ended December 31, 2024 2023 Earnings per share to non-GAAP net income per share, diluted: Earnings per share, diluted $ 8.92 $ 5.88 Non-cash stock-based compensation expense (0.41 ) 2.24 Loss on extinguishment of debt — 0.02 Income tax effect on non-GAAP adjustments (0.30 ) (0.39 ) Non-GAAP net income per share, diluted $ 8.21 $ 7.75
We have historically funded our operations from cash flows generated from operations, cash from the sale of equity securities and debt financing. We are funding our current building expansion projects from available cash. Further, to date, all cash dividends and purchases under our stock repurchase plan have been funded from available cash.
We are funding our ongoing capital expenditures from available cash. Further, to date, all cash dividends and purchases under our stock repurchase plan have been funded from available cash.
Expenses Cost of Revenues During the year ended December 31, 2023, operating expenses increased from the prior year by $53.9 million primarily due to a $44.2 million increase in employee-related expenses attributable to growth in the number of operating personnel, a $5.0 million increase in shipping and supplies fees, and a $2.5 million increase in automated clearing house fees in connection with the increase in revenues.
Expenses Cost of Revenues During the year ended December 31, 2024, operating expenses increased from the prior year by $43.7 million, primarily due to a $29.2 million increase in employee-related expenses, an $8.3 million increase in banking related fees, and a $6.1 million increase in shipping and supplies fees.
The amount of depreciation and amortization of property and equipment allocated to cost of revenues is determined based upon an estimate of assets used to support our operations. Administrative Expenses Administrative expenses consist of sales and marketing expenses, research and development expenses, general and administrative expenses and depreciation and amortization expenses.
They also include our cost for time clocks sold and ongoing technology and support costs related to our systems. The amount of depreciation and amortization of property and equipment allocated to cost of revenues is determined based upon an estimate of assets used to support our operations.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. 50 Revenue Recognition 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.
Revenue Recognition 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.
Interest Expense The decrease in interest expense for the year ended December 31, 2023 was due to the timing and progress of construction of the expansion of our corporate headquarters, which resulted in a higher capitalization rate of interest in 2023.
Interest Expense The increase in interest expense for the year ended December 31, 2024 primarily due to the timing of our expansion project at our corporate headquarters, which resulted in a higher capitalization rate of interest in 2023. 45 Other Income (Expense), net The decrease in other income (expense), net for the year ended December 31, 2024, as compared to the prior year, was primarily attributable to a decrease in interest earned on our corporate funds primarily due to lower operating cash balances.
Determining these assumptions is subjective and complex, and therefore, a change in the assumptions utilized could impact the calculation of the fair value of our market-based stock awards and performance-based restricted stock units and the associated compensation expense. Refer to Note 12 in the notes to our consolidated financial statements for further information regarding our stock-based compensation awards.
Determining these assumptions is subjective and complex, and therefore, a change in the assumptions utilized could impact the calculation of the fair value of our awards that vest based on achieving certain market conditions and the associated stock-based compensation cost.
The market for HCM software is highly competitive, rapidly evolving and fragmented, and we expect competition to continue to intensify as new market entrants and disruptive technologies emerge and increasingly aggressive pricing and client retention strategies persist. Historically, our target client range has been organizations with 50 to 10,000 employees.
We plan to open additional sales offices in the future to further expand 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.
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.
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 HR will continue to drive companies to turn to outsourced providers for help with their HCM needs.
All loans under the Credit Agreement will mature on July 29, 2027 (the “Scheduled Maturity Date”).
The Credit Agreement provides for the Revolving Credit Facility in the aggregate principal amount of up to $1.0 billion. All loans under the Credit Agreement will mature on July 29, 2027 (the “Scheduled Maturity Date”).

… 95 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+0 added−1 removed1 unchanged
Biggest changeOur available-for-sale securities consisted of U.S. treasury securities with an original maturity greater than one year and certificates of deposit. The primary objectives of our investing activities are capital preservation, meeting our liquidity needs and, with respect to investing client funds, generating interest income while maintaining the safety of principal.
Biggest changeOur available-for-sale securities consisted of a U.S. treasury security with an original maturity of two years. The primary objectives of our investing activities are capital preservation, meeting our liquidity needs and, with respect to investing client funds, generating interest income while maintaining the safety of principal. We do not enter into investments for trading or speculative purposes.
Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates, or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates.
Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates, or we 51 may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates.
An immediate decrease in interest rates of 100 basis points would have resulted in a $0.5 million increase in the aggregate market value of our fixed rate securities as of December 31, 2023. These estimates are based on a sensitivity model that measures market value changes when changes in interest rates occur.
An immediate decrease in interest rates of 100 basis points would have resulted in a $0.5 million increase in the aggregate market value of our fixed rate securities as of December 31, 2024. These estimates are based on a sensitivity model that measures market value changes when changes in interest rates occur. 52
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 available-for-sale securities totaling $198.6 million included within funds held for clients on the consolidated balance sheets as of December 31, 2023.
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 available-for-sale securities totaling $24.7 million included within funds held for clients on the consolidated balance sheets as of December 31, 2024.
Item 7A. Quantitative and Qualitat ive Disclosures about Market Risk Interest rate sensitivity As of December 31, 2023, we had corporate cash and cash equivalents totaling $294.0 million and funds held for clients cash and cash equivalents totaling $2.3 billion. These amounts are invested primarily in demand deposit accounts and money market funds.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk Interest Rate Sensitivity As of December 31, 2024, we had corporate cash and cash equivalents totaling $402.0 million and funds held for clients cash and cash equivalents totaling $3.7 billion. These amounts are invested primarily in demand deposit accounts and money market funds.
We do not enter into investments for trading or speculative purposes. Our investments are subject to market risk due to changes in interest rates. The market value of fixed rate securities may be adversely affected due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall.
Our investments are subject to market risk due to changes in interest rates. The market value of fixed rate securities may be adversely affected due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall.
There are no incremental costs of revenue associated with changes in interest earned on funds held for clients. An immediate increase in interest rates of 100 basis points would have resulted in a $0.5 million reduction in the aggregate market value of our fixed rate securities as of December 31, 2023.
An immediate increase in interest rates of 100 basis points would have resulted in a $0.5 million reduction in the aggregate market value of our fixed rate securities as of December 31, 2024.
As of December 31, 2023, a hypothetical increase or decrease in interest rates of 100 basis points would result in an approximately $19.2 million increase or decrease, respectively, in interest earned on funds held for clients over the ensuing 12-month period. Interest earned on funds held for clients is included in recurring revenues in the consolidated statements of comprehensive income.
As of December 31, 2024, a hypothetical increase or decrease in interest rates of 100 basis points would result in an approximately $23.9 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.
Removed
As of December 31, 2023, we did not have any indebtedness outstanding under the Revolving Credit Facility. As of December 31, 2023, a hypothetical 100 basis point change in the applicable reference rates would not result in a change our interest expense over the ensuing 12-month period. Please refer to “Note 6. Long-Term Debt” for additional information. 54

Other PAYC 10-K year-over-year comparisons