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| 8-K - FORM 8-K - Paycom Software, Inc. | d178606d8k.htm |
Exhibit 99.1
Paycom Software, Inc. Reports Record First Quarter 2016 Financial Results
Record First Quarter Revenue of $90.1 million, up 63% from comparable prior year period
Record First Quarter Adjusted EBITDA of $33 million, up 142% from comparable prior year period
Record First Quarter GAAP Net Income of $18.6 million, or $0.31 per diluted share
Record First Quarter non-GAAP Net Income of $19.4 million, or $0.33 per diluted share
OKLAHOMA CITY –(BUSINESS WIRE)– Paycom Software, Inc. (“Paycom”) (NYSE: PAYC), a leading provider of comprehensive, cloud-based human capital management software, today announced its financial results for the quarter ended March 31, 2016.
“We kicked off the year with our best ever first quarter performance” said Chad Richison, Paycom founder and CEO. “Clients across a diverse range of industries continue to see the benefits of Paycom. Our strong results underscore the growing appeal of our cloud-based solution in the marketplace. In the first quarter we experienced continued robust demand for our software, as well as outperformance in our tax form filing business which contributed to drive our record results.”
Financial Highlights for the First Quarter of 2016
Total Revenue of $90.1 million represented a 63% increase compared to total revenue of $55.2 million in the same period last year. Recurring revenues of $88.9 million increased 64% from the comparable prior year period, and constituted 99% of total revenues.
GAAP Net Income was $18.6 million, or $0.31 per diluted share, compared to GAAP net income of $6.0 million, or $0.11 per diluted share, in the same period last year.
Adjusted EBITDA1 was $33.0 million, compared to $13.6 million in the same period last year.
Non-GAAP Net Income1 was $19.4 million, or $0.33 per diluted share, compared to $6.7 million, or $0.12 per diluted share, in the same period last year.
Cash and Cash Equivalents were $72.1 million as of March 31, 2016.
Total Debt was $25.6 million as of March 31, 2016. This debt consisted solely of debt on our corporate headquarters.
1 Adjusted EBITDA and non-GAAP net income are non-GAAP financial measures. Please see the discussion below under the heading “Use of Non-GAAP Financial Information” and the reconciliations at the end of this release for additional information concerning these non-GAAP financial measures.
Financial Outlook
Paycom provides the following expected financial guidance for the quarter ending June 30, 2016 and year ending December 31, 2016:
Quarter Ending June 30, 2016
Total Revenues in the range of $69 million to $71 million.
Adjusted EBITDA in the range of $14 million to $16 million.
Year Ending December 31, 2016
Total Revenues in the range of $320 million to $322 million.
Adjusted EBITDA in the range of $73 million to $75 million.
We have not reconciled the Adjusted EBITDA ranges for the quarter ending June 30, 2016 or the year ending December 31, 2016 to net income because applicable information for future periods, on which this reconciliation would be based, is not readily available due to uncertainty regarding, and the potential variability of, depreciation and amortization, interest expense, taxes, stock-based compensation expense and other items. Accordingly, a reconciliation of these Adjusted EBITDA ranges to net income is not available at this time without unreasonable effort.
Use of Non-GAAP Financial Information
To supplement our financial information presented in accordance with generally accepted accounting principles in the United States (“GAAP”), we consider and have included certain non-GAAP financial measures in this press release, including Adjusted EBITDA and non-GAAP net income. We use Adjusted EBITDA and non-GAAP net income as supplemental measures to review and assess our performance and for planning purposes. We define: (i) Adjusted EBITDA as net income plus interest expense, taxes, depreciation and amortization, stock-based compensation expense and certain transaction expenses that are not core to our operations and (ii) non-GAAP net income as net income plus tax adjusted stock-based compensation expense and certain tax adjusted transaction expenses that are not core to our operations. Adjusted EBITDA and non-GAAP net income are metrics that we believe are useful to investors in evaluating our performance and facilitating comparison with other peer companies, many of which use similar non-GAAP financial measures to supplement results under GAAP.
Adjusted EBITDA and non-GAAP net income are not measures of financial performance under GAAP and should not be considered a substitute for net income, which we consider to be the most directly comparable GAAP measure. Adjusted EBITDA and non-GAAP net income have limitations as analytical tools, and when assessing our operating performance, you should not consider Adjusted EBITDA and non-GAAP net income in isolation, or as a substitute for net income or other Consolidated Statements of Income data prepared in accordance with GAAP. Adjusted EBITDA and non-GAAP net income may not be comparable to similar titled measures of other companies and other companies may not calculate such measures in the same manner as we do.
Conference Call Details:
In conjunction with this announcement, Paycom will host a conference call today, May 3, 2016, at 5:00 p.m. Eastern time to discuss its financial results. To access this call, dial (888) 317-6003 (domestic) or (412) 317-6061 (international) and enter conference ID 8716001. A live webcast as well as the replay of the conference call will be available on the Investor Relations page of Paycom’s website at investors.paycom.com. A replay of this conference call can also be accessed by dialing (877) 344-7529 (domestic) or (412) 317-0088 (international) until May 17, 2016. The replay passcode is 10083694.
About Paycom
As a leader in payroll and HR technology, Oklahoma City-based Paycom redefines the human capital management industry by allowing companies to effectively navigate a rapidly changing business environment. Its cloud-based software is based on a core system of record maintained in a single database for all human capital management functions, providing the functionality that businesses need to manage the complete employment lifecycle, from recruitment to retirement. Paycom has the ability to serve businesses of all sizes and in every industry. As one of the leading human capital management providers, Paycom has sales offices across the country and serves clients in all 50 states.
Forward-Looking Statements
Certain statements in this press release are, and certain statements on the related teleconference call may be, forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are any statements that look to future events and include, but are not limited to, statements regarding our business strategy; anticipated future operating results and operating expenses, cash flows, capital resources and liquidity; trends, opportunities and risks affecting our business, industry and financial results; future expansion or growth plans and potential for future growth; our ability to attract new clients to purchase our solution; our ability to retain clients and induce them to purchase additional applications; our ability to accurately forecast future revenues and appropriately plan our expenses; market acceptance of our solution and applications; our expectations regarding future revenue generated by certain applications, including Enhanced ACA; how certain factors affecting our performance correlate to improvements or deterioration in the labor market; our plan to open additional sales offices and our ability to effectively execute such plan; the sufficiency of our existing cash and cash equivalents to meet our working capital and capital expenditure needs over the next 12 months; our ability to create additional jobs at our corporate headquarters; our ability to expand our corporate headquarters within an expected timeframe; and our expectation of increasing our capital expenditures and investment activity as our business grows. In addition, forward-looking statements also consist of statements involving trend analyses and statements including such words as “may,” “believe,” “could,” “anticipate,” “should,” “would,” “might,” “plan,” “expect,” “potential,” “possible,” “project,” and similar expressions or the negative of such terms or other comparable terminology. These forward-looking statements speak only as of the date hereof and are subject to business and economic risks. As such, our actual results may differ materially from those set forth in the forward-looking statements as a result of the factors discussed in our filings with the Securities and Exchange Commission, including those discussed in our Annual Report on Form 10-K for the year ended December 31, 2015. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable securities laws.
Paycom Software, Inc.
Consolidated Balance Sheets
(thousands, except share amounts)
(unaudited)
| March 31, 2016 |
December 31, 2015 |
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| Assets |
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| Current assets: |
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| Cash and cash equivalents |
$ | 72,075 | $ | 50,714 | ||||
| Accounts receivable |
2,580 | 2,354 | ||||||
| Prepaid expenses |
4,793 | 3,531 | ||||||
| Inventory |
736 | 1,093 | ||||||
| Income tax receivable |
— | 6,743 | ||||||
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| Current assets before funds held for clients |
80,184 | 64,435 | ||||||
| Funds held for clients |
1,125,619 | 696,703 | ||||||
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| Total current assets |
1,205,803 | 761,138 | ||||||
| Property and equipment, net |
66,990 | 58,858 | ||||||
| Deposits and other assets |
866 | 1,286 | ||||||
| Goodwill |
51,889 | 51,889 | ||||||
| Intangible assets, net |
3,081 | 3,484 | ||||||
| Deferred income tax assets, net |
3,003 | — | ||||||
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| Total assets |
$ | 1,331,632 | $ | 876,655 | ||||
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| Liabilities and Stockholders’ Equity |
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| Current liabilities: |
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| Accounts payable |
$ | 5,694 | $ | 4,899 | ||||
| Income tax payable |
6,582 | — | ||||||
| Accrued commissions and bonuses |
1,784 | 8,687 | ||||||
| Accrued payroll and vacation |
5,237 | 2,898 | ||||||
| Deferred revenue |
3,994 | 3,726 | ||||||
| Current portion of long-term debt |
900 | 886 | ||||||
| Accrued expenses and other current liabilities |
11,983 | 9,735 | ||||||
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| Current liabilities before client funds obligation |
36,174 | 30,831 | ||||||
| Client funds obligation |
1,125,619 | 696,703 | ||||||
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| Total current liabilities |
1,161,793 | 727,534 | ||||||
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| Deferred income tax liabilities, net |
— | 641 | ||||||
| Long-term deferred revenue |
26,825 | 25,310 | ||||||
| Net long-term debt, less current portion |
24,650 | 24,856 | ||||||
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| Total long-term liabilities |
51,475 | 50,807 | ||||||
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| Commitments and contingencies |
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| Stockholders’ equity: |
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| Common stock, $0.01 par value (100,000,000 shares authorized, 57,138,157 and 57,119,873 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively) |
571 | 571 | ||||||
| Additional paid in capital |
72,597 | 71,135 | ||||||
| Retained earnings |
45,196 | 26,608 | ||||||
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| Total stockholders’ equity |
118,364 | 98,314 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 1,331,632 | $ | 876,655 | ||||
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Paycom Software, Inc.
Consolidated Statements of Income
(thousands, except per share and share amounts)
(unaudited)
| Three Months Ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| Revenues |
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| Recurring |
$ | 88,904 | $ | 54,351 | ||||
| Implementation and other |
1,222 | 871 | ||||||
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| Total revenues |
90,126 | 55,222 | ||||||
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| Cost of revenues |
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| Operating expenses |
10,785 | 7,471 | ||||||
| Depreciation and amortization |
1,186 | 810 | ||||||
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| Total cost of revenues |
11,971 | 8,281 | ||||||
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| Administrative expenses |
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| Sales and marketing |
28,662 | 21,229 | ||||||
| Research and development |
3,860 | 1,867 | ||||||
| General and administrative |
15,206 | 11,984 | ||||||
| Depreciation and amortization |
1,723 | 1,323 | ||||||
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| Total administrative expenses |
49,451 | 36,403 | ||||||
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| Total operating expenses |
61,422 | 44,684 | ||||||
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| Operating income |
28,704 | 10,538 | ||||||
| Interest expense |
(311 | ) | (332 | ) | ||||
| Other income, net |
34 | 33 | ||||||
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| Income before income taxes |
28,427 | 10,239 | ||||||
| Provision for income taxes |
9,839 | 4,244 | ||||||
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| Net income |
$ | 18,588 | $ | 5,995 | ||||
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| Earnings per share, basic |
$ | 0.32 | $ | 0.11 | ||||
| Earnings per share, diluted |
$ | 0.31 | $ | 0.11 | ||||
| Weighted average shares outstanding: |
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| Basic |
57,132,909 | 54,749,951 | ||||||
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| Diluted |
58,362,040 | 56,562,661 | ||||||
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Paycom Software, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Three Months Ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| Cash flows from operating activities |
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| Net income |
$ | 18,588 | $ | 5,995 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
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| Depreciation and amortization |
2,909 | 2,133 | ||||||
| Amortization of debt issuance costs |
32 | 13 | ||||||
| Stock-based compensation expense |
1,223 | 254 | ||||||
| Deferred income taxes, net |
(3,644 | ) | (101 | ) | ||||
| Changes in operating assets and liabilities: |
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| Accounts receivable |
(226 | ) | 1,110 | |||||
| Prepaid expenses |
(1,262 | ) | (1,092 | ) | ||||
| Inventory |
423 | (523 | ) | |||||
| Deposits and other assets |
420 | (119 | ) | |||||
| Accounts payable |
(1,170 | ) | (515 | ) | ||||
| Income taxes, net |
13,325 | 4,288 | ||||||
| Accrued commissions and bonuses |
(6,903 | ) | (3,512 | ) | ||||
| Accrued payroll and vacation |
2,339 | 1,578 | ||||||
| Deferred revenue |
1,783 | 1,439 | ||||||
| Accrued expenses and other current liabilities |
2,111 | 2,188 | ||||||
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| Net cash provided by operating activities |
29,948 | 13,136 | ||||||
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| Cash flows from investing activities |
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| (Increase) decrease in funds held for clients |
(428,916 | ) | 68,994 | |||||
| Decrease in restricted cash |
— | 371 | ||||||
| Purchases of property and equipment |
(8,363 | ) | (2,502 | ) | ||||
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| Net cash provided by (used in) investing activities |
(437,279 | ) | 66,863 | |||||
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| Cash flows from financing activities |
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| Principal payments on long-term debt |
(224 | ) | (464 | ) | ||||
| Increase (decrease) in client funds obligation |
428,916 | (68,994 | ) | |||||
| Payment of debt issuance costs |
— | (12 | ) | |||||
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| Net cash provided by (used in) financing activities |
428,692 | (69,470 | ) | |||||
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| Net increase in cash and cash equivalents |
21,361 | 10,529 | ||||||
| Cash and cash equivalents |
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| Beginning of period |
50,714 | 25,144 | ||||||
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| End of period |
$ | 72,075 | $ | 35,673 | ||||
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Paycom Software, Inc.
Breakout of Stock-Based Compensation Expense
(in thousands)
(unaudited)
| Three months ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| Non-cash stock-based compensation expense: |
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| Operating expenses |
$ | 113 | $ | 7 | ||||
| Sales and marketing |
277 | 5 | ||||||
| Research and development |
49 | 5 | ||||||
| General and administrative |
914 | 237 | ||||||
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| Total non-cash stock-based compensation expense |
$ | 1,353 | $ | 254 | ||||
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Paycom Software, Inc.
Reconciliation of GAAP to non-GAAP Financial Measures
(in thousands)
(unaudited)
| Three months ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| Net income to Adjusted EBITDA: |
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| Net income |
$ | 18,588 | $ | 5,995 | ||||
| Interest expense |
311 | 332 | ||||||
| Provision for income taxes |
9,839 | 4,244 | ||||||
| Depreciation and amortization expense |
2,909 | 2,133 | ||||||
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| EBITDA |
31,647 | 12,704 | ||||||
| Non-cash stock-based compensation expense |
1,353 | 254 | ||||||
| Transaction expenses |
— | 685 | ||||||
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| Adjusted EBITDA |
$ | 33,000 | $ | 13,643 | ||||
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| Three months ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| Net income to non-GAAP net income |
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| Net income |
$ | 18,588 | $ | 5,995 | ||||
| Tax adjusted non-cash stock-based compensation expense |
849 | 150 | ||||||
| Tax adjusted transaction expenses |
— | 507 | ||||||
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| Non-GAAP net income |
$ | 19,437 | $ | 6,652 | ||||
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| Non-GAAP net income per share, basic |
$ | 0.34 | $ | 0.12 | ||||
| Non-GAAP net income per share, diluted |
$ | 0.33 | $ | 0.12 | ||||
| Weighted average shares outstanding: |
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| Basic |
57,132,909 | 54,749,951 | ||||||
| Diluted |
58,362,040 | 56,562,661 | ||||||
| Three months ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| Adjusted gross profit: |
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| Total revenues |
$ | 90,126 | $ | 55,222 | ||||
| Less: Total cost of revenues |
(11,971 | ) | (8,281 | ) | ||||
| Plus: Non-cash stock-based compensation expense |
113 | 7 | ||||||
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| Total adjusted gross profit |
$ | 78,268 | $ | 46,948 | ||||
| Total adjusted gross profit % |
87 | % | 85 | % | ||||
| Three months ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| Adjusted sales and marketing expenses: |
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| Sales and marketing expenses |
$ | 28,662 | $ | 21,229 | ||||
| Less: Non-cash stock-based compensation expense |
(277 | ) | (5 | ) | ||||
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| Total adjusted sales and marketing expenses |
$ | 28,385 | $ | 21,224 | ||||
| Three months ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| Adjusted research and development expenses: |
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| Research and development expenses |
$ | 3,860 | $ | 1,867 | ||||
| Less: Non-cash stock-based compensation expense |
(49 | ) | (5 | ) | ||||
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| Total adjusted research and development expenses |
$ | 3,811 | $ | 1,862 | ||||
| Three months ended March 31, | ||||||||
| 2016 | 2015 | |||||||
| Adjusted administrative expenses: |
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| Administrative expenses |
$ | 49,451 | $ | 36,403 | ||||
| Less: Transaction expenses |
— | (685 | ) | |||||
| Less: Non-cash stock-based compensation expense |
(1,240 | ) | (247 | ) | ||||
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| Total adjusted administrative expenses |
$ | 48,211 | $ | 35,471 | ||||
Contacts
Paycom Software, Inc.
Media Contact:
Kathy Oden-Hall, 800-580-4505
CMO
Kathy.Oden-Hall@paycom.com
or
Investor Relations Contact:
David Niederman, 855-603-
1620 investors@paycom.com
Source: Paycom Software, Inc.