Exhibit 99.1
November 4, 2014
Paycom Software Reports Third Quarter 2014 Earnings
Third Quarter Revenue Growth Accelerated to 41.7% Year-over-Year
Record Annualized New Recurring Revenue (ANRR) of $14.9 Million Grew 52.0% Year-over-Year
OKLAHOMA CITY—(BUSINESS WIRE)— Paycom Software, Inc. (“Paycom”) (NYSE: PAYC), a leading provider of a comprehensive cloud-based human capital management software solution, today announced its financial results for the quarter ended September 30, 2014.
“We continued to experience robust demand for our advanced human capital management and payroll software solution in the third quarter,” said Chad Richison, President and Chief Executive Officer of Paycom. “The power, flexibility and value of a single-database system are resonating with our current and prospective clients. Human resource professionals are increasingly looking to leverage technology to become key strategic players within the organization, and the Paycom solution is uniquely suited to help them achieve this.”
Financial Highlights for the Third Quarter of 2014
Total Revenues of $36.6 million increased 41.7% compared to $25.8 million in the same period last year, primarily due to the addition of clients in mature sales offices. Recurring revenues of $35.9 million also increased 42.4% from the comparable prior year period, and comprised 98% of total revenues.
GAAP Net Income was $2.7 million, or $0.05 per diluted share, compared to a loss of ($0.4) million, or ($0.01) per diluted share in the same period last year.
Adjusted EBITDA1 was $6.6 million, compared to $3.8 million in the same period last year.
Non-GAAP Net Income (Loss)1 was $2.7 million, or $0.05 per diluted share, compared to $(0.0) million, or $0.00 per diluted share, in the same period last year.
Annualized New Recurring Revenue (“ANRR”) was $14.9 million, up from $9.8 million for the same period last year, representing a 52.0% growth from the comparable prior year period.
Cash and Cash Equivalents were $18.5 million as of September 30, 2014.
Total Debt was $27.2 million as of September 30, 2014. This debt consisted of debt on the 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. |
Financial Outlook
Paycom provides the following expected financial guidance for the quarter ending December 31, 2014, and year ending December 31, 2014:
Fourth Quarter 2014
Total Revenues in the range of $40 million to $41 million.
Adjusted EBITDA in the range of $5.5 million to $6.5 million.
Fiscal Year 2014
Total Revenues in the range of $147 million to $148 million.
Adjusted EBITDA in the range of $25 million to $26 million.
We have not reconciled the Adjusted EBITDA range for the quarter ending December 31, 2014 or the year ending December 31, 2014 to net income (loss) because applicable information for future periods, on which this reconciliation is 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 (loss) 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 EBITDA, Adjusted EBITDA and non-GAAP net income. We use earnings before interest, taxes, depreciation and amortization (“EBITDA”), Adjusted EBITDA and non-GAAP net income, as supplemental measures to review and assess our performance and planning purposes. We define: (i) EBITDA as net income, plus interest expense, taxes and depreciation and amortization, (ii) Adjusted EBITDA as net income, plus interest expense, taxes, depreciation and amortization, stock-based compensation expense, net loss on early extinguishment of debt and certain transaction expenses that are not core to our operations and (iii) non-GAAP net income as pro forma net income plus tax adjusted stock-based compensation expense, tax adjusted net loss on early extinguishment of debt and certain tax adjusted transaction expenses that are not core to our operations. EBITDA, 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.
EBITDA, 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 (loss) or pro forma net income (loss), as applicable, which we consider to be the most directly comparable GAAP measures. EBITDA, Adjusted EBITDA and non-GAAP net income have limitations as analytical tools, and when assessing our operating performance, you should not consider EBITDA, Adjusted EBITDA and non-GAAP net income in isolation, or as a substitute for “Net income (loss),” “Pro forma net income (loss)” or other Condensed Consolidated Statements of Income data prepared in accordance with GAAP. EBITDA, 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, November 4, 2014 at 5:00 p.m. Eastern Time to discuss the company’s financial results. To access this call, dial (888) 317-6003 (domestic) or (412)-317-6061 (international) with conference ID 6642499. A live webcast, as well as the replay of the conference call will be available on the Investor Relations page of the company’s website athttp://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 November 19, 2014. The replay passcode is 10054725.
About Paycom
As a leader in payroll and HR technology, Oklahoma City-based Paycom redefines the human capital management industry by allowing companies to effectively navigate a rapidly changing business environment. Its cloud-based software solution is based on a core system of record maintained in a single database for all human capital management functions, providing the functionality that businesses need to manage the complete employment lifecycle, from recruitment to retirement. Paycom serves businesses of all sizes and in every industry. As one of the leading human capital management providers, Paycom serves clients in all 50 states and has sales offices in 30 major cities across the nation.
Forward-Looking Statements
Certain statements in this press release are, and certain statements on the teleconference call may be, forward looking statements within the meaning provided under the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are made only as of the date hereof. These statements involve known and unknown risks and uncertainties that may cause Paycom’s actual results to differ materially from those stated or implied by such forward-looking statements, as a result of various risks and uncertainties including: changes in the demand for our solution, pricing changes and the impact of competition; changes in technology; our ability to attract, hire and retain skilled employees; our ability to attract and retain clients and increase the number of applications utilized by our clients; our ability to develop and market new applications, improve our existing applications and increase the value of our solution; our ability to maintain or increase our revenues and revenue growth rate; the sufficiency of our cash and cash equivalents and cash generated from operations to meet our working capital and capital expenditure requirements; changes in laws regulating payroll taxes and employee benefits; the possibility of a security breach that disrupts operations or exposes client confidential data; and potentially unfavorable outcomes related to pending legal matters.
Other factors that may cause such differences include, but are not limited to, those discussed in our periodic filings with the Securities and Exchange Commission, including those discussed in the prospectus filed with the Securities and Exchange Commission on April 15, 2014, and in particular the section entitled “Risk Factors” of the prospectus. Paycom undertakes 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.
Condensed Consolidated Balance Sheets
(in thousands, except share amounts)
(unaudited)
| | | | | | | | |
| | | September 30, | | | December 31, | |
| | | 2014 | | | 2013 | |
Assets | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 18,473 | | | $ | 13,362 | |
Restricted cash | | | 370 | | | | 369 | |
Accounts receivable | | | 1,468 | | | | 1,705 | |
Prepaid expenses | | | 1,581 | | | | 2,133 | |
Inventory | | | 384 | | | | 578 | |
Income tax receivable | | | — | | | | 150 | |
Deferred tax assets | | | 2,422 | | | | 3,672 | |
| | | | | | | | |
Current assets before funds held for clients | | | 24,698 | | | | 21,969 | |
Funds held for clients | | | 393,633 | | | | 455,779 | |
| | | | | | | | |
Total current assets | | | 418,331 | | | | 477,748 | |
Property, plant and equipment, net of accumulated depreciation of $15.5 million and $11.5 million, respectively | | | 46,642 | | | | 38,671 | |
Deposits and other assets | | | 595 | | | | 461 | |
Goodwill | | | 51,889 | | | | 51,889 | |
Intangible assets, net of accumulated amortization of $11.7 million and $10.5 million, respectively | | | 5,499 | | | | 6,709 | |
| | | | | | | | |
Total assets | | $ | 522,956 | | | $ | 575,478 | |
| | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 1,976 | | | $ | 5,020 | |
Income tax payable | | | 148 | | | | — | |
Accrued commissions and bonuses | | | 2,568 | | | | 3,598 | |
Accrued payroll and vacation | | | 2,665 | | | | 3,087 | |
Deferred revenue | | | 2,186 | | | | 1,582 | |
Current portion of long-term debt | | | 845 | | | | 9,545 | |
Accrued expenses and other current liabilities | | | 3,871 | | | | 4,372 | |
| | | | | | | | |
Current liabilities before client funds obligation | | | 14,259 | | | | 27,204 | |
Client funds obligation | | | 393,633 | | | | 455,779 | |
| | | | | | | | |
Total current liabilities | | | 407,892 | | | | 482,983 | |
| | | | | | | | |
Deferred tax liabilities | | | 3,059 | | | | 2,895 | |
Long-term deferred revenue | | | 15,048 | | | | 10,990 | |
Long-term debt, less current portion | | | 26,341 | | | | 11,545 | |
Long-term debt to related parties | | | — | | | | 60,875 | |
Derivative liability | | | — | | | | 1,107 | |
| | | | | | | | |
Total long-term liabilities | | | 44,448 | | | | 87,412 | |
| | | | | | | | |
Commitments and contingencies | | | | | | | | |
Stockholders’ equity: | | | | | | | | |
Common stock, $0.01 par value (100,000,000 shares authorized, 51,056,462 and 45,708,573 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively) | | | 510 | | | | 457 | |
Additional paid in capital | | | 66,949 | | | | 33,978 | |
Retained earnings (accumulated deficit) | | | 3,157 | | | | (29,349 | ) |
| | | | | | | | |
Total parent’s stockholders’ equity | | | 70,616 | | | | 5,086 | |
| | | | | | | | |
Noncontrolling interest | | | — | | | | (3 | ) |
| | | | | | | | |
Total stockholders’ equity | | | 70,616 | | | | 5,083 | |
| | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 522,956 | | | $ | 575,478 | |
| | | | | | | | |
Paycom Software, Inc.
Condensed Consolidated Statements of Income
(in thousands, except share amounts)
(unaudited)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
Revenues | | | | | | | | | | | | | | | | |
Recurring | | $ | 35,910 | | | $ | 25,210 | | | $ | 105,030 | | | $ | 75,808 | |
Implementation and other | | | 688 | | | | 620 | | | | 1,859 | | | | 1,513 | |
| | | | | | | | | | | | | | | | |
Total revenues | | | 36,598 | | | | 25,830 | | | | 106,889 | | | | 77,321 | |
| | | | | | | | | | | | | | | | |
Cost of revenues | | | | | | | | | | | | | | | | |
Operating expenses | | | 5,798 | | | | 4,846 | | | | 17,847 | | | | 13,633 | |
Depreciation | | | 638 | | | | 494 | | | | 1,876 | | | | 1,320 | |
| | | | | | | | | | | | | | | | |
Total cost of revenues | | | 6,436 | | | | 5,340 | | | | 19,723 | | | | 14,953 | |
| | | | | | | | | | | | | | | | |
Administrative expenses | | | | | | | | | | | | | | | | |
Sales and marketing | | | 14,856 | | | | 10,339 | | | | 44,237 | | | | 28,913 | |
Research and development | | | 1,059 | | | | 538 | | | | 2,878 | | | | 1,317 | |
General and administrative | | | 8,410 | | | | 6,815 | | | | 25,816 | | | | 18,851 | |
Depreciation and amortization | | | 1,159 | | | | 959 | | | | 3,322 | | | | 2,716 | |
| | | | | | | | | | | | | | | | |
Total administrative expenses | | | 25,484 | | | | 18,651 | | | | 76,253 | | | | 51,797 | |
| | | | | | | | | | | | | | | | |
Total operating expenses | | | 31,920 | | | | 23,991 | | | | 95,976 | | | | 66,750 | |
| | | | | | | | | | | | | | | | |
Operating income | | | 4,678 | | | | 1,839 | | | | 10,913 | | | | 10,571 | |
Interest expense | | | (338 | ) | | | (2,329 | ) | | | (3,079 | ) | | | (6,929 | ) |
Net loss on early repayment of debt | | | — | | | | — | | | | (4,044 | ) | | | — | |
Other income (expense), net | | | 39 | | | | (133 | ) | | | 1,395 | | | | 140 | |
| | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 4,379 | | | | (623 | ) | | | 5,185 | | | | 3,782 | |
Provision (benefit) for income taxes | | | 1,689 | | | | (199 | ) | | | 2,028 | | | | 1,211 | |
| | | | | | | | | | | | | | | | |
Net income (loss) | | | 2,690 | | | | (424 | ) | | | 3,157 | | | | 2,571 | |
Net income (loss) attributable to noncontrolling interest | | | — | | | | (3 | ) | | | — | | | | 19 | |
| | | | | | | | | | | | | | | | |
Net income (loss) attributable to the Company | | $ | 2,690 | | | $ | (421 | ) | | $ | 3,157 | | | $ | 2,552 | |
| | | | | | | | | | | | | | | | |
Pro forma additional income tax expense (benefit) | | | — | | | | (93 | ) | | | — | | | | 563 | |
| | | | | | | | | | | | | | | | |
Pro forma net income (loss) | | $ | 2,690 | | | $ | (328 | ) | | $ | 3,157 | | | $ | 1,989 | |
| | | | | | | | | | | | | | | | |
Net income (loss) per share, basic | | $ | 0.05 | | | $ | (0.01 | ) | | $ | 0.06 | | | $ | 0.06 | |
Net income (loss) per share, diluted | | $ | 0.05 | | | $ | (0.01 | ) | | $ | 0.06 | | | $ | 0.05 | |
Pro forma net income (loss) per share, basic | | $ | 0.05 | | | $ | (0.01 | ) | | $ | 0.06 | | | $ | 0.04 | |
Pro forma net income (loss) per share, diluted | | $ | 0.05 | | | $ | (0.01 | ) | | $ | 0.06 | | | $ | 0.04 | |
Weighted average shares outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 51,056,462 | | | | 45,707,802 | | | | 49,040,344 | | | | 45,398,933 | |
| | | | | | | | | | | | | | | | |
Diluted | | | 52,978,051 | | | | 45,707,802 | | | | 51,223,048 | | | | 47,975,548 | |
| | | | | | | | | | | | | | | | |
Pro forma weighted average shares outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 51,056,462 | | | | 45,707,802 | | | | 49,040,344 | | | | 45,398,933 | |
| | | | | | | | | | | | | | | | |
Diluted | | | 52,978,051 | | | | 45,707,802 | | | | 51,223,048 | | | | 47,975,548 | |
| | | | | | | | | | | | | | | | |
Paycom Software, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands, except share amounts)
(unaudited)
| | | | | | | | |
| | | Nine Months Ended September 30, | |
| | | 2014 | | | 2013 | |
Operating activities | | | | | | | | |
Net income | | $ | 3,157 | | | $ | 2,571 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 5,198 | | | | 4,036 | |
Amortization of debt discount | | | 67 | | | | 178 | |
Write off of debt issuance costs | | | 4,051 | | | | — | |
Stock-based compensation | | | 362 | | | | 925 | |
Change in fair value of derivative liability | | | (1,107 | ) | | | 257 | |
Changes in operating assets and liabilities: | | | | | | | | |
Accounts receivable | | | 237 | | | | (85 | ) |
Prepaid expenses | | | (94 | ) | | | (753 | ) |
Inventory | | | 195 | | | | (121 | ) |
Deposits and other assets | | | (145 | ) | | | (53 | ) |
Income tax receivable | | | 150 | | | | — | |
Deferred tax assets | | | 1,250 | | | | 1,211 | |
Deferred tax liabilities | | | 164 | | | | — | |
Income tax payable | | | 148 | | | | — | |
Accounts payable | | | (3,044 | ) | | | (159 | ) |
Accrued commissions and bonuses | | | (1,030 | ) | | | (1,195 | ) |
Accrued payroll and vacation | | | (422 | ) | | | (170 | ) |
Deferred revenue | | | 4,662 | | | | 2,775 | |
Accrued expenses and other liabilities | | | (498 | ) | | | 2,679 | |
| | | | | | | | |
Net cash provided by operating activities | | | 13,301 | | | | 12,096 | |
| | | | | | | | |
Investing activities | | | | | | | | |
Decrease in funds held for clients | | | 62,146 | | | | 82,294 | |
Increase (decrease) in restricted cash | | | 1 | | | | (1 | ) |
Additions to property, plant and equipment | | | (11,948 | ) | | | (6,243 | ) |
| | | | | | | | |
Net cash provided by investing activities | | | 50,199 | | | | 76,050 | |
| | | | | | | | |
Financing activities | | | | | | | | |
Proceeds from issuance of long-term debt | | | 6,539 | | | | — | |
Proceeds from initial public offering | | | 62,842 | | | | — | |
Payments on long-term debt | | | (65,442 | ) | | | 1,750 | |
Decrease in client funds obligation | | | (62,146 | ) | | | (82,294 | ) |
Incentive awards redeemed | | | — | | | | (1,061 | ) |
Capital impact of reorganization | | | (183 | ) | | | — | |
Capital contribution | | | 1 | | | | 1,162 | |
| | | | | | | | |
Net cash used in financing activities | | | (58,389 | ) | | | (80,443 | ) |
| | | | | | | | |
Change in cash and cash equivalents | | | 5,111 | | | | 7,703 | |
Cash and cash equivalents | | | | | | | | |
Beginning of period | | | 13,362 | | | | 13,435 | |
| | | | | | | | |
End of period | | $ | 18,473 | | | $ | 21,138 | |
| | | | | | | | |
Paycom Software, Inc.
Breakout of Stock-based Compensation Expense
(in thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
Stock-based compensation expense: | | | | | | | | | | | | | | | | |
Operating expenses | | $ | 4 | | | $ | 6 | | | $ | 19 | | | $ | 218 | |
Sales and marketing | | | 3 | | | | 64 | | | | 159 | | | | 112 | |
Research and development | | | 2 | | | | 11 | | | | 7 | | | | 340 | |
General and administrative | | | 79 | | | | — | | | | 177 | | | | 255 | |
| | | | | | | | | | | | | | | | |
| | $ | 88 | | | $ | 81 | | | $ | 362 | | | $ | 925 | |
| | | | | | | | | | | | | | | | |
Paycom Software, Inc.
Reconciliation of Net income (loss) to EBITDA and Adjusted EBITDA
(in thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
Consolidated statements of income data: | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 2,690 | | | $ | (424 | ) | | $ | 3,157 | | | $ | 2,571 | |
Interest expense | | | 338 | | | | 2,329 | | | | 3,079 | | | | 6,929 | |
Taxes | | | 1,689 | | | | (199 | ) | | | 2,028 | | | | 1,211 | |
Depreciation and amortization | | | 1,797 | | | | 1,453 | | | | 5,198 | | | | 4,036 | |
| | | | | | | | | | | | | | | | |
EBITDA | | | 6,514 | | | | 3,159 | | | | 13,462 | | | | 14,747 | |
Stock-based compensation expense | | | 88 | | | | 81 | | | | 362 | | | | 925 | |
Transaction expenses | | | — | | | | 532 | | | | 1,363 | | | | 663 | |
Net loss on early extinguishment of debt | | | — | | | | — | | | | 4,044 | | | | — | |
| | | | | | | | | | | | | | | | |
Adjusted EBITDA | | $ | 6,602 | | | $ | 3,772 | | | $ | 19,231 | | | $ | 16,335 | |
| | | | | | | | | | | | | | | | |
Paycom Software, Inc.
Reconciliation of Pro forma net income (loss) to Non-GAAP net income
(in thousands, expect per share amounts)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
Consolidated statements of income data: | | | | | | | | | | | | | | | | |
Pro forma net income (loss) | | $ | 2,690 | | | $ | (328 | ) | | $ | 3,157 | | | $ | 1,989 | |
Tax adjusted stock-based compensation expense | | | 51 | | | | 43 | | | | 211 | | | | 491 | |
Tax adjusted transaction expenses | | | — | | | | 282 | | | | 795 | | | | 352 | |
Tax adjusted net loss on early extinguishment of debt | | | — | | | | — | | | | 2,358 | | | | — | |
| | | | | | | | | | | | | | | | |
Non-GAAP net income | | $ | 2,741 | | | $ | (3 | ) | | $ | 6,521 | | | $ | 2,832 | |
| | | | | | | | | | | | | | | | |
Non-GAAP net income per share, basic | | $ | 0.05 | | | $ | (0.00 | ) | | $ | 0.13 | | | $ | 0.06 | |
Non-GAAP net income per share, diluted | | $ | 0.05 | | | $ | (0.00 | ) | | $ | 0.13 | | | $ | 0.06 | |
Pro Forma weighted average shares outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 51,056,462 | | | | 45,707,802 | | | | 49,040,344 | | | | 45,398,933 | |
Diluted | | | 52,978,051 | | | | 45,707,802 | | | | 51,223,048 | | | | 47,975,548 | |
Contacts
Paycom Software, Inc.
Media Contact:
Kathy Oden-Hall, 800-580-4505
CMO
Kathy.Oden-Hall@paycom.com
or
Investor Relations Contact:
855-603-1620
investors@paycom.com Source:
Paycom Software, Inc.
