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Paycom Software Reports 39.3% Revenue Growth in the Second Quarter 2014

Companies mentioned in this article: Paycom Software, Inc.

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 June 30, 2014.

“Our efforts to capture share of the Human Capital Management sector are paying off,” said Chad Richison, President and Chief Executive Officer of Paycom. “Our second quarter results were highlighted by revenue growth of 39.3% over the second quarter last year, and adjusted EBITDA for the second quarter of 2014 representing 18.2% of total revenues. I am very pleased with the traction that we are seeing with recent major new application launches and new application enhancements. Our footprint continues to grow, evidenced by the addition of five new sales offices in the first half of 2014. We look forward to the opportunities these new sales teams will afford Paycom in the coming months.”

Financial Highlights for the Second Quarter of 2014

Total Revenues of $33.3 million increased 39.3% compared to $23.9 million in the same period last year, primarily due to the addition of clients in mature sales offices. Recurring revenues of $32.7 million also increased 39.6% from the comparable prior year period, and comprised 98.2% of total revenues.

GAAP Net Income (Loss) was ($0.6) million, or ($0.01) per diluted share, compared to $0.4 million, or $0.01 per diluted share in the same period last year. The GAAP net loss for the second quarter of 2014 was due to a one-time charge of $4.0 million to retire related-party debt from the proceeds of our initial public offering (“IPO”).

Adjusted EBITDA1 was $6.1 million, compared to $4.4 million in the same period last year.

Non-GAAP Net Income1 was $2.1 million, or $0.04 per diluted share, compared to $0.5 million, or $0.01 per diluted share, in the same period last year.

Annualized New Recurring Revenue (“ANRR”) was $11.5 million, up from $8.3 million for the same period last year.

Cash and Cash Equivalents were $14.0 million as of June 30, 2014.

Total Debt was $27.4 million as of June 30, 2014. This debt consisted of debt on the corporate headquarters. Paycom used net proceeds from its IPO and existing cash in April to retire $65.0 million of outstanding debt.

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.

Business Highlights for the Second Quarter of 2014

Total Sales Teams and Offices consist of 31 sales teams in 30 offices. Paycom currently has a sales office in 25 of the 50 largest Metropolitan Statistical Areas (“MSAs”) in the United States.

Application Launches included Paycom Push Reporting, a new capability that will increase the quality, speed and efficiency with which human resource executives can populate, produce and analyze employee data generated reports. With Push Reporting companies can pull very complex reports in a very simple way.

Initial Public Offering – On April 21, 2014, Paycom successfully completed an initial public offering whereby an aggregate of 7,641,750 shares, including 4,606,882 primary shares generated net proceeds of approximately $64.3 million to Paycom. Concurrent with the IPO, Paycom retired $65.0 million of outstanding debt.

“With the completion of our IPO now behind us, and with the recent record number of office and application launches, we believe we are very well positioned to deliver rapid growth” continued Mr. Richison. “We remain squarely focused delivering robust technology solutions across our HCM suite, and expanding our national sales footprint into the significant ‘whitespace’ opportunity that remains untapped. Our outlook reflects our confidence in our ability to execute against our strategic approach of transforming the payroll and human resources industry. Paycom is a SaaS HCM provider that offers a single-database platform for the entire employment life cycle, a key differentiator that sets us apart.”

Financial Outlook

Paycom provides the following expected financial guidance for the quarter ending September 30, 2014, and year ending December 31, 2014:

Third Quarter 2014

Total Revenues in the range of $34 million to $35 million.

Adjusted EBITDA in the range of $4.5 million to $5.5 million.

Fiscal Year 2014

Total Revenues in the range of $143 million to $145 million.

Adjusted EBITDA in the range of $22 million to $24 million.

We have not reconciled the Adjusted EBITDA range for the quarter ending September 30, 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 are 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, August 5, 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 0376659. 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 at http://investors.paycom.com. A replay of this conference call can also be accessed by dialing (877)-344-7529 (domestic) or (877)-344-7529 (international) until August 20, 2014.

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)
   
June 30, December 31,
  2014   2013  
Assets
Current assets:
Cash and cash equivalents $ 13,968 $ 13,362
Restricted cash 370 369
Accounts receivable 906 1,705
Prepaid expenses 1,615 2,133
Inventory 519 578
Income tax receivable 15 150
Deferred tax assets   3,470   3,672  
Current assets before funds held for clients 20,863 21,969
Funds held for clients   315,629   455,779  
Total current assets 336,492 477,748

Property, plant and equipment, net of accumulated depreciation of $14.1 million and $11.5 million, respectively

45,358 38,671
Deposits and other assets 554 461
Goodwill 51,889 51,889

Intangible assets, net of accumulated amortization of $11.3 million and $10.5 million, respectively

  5,902   6,709  
Total assets $ 440,195 $ 575,478  
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 2,620 $ 5,020
Accrued commissions and bonuses 1,579 3,598
Accrued payroll and vacation 3,492 3,087
Deferred revenue 1,941 1,582
Current portion of long-term debt 893 9,545
Accrued expenses and other current liabilities   3,244   4,372  
Current liabilities before client funds obligation 13,769 27,204
Client funds obligation   315,629   455,779  
Total current liabilities   329,398   482,983  
Deferred tax liabilities 3,081 2,895
Long-term deferred revenue 13,350 10,990
Long-term debt, less current portion 26,528 11,545
Long-term debt to related parties - 60,875
Derivative liability   -   1,107  
Total long-term liabilities   42,959   87,412  
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value (100,000,000 shares authorized, 51,041,157 and 45,708,573 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively) 510 457
Additional paid in capital 66,861 33,978
Retained earnings (accumulated deficit)   467   (29,349 )
Total parent's stockholders' equity   67,838   5,086  
Noncontrolling interest   -   (3 )
Total stockholders' equity   67,838   5,083  
Total liabilities and stockholders' equity $ 440,195 $ 575,478  

 

 

 
Paycom Software, Inc.
Condensed Consolidated Statements of Income

(in thousands, except share amounts)

(unaudited)
         
 
 
Three Months Ended June 30, Six Months Ended June 30,
  2014     2013     2014     2013  
 
Revenues
Recurring $ 32,666 $ 23,394 $ 69,120 $ 50,598
Implementation and other   640     520     1,171     893  
Total revenues   33,306     23,914     70,291     51,491  
Cost of revenues
Operating expenses 5,757 4,353 12,049 8,787
Depreciation   608     415     1,238     826  
Total cost of revenues   6,365     4,768     13,287     9,613  
Administrative expenses
Sales and marketing 13,700 8,716 29,381 18,574
Research and development 937 324 1,819 779
General and administrative 8,138 6,040 17,406 12,036
Depreciation and amortization   1,072     873     2,163     1,757  
Total administrative expenses   23,847     15,953     50,769     33,146  
Total operating expenses   30,212     20,721     64,056     42,759  
 
Operating income 3,094 3,193 6,235 8,732
Interest expense (674 ) (2,326 ) (2,741 ) (4,600 )
Net loss on early repayment of debt (4,044 ) - (4,044 ) -
Other income (expense), net   587     (338 )   1,356     273  
Income before income taxes (1,037 ) 529 806 4,405
Provision for income taxes   (444 )   169     339     1,410  
Net income (loss) (593 ) 360 467 2,995
Net income attributable to the noncontrolling interest   -     3     -     22  
Net income (loss) attributable to Paycom $ (593 ) $ 357   $ 467   $ 2,973  
 
Pro forma additional income tax expense   -     79     -     656  
Pro forma net income (loss) $ (593 ) $ 278   $ 467   $ 2,317  
 
Net income (loss) per share, basic $ (0.01 ) $ 0.01 $ 0.01 $ 0.07
Net income (loss) per share, diluted $ (0.01 ) $ 0.01 $ 0.01 $ 0.06
 
Pro forma net income (loss) per share, basic $ (0.01 ) $ 0.01 $ 0.01 $ 0.05
Pro forma net income (loss) per share, diluted $ (0.01 ) $ 0.01 $ 0.01 $ 0.05
 
 
Weighted average shares outstanding:
Basic   50,284,362     45,621,868     48,015,577     45,241,939  
 
Diluted   50,284,362     47,998,224     50,331,002     47,958,339  
 
 
Pro forma weighted average shares outstanding:
Basic   50,284,362     45,621,868     48,015,577     45,241,939  
 
Diluted   50,284,362     47,998,224     50,331,002     47,958,339  
 
 
Paycom Software, Inc.
Condensed Consolidated Statements of Cash Flows

(in thousands, except share amounts)

(unaudited)
   
Six Months Ended June 30,
  2014     2013  
 
Operating activities
Net income $ 467 $ 2,995
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,401 2,583
Amortization of debt discount 74 116
Write off of debt issuance costs 4,051 -
Stock-based compensation 274 844
Change in fair value of derivative liability (1,107 ) (1 )
Changes in operating assets and liabilities:
Accounts receivable 799 63
Prepaid expenses (132 ) (467 )
Inventory 59 87
Deposits and other assets (93 ) (73 )
Income tax receivable, net 135 -
Deferred tax assets 202 1,411
Deferred tax liabilities 186 -
Accounts payable (2,400 ) (635 )
Accrued commissions and bonuses (2,019 ) (1,403 )
Accrued payroll and vacation 405 262
Deferred revenue 2,719 1,644
Accrued expenses and other liabilities   (1,128 )   1,480  
Net cash provided by operating activities   5,893     8,906  
Investing activities
Decrease in funds held for clients 140,150 38,768
Increase (decrease) in restricted cash 1 (1 )
Additions to property, plant and equipment   (9,278 )   (2,839 )
Net cash provided by investing activities   130,873     35,928  
Financing activities
Proceeds from issuance of long-term debt 6,539 -
Proceeds from Initial Public Offering 62,196 -
Payments on long-term debt (65,207 ) (197 )
Decrease in client funds obligation (140,150 ) (38,768 )
Incentive awards redeemed - (1,008 )
Payments of deferred offering costs 645 -
Capital impact of reorganization (183 ) -
Distributions received from members   -     (520 )
Net cash used in financing activities   (136,160 )   (40,493 )
Change in cash and cash equivalents 606 4,341
Cash and cash equivalents
Beginning of period   13,362     13,435  
End of period $ 13,968   $ 17,776  
 
 
Paycom Software, Inc.
Breakout of Stock-based Compensation Expense
(in thousands)
       
Three Months Ended June 30, Six Months Ended June 30,
  2014   2013   2014   2013
Stock-based compensation expense:
Operating expenses $ 11 $ 9 $ 15 $ 213
Sales and marketing 154 28 157 51
Research and development 4 6 6 329
General and administrative   12   83   96   255
$ 181 $ 126 $ 274 $ 848
 
 
Paycom Software, Inc.
Reconciliation of Net income (loss) to EBITDA and Adjusted EBITDA
(in thousands)
       
Three Months Ended June 30, Six Months Ended June 30,
  2014     2013   2014   2013
Consolidated statements of income data:
Net income (loss) $ (593 ) $ 360 $ 467 $ 2,995
Interest expense 674 2,326 2,741 4,600
Taxes (444 ) 169 339 1,410
Depreciation and amortization   1,680     1,288   3,401   2,583
EBITDA 1,317 4,143 6,948 11,588
Stock-based compensation expense 181 126 274 848
Transaction expenses 523 131 1,363 131
Net loss on early extinguishment of debt   4,044     -   4,044   -
Adjusted EBITDA $ 6,065   $ 4,400 $ 12,629 $ 12,567
 
 
 
Paycom Software, Inc.
Reconciliation of Pro forma net income (loss) to Non-GAAP net income
(in thousands, expect per share amounts)
 
Three Months Ended June 30, Six Months Ended June 30,
  2014     2013   2014   2013
Consolidated statements of income data:
Pro forma net income (loss) $ (593 ) $ 278 $ 467 $ 2,317
Tax adjusted stock-based compensation expense 104 86 159 577
Tax adjusted transaction expenses 299 89 790 89
Tax adjusted net loss on early extinguishment of debt   2,313     0   2,343   0
Non-GAAP net income $ 2,123   $ 453 $ 3,759 $ 2,983
 
Non-GAAP net income per share, basic $ 0.04 $ 0.01 $ 0.08 $ 0.07
Non-GAAP net income per share, diluted $ 0.04 $ 0.01 $ 0.07 $ 0.06
 
Pro Forma weighted average shares outstanding:
Basic 50,284,362 45,621,868 48,015,577 45,241,939
Diluted 52,269,300 47,998,224 50,331,002 47,958,339
 


Copyright © Business Wire 2014
Contact:

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