8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 4, 2014

Paycom Software, Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-36393	80-0957485
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification Number)

7501 W. Memorial Road, Oklahoma City, Oklahoma	73142
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (405) 722-6900

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d -2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c))

Item 2.02. Results of Operations and Financial Condition.

On November 4, 2014, Paycom Software, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended September 30, 2014. In the press release, the Company announced that it will hold a conference call at 5:00 PM Eastern Time, on Tuesday, November 4, 2014, to discuss its financial results. The press release is furnished hereto as Exhibit 99.1 and is incorporated herein by reference.

The information furnished pursuant to Item 2.02 (including Exhibit 99.1 hereto), shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Description of Exhibit
99.1	Press release, dated November 4, 2014, issued by Paycom Software, Inc. (furnished pursuant to Item 2.02).

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	PAYCOM SOFTWARE, INC.
Dated: November 4, 2014	By:	/s/ Craig E. Bolte
		Craig E. Bolte
		Chief Financial Officer

Exhibit Index

Exhibit No.	Description of Exhibit
99.1	Press release, dated November 4, 2014, issued by Paycom Software, Inc. (furnished pursuant to Item 2.02).

EX-99.1

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 at http://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.