During the three months ended March 31, 2024, we issued an aggregate of 638,447 restricted shares of common stock under the Paycom Software, Inc. 2023 Long-Term Incentive Plan (the “2023 LTIP”), consisting of 187,078 shares subject to market-based vesting conditions (“Market-Based Shares”) and 451,369 shares subject to time-based or no vesting conditions (“Time-Based Shares”). Generally, Market-Based Shares will vest 50% on the first date, if any, that the arithmetic average of the Company’s volume weighted average price on each of the twenty consecutive trading days immediately preceding such date (the “VWAP Value”) equals or exceeds $222 per share and 50% on the first date, if any, that the Company’s VWAP Value equals or exceeds $251 per share, in each case provided that (i) such date occurs on or before the eighth anniversary of the grant date and (ii) the recipient is employed by, or providing services to, the Company on the applicable vesting date, and subject to the terms and conditions of the 2023 LTIP and the applicable restricted stock award agreement. Generally, the Time-Based Shares granted to non-executive employees will vest over approximately four years, provided that the recipient is employed by, or providing services to, the Company on the applicable vesting date, and subject to the terms and conditions of the 2023 LTIP and the applicable restricted stock award agreement. The Time-Based Shares include 4,104 shares of common stock granted to Chris G. Thomas in connection with his appointment as Co-Chief Executive Officer of the Company effective February 7, 2024.

In connection with the Co-Chief Executive Officer transition, the Company and Chad Richison entered into a letter agreement pursuant to which, among other things, Mr. Richison acknowledged and agreed that the change in his position from Chief Executive Officer to Co-Chief Executive Officer triggered the forfeiture of 1,610,000 shares of restricted stock granted to him on November 23, 2020 (the “2020 CEO Performance Award”) in accordance with the terms of the award. As a result, on February 7, 2024, 1,610,000

shares of restricted stock were forfeited to the Company and $117.5 million of previously recognized compensation costs that were recorded in reporting periods prior to 2024 were reversed to additional paid-in capital in the consolidated balance sheets and to general and administrative expenses in the consolidated statements of comprehensive income.

The following table summarizes restricted stock awards activity for the three months ended March 31, 2024:


	Time-Based					Market-Based
	Restricted Stock Awards					Restricted Stock Awards
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Unvested shares of restricted stock outstanding at December 31, 2023		904.0		$	293.74		1,745.5		$	124.38
Granted		451.4		$	185.46		187.1		$	167.48
Vested		(36.7	)	$	265.98		—		$	—
Forfeited		(37.8	)	$	290.52		(1,620.3	)	$	110.53
Unvested shares of restricted stock outstanding at March 31, 2024		1,280.9		$	256.48		312.3		$	222.04

During the three months ended March 31, 2024, we issued the following restricted stock unit awards to certain of our executive officers, in each case subject to the terms and conditions of the 2023 LTIP and the applicable restricted stock unit award agreement: (i) an aggregate of 41,230 performance-based restricted stock units (“PSUs”), with the number of shares deliverable upon vesting of such PSUs to be determined based on achievement of a pre-established revenue performance goal for the one-year performance period from January 1, 2024 to December 31, 2024; (ii) an aggregate of 26,230 time-based restricted stock units (“RSUs”) vesting in three equal annual tranches over a period of approximately three years, provided that the recipient is employed by, or providing services to, the Company on the applicable vesting date; and (iii) 17,209 RSUs, with 24% vesting in February 2025, 24% vesting in February 2026 and 52% vesting in February 2027, provided that the recipient is employed by, or providing services to, the Company on the applicable vesting date. The PSUs will be eligible to vest no later than 60 days following the end of the performance period, provided that the recipient is employed by, or providing services to, the Company on the applicable vesting date.

During the three months ended March 31, 2024, 75,464 PSUs (consisting of PSUs granted to certain executive officers in 2021, 2022 and 2023) were eligible to vest based on the Company’s performance during a performance period ended December 31, 2023. On February 5, 2024, we issued 4,472 shares of common stock upon the vesting of PSUs awarded to Mr. Boelte in May 2023. The number of shares delivered upon vesting of such PSUs was determined based on the Company’s achievement of an adjusted EBITDA performance goal. With respect to all other PSUs eligible to vest based on the Company’s performance during a performance period ended December 31, 2023, the relevant performance goals were not achieved and, as a result, none of such PSUs vested and all were forfeited.

The following table summarizes PSU and RSU activity for the three months ended March 31, 2024:


	RSUs					PSUs
	Units			Weighted Average Grant Date Fair Value Per Unit		Units			Weighted Average Grant Date Fair Value Per Unit
Unvested restricted stock units outstanding at December 31, 2023		9.2		$	300.74		37.2		$	308.05
Granted		43.4		$	190.41		41.2		$	189.95
Vested		(2.9	)	$	297.55		(4.4	)	$	288.77
Forfeited		—		$	—		—		$	—
Unvested restricted stock units outstanding at March 31, 2024(1)		49.7		$	204.52		74.0		$	243.38

(1)

A maximum of 123,078 shares could be delivered upon settlement of PSUs based upon the Company’s achievement of the applicable performance goals over the applicable performance periods.

For the three months ended March 31, 2024, the Company recognized stock-based compensation expense, inclusive of forfeitures, that totaled a net benefit of $93.8 million. For the three months ended March 31, 2023, our total stock-based compensation expense was $27.8 million.

The following table presents the unrecognized compensation cost and the related weighted average recognition period associated with unvested restricted stock awards and unvested restricted stock unit awards (including RSUs and PSUs) as of March 31, 2024.


	Restricted Stock		Restricted Stock
	Awards		Units
Unrecognized compensation cost	$	270,863	$	10,581
Weighted average period for recognition (years)		2.8		1.5

We capitalized stock-based compensation costs related to software developed for internal use of $3.6 million for the three months ended March 31, 2024 and 2023, respectively.

In May 2023, our Board of Directors adopted a dividend policy under which we intend to pay quarterly cash dividends on our common stock. All unvested shares of restricted stock, RSUs and PSUs 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 the release of restrictions on such shares of restricted stock, RSUs or PSUs (i.e., upon vesting).