Stock-Based Compensation

9 Months Ended

Sep. 30, 2024

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

11.STOCK-BASED COMPENSATION

The Company recognizes stock-based compensation expense related to awards of (i) restricted stock subject to time-based or no vesting conditions (“Time-Based Restricted Stock Awards”), (ii) restricted stock subject to market-based vesting conditions (“Market-Based Restricted Stock Awards”), (iii) restricted stock units subject to time-based vesting conditions (“RSUs”) and (iv) restricted stock units subject to performance-based vesting conditions (“PSUs”). During the nine months ended September 30, 2024, awards were granted to executive officers, non-executive employees, non-employee directors and contractors pursuant to the Paycom Software, Inc. 2023 Long-Term Incentive Plan.

The following table summarizes restricted stock awards activity for the nine months ended September 30, 2024:

	Time-Based Restricted Stock Awards					Market-Based 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		675.9		$	179.52		187.2		$	164.29
Vested		(240.9	)	$	295.16		—		$	—
Forfeited		(159.2	)	$	270.99		(1,641.2	)(1)	$	111.52
Unvested shares of restricted stock outstanding at September 30, 2024		1,179.8		$	231.09		291.5		$	222.43

(1)The change in Mr. Richison’s position from Chief Executive Officer to Co-Chief Executive Officer, effective February 7, 2024, triggered the forfeiture of 1,610,000 shares of restricted stock granted to him on November 23, 2020, in accordance with the terms of the award. As a result, $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 PSU and RSU activity for the nine months ended September 30, 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		48.7		$	187.02		50.5		$	187.34
Vested		(3.0	)	$	300.76		(4.5	)	$	288.77
Forfeited		(31.3	)	$	200.62		(33.0	)	$	215.12
Unvested restricted stock units outstanding at September 30, 2024(1)		23.6		$	198.54		50.2		$	249.52

(1)A maximum of 89,913 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 nine months ended September 30, 2024, the Company recognized non-cash stock-based compensation expense, inclusive of forfeitures, that totaled a net benefit of $45.5 million. For the nine months ended September 30, 2023, our total non-cash stock-based compensation expense was $96.4 million.

The following table presents the non-cash stock-based compensation expense that is included within the specified line items in our consolidated statements of comprehensive income:

	Nine Months Ended September 30,
	2024			2023
Non-cash stock-based compensation expense:
Operating expenses	$	11,027		$	8,606
Sales and marketing		13,599			18,367
Research and development		20,716			17,514
General and administrative		(90,856	)		51,896
Total non-cash stock-based compensation expense	$	(45,514	)	$	96,383

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 September 30, 2024.

	Restricted Stock		Restricted Stock
	Awards		Units
Unrecognized compensation cost	$	221,031	$	5,899
Weighted average period for recognition (years)		2.5		0.9

We capitalized stock-based compensation costs related to software developed for internal use of $5.1 million and $13.9 million for the three and nine months ended September 30, 2024, respectively. We capitalized stock-based compensation costs related to software developed for internal use of $3.8 million and $11.5 million for the three and nine months ended September 30, 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).