In May 2023, the stockholders of the Company approved the Paycom Software, Inc. 2023 Long-Term Incentive Plan (the “2023 LTIP”), which provides for the granting of equity-based awards to the Company’s employees, contractors and outside directors. Subject to certain adjustments, the maximum number of shares of common stock that may be delivered pursuant to awards under the 2023 LTIP is 3.6 million.

We have historically issued shares of restricted stock that are subject to either market-based vesting conditions (“Market-Based Restricted Stock Awards”) or time-based or no vesting conditions (“Time-Based Restricted Stock Awards”). The market-based vesting conditions are based on the Company’s total enterprise value or volume weighted average stock price over a specific period exceeding certain specified thresholds.

During the year ended December 31, 2024, we issued an aggregate of 894,475 restricted shares of common stock under the 2023 LTIP, consisting of 187,174 shares underlying Market-Based Restricted Stock Awards and 707,301 shares underlying Time-Based Restricted Stock Awards. Generally, Market-Based Restricted Stock Awards 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 20 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 Restricted Stock Awards will vest over periods ranging from three to 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 Restricted Stock Awards mentioned above include an aggregate of 8,255 shares of restricted stock issued to the non-employee members of our Board of Directors in 2024 under the 2023 LTIP. Such shares of restricted stock will cliff-vest on the seventh day following the first anniversary date of the grant, provided that such director is providing services to the Company through the applicable vesting date, and subject to the terms and conditions of the 2023 LTIP and the applicable restricted stock award agreement.

In connection with the Co-Chief Executive Officer transition in February 2024, 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 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 presents a summary of the grant date fair values of restricted stock granted during the years ended December 31, 2024, 2023 and 2022 and the related assumptions:


	Year Ended December 31,
	2024	2023	2022
Grant date fair value of restricted stock	$144.16 - $210.65	$167.76 - $337.44	$259.65 - $348.19
Risk-free interest rate	4.27%	3.58%	1.75%
Estimated volatility	40.1%	40.9%	40.0%
Expected life (in years)	2.3	2.3	2.5

The following table summarizes restricted stock awards activity for the year ended December 31, 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
	(in thousands)			(in dollars)		(in thousands)			(in dollars)
Unvested shares of restricted stock outstanding at December 31, 2023		904.0		$	293.74		1,745.5		$	124.38
Granted		707.3		$	179.85		187.2		$	167.25
Vested		(256.2	)	$	293.40		(81.6	)	$	170.32
Forfeited		(214.8	)	$	257.23		(1,655.4	)(1)	$	112.80
Unvested shares of restricted stock outstanding at December 31, 2024		1,140.3		$	230.10		195.7		$	244.14

(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 presents the aggregate fair value of awards that vested during the indicated period:


	Year Ended December 31,
	2024		2023		2022
Time-Based Restricted Stock Awards	$	46.5	$	43.0	$	64.0
Market-Based Restricted Stock Awards	$	19.8	$	—	$	—

During the year ended December 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 50,473 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 31,473 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 were eligible to vest following the performance period, but no later than February 28, 2025, provided that the recipient was 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 unit award agreement.

During the year ended December 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 presents a summary of the grant date fair values of restricted stock units granted during the years ended December 31, 2024, 2023 and 2022 and the related assumptions:


	Year Ended December 31,
	2024	2023	2022
Grant date fair value of restricted stock	$158.95 - $199.03	$55.83 - $297.55	$252.16 - $377.01
Risk-free interest rate	—	4.89%	1.25% - 1.51%
Estimated volatility	—	42.5%	49.2%
Expected life (in years)	1.4	1.0	2.7

The following table summarizes RSU and PSU activity for the year ended December 31, 2024:


	RSUs		PSUs
	Units	Weighted Average Grant Date Fair Value Per Unit	Units	Weighted Average Grant Date Fair Value Per Unit
	(in thousands)	(in dollars)	(in thousands)	(in dollars)
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)	$288.75
Forfeited	(31.3)	$200.62	(59.5)	$257.66
Unvested restricted stock units outstanding at December 31, 2024(1)	23.6	$198.54	23.7	$181.24

(1)

A maximum of 23,715 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 year ended December 31, 2024, the Company recognized non-cash stock-based compensation expense, inclusive of forfeitures, that totaled a net benefit of $22.9 million. For the years ended December 31, 2023 and 2022, our total non-cash stock-based compensation expense was $129.8 million and $94.9 million, respectively.

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:


	Year Ended December 31,
	2024			2023		2022
Non-cash stock-based compensation expense:
Operating expenses	$	13.5		$	10.6	$	4.7
Sales and marketing		19.0			23.9		18.7
Research and development		26.3			22.3		11.1
General and administrative		(81.7	)		73.0		60.4
Total non-cash stock-based compensation expense	$	(22.9	)	$	129.8	$	94.9

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 December 31, 2024:


	Restricted Stock		Restricted Stock
	Awards		Units
Unrecognized compensation cost	$	186.7	$	3.2
Weighted average period for recognition (years)		2.4		1.1

We capitalized stock-based compensation costs related to software developed for internal use of $17.5 million, $14.7 million and $9.0 million for the years ended December 31, 2024, 2023 and 2022, 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).