payc-10q_20220630.htm

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 26, 2022, there were 60,026,348 shares of common stock, par value of $0.01 per share, outstanding, including 2,161,200 shares of restricted stock.

	June 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	279,039		$	277,978
Accounts receivable		20,078			9,490
Prepaid expenses		37,779			23,729
Inventory		1,647			1,131
Income tax receivable		220			16,413
Deferred contract costs		86,048			76,724
Current assets before funds held for clients		424,811			405,465
Funds held for clients		3,423,181			1,846,573
Total current assets		3,847,992			2,252,038
Property and equipment, net		374,940			348,953
Intangible assets, net		55,969			58,028
Goodwill		51,889			51,889
Long-term deferred contract costs		511,957			461,852
Other assets		48,956			42,385
Total assets	$	4,891,703		$	3,215,145
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	13,475		$	5,772
Accrued commissions and bonuses		14,798			22,357
Accrued payroll and vacation		41,802			34,259
Deferred revenue		17,920			16,277
Current portion of long-term debt		—			1,775
Accrued expenses and other current liabilities		54,904			63,397
Current liabilities before client funds obligation		142,899			143,837
Client funds obligation		3,425,573			1,846,573
Total current liabilities		3,568,472			1,990,410
Deferred income tax liabilities, net		135,282			145,504
Long-term deferred revenue		90,960			85,149
Net long-term debt, less current portion		29,000			27,380
Other long-term liabilities		73,850			72,988
Total long-term liabilities		329,092			331,021
Total liabilities		3,897,564			2,321,431
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value (100,000 shares authorized, 62,514 and 62,298 shares issued at June 30, 2022 and December 31, 2021, respectively; 57,864 and 58,012 shares outstanding at June 30, 2022 and December 31, 2021, respectively)		625			623
Additional paid-in capital		517,777			465,594
Retained earnings		1,064,864			915,579
Accumulated other comprehensive earnings (loss)		(1,600	)		—
Treasury stock, at cost 4,650 and 4,286 shares at June 30, 2022 and December 31, 2021, respectively)		(587,527	)		(488,082	)
Total stockholders’ equity		994,139			893,714
Total liabilities and stockholders’ equity	$	4,891,703		$	3,215,145

	Three Months Ended June 30,						Six Months Ended June 30,
	2022				2021		2022				2021
Revenues
Recurring	$	311,534		$	237,585		$	659,698		$	505,359
Implementation and other		5,390			4,561			10,745			8,985
Total revenues		316,924			242,146			670,443			514,344
Cost of revenues
Operating expenses		39,604			28,773			78,096			57,846
Depreciation and amortization		10,478			7,637			20,470			14,837
Total cost of revenues		50,082			36,410			98,566			72,683
Administrative expenses
Sales and marketing		87,724			67,979			162,720			130,740
Research and development		36,803			28,224			68,408			52,935
General and administrative		57,912			54,063			118,416			100,254
Depreciation and amortization		12,090			8,380			23,753			16,096
Total administrative expenses		194,529			158,646			373,297			300,025
Total operating expenses		244,611			195,056			471,863			372,708
Operating income		72,313			47,090			198,580			141,636
Interest expense		(354	)		—			(569	)		—
Other income (expense), net		878			146			2,290			775
Income before income taxes		72,837			47,236			200,301			142,411
Provision for income taxes		15,482			(5,042	)		51,016			25,517
Net income	$	57,355		$	52,278		$	149,285		$	116,894
Earnings per share, basic	$	0.99		$	0.90		$	2.57		$	2.02
Earnings per share, diluted	$	0.99		$	0.90		$	2.57		$	2.01
Weighted average shares outstanding:
Basic		57,969			57,853			57,992			57,797
Diluted		58,067			58,092			58,186			58,135
Comprehensive earnings (loss):
Net income	$	57,355		$	52,278		$	149,285		$	116,894
Unrealized net gains (losses) on available-for-sale securities		(654	)		—			(2,176	)		—
Tax effect		173			—			576			—
Other comprehensive income (loss), net of tax		(481	)		—			(1,600	)		—
Comprehensive earnings (loss)	$	56,874		$	52,278		$	147,685		$	116,894

	Common Stock				Additional			Retained		Accumulated Other			Treasury Stock					Total
	Shares		Amount		Paid-in Capital			Earnings		Comprehensive Loss			Shares		Amount			Stockholders’ Equity
Balances at December 31, 2020		61,861	$	618	$	357,908		$	719,619	$	—			4,122	$	(422,502	)	$	655,643
Vesting of restricted stock		3		—		—			—		—			—		—			—
Stock-based compensation		—		—		25,594			—		—			—		—			25,594
Repurchases of common stock		—		—		—			—		—			1		(377	)		(377	)
Net income		—		—		—			64,616		—			—		—			64,616
Balances at March 31, 2021		61,864	$	618	$	383,502		$	784,235	$	—			4,123	$	(422,879	)	$	745,476
Vesting of restricted stock		271		3		(3	)		—		—			—		—			—
Stock-based compensation		—		—		26,480			—		—			—		—			26,480
Repurchases of common stock		—		—		—			—		—			94		(31,978	)		(31,978	)
Net income		—		—		—			52,278		—			—		—			52,278
Balances at June 30, 2021		62,135	$	621	$	409,979		$	836,513	$	—			4,217	$	(454,857	)	$	792,256

	Common Stock				Additional			Retained		Accumulated Other			Treasury Stock					Total
	Shares		Amount		Paid-in Capital			Earnings		Comprehensive Loss			Shares		Amount			Stockholders’ Equity
Balances at December 31, 2021		62,298	$	623	$	465,594		$	915,579	$	—			4,286	$	(488,082	)	$	893,714
Vesting of restricted stock		4		—		—			—		—			—		—			—
Stock-based compensation		—		—		24,713			—		—			—		—			24,713
Repurchases of common stock		—		—		—			—		—			1		(218	)		(218	)
Net income		—		—		—			91,930		—			—		—			91,930
Other comprehensive earnings (loss), net of tax		—		—		—			—		(1,119	)		—		—			(1,119	)
Balances at March 31, 2022		62,302	$	623	$	490,307		$	1,007,509	$	(1,119	)		4,287	$	(488,300	)	$	1,009,020
Vesting of restricted stock		212		2		(2	)		—		—			—		—			—
Stock-based compensation		—		—		27,472			—		—			—		—			27,472
Repurchases of common stock		—		—		—			—		—			363		(99,227	)		(99,227	)
Net income		—		—		—			57,355		—			—		—			57,355
Other comprehensive earnings (loss), net of tax		—		—		—			—		(481	)		—		—			(481	)
Balances at June 30, 2022		62,514	$	625	$	517,777		$	1,064,864	$	(1,600	)		4,650	$	(587,527	)	$	994,139

Large accelerated filer ☒	Accelerated filer	☐

Non-accelerated filer ☐	Smaller reporting company	☐

	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Unaudited Consolidated Balance Sheets	3
	Unaudited Consolidated Statements of Comprehensive Income	4
	Unaudited Consolidated Statements of Stockholders’ Equity	5
	Unaudited Consolidated Statements of Cash Flows	6
	Notes to the Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 6.	Exhibits	35
Signatures		37