What changed in this filing

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Item 1. Financial Statements

2021-11-04 compared with 2021-08-05 · 117 added, 81 removed, 477 unchanged (29% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

June 30, 2021

September 30, 2021

December 31, 2020

30 unchanged sentences

Stockholders’ equity:

Common stock, $ 0.01 par value ( 100,000 shares authorized, 62,135 and 61,861 shares issued at June 30, 2021 and December 31, 2020, respectively;

57,918 and 57,739 shares outstanding at June 30, 2021 and December 31, 2020, respectively)

Common stock, $ 0.01 par value ( 100,000 shares authorized, 62,275 and 61,861 shares issued at September 30, 2021 and December 31, 2020, respectively;

57,997 and 57,739 shares outstanding at September 30, 2021 and December 31, 2020, respectively)

Additional paid-in capital

Retained earnings

Treasury stock, at cost ( 4,217 and 4,122 shares at June 30, 2021 and December 31, 2020, respectively)

Treasury stock, at cost ( 4,278 and 4,122 shares at September 30, 2021 and December 31, 2020, respectively)

Total stockholders’ equity

4 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Implementation and other

15 unchanged sentences

Income before income taxes

Provision (benefit) for income taxes

Provision for income taxes

Earnings per share, basic

17 unchanged sentences

Balances at June 30, 2020

Vesting of restricted stock

Stock-based compensation

Repurchases of common stock

Balances at September 30, 2020

Treasury Stock

10 unchanged sentences

Balances at June 30, 2021

Vesting of restricted stock

Stock-based compensation

Repurchases of common stock

Balances at September 30, 2021

See accompanying notes to the unaudited consolidated financial statements.

2 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities

23 unchanged sentences

Proceeds from maturities of short-term investments from funds held for clients

Purchases of intangible assets

Purchases of property and equipment

10 unchanged sentences

Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period

Six Months Ended June 30,

Nine Months Ended September 30,

Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents

25 unchanged sentences

These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes presented in the Form 10-K.

The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results expected for the full year.

The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results expected for the full year.

Recently Adopted Accounting Pronouncements

20 unchanged sentences

Significant estimates include income taxes, loss contingencies, the useful life of property and equipment, the life of our client relationships, the fair value of our stock-based awards and the fair value of our financial instruments, intangible assets and goodwill.

These estimates are based on historical experience where applicable and other assumptions that management believes are reasonable under the circumstances.

Actual results could materially differ from these estimates.

These estimates are based on

Paycom Software, Inc.

1 unchanged sentence

(tabular dollars and shares in thousands, except per share amounts)

historical experience where applicable and other assumptions that management believes are reasonable under the circumstances.

Actual results could materially differ from these estimates.

Prior Period Reclassifications

15 unchanged sentences

The client funds obligation represents liabilities that will be repaid within one year of the consolidated balance sheet date.

As of June 30, 2021 and December 31, 2020, the funds held for clients were invested in money market funds, demand deposit accounts, commercial paper with a maturity duration less than three months and certificates of deposit.

As of September 30, 2021 and December 31, 2020, the funds held for clients were invested in money market funds, demand deposit accounts, commercial paper with a maturity duration less than three months and certificates of deposit.

Short-term investments in commercial paper and certificates of deposit with an original maturity duration greater than three months are classified as available-for-sale securities, and are also included within the funds held for clients line item in the consolidated balance sheets.

1 unchanged sentence

Funds held for clients are classified as a current asset in the consolidated balance sheets because the funds are held solely to satisfy the client funds obligation.

Additionally, the funds held for clients is classified as restricted cash and restricted cash equivalents and presented within the reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents on the consolidated statements of cash flows.

Stock Repurchase Plan

2 unchanged sentences

Most recently, in May 2021, our Board of Directors authorized the repurchase of up to $ 300.0 million of our common stock.

As of June 30, 2021, there was $ 299.5 million available for repurchases under our stock repurchase plan.

As of September 30, 2021, there was $ 270.7 million available for repurchases under our stock repurchase plan.

Our stock repurchase plan may be suspended or discontinued at any time.

1 unchanged sentence

The current stock repurchase plan will expire on May 13, 2023 .

During the six months ended June 30, 2021, we repurchased an aggregate of 94,997 shares of our common stock at an average cost of $ 340.59 per share, all of which were shares withheld to satisfy tax withholding obligations for certain employees upon the vesting of restricted stock.

During the nine months ended September 30, 2021, we repurchased an aggregate of 155,575 shares of our common stock at an average cost of $ 393.05 per share, all of which were shares withheld to satisfy tax withholding obligations for certain employees upon the vesting of restricted stock.

Recently Issued Accounting Pronouncements

2 unchanged sentences

ASU 2020-04 provides temporary optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships and other transactions affected by reference rate reform.

Our interest-bearing notes bear interest, at our option, at either (a) a prime rate plus 1.0 % or (b) fluctuating interest rates based on LIBOR.

If LIBOR ceases to exist, we may need to renegotiate our loan documents and we cannot predict what alternative index would be negotiated with our lenders.

ASU 2020-04 is currently effective and upon adoption may be

GAAP to contracts, hedging relationships and other transactions

Paycom Software, Inc.

1 unchanged sentence

(tabular dollars and shares in thousands, except per share amounts)

applied prospectively to contract modifications made on or before December 31, 2022.

affected by reference rate reform.

Our interest-bearing notes bear interest , at our option, at either (a) a prime rate plus 1.0 % or (b) fluctuating interest rates based on a one-month USD LIBOR rate .

Once the one-month USD LIBOR rate ceases to exist, we will have to renegotiate our loan documents and cannot currently predict what alternative index will be negotiated with our lenders.

While ASU 2020-04 is currently effective , we plan to adopt and apply ASU 2020-04 prospectively to contract modifications made on or before December 31, 2022.

We are currently assessing the impact that this guidance will have on our consolidated financial statements .

38 unchanged sentences

Therefore, we do not recognize a contract asset or liability resulting from the timing of revenue recognition and invoicing.

Changes in deferred revenue related to material right performance obligations as of June 30, 2021 and 2020 were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Changes in deferred revenue related to material right performance obligations as of September 30, 2021 and 2020 were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Balance, beginning of period

19 unchanged sentences

The following tables present the asset balances and related amortization expense for these contract costs:

As of and for the Three Months Ended June 30, 2021

As of and for the Three Months Ended September 30, 2021

Capitalization

1 unchanged sentence

Costs to fulfill a contract

As of and for the Three Months Ended June 30, 2020

As of and for the Three Months Ended September 30, 2020

Capitalization

1 unchanged sentence

Costs to fulfill a contract

As of and for the Six Months Ended June 30, 2021

As of and for the Nine Months Ended September 30, 2021

Capitalization

1 unchanged sentence

Costs to fulfill a contract

As of and for the Six Months Ended June 30, 2020

As of and for the Nine Months Ended September 30, 2020

Capitalization

3 unchanged sentences

Property and equipment and accumulated depreciation and amortization were as follows:

June 30, 2021

September 30, 2021

December 31, 2020

8 unchanged sentences

We capitalize computer software development costs related to software developed for internal use in accordance with ASC 350-40.

For the three and six months ended June 30, 2021, we capitalized $ 13.7 million and $ 26.0 million, respectively, of computer software development costs related to software developed for internal use.

For the three and six months ended June 30, 2020, we capitalized $ 11.0 million and $ 20.7 million, respectively, of computer software development costs related to software developed for internal use.

For the three and nine months ended September 30, 2021, we capitalized $ 13.2 million and $ 39.2 million, respectively, of computer software development costs related to software developed for internal use.

For the three and nine months ended September 30, 2020, we capitalized $ 11.7 million and $ 32.4 million, respectively, of computer software development costs related to software developed for internal use.

Rental clocks included in property and equipment, net represent time clocks issued to clients under month-to-month operating leases.

4 unchanged sentences

We capitalize interest incurred for indebtedness related to construction in progress.

For the three and six months ended June 30, 2021, we incurred interest costs of $ 0.3 million and $ 0.7 million, respectively, of which we capitalized $ 0.3 million and $ 0.7 million, respectively.

For the three and six months ended June 30, 2020, we incurred interest costs of $ 0.4 million and $ 0.8 million, respectively, of which we capitalized $ 0.4 million and $ 0.8 million, respectively.

Included in the construction in progress balance at June 30, 2021 and December 31, 2020 is $ 3.9 million and $ 3.5 million in retainage, respectively.

Depreciation and amortization expense for property and equipment was $ 15.6 million and $ 30.5 million, respectively, for the three and six months ended June 30, 2021.

Depreciation and amortization expense for property and equipment was $ 13.0 million and $ 25.2 million, respectively, for the three and six months ended June 30, 2020.

For the three and nine months ended September 30, 2021, we incurred interest costs of $ 0.4 million and $ 1.1 million, respectively, of which we capitalized $ 0.4 million and $ 1.1 million, respectively.

For the three and nine months ended September 30, 2020, we incurred interest costs of $ 0.4 million and $ 1.1 million, respectively, of which we capitalized $ 0.4 million and $ 1.1 million, respectively.

Included in the construction in progress balance at September 30, 2021 and December 31, 2020 is $ 3.4 million and $ 3.5 million in retainage, respectively.

Depreciation and amortization expense for property and equipment was $ 16.3 million and $ 46.8 million, respectively, for the three and nine months ended September 30, 2021.

Depreciation and amortization expense for property and equipment was $ 13.8 million and $ 39.1 million, respectively, for the three and nine months ended September 30, 2020.

GOODWILL AND INTANGIBLE ASSETS, NET

As of both June 30, 2021 and December 31, 2020, goodwill was $ 51.9 million.

As of both September 30, 2021 and December 31, 2020, goodwill was $ 51.9 million.

We have selected June 30 as our annual goodwill impairment testing date.

We performed a qualitative analysis of the fair value of our goodwill and determined there was no impairment as of June 30, 2021.

As of June 30, 2021 and December 31, 2020, there were no indicators of impairment.

As of September 30, 2021 and December 31, 2020, there were no indicators of impairment.

In connection with our marketing initiatives, we have purchased the naming rights to the downtown Oklahoma City arena that is home to the Oklahoma City Thunder National Basketball Association franchise.

Under the terms of the naming rights agreement, we have committed to make estimated payments escalating annually from $ 4.0 million to $ 6.1 million through 2035.

Under the terms of the naming rights agreement, we have committed to make payments escalating annually from $ 4.0 million in 2021 to $ 6.1 million in 2035.

We also made a $ 1.5 million one-time payment in July 2021 to cover sponsorship rights leading up to the 2021-2022 season.

Upon the conclusion of the initial term, the agreement may be extended upon the mutual agreement of both parties for an additional five-year period.

The cost of the naming rights has been recorded as an intangible asset with an offsetting liability as of the date of the contract.

The intangible asset is being amortized over the life of the agreement on a straight line basis commencing in June 2021.

The offsetting liability is being relieved through sales and marketing expense using the effective interest method over the life of the agreement.

The intangible asset is being amortized over the life of the agreement on a straight line basis that commenced in June 2021.

The difference between the present value of the offsetting liability and actual cash payments is being relieved through sales and marketing expense using the effective interest method over the life of the agreement.

All of our intangible assets other than goodwill are considered to have definite lives and, as such, are subject to amortization.

The following table presents the components of intangible assets within our consolidated balance sheets:

June 30, 2021

September 30, 2021

Weighted Average Remaining

2 unchanged sentences

Weighted Average Remaining

Amortization of intangible assets for the three and six months ended June 30, 2021 was $ 0.4 million and $ 0.4 million, respectively.

Amortization of intangible assets for the three and six months ended June 30, 2020 was less than $ 0.1 million and $ 0.1 million, respectively.

We estimate the aggregate amortization expense will be $ 2.1 million for the remainder of 2021, $ 4.0 million for 2022, and $ 3.9 million for 2023, 2024, 2025 and 2026, respectively.

Amortization of intangible assets for the three and nine months ended September 30, 2021 was $ 1.1 million and $ 1.5 million, respectively.

Amortization of intangible assets for the three and nine months ended September 30, 2020 was less than $ 0.1 million and $ 0.2 million, respectively.

We estimate the aggregate amortization expense will be $ 1.0 million for the remainder of 2021, $ 4.0 million for 2022, and $ 3.9 million for each of 2023, 2024, 2025 and 2026, respectively.

Paycom Software, Inc.

3 unchanged sentences

Long-term debt consisted of the following:

June 30, 2021

September 30, 2021

December 31, 2020

7 unchanged sentences

The Term Loans mature on September 7, 2025 and bear interest, at our option, at either (a) a prime rate plus 1.0 % or (b) an adjusted LIBOR rate for the interest period in effect for such Term Loan plus 1.5 %.

As of June 30, 2021, our long-term indebtedness consisted solely of the Term Loans made under the Term Credit Agreement.

Unamortized debt issuance costs of $ 0.2 million as of both June 30, 2021 and December 31, 2020 are presented as a direct deduction from the carrying amount of the debt liability.

As of September 30, 2021, our long-term indebtedness consisted solely of the Term Loans made under the Term Credit Agreement.

Unamortized debt issuance costs of $ 0.1 million and $ 0.2 million as of September 30, 2021 and as of December 31, 2020, respectively, are presented as a direct deduction from the carrying amount of the debt liability.

Under the Term Credit Agreement, we are subject to two material financial covenants, which require us to maintain a fixed charge coverage ratio of not less than 1.25 to 1.0 and a funded indebtedness to EBITDA ratio of not greater than 2.0 to 1.0.

As of June 30, 2021, we were in compliance with these covenants.

As of September 30, 2021, we were in compliance with these covenants.

On February 12, 2018 , we entered into a senior secured revolving credit agreement (the “Revolving Credit Agreement”) with JPMorgan Chase Bank, N.A.

9 unchanged sentences

Letters of credit are to be issued only to support our business operations.

As of June 30, 2021, we did no t have any borrowings outstanding under the Facility.

As of September 30, 2021, we did no t have any borrowings outstanding under the Facility.

Under the Revolving Credit Agreement, we are required to maintain a fixed charge coverage ratio of not less than 1.25 to 1.0 and a funded indebtedness to EBITDA ratio of not greater than 2.0 to 1.0 .

Additionally, the Revolving Credit Agreement contains customary affirmative and negative covenants, including covenants limiting our ability to, among other things, grant liens, incur debt, effect certain mergers, make certain investments, dispose of assets, enter into certain transactions, including swap agreements and sale and leaseback transactions, pay dividends or distributions on our capital stock, and enter into transactions with affiliates, in each case subject to customary exceptions for a facility of the size and type of the Facility.

As of June 30, 2021, we were in compliance with all covenants related to the Revolving Credit Agreement.

As of June 30, 2021 and December 31, 2020, the carrying value of our total long-term debt approximated its fair value as of such date.

As of September 30, 2021, we were in compliance with all covenants related to the Revolving Credit Agreement.

As of September 30, 2021 and December 31, 2020, the carrying value of our total long-term debt approximated its fair value as of such date.

The fair value of our long-term debt is estimated based on the borrowing rates currently available to us for bank loans with similar terms and maturities.

10 unchanged sentences

therefore, changes in the fair value of the derivative instrument are recognized in our consolidated statements of income within Other income (expense), net.

The objective of the interest rate swap is to reduce the variability in the forecasted interest payments of the Term Loans, which is based on a one-month LIBOR rate versus a fixed interest rate of 2.54 % on a notional value of $ 35.5 million.

The objective of the interest rate swap is to reduce the variability in the forecasted interest payments of the Term Loans, which is based on a one-month USD LIBOR rate versus a fixed interest rate of 2.54 % on a notional value of $ 35.5 million.

Under the terms of the interest rate swap agreement, we receive quarterly variable interest payments based on the LIBOR rate and pay interest at a fixed rate.

The interest rate swap agreement has a maturity date of September 7, 2025 .

For the three and six months ended June 30, 2021, we recorded gains of less than $ 0.1 million and $ 0.7 million, respectively, for the change in fair value of the interest rate swap, and for the three and six months ended June 30, 2020, we recorded losses of $ 0.1 million and $ 1.7 million, respectively, for the change in fair value of the interest rate swap.

For the three and nine months ended September 30, 2021, we recorded gains of $ 0.2 million and $ 0.9 million, respectively, for the change in fair value of the interest rate swap, and for the three months ended September 30, 2020, we recorded a gain of $ 0.1 million and for the nine months ended September 30, 2020, we recorded a loss of $ 1.6 million, for the change in fair value of the interest rate swap.

The change in the fair value of the interest rate swap is included in Other income (expense), net in the consolidated statements of income.

6 unchanged sentences

These available-for-sale securities are recognized in the consolidated balance sheets at fair value, which approximates the amortized cost of the securities.

All of our available-for-sale securities had expected maturity dates of twelve months or less at June 30, 2021.

All of our available-for-sale securities had expected maturity dates of twelve months or less at September 30, 2021.

As discussed in Note 7, during the year ended December 31, 2017, we entered into an interest rate swap.

7 unchanged sentences

(tabular dollars and shares in thousands, except per share amounts)

Included in the following tables are the Company’s major categories of assets and liabilities measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020:

June 30, 2021

Included in the following tables are the Company’s major categories of assets and liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020:

September 30, 2021

Commercial paper

11 unchanged sentences

The QACA matching contributions as well as the discretionary matching and profit sharing contributions vest 100 % after two years of employment from the date of hire.

Matching contributions were $ 2.6 million and $ 5.9 million for the three and six months ended June 30, 2021, respectively.

Matching contributions were $ 2.2 million and $ 4.4 million for the three and six months ended June 30, 2020, respectively.

Matching contributions were $ 2.9 million and $ 8.8 million for the three and nine months ended September 30, 2021, respectively.

Matching contributions were $ 1.9 million and $ 6.3 million for the three and nine months ended September 30, 2020, respectively.

The ESPP has overlapping offering periods, with each offering period lasting approximately 24 months.

4 unchanged sentences

The maximum aggregate number of shares of the Company’s common stock that may be purchased by all participants under the ESPP is 2.0 million shares.

Eligible employees purchased 24,717 and 32,764 shares of the Company’s common stock under the ESPP during the six months ended June 30, 2021 and 2020, respectively.

Eligible employees purchased 31,824 and 42,966 shares of the Company’s common stock under the ESPP during the nine months ended September 30, 2021 and 2020, respectively.

Compensation expense related to the ESPP is recognized on a straight-line basis over the requisite service period.

Our compensation expense related to the ESPP was $ 0.7 million and $ 1.4 million for the three and six months ended June 30, 2021, respectively.

Our compensation expense related to the ESPP was $ 0.4 million and $ 0.8 million for the three and six months ended June 30, 2020, respectively.

Our compensation expense related to the ESPP was $ 0.6 million and $ 2.0 million for the three and nine months ended September 30, 2021, respectively.

Our compensation expense related to the ESPP was $ 0.7 million and $ 1.5 million for the three and nine months ended September 30, 2020, respectively.

EARNINGS PER SHARE

9 unchanged sentences

The following is a reconciliation of net income and the shares of common stock used in the computation of basic and diluted earnings per share:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

income allocable to participating securities

9 unchanged sentences

Restricted Stock Awards

During the six months ended June 30, 2021, we issued an aggregate of 176,060 restricted shares of common stock to certain non-executive employees and non-employee members of our board of directors under the Paycom Software, Inc.

During the nine months ended September 30, 2021, we issued an aggregate of 180,735 restricted shares of common stock to certain non-executive employees and non-employee members of our board of directors under the Paycom Software, Inc.

2014 Long-Term Incentive Plan (the “LTIP”), consisting of 42,934 shares subject to market-based vesting conditions (“Market-Based Shares”) and 137,801 shares subject to time-based vesting conditions (“Time-Based Shares”).

3 unchanged sentences

Such shares of restricted stock will cliff-vest on the seventh day following the first anniversary of the date of 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 LTIP and the applicable restricted stock award agreement .

In September 2021, Janet Haugen tendered her resignation from our Board of Directors.

As a result of Ms.

Haugen’s resignation, the compensation committee of the Board of Directors determined to accelerate the vesting of 297 shares of Ms.

Haugen’s unvested shares of restricted stock, which was approximately one-half of the shares of restricted stock awarded to Ms.

Haugen in 2021.

Subsequent to Ms.

Haugen’s resignation, the Board of Directors appointed Sharen Turney to serve as a Class I director to fill the resulting vacancy.

Turney received a prorated portion of the standard compensation package for the Company’s non-management directors, which included 230 shares of restricted stock, and which will vest on May 10, 2022.

Paycom Software, Inc.

1 unchanged sentence

(tabular dollars and shares in thousands, except per share amounts)

The following table summarizes restricted stock awards activity for the six months ended June 30, 2021:

The following table summarizes restricted stock awards activity for the nine months ended September 30, 2021:

Restricted Stock Awards

5 unchanged sentences

Unvested shares of restricted stock outstanding at December 31, 2020

Unvested shares of restricted stock outstanding at June 30, 2021

Unvested shares of restricted stock outstanding at September 30, 2021

The following table summarizes vesting activity for Market-Based Shares during the nine months ended September 30, 2021, the associated compensation cost recognized in connection with each vesting event and the number of shares withheld to satisfy tax withholding obligations:

Vesting Condition

Number of Shares

Cost Recognized

Shares Withheld

Market-based (Total Enterprise Value = $ 27.7 billion)

September 11, 2021

All shares withheld to satisfy tax withholding obligations are held as treasury stock.

Performance-Based Restricted Stock Units

14 unchanged sentences

York, to, among other things, reflect the change in Mr.

York’s role, eliminate certain executive-level benefits and remove the termination and severance provisions, and (ii) forfeits and releases the PSU award granted to Mr.

York’s role, eliminate

Paycom Software, Inc.

Notes to the Unaudited Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share amounts)

certain executive-level benefits and remove the termination and severance provisions, and (ii) forfeit s and release s the PSU award granted to Mr.

York on February 10, 2021.

5 unchanged sentences

Faurot received 5,445 target PSUs that will vest based on the Company’s total stockholder return relative to a peer group of 34 publicly traded companies, subject to the terms and conditions of the LTIP and the PSU Award Agreement.

Paycom Software, Inc.

Notes to the Unaudited Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share amounts)

The following table summarizes PSU activity for the six months ended June 30, 2021:

The following table summarizes PSU activity for the nine months ended September 30, 2021:

Weighted Average

1 unchanged sentence

Unvested PSUs outstanding at December 31, 2020

Unvested PSUs outstanding at June 30, 2021 (1)

Unvested PSUs outstanding at September 30, 2021 (1)

A maximum of 92,814 units could be awarded based upon Paycom’s Relative TSR over the applicable performance periods.

For the three and six months ended June 30, 2021, our total compensation expense related to restricted stock awards and PSU awards, in the aggregate, was $ 23.8 million and $ 47.4 million, respectively.

For the three and six months ended June 30, 2020, our total compensation expense related to restricted stock awards and PSU awards, in the aggregate, was $ 21.2 million and $ 37.0 million, respectively.

The following table presents the unrecognized compensation cost and the related weighted average recognition period associated with unvested restricted stock awards and unvested PSU awards as of June 30, 2021.

For the three and nine months ended September 30, 2021, our total compensation expense related to restricted stock awards and PSU awards, in the aggregate, was $ 29.0 million and $ 76.4 million, respectively.

For the three and nine months ended September 30, 2020, our total compensation expense related to restricted stock awards and PSU awards, in the aggregate, was $ 19.5 million and $ 56.5 million, respectively.

Restricted Stock

1 unchanged sentence

Weighted average period for recognition (years)

We capitalized stock-based compensation costs related to software developed for internal use of $ 1.9 million and $ 3.4 million for the three and six months ended June 30, 2021, respectively.

We capitalized stock-based compensation costs related to software developed for internal use of $ 2.1 million and $ 3.7 million for the three and six months ended June 30, 2020, respectively.

We capitalized stock-based compensation costs related to software developed for internal use of $ 1.7 million and $ 5.1 million for the three and nine months ended September 30, 2021, respectively.

We capitalized stock-based compensation costs related to software developed for internal use of $ 1.6 million and $ 5.3 million for the three and nine months ended September 30, 2020, respectively.

COMMITMENTS AND CONTINGENCIES

5 unchanged sentences

This issue did not have a material impact on our financial results for any prior period.

In connection with this matter, we have agreed to pay a total of $ 0.25 million to the SEC to settle two accounting-related charges concerning our books and records and internal controls.

We have neither admitted nor denied the SEC’s findings with respect to these charges.

In connection with this matter, we paid a total of $ 0.25 million to the SEC to settle two accounting-related charges concerning our books and records and internal controls.

We neither admitted nor denied the SEC’s findings with respect to these charges.

We are involved in various legal proceedings in the ordinary course of business.

Although we cannot predict the outcome of these proceedings, legal matters are subject to inherent uncertainties and there exists the possibility that the ultimate resolution of these matters could have a material adverse effect on our business, financial condition, results of operations and cash flows.

The Company’s effective income tax rate was 17.9 % and 20.4 % for the six months ended June 30, 2021 and 2020, respectively.

The lower effective tax rate for the six months ended June 30, 2021 is primarily related to an increase in excess tax benefits from stock-based compensation.

Paycom Software, Inc.

Notes to the Unaudited Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share amounts)

The Company’s effective income tax rate was 20.8 % and 20.3 % for the nine months ended September 30, 2021 and 2020, respectively.

The higher effective income tax rate for the nine months ended September 30, 2021 is primarily related to a decrease in excess tax benefits from stock-based compensation.

SUBSEQUENT EVENTS

On October 30, 2021, the Company’s VWAP value exceeded $ 520 per share, which resulted in the vesting of 18,727 Market-Based Shares issued on February 5, 2021.

For additional information on our stock-based compensation, see “Note 11.

Stock-Based Compensation” in this Form 10-Q.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements