What changed in this filing

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Item 1. Financial Statements

2022-08-04 compared with 2022-05-05 · 199 added, 143 removed, 454 unchanged (43% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

March 31, 2022

June 30, 2022

December 31, 2021

14 unchanged sentences

Accounts payable

Income tax payable

Accrued commissions and bonuses

14 unchanged sentences

Stockholders’ equity:

Common stock, $ 0.01 par value ( 100,000 shares authorized, 62,302 and 62,298 shares issued at March 31, 2022 and December 31, 2021, respectively;

58,015 and 58,012 shares outstanding at March 31, 2022 and December 31, 2021, respectively)

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)

Additional paid-in capital

1 unchanged sentence

Accumulated other comprehensive earnings (loss)

Treasury stock, at cost ( 4,287 and 4,286 shares at March 31, 2022 and December 31, 2021, respectively)

Treasury stock, at cost 4,650 and 4,286 shares at June 30, 2022 and December 31, 2021, respectively)

Total stockholders’ equity

4 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Implementation and other

37 unchanged sentences

Balances at March 31, 2021

Vesting of restricted stock

Stock-based compensation

Repurchases of common stock

Balances at June 30, 2021

Accumulated Other

9 unchanged sentences

Balances at March 31, 2022

Vesting of restricted stock

Stock-based compensation

Repurchases of common stock

Other comprehensive earnings (loss), net of tax

Balances at June 30, 2022

See accompanying notes to the unaudited consolidated financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

7 unchanged sentences

Cash paid for derivative settlement

(Gain)/loss on derivative

Gain on derivative

Deferred income taxes, net

14 unchanged sentences

Purchases of property and equipment

Net cash provided by (used in) investing activities

Net cash used in investing activities

Cash flows from financing activities

Proceeds from issuance of debt

Repurchases of common stock

Withholding taxes paid related to net share settlements

1 unchanged sentence

Net change in client funds obligation

Net cash provided by (used in) financing activities

Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents

Payment of debt issuance costs

Net cash provided by financing activities

Increase in cash, cash equivalents, restricted cash and restricted cash equivalents

Cash, cash equivalents, restricted cash and restricted cash equivalents

1 unchanged sentence

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

Three Months Ended March 31,

Six Months Ended June 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 months ended March 31, 2022 are not necessarily indicative of the results expected for the full year.

The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results expected for the full year.

Recently Adopted Accounting Pronouncements

22 unchanged sentences

Amounts collected by us from clients for their federal, state and local employment taxes are invested by us, and we earn interest on these funds during the interval between receipt and disbursement.

These investments are shown in our consolidated balance sheets as funds held for clients, and the offsetting liability for the tax filings is shown as client funds obligation.

These investments are shown in our consolidated balance sheets as funds held for clients, and the associated liability for the tax filings is shown as client funds obligation.

The liability is recorded in the accompanying consolidated balance sheets at the time we obtain the funds from clients.

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

As of March 31, 2022 and December 31, 2021, the funds held for clients were invested in money market funds, demand deposit accounts, commercial paper and certificates of deposit.

Additionally, as of March 31, 2022, the funds held for clients were invested in U.S.

As of June 30, 2022 and December 31, 2021, the funds held for clients were invested in money market funds, demand deposit accounts, commercial paper and certificates of deposit.

Additionally, as of June 30, 2022, the funds held for clients were invested in U.S.

treasury securities with an original maturity duration of greater than one year.

7 unchanged sentences

Since the initial authorization of the stock repurchase plan, our Board of Directors has amended and extended and authorized new stock repurchase plans from time to time.

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

As of March 31, 2022, there was $ 266.1 million available for repurchases under our stock repurchase plan.

Most recently, in June 2022, our Board of Directors authorized the repurchase of up to $ 550.0 million of our common stock.

As of June 30, 2022, there was $ 550.0 million available for repurchases under our stock repurchase plan.

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

The actual timing, number and value of shares repurchased depends on a number of factors, including the market price of our common stock, general market and economic conditions, shares withheld for taxes associated with the vesting of restricted stock and other corporate considerations.

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

During the three months ended March 31, 2022, we repurchased an aggregate of 594 shares of our common stock at an average cost of $ 366.49 per share, all of which were shares withheld to satisfy tax withholding obligations for certain employees upon the vesting of restricted stock.

The current stock repurchase plan will expire on June 7, 2024 .

During the six months ended June 30, 2022, we repurchased an aggregate of 363,569 shares of our common stock at an average cost of $ 273.52 per share, including 16,257 shares withheld to satisfy tax withholding obligations for certain employees upon the vesting of restricted stock.

Recently Issued Accounting Pronouncements

3 unchanged sentences

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

As of March 31, 2022, our interest-bearing notes bore 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.

When the one-month USD LIBOR rate ceased to exist, we would have had to renegotiate our loan documents.

As of June 30 2022, our floating-to-fixed interest rate swap remains outstanding to offset the rate variability associated with outstanding borrowings under the 2022 Facility (as defined in Note 6).

As further discussed in Note 7, 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.

When the one-month USD LIBOR rate ceases to exist, we will have to renegotiate our interest rate swap agreement.

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

As of March 31, 2022, there were no contract modifications that would have been impacted by ASU 2020-04.

As of June 30, 2022, there were no contract modifications that would have been impacted by ASU 2020-04.

In January 2021, the FASB issued ASU No.

1 unchanged sentence

ASU 2021-01 amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition.

ASU 2021-01 is currently effective and upon adoption may be applied to contract modifications that change the interest rate used for margining, discounting, or contract price alignment retrospectively as of any date from the beginning of the interim period that includes March 12, 2020, or prospectively to new modifications from any date within the interim

Paycom Software, Inc.

1 unchanged sentence

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

period that includes or is subsequent to January 7, 2021, up to the date that financial statements are available to be issued.

As of March 31, 2022, there were no contract modifications that would have been impacted by ASU 2021-01 .

beginning of the interim period that includes March 12, 2020, or prospectively to new modifications from any date within the interim period that includes or is subsequent to January 7, 2021, up to the date that financial statements are available to be issued.

As of June 3 0 , 2022, there were no contract modifications that would have been impacted by ASU 2021-01 .

Revenues are recognized when control of the promised goods or services is transferred to our clients in an amount that reflects the consideration we expect to be entitled to for those goods or services.

32 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 March 31, 2022 and 2021 were as follows:

Three Months Ended March 31,

Changes in deferred revenue related to material right performance obligations as of June 30, 2022 and 2021 were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Balance, beginning of period

15 unchanged sentences

Amortization expense related to costs to obtain and costs to fulfill a contract are included in the “sales and marketing” and “general and administrative” line items in the accompanying consolidated statements of comprehensive income.

Paycom Software, Inc.

Notes to the Unaudited Consolidated Financial Statements

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

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

As of and for the Three Months Ended March 31, 2022

As of and for the Three Months Ended June 30, 2022

Capitalization

1 unchanged sentence

Costs to fulfill a contract

As of and for the Three Months Ended March 31, 2021

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

Capitalization

1 unchanged sentence

Costs to fulfill a contract

Paycom Software, Inc.

Notes to the Unaudited Consolidated Financial Statements

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

As of and for the Six Months Ended June 30, 2022

Capitalization

Costs to obtain a contract

Costs to fulfill a contract

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

Capitalization

Costs to obtain a contract

Costs to fulfill a contract

PROPERTY AND EQUIPMENT

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

March 31, 2022

June 30, 2022

December 31, 2021

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 months ended March 31, 2022 and 2021, we capitalized $ 15.4 million and $ 12.3 million, respectively, of computer software development costs related to software developed for internal use.

For the three and six months ended June 30, 2022, we capitalized $ 16.4 million and $ 31.8 million, respectively, of computer software development costs related to software developed for internal use.

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.

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

As such, these items are transferred from inventory to property and equipment and depreciated over their estimated useful lives.

Paycom Software, Inc.

Notes to the Unaudited Consolidated Financial Statements

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

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

For the three months ended March 31, 2022 and 2021, we incurred interest costs of $ 0.3 million and $ 0.4 million, respectively, of which we capitalized $ 0.1 million and $ 0.4 million, respectively.

Included in the construction in progress balance at March 31, 2022 and December 31, 2021 is $ 0.4 million and $ 0.1 million in retainage, respectively.

Depreciation and amortization expense for property and equipment was $ 20.6 million and $ 14.9 million, for the three months ended March 31, 2022 and 2021, respectively.

For the three and six months ended June 30, 2022, we incurred interest costs of $ 0.6 million and $ 0.9 million, respectively, of which we capitalized $ 0.2 million and $ 0.3 million, respectively.

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.

Included in the construction in progress balance at June 30, 2022 and December 31, 2021 is $ 0.7 million and $ 0.1 million in retainage, respectively.

Depreciation and amortization expense for property and equipment was $ 21.6 million and $ 42.2 million, respectively, for the three and six months ended June 30, 2022.

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.

GOODWILL AND INTANGIBLE ASSETS, NET

As of both March 31, 2022 and December 31, 2021, goodwill was $ 51.9 million.

As of both June 30, 2022 and December 31, 2021, 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, 2022.

As of March 31, 2022 and December 31, 2021, there were no indicators of impairment.

As of June 30, 2022 and December 31, 2021, 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.

5 unchanged sentences

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.

Paycom Software, Inc.

Notes to the Unaudited Consolidated Financial Statements

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

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:

March 31, 2022

June 30, 2022

Weighted Average Remaining

3 unchanged sentences

Naming rights

Amortization of intangible assets for the three months ended March 31, 2022 and 2021 was $ 1.0 million and $ 0.1 million, respectively.

We estimate the aggregate amortization expense will be $ 3.0 million for the remainder of 2022 and $ 3.9 million for each of 2023, 2024, 2025, 2026 and 2027, respectively.

Amortization of intangible assets for the three and six months ended June 30, 2022 was $ 1.1 million and $ 2.1 million, respectively.

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

We estimate the aggregate amortization expense will be $ 2.0 million for the remainder of 2022 and $ 3.9 million for each of 2023, 2024, 2025, 2026 and 2027.

Paycom Software, Inc.

Notes to the Unaudited Consolidated Financial Statements

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

LONG-TERM DEBT, NET

Long-term debt consisted of the following:

March 31, 2022

June 30, 2022

December 31, 2021

2022 Revolving Credit Agreement due May 4, 2027

Net term note to bank due September 7, 2025

6 unchanged sentences

The 2017 Term Loans were due to mature on September 7, 2025 and bore 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 2017 Term Loan plus 1.5 %.

As of March 31, 2022, our long-term indebtedness consisted solely of the Term Loans made under the Term Credit Agreement.

Unamortized debt issuance costs of $ 0.1 million as of both March 31, 2022 and December 31, 2021, are presented as a direct deduction from the carrying amount of the debt liability.

Under the Term Credit Agreement, we were subject to two material financial covenants, which required 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 March 31, 2022, we were in compliance with these covenants.

As discussed below, the 2017 Term Loans were repaid in full on May 4, 2022 and the 2017 Term Credit Agreement was terminated.

At the time of payoff, unamortized debt issuance costs totaling $ 0.1 million were written off.

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

and Bank of America, N.A.

that provided for a senior secured revolving credit facility (the “2018 Facility”) in the aggregate principal amount of $ 50.0 million (the “2018 Revolving Commitment”), which could have been increased to up to $ 100.0 million, subject to obtaining additional lender commitments and certain approvals and satisfying certain other

The 2018 Facility included a $ 5.0 million sublimit for swingline loans and a $ 2.5 million sublimit for letters of credit.

The 2018 Facility was scheduled to mature on February 12, 2020 .

On April 15, 2019, we entered into the First Amendment to Revolving Credit Agreement, pursuant to which (i) Wells Fargo Bank, N.A., was added as a lender, (ii) the 2018 Revolving Commitment was increased to $ 75.0 million, which could have been further increased to $ 125.0 million subject to obtaining additional lender commitments and certain approvals and satisfying other conditions, and (iii) the scheduled maturity date of the 2018 Facility was extended to April 15, 2022 .

Pursuant to its terms, the 2018 Facility matured on April 15, 2022 .

At maturity, we did no t have any borrowings outstanding under the 2018 Facility.

On May 4, 2022 (the “May 2022 Facility Closing Date”), Paycom Payroll, LLC (the “Borrower”), Software, and certain other subsidiaries of Software (collectively, the “Guarantors,” and collectively with the Borrower, the “Loan Parties”), entered into a new credit agreement (as amended from time to time, the “May 2022 Revolving Credit Agreement”) with Bank of America, N.A., as a lender, swingline lender and letters of credit issuer, the lenders from time to time party thereto (collectively with Bank of America, N.A., the “May 2022 Lenders”), and Bank of America, N.A., as the administrative agent.

The May 2022 Revolving Credit Agreement provided for a senior secured revolving credit facility (the “May 2022 Facility”) in the initial aggregate principal amount of up to $ 250.0 million, and the ability to request an incremental facility of up to an additional $ 100.0 million, subject to obtaining additional lender commitments and certain approvals and satisfying certain other conditions.

The May 2022 Facility included a $ 25.0 million sublimit for swingline loans and a $ 2.5 million sublimit for letters of credit.

On June 7, 2022, the aggregate commitments under the May 2022 Revolving Credit Agreement were increased from $ 250.0 million to $ 350.0 million.

The May 2022 Facility was scheduled to mature on May 4, 2027 .

We had the option to borrow under the May 2022 Facility in the form of either base rate loans or Bloomberg Short-Term Bank Yield Index (“BSBY”) rate loans.

Each BSBY rate loan would bear interest at a rate per annum equal to the BSBY rate plus (i) 1.125 % if the Company’s consolidated leverage ratio was less than 1.0 to 1.0 or (ii) 1.375 % if the Company’s consolidated leverage ratio was greater than or equal to 1.0 to 1.0.

Each base rate loan would bear interest at a rate per annum equal to (x) a fluctuating rate of interest per annum equal to the highest of (i) the federal funds rate plus 0.50 %, (ii) the prime rate and (iii) the BSBY rate plus 1.0 %, subject to the interest rate floors set forth therein, plus (y) 0.125 % if the Company’s consolidated leverage ratio was less than 1.0 to 1.0, or (ii) 0.375 % if the Company’s consolidated leverage ratio was greater than or equal to 1.0 to 1.0.

We were required to pay a quarterly commitment fee at a rate of 0.20 % per annum on the daily amount of the undrawn portion of the revolving commitments under the May 2022 Facility.

We were also required to pay customary letter of credit fees upon drawing any letter of credit.

The May 2022 Facility provided for no scheduled principal amortization prior to the scheduled maturity date.

Subject to certain conditions set forth in the May 2022 Revolving Credit Agreement, we could borrow, prepay and reborrow under the May 2022 Facility and terminate or reduce the May 2022 Lenders’ commitments at any time prior to the scheduled maturity date.

Paycom Software, Inc.

1 unchanged sentence

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

The 2018 Facility include d a $ 5.0 million sublimit for swingline loans and a $ 2.5 million s ublimit for letters of credit.

The 2018 Facility was scheduled to mature on February 12, 2020 .

On April 15, 2019, we entered into the First Amendment to Revolving Credit Agreement , p ursuant to which (i) Wells Fargo Bank, N.A., was added as a lender , (ii) the 2018 Revolving Commitment was increased to $ 75.0 million, which could have been further increased to $ 125.0 million subject to obtaining additional lender commitments and certain approvals and satisfying other conditions , and ( i ii) t he scheduled maturity date of the 2018 Facility was extended to April 15, 2022 .

Borrowings under the 2018 Facility would generally have borne interest at a prime rate plus 1.0 % or, at our option, an adjusted LIBOR rate for the interest period in effect for such borrowing plus 1.5 %.

The proceeds of the loans and letters of credit under the 2018 Facility would have to have been used only for our general business purposes and working capital.

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

As of March 31, 2022, we did no t have any borrowings outstanding under the 2018 Facility.

Under the 2018 Revolving Credit Agreement, we were 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 2018 Revolving Credit Agreement contained 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 2018 Facility.

As of March 31, 2022, we were in compliance with all covenants related to the 2018 Revolving Credit Agreement.

Pursuant to its terms, the 2018 Facility matured on April 15, 2022 .

On May 4, 2022, we entered into the 2022 Revolving Credit Agreement (as defined in Note 15) and borrowed $ 29.0 million under the 2022 Facility (as defined in Note 15) to repay the Term Loans along with accrued interest, expenses and fees.

The proceeds of the loans and letters of credit under the May 2022 Facility were to be used for ongoing working capital and general corporate purposes and refinancing the 2017 Term Loans.

On the May 2022 Closing Date, we borrowed $ 29.0 million under the May 2022 Facility to repay the 2017 Term Loans, along with accrued interest, expenses and fees.

The loan on the May 2022 Facility Closing Date bore interest at the BSBY rate plus 1.125 %.

In connection with the repayment of the 2017 Term Loans, the 2017 Term Credit Agreement was terminated on May 4, 2022 .

See Note 15 for additional information regarding the 2022 Revolving Credit Agreement and 2022 Facility.

As of March 31, 2022 and December 31, 2021, the carrying value of our total long-term debt approximated its fair value as of such date.

Under the May 2022 Revolving Credit Agreement, we were required to maintain as of the end of each fiscal quarter a consolidated fixed charge coverage ratio of not less than 1.25 to 1.0 and a consolidated leverage ratio of not greater than 2.25 to 1.0.

Additionally, the May 2022 Revolving Credit Agreement contained customary affirmative and negative covenants, including covenants limiting our ability to, among other things, grant liens, incur debt, effect certain mergers, make 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 May 2022 Facility.

Our obligations under the May 2022 Facility were secured by a senior security interest in all personal property of the Loan Parties.

The events of default under the May 2022 Revolving Credit Agreement included, among others, payment defaults, breaches of covenants, defaults under the related loan documents, material misrepresentations, cross defaults with certain other material indebtedness, bankruptcy and insolvency events, judgment defaults and change in control events.

The occurrence of an event of default could have resulted in the acceleration of our obligations under the May 2022 Revolving Credit Agreement, the requirement to post cash collateral with respect to letters of credit, the termination of the May 2022 Lenders’ commitments and a 2.0 % increase in the rate of interest.

As of June 30, 2022, we had $ 29.0 million outstanding under the May 2022 Facility.

On July 29, 2022, we entered into the July 2022 Credit Agreement (as defined in Note 15) and borrowed $ 29.0 million under the July 2022 Term Loan Facility (as defined in Note 15) to repay the outstanding borrowings of $ 29.0 million under the May 2022 Facility along with accrued interest, expenses and fees.

In connection with the repayment, the May 2022 Revolving Credit Agreement was terminated on July 29, 2022 .

See Note 15 for additional information regarding the July 2022 Credit Agreement.

As of June 30, 2022 and December 31, 2021, 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

As further discussed in Note 6, on May 4, 2022, we repaid the Term Loans and terminated the Term Credit Agreement.

In connection with the repayment of the Term Loans, we borrowed funds under the 2022 Facility, as discussed in Note 15.

In connection with the repayment of the Term Loans, we borrowed funds under the 2022 Facility.

The interest rate swap remains outstanding to offset the interest rate variability associated with the outstanding borrowings under the 2022 Facility.

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

For the three months ended March 31, 2022 and 2021, we recorded gains of $ 1.3 million and $ 0.7 million, respectively, for the change in fair value of the interest rate swap.

For the three and six months ended June 30, 2022, we recorded gains of $ 0.4 million and $ 1.7 million, respectively, for the change in fair value of the interest rate swap, and 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.

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

4 unchanged sentences

The tables below present our cash and cash equivalents, the funds held for clients’ cash and cash equivalents as well as the investments that were included within funds held for clients on the consolidated balance sheets:

March 31, 2022

June 30, 2022

Type of issue

22 unchanged sentences

All available-for-sale securities were included within funds held for clients.

We did not make any reclassification adjustments out of accumulated other comprehensive income for realized gains or losses on the sale or maturity of available-for-sale securities for the three months ended March 31, 2022 or 2021.

There were no realized gains or losses on the sale of available-for-sale securities for the three months ended March 31, 2022 or 2021.

We regularly review the composition of our investment portfolio and did no t recognize any credit impairment losses during the three months ended March 31, 2022 or during the three months ended March 31, 2021.

All of our commercial paper securities held an A-2 rating or better as of March 31, 2022 and the U.S.

treasury securities held a rating of AAA as of March 31, 2022.

Expected maturities of available-for-sale securities at March 31, 2022 are as follows:

There were no realized gains or losses on the sale of available-for-sale securities for the six months ended June 30, 2022 or 2021.

We regularly review the composition of our investment portfolio and did no t recognize any credit impairment losses during the six months ended June 30, 2022 or during the six months ended June 30, 2021.

All of our commercial paper securities held an A-2 rating or better as of June 30, 2022 and the U.S.

treasury securities held a rating of AAA as of June 30, 2022.

Expected maturities of available-for-sale securities at June 30, 2022 are as follows:

Expected maturity

3 unchanged sentences

Total available-for-sale securities

Paycom Software, Inc.

Notes to the Unaudited Consolidated Financial Statements

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

FAIR VALUE OF FINANCIAL INSTRUMENTS

4 unchanged sentences

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.

These available-for-sale securities are recognized in the consolidated balance sheets at fair value, with the difference between the amortized cost and fair value of these available-for-sale securities recorded as unrealized net gains (losses) within comprehensive earnings (loss) in our consolidated statements of comprehensive income.

Paycom Software, Inc.

Notes to the Unaudited Consolidated Financial Statements

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

gains (losses) within comprehensive earnings (loss) in our consolidated statements of comprehensive income.

See Note 8 for additional information.

10 unchanged sentences

Level 3 – Unobservable inputs in which there is little or no market data

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 March 31, 2022 and December 31, 2021:

March 31, 2022

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, 2022 and December 31, 2021:

June 30, 2022

Commercial paper

6 unchanged sentences

Interest rate swap

Paycom Software, Inc.

Notes to the Unaudited Consolidated Financial Statements

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

EMPLOYEE SAVINGS PLAN AND EMPLOYEE STOCK PURCHASE PLAN

4 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 $ 3.5 million and $ 3.3 million for the three months ended March 31, 2022 and 2021, respectively.

Matching contributions were $ 3.1 million and $ 6.6 million for the three and six months ended June 30, 2022, respectively.

Matching contributions were $ 2.6 million and $ 5.9 million for the three and six months ended June 30, 2021, 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 19,133 and 15,762 shares of the Company’s common stock under the ESPP during the three months ended March 31, 2022 and 2021, respectively.

Eligible employees purchased 31,350 and 24,717 shares of the Company’s common stock under the ESPP during the six months ended June 30, 2022 and 2021, 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 $ 0.6 million and $ 0.7 million for the three months ended March 31, 2022 and 2021, respectively.

Our compensation expense related to the ESPP was $ 0.8 million and $ 1.4 million for the three and six months ended June 30, 2022, respectively.

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.

Paycom Software, Inc.

Notes to the Unaudited Consolidated Financial Statements

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

EARNINGS PER SHARE

5 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Basic weighted average shares outstanding

2 unchanged sentences

Earnings per share:

Paycom Software, Inc.

Notes to the Unaudited Consolidated Financial Statements

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

STOCK-BASED COMPENSATION

Restricted Stock Awards

During the three months ended March 31, 2022, we issued an aggregate of 209,203 restricted shares of common stock to certain non-executive employees under the Paycom Software, Inc.

2014 Long-Term Incentive Plan (as amended, the “LTIP”), consisting of 59,503 shares subject to market-based vesting conditions (“Market-Based Shares”) and 149,700 shares subject to time-based vesting conditions (“Time-Based Shares”).

During the six months ended June 30, 2022, we issued an aggregate of 404,250 restricted shares of common stock under the Paycom Software, Inc.

2014 Long-Term Incentive Plan (as amended, the “LTIP”), consisting of 59,503 shares subject to market-based vesting conditions (“Market-Based Shares”) and 344,747 shares subject to time-based or no vesting conditions (“Time-Based Shares”).

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 $ 484 per share and 50 % on the first date, if any, that the Company’s VWAP Value equals or exceeds $ 559 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 LTIP and the applicable restricted stock award agreement.

The majority of the Time-Based Shares will vest 21 % on a specified initial vesting date, 21 % on the first anniversary of such initial vesting date, 25 % on the second anniversary of such initial vesting date, and 33 % on the on the third anniversary of such initial vesting date, 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 LTIP and the applicable restricted stock award agreement.

The following table summarizes restricted stock awards activity for the three months ended March 31, 2022:

The Time-Based Shares granted to non-executive employees 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 LTIP and the applicable restricted stock award agreement.

Paycom Software, Inc.

Notes to the Unaudited Consolidated Financial Statements

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

The 344,747 Time-Based Shares mentioned above include an aggregate of 5,210 Time-Based Shares issued to the non-employee members of our Board of Directors in May 2022, all of which will cliff-vest on May 9, 2023, 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.

The following table summarizes restricted stock awards activity for the six months ended June 30, 2022:

Restricted Stock Awards

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Unvested shares of restricted stock outstanding at December 31, 2021

Unvested shares of restricted stock outstanding at March 31, 2022

Unvested shares of restricted stock outstanding at June 30, 2022

Performance-Based Restricted Stock Units

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The number of PSUs that will vest and be converted into shares of common stock will depend on the Company’s relative total stockholder return (“Relative TSR”), expressed as a percentile ranking of the Company’s total stockholder return (“TSR”) as compared to the Company’s peer group set forth in the PSU Award Agreement.

For purposes of the 2022 PSU Awards, TSR is determined by dividing (i) the sum of (A) the average daily volume weighted average price (or “VWAP” as defined in the PSU Award Agreement) of a share of the Company’s common stock or the common stock of a peer company, as applicable, during the final 60 trading day period of the applicable performance period, less (B) the average VWAP of a share of the Company’s common stock or the common stock of a peer company, as applicable, during the 60 trading day period ending on December 31, 2021, plus (C) the sum of all dividends which are paid by the Company (or the member of the peer group) to its stockholders, assuming such dividends are reinvested in the applicable company through the applicable performance period, by (ii) the average VWAP of a share of the Company’s common stock or the common stock of a peer company,

The Company’s peer group includes 35 publicly traded companies, which were reflective of the S&P 500 Software & Services index on the grant date.

On April 14, 2022, the Company announced the departure of Jon Evans from the position of Chief Operating Officer of the Company, effective April 14, 2022.

Justin Long, the Company’s Executive Vice President of Operations, will assume Mr.

Evans’s responsibilities.

In connection with Mr.

Evans’s departure, 5,663 of the Time-Based Shares previously granted to Mr.

Evans accelerated in vesting.

The PSUs granted to Mr.

Evans in 2021 and 2022 will remain eligible for vesting based on the Company’s actual performance, but pro-rated for the number of days Mr.

Evans was employed during the applicable two-year performance periods and three-year performance periods.

Paycom Software, Inc.

1 unchanged sentence

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

as applicable, during the 60 trading day period ending on December 31, 2021.

The Company’s peer group includes 35 publicly traded companies, which were reflective of the S&P 500 Software & Services index on the grant date .

The following table summarizes PSU activity for the three months ended March 31, 2022:

The following table summarizes PSU activity for the six months ended June 30, 2022:

Weighted Average

2 unchanged sentences

Unvested PSUs outstanding at December 31, 2021

Unvested PSUs outstanding at March 31, 2022 (1)

Unvested PSUs outstanding at June 30, 2022 (1)

A maximum of 194,478 units could be awarded based upon Paycom’s Relative TSR over the applicable performance periods.

For the three months ended March 31, 2022 and 2021, our total compensation expense related to restricted stock awards and PSU awards, in the aggregate, was $ 22.1 million and $ 23.6 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 March 31, 2022.

For the three and six months ended June 30, 2022, our total compensation expense related to restricted stock awards and PSU awards, in the aggregate, was $ 24.2 million and $ 46.3 million, respectively.

For the three and six months ended June 30, 2021, our total compensation expense related to restricted stock awards and PSU awards, in aggregate, was $ 23.8 million and $ 47.4 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 $ 1.5 million for the three months ended March 31, 2022 and 2021, respectively.

We capitalized stock-based compensation costs related to software developed for internal use of $ 2.3 million and $ 4.2 million for the three and six months ended June 30, 2022, respectively.

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.

COMMITMENTS AND CONTINGENCIES

1 unchanged sentence

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 27.9 % and 32.1 % for the three months ended March 31, 2022 and 2021, respectively.

The lower effective income tax rate for the three months ended March 31, 2022 is primarily related to a decrease in nondeductible expenses.

The Company’s effective income tax rate was 25.5 % and 17.9 % for the six months ended June 30, 2022 and 2021, respectively.

The increase in effective tax rate for the six months ended June 30, 2022 is primarily related to a decrease of excess tax benefits from stock-based compensation.

SUBSEQUENT EVENTS

Officer Transition

On April 14, 2022, the Company announced the departure of Jon Evans from the position of Chief Operating Officer of the Company, effective April 14, 2022.

Justin Long, the Company’s Executive Vice President of Operations, will assume Mr.

Evans’s responsibilities.

In connection with Mr.

Evans’s departure, 5,663 of the Time-Based Shares previously granted to Mr.

Evans accelerated in vesting.

The PSUs granted to Mr.

Evans in 2021 and 2022 will remain eligible for vesting based on the Company’s actual performance, but pro-rated for the number of days Mr.

Evans was employed during the applicable two-year performance periods and three-year performance periods.

Restricted Stock Awards

On July 22, 2022, we issued an aggregate of 16,287 restricted shares of common stock to certain non-executive employees under the LTIP consisting of Time-Based Shares that will vest in three or four tranches annually, beginning on the first anniversary of such initial vesting date, 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 LTIP and the applicable restricted stock award agreement.

Debt Agreements

As discussed in Note 6, on April 15, 2022, the 2018 Revolving Credit Agreement matured pursuant to its terms.

On May 4, 2022 (the “Closing Date”), Paycom Payroll, LLC (the “Borrower”), Software, and certain other subsidiaries of Software (collectively, the “Guarantors,” and collectively with the Borrower, the “Loan Parties”), entered into a new credit agreement

On July 29, 2022 (the “July 2022 Facility Closing Date”), the Borrower, Software, and certain other subsidiaries of Software entered into a new credit agreement (the “July 2022 Credit Agreement”) with JPMorgan Chase Bank, N.A., as a lender, swingline lender and issuing bank, the lenders from time to time party thereto (collectively with JPMorgan Chase Bank, N.A., the “July 2022 Lenders”), and JPMorgan Chase Bank, N.A., as the administrative agent.

The July 2022 Credit Agreement provides for a senior secured revolving credit facility (the “July 2022 Revolving Credit Facility”) in the aggregate principal amount of up to $ 650.0 million, and the ability to request an incremental facility of up to an additional $ 500.0 million, subject to obtaining additional lender commitments and certain approvals and satisfying certain other

Paycom Software, Inc.

1 unchanged sentence

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

(the “2022 Revolving Credit Agreement”) with Bank of America, N.A., as a lender, swingline lender and letters of credit issuer, the lenders from time to time party thereto (collectively with Bank of America, N.A., the “Lenders”), and Bank of America, N.A., as the administrative agent.

The 2022 Revolving Credit Agreement provides for a senior secured revolving credit facility (the “2022 Facility”) in the aggregate principal amount of up to $ 250.0 million, and the ability to request an incremental facility of up to an additional $ 100.0 million, subject to obtaining additional lender commitments and certain approvals and satisfying certain other conditions.

The 2022 Facility includes a $ 25.0 million sublimit for swingline loans and a $ 2.5 million sublimit for letters of credit.

The 2022 Facility is scheduled to mature on May 4, 2027 (the “Scheduled Maturity Date”).

We have the option to borrow under the 2022 Facility in the form of either base rate loans or Bloomberg Short-Term Bank Yield Index (“BSBY”) rate loans.

Each BSBY rate loan bears interest at a rate per annum equal to the BSBY rate plus (i) 1.125 % if the Company’s consolidated leverage ratio is less than 1.0 to 1.0 or (ii) 1.375 % if the Company’s consolidated leverage ratio is greater than or equal to 1.0 to 1.0.

Each base rate loan bears interest at a rate per annum equal to (x) a fluctuating rate of interest per annum equal to the highest of (i) the federal funds rate plus 0.50 %, (ii) the prime rate and (iii) the BSBY rate plus 1.0 %, subject to the interest rate floors set forth therein, plus (y) 0.125 % if the Company’s consolidated leverage ratio is less than 1.0 to 1.0, or (ii) 0.375 % if the Company’s consolidated leverage ratio is greater than or equal to 1.0 to 1.0.

We are required to pay a quarterly commitment fee at a rate of 0.20 % per annum on the daily amount of the undrawn portion of the revolving commitments under the 2022 Facility.

The July 2022 Credit Agreement includes a $ 25.0 million sublimit for swingline loans and a $ 6.5 million sublimit for letters of credit.

The July 2022 Credit Agreement also provides for a senior secured delayed draw term loan (the “July 2022 Term Loan Facility”) in the aggregate amount of up to $ 750.0 million.

All loans under the July 2022 Credit Agreement will mature on July 29, 2027 (the “Scheduled Maturity Date”).

The borrowings under the July 2022 Credit Agreement will bear interest at a rate per annum equal to (i) the Alternate Base Rate (“ABR”) plus an applicable margin (“ABR Loans”) or (ii) (x) the term Secured Overnight Financing Rate (“SOFR”) plus 0.10 % (the “Adjusted Term SOFR Rate”) or (y) the daily SOFR plus 0.10%, in each case plus an applicable margin (“SOFR Rate Loans”).

ABR is calculated as the highest of (i) the rate of interest last quoted by The Wall Street Journal in the United States as the prime rate in effect, (ii) the federal funds rate plus 0.5 % and (iii) the Adjusted Term SOFR Rate for a one-month interest period plus 1.00 %;

provided that, if the ABR as determined pursuant to the foregoing would be less than 1.00%, such rate shall be deemed to be 1.00%.

The applicable margin for ABR Loans is (i) 0.25 % if the Company’s consolidated leverage ratio is less than 1.0 to 1.0;

(ii) 0.50 % if the Company’s consolidated leverage ratio is greater than or equal to 1.0 to 1.0 but less than 2.0 to 1.0;

(iii) 0.75 % if the Company’s consolidated leverage ratio is greater than or equal to 2.0 to 1.0 but less than 3.0 to 1.0;

or (iv) 1.00 % if the Company’s consolidated leverage ratio is greater than or equal to 3.0 to 1.0.

The applicable margin for SOFR Rate Loans is (i) 1.25 % if the Company’s consolidated leverage ratio is less than 1.0 to 1.0;

(ii) 1.5 % if the Company’s consolidated leverage ratio is greater than or equal to 1.0 to 1.0 but less than 2.0 to 1.0;

(iii) 1.75 % if the Company’s consolidated leverage ratio is greater than 2.0 to 1.0 but less than 3.0 to 1.0;

or (iv) 2.00 % if the Company’s consolidated leverage ratio is greater than or equal to 3.0 to 1.0.

We are required to pay a quarterly commitment fee on the daily amount of the undrawn portion of the revolving commitments under the July 2022 Revolving Credit Facility and a quarterly ticking fee on the daily amount of the undrawn portion of the July 2022 Term Loan Facility, in each case at a rate per annum of (i) 0.20 % if the Company’s consolidated leverage ratio is less than 1.0 to 1.0;

(ii) 0.225 % if the Company’s consolidated leverage ratio is greater than or equal to 1.0 to 1.0 but less than 2.0 to 1.0;

(iii) 0.25 % if the Company’s consolidated leverage ratio is greater than or equal to 2.0 to 1.0 but less than 3.0 to 1.0;

or (iv) 0.275 % if the Company’s consolidated leverage ratio is greater than or equal to 3.0 to 1.0.

We are also required to pay customary letter of credit fees upon drawing any letter of credit.

The 2022 Facility provides for no scheduled principal amortization prior to the Scheduled Maturity Date.

Subject to certain conditions set forth in the 2022 Revolving Credit Agreement, we may borrow, prepay and reborrow under the 2022 Facility and terminate or reduce the Lenders’ commitments at any time prior to the Scheduled Maturity Date.

The proceeds of the loans and letters of credit under the 2022 Facility are to be used for ongoing working capital and general corporate purposes and refinancing the Term Loans.

On the Closing Date, we borrowed $ 29.0 million under the 2022 Facility to repay the Term Loans, along with accrued interest, expenses and fees.

The loan on the Closing Date bears interest at the BSBY rate plus 1.125 %.

In connection with the repayment of the Term Loans, the Term Credit Agreement was terminated on May 4, 2022 .

Under the 2022 Revolving Credit Agreement, we are required to maintain as of the end of each fiscal quarter a consolidated fixed charge coverage ratio of not less than 1.25 to 1.0 and a consolidated leverage ratio of not greater than 2.25 to 1.0.

Additionally, the 2022 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 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 2022 Facility.

Our obligations under the 2022 Facility are secured by a senior security interest in all personal property of the Loan Parties.

The events of default under the 2022 Revolving Credit Agreement include, among others, payment defaults, breaches of covenants, defaults under the related loan documents, material misrepresentations, cross defaults with certain other material indebtedness, bankruptcy and insolvency events, judgment defaults and change in control events.

The occurrence of an event of default could result in the acceleration of our obligations under the 2022 Revolving Credit Agreement, the requirement to post cash collateral with respect to letters of credit, the termination of the Lenders’ commitments and a 2.0 % increase in the rate of interest.

From time to time, the Lenders and certain of their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with the Company or the Company’s affiliates.

They have received, or may in the future receive, customary fees and commissions for these transactions.

Restricted Stock Awards

On April 22, 2022, we issued an aggregate of 45,303 restricted shares of common stock to certain non-executive employees under the LTIP consisting of Time-Based Shares that will vest in three or four equal tranches annually, beginning on the first anniversary of such initial vesting date, 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 LTIP and the applicable restricted stock award agreement.

On May 2, 2022, we issued an aggregate of 4,608 restricted shares of common stock under the LTIP to the non-employee members of our board of directors.

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.

The July 2022 Revolving Credit Facility provides for no scheduled principal amortization prior to the Scheduled Maturity Date.

Subject to certain conditions set forth in the July 2022 Credit Agreement, we may borrow, prepay and reborrow under the July 2022 Revolving Credit Facility and terminate or reduce the July 2022 Lenders’ commitments at any time prior to the Scheduled Maturity Date.

We may make up to ten draws under the July 2022 Term Loan Facility at any time during the period from and after the July 2022 Facility Closing Date through twelve months after the July 2022 Facility Closing Date.

Loans under the July 2022 Term Loan Facility will amortize in equal quarterly installments commencing with the first full fiscal quarter after the earlier of (x) the date on which the July 2022 Term Loan Facility has been fully drawn and (y) the expiration of the draw period, in an aggregate annual amount equal to 7.5 % in year one (if applicable) and year two, and 10 % thereafter.

The proceeds of the loans and letters of credit under the July 2022 Credit Agreement are to be used for ongoing working capital and general corporate purposes, permitted acquisitions, share repurchases and refinancing the May 2022 Facility.

On the July 2022 Facility Closing Date, we borrowed $ 29.0 million under the July 2022 Term Loan Facility to repay the outstanding indebtedness under the May 2022 Facility, along with accrued interest, expenses and fees.

The loan on the July 2022 Facility Closing Date will bear interest at the Adjusted Term SOFR Rate plus 1.25 %.

In connection with the repayment of the May 2022 Facility, the May 2022 Revolving Credit Agreement was terminated on July 29, 2022 .

Under the July 2022 Credit Agreement, we are required to maintain as of the end of each fiscal quarter a consolidated interest ratio of not less than 3.0 to 1.0 and a consolidated leverage ratio of not greater than 3.75 to 1.0, stepping down to 3.0 to 1.0 at intervals thereafter.

Additionally, the July 2022 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 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.

Our obligations under the July 2022 Credit Agreement are secured by a senior security interest in all personal property of the Loan Parties.

The events of default under the July 2022 Credit Agreement include, among others, payment defaults, breaches of covenants, defaults under the related loan documents, material misrepresentations, cross defaults with certain other material indebtedness, bankruptcy and insolvency events, judgment defaults, certain events related to plans subject to the Employee Retirement Income Security Act of 1974, as amended, invalidity of the July 2022 Credit Agreement or the related loan documents and change in control events.

The occurrence of an event of default could result in the acceleration of our obligations under the July 2022 Credit Agreement, the requirement to post cash collateral with respect to letters of credit, the termination of the July 2022 Lenders’ commitments and a 2.0 % increase in the rate of interest.

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