Paycom Software, Inc. 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Sensitivity We had cash and cash equivalents totaling $279.0 million as of June 30, 2022. These amounts are invested primarily in demand deposit accounts and money market funds. We consider all highly liquid debt instruments purchased with a maturity of three months or less and SEC-registered money market mutual funds to be cash equivalents. The primary objectives of our investing activities are capital preservation, meeting our liquidity needs and, with respect to investing client funds, generating interest income while maintaining the safety of principal. We do not enter into investments for trading or speculative purposes. Our cash equivalents are subject to market risk due to changes in interest rates. The market value of fixed rate securities may be adversely affected due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates, or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. To mitigate interest rate risk, we entered into the Interest Rate Swap Agreement. The Interest Rate Swap Agreement effectively eliminates a portion of the variable rate and coinciding interest rate risk associated with our outstanding indebtedness. As of June 30, 2022, an increase or decrease in interest rates of 100-basis points would not have had a material effect on our operating results or financial condition. As of June 30, 2022, we had $29.0 million of indebtedness outstanding under the May 2022 Facility. As described elsewhere in this Form 10-Q, on July 29, 2022, we refinanced the May 2022 Facility and borrowed $29.0 million under the July 2022 Term Loan Facility. Our borrowings under the July 2022 Term Loan Facility bear interest at the Adjusted Term SOFR Rate plus 1.25%, and as a result, we may be exposed to increased interest rate risk. The interest rate swap remains outstanding to offset the interest rate variability associated with our outstanding indebtedness.