{
  "ticker": "PAYC",
  "company": "PAYC",
  "filing_type": "10-K",
  "year_current": "2026",
  "year_prior": "2025",
  "summary": {
    "added": 110,
    "removed": 5,
    "modified": 13,
    "unchanged": 19,
    "total_current": 142,
    "total_prior": 37
  },
  "source": "SEC EDGAR",
  "url": "https://riskdiff.com/payc/2026-vs-2025/",
  "markdown_url": "https://riskdiff.com/payc/2026-vs-2025/index.md",
  "json_url": "https://riskdiff.com/payc/2026-vs-2025/index.json",
  "generated": "2026-06-01",
  "ai_summary": null,
  "risks": [
    {
      "status": "ADDED",
      "current_title": "Adverse economic and market conditions could affect our business, operating results or financial condition.",
      "prior_title": null,
      "current_body": "Our business depends on the overall demand for HCM applications and on the economic health of our current and prospective clients. If economic conditions in the United States or in global markets deteriorate, clients may cease their operations, eliminate or reduce unscheduled payroll runs (such as bonuses), reduce headcount, delay or reduce their spending on HCM and other outsourcing services or attempt to renegotiate their contracts with us. In addition, global and regional macroeconomic developments, such as changes in global trade policies and tariffs, increased unemployment, decreased income, uncertainty related to future economic activity, reduced access to credit, increased interest rates, inflation, volatility in capital markets, and decreased liquidity, among other possible factors, could negatively affect our ability to conduct business. Furthermore, the impact of such macroeconomic developments may be exacerbated by geopolitical events and ongoing military conflicts throughout the world. An economic decline could result in reductions in sales of our applications, decreased revenue from unscheduled payroll runs and fees charged on a per-employee basis, longer sales cycles, slower adoption of new technologies and increased price competition, any of which could adversely affect our business, operating results or financial condition. In addition, HCM spending levels may not increase following any recovery. Further, as part of our payroll and payroll tax filing services, we collect and then remit client funds to taxing authorities and accounts designated by our clients. During the interval between receipt and disbursement, we typically invest such funds in money market funds, demand deposit accounts, certificates of deposit, U.S. treasury securities and commercial paper. These investments are subject to general market, interest rate, credit and liquidity risks, and such risks may be exacerbated during periods of unusual financial market volatility. Any loss of or inability to access such funds could have an adverse impact on our cash position and results of operations and could require us to obtain additional sources of liquidity, which may not be available on terms that are acceptable to us, if at all. Furthermore, although increased interest rates may have a negative impact on certain clients, increased interest rates have resulted in increased interest earned on funds held for clients and additional income earned on our corporate funds. Changes in interest rates will impact potential earnings of future investments. A stable or rising interest rate environment would sustain the additional interest earned on funds held for clients and interest earned on our corporate funds, whereas a decreasing interest rate environment would compress the additional interest earnings and potentially adversely affect our operating results. In recent years, there have been several instances when there has been uncertainty regarding the ability of Congress and the President collectively to reach agreement on federal budgetary and spending matters. A period of failure to reach agreement on these matters, particularly if accompanied by an actual or threatened government shutdown, may have an adverse impact on the U.S. economy. Additionally, because certain of our clients rely on government resources to fund their operations, a prolonged government shutdown may affect such clients’ ability to make timely payments to us, which could adversely affect our operations results or financial condition. Item 1B. Unresolved Staff Comments None. 34 34 Item 1C. CybersecurityRisk Management and StrategyOverviewWe recognize that our clients entrust us with highly sensitive data. We also recognize our attendant responsibility to safeguard the accessibility, confidentiality, and integrity of this data. Our information security program consists of policies, procedures, systems, controls and technology designed to help us prevent, identify, detect and mitigate cybersecurity risks. Our processes are informed by cybersecurity events we have observed within the Company, across our industry, and across the cybersecurity landscape. We utilize the risk management framework for risk assessments as defined by the ISO 27001 Information Security Management Standard. We have integrated cybersecurity risk management into our overall risk management framework by conducting annual enterprise risk management assessments and IT risk management assessments, implementing periodic key risk indicator tracking, and holding periodic meetings among multiple department stakeholders to address cybersecurity risks. We review our information security policies at least annually and in connection with certain process changes to ensure that they meet the needs of the organization and the goals and objectives of the information security program.Prevention, Identification, Detection and Mitigation ActivitiesWe routinely undertake activities to prevent, identify, detect and mitigate risks from cybersecurity threats, including but not limited to the following:•Procedures and guidelines designed to ensure that information security is a key consideration in the requirements for both new information systems and enhancements to existing systems and assets;•IT environment risk assessments conducted at regular intervals and in connection with certain events, such as implementation of a new system, service or vendor;•Tabletop and simulation exercises to discuss roles and responsibilities of team members in the event of a cybersecurity incident and to test and modify the plan as needed;•Ongoing security penetration testing and threat modeling of our network and web application;•Automated tools and manual review processes to ensure ongoing compliance with technical standards and identify configuration issues and technical vulnerabilities;•Encryption of all communications with our servers, which are configured to utilize only high-grade encryption algorithms; and•Ongoing employee training related to information security and data privacy policies and standards, including periodic phishing, vishing, and social engineering exercises.We also have implemented and continue to maintain policies, procedures, systems, controls and technology to oversee and identify the cybersecurity risks associated with our use of third-party service providers. For example, we conduct thorough cybersecurity risk assessments of all third-party service providers prior to engagement and ongoing monitoring to ensure compliance with our robust cybersecurity requirements. The monitoring includes periodic audits of third-party systems and vendors. We engage third-party consultants and auditors in connection with assessing, identifying and managing material risks from cybersecurity threats. Our collaboration with these third parties includes independent audits, threat assessments, and consultation on security enhancements.Infrastructure; Network and Physical SecurityOur IT infrastructure is secured and monitored using a number of leading practices and tools across physical and logical security. This security is also continually monitored by our information security department. We strictly regulate and limit all access to servers and networks at each of our facilities. Local network access is restricted by domain authentication, using stringent access control lists. Remote network access is restricted by a defense-in-depth approach that includes redundant firewalls, preventing unauthorized access from external networks to systems within our local network. We also employ (i) network and endpoint intrusion detection, intrusion prevention, and data loss prevention sensors throughout our infrastructure, (ii) systems that monitor our infrastructure and alert our continuously staffed security operations center of potential cybersecurity issues, and (iii) a seasoned process for managing and installing patches for third-party applications.Incident ResponseWe maintain plans to address any cybersecurity incidents, including but not limited to a Crisis Management Plan, an Incident Response Plan, an Information Security Incident Management Policy and a Business Resiliency Policy. Information security continuity is embedded in our business continuity management system to minimize the risk that continuity operations could result in a compromise to our security standards. We conduct business continuity, crisis communications and disaster recovery exercises at least annually to test and modify the plan, as needed. The activities related to the business continuity management system are routinely reported to executive management as part of our IT security team’s ongoing metrics Item 1C. CybersecurityRisk Management and StrategyOverviewWe recognize that our clients entrust us with highly sensitive data. We also recognize our attendant responsibility to safeguard the accessibility, confidentiality, and integrity of this data. Our information security program consists of policies, procedures, systems, controls and technology designed to help us prevent, identify, detect and mitigate cybersecurity risks. Our processes are informed by cybersecurity events we have observed within the Company, across our industry, and across the cybersecurity landscape. We utilize the risk management framework for risk assessments as defined by the ISO 27001 Information Security Management Standard. We have integrated cybersecurity risk management into our overall risk management framework by conducting annual enterprise risk management assessments and IT risk management assessments, implementing periodic key risk indicator tracking, and holding periodic meetings among multiple department stakeholders to address cybersecurity risks. We review our information security policies at least annually and in connection with certain process changes to ensure that they meet the needs of the organization and the goals and objectives of the information security program.Prevention, Identification, Detection and Mitigation ActivitiesWe routinely undertake activities to prevent, identify, detect and mitigate risks from cybersecurity threats, including but not limited to the following:•Procedures and guidelines designed to ensure that information security is a key consideration in the requirements for both new information systems and enhancements to existing systems and assets;•IT environment risk assessments conducted at regular intervals and in connection with certain events, such as implementation of a new system, service or vendor;•Tabletop and simulation exercises to discuss roles and responsibilities of team members in the event of a cybersecurity incident and to test and modify the plan as needed;•Ongoing security penetration testing and threat modeling of our network and web application;•Automated tools and manual review processes to ensure ongoing compliance with technical standards and identify configuration issues and technical vulnerabilities;•Encryption of all communications with our servers, which are configured to utilize only high-grade encryption algorithms; and•Ongoing employee training related to information security and data privacy policies and standards, including periodic phishing, vishing, and social engineering exercises.We also have implemented and continue to maintain policies, procedures, systems, controls and technology to oversee and identify the cybersecurity risks associated with our use of third-party service providers. For example, we conduct thorough cybersecurity risk assessments of all third-party service providers prior to engagement and ongoing monitoring to ensure compliance with our robust cybersecurity requirements. The monitoring includes periodic audits of third-party systems and vendors. We engage third-party consultants and auditors in connection with assessing, identifying and managing material risks from cybersecurity threats. Our collaboration with these third parties includes independent audits, threat assessments, and consultation on security enhancements.Infrastructure; Network and Physical SecurityOur IT infrastructure is secured and monitored using a number of leading practices and tools across physical and logical security. This security is also continually monitored by our information security department. We strictly regulate and limit all access to servers and networks at each of our facilities. Local network access is restricted by domain authentication, using stringent access control lists. Remote network access is restricted by a defense-in-depth approach that includes redundant firewalls, preventing unauthorized access from external networks to systems within our local network. We also employ (i) network and endpoint intrusion detection, intrusion prevention, and data loss prevention sensors throughout our infrastructure, (ii) systems that monitor our infrastructure and alert our continuously staffed security operations center of potential cybersecurity issues, and (iii) a seasoned process for managing and installing patches for third-party applications.Incident ResponseWe maintain plans to address any cybersecurity incidents, including but not limited to a Crisis Management Plan, an Incident Response Plan, an Information Security Incident Management Policy and a Business Resiliency Policy. Information security continuity is embedded in our business continuity management system to minimize the risk that continuity operations could result in a compromise to our security standards. We conduct business continuity, crisis communications and disaster recovery exercises at least annually to test and modify the plan, as needed. The activities related to the business continuity management system are routinely reported to executive management as part of our IT security team’s ongoing metrics Item 1C. Cybersecurity"
    },
    {
      "status": "ADDED",
      "current_title": "Risk Management and Strategy",
      "prior_title": null,
      "current_body": "Overview We recognize that our clients entrust us with highly sensitive data. We also recognize our attendant responsibility to safeguard the accessibility, confidentiality, and integrity of this data. Our information security program consists of policies, procedures, systems, controls and technology designed to help us prevent, identify, detect and mitigate cybersecurity risks. Our processes are informed by cybersecurity events we have observed within the Company, across our industry, and across the cybersecurity landscape. We utilize the risk management framework for risk assessments as defined by the ISO 27001 Information Security Management Standard. We have integrated cybersecurity risk management into our overall risk management framework by conducting annual enterprise risk management assessments and IT risk management assessments, implementing periodic key risk indicator tracking, and holding periodic meetings among multiple department stakeholders to address cybersecurity risks. We review our information security policies at least annually and in connection with certain process changes to ensure that they meet the needs of the organization and the goals and objectives of the information security program. We have integrated integrated cybersecurity risk management into our overall risk management framework by conducting annual enterprise risk management assessments and IT risk management assessments, implementing periodic key risk indicator tracking, and holding periodic meetings among multiple department stakeholders to address cybersecurity risks. We review our information security policies at least annually and in connection with certain process changes to ensure that they meet the needs of the organization and the goals and objectives of the information security program."
    },
    {
      "status": "ADDED",
      "current_title": "Prevention, Identification, Detection and Mitigation Activities",
      "prior_title": null,
      "current_body": "We routinely undertake activities to prevent, identify, detect and mitigate risks from cybersecurity threats, including but not limited to the following: •Procedures and guidelines designed to ensure that information security is a key consideration in the requirements for both new information systems and enhancements to existing systems and assets; Procedures and guidelines designed to ensure that information security is a key consideration in the requirements for both new information systems and enhancements to existing systems and assets; •IT environment risk assessments conducted at regular intervals and in connection with certain events, such as implementation of a new system, service or vendor; IT environment risk assessments conducted at regular intervals and in connection with certain events, such as implementation of a new system, service or vendor; •Tabletop and simulation exercises to discuss roles and responsibilities of team members in the event of a cybersecurity incident and to test and modify the plan as needed; Tabletop and simulation exercises to discuss roles and responsibilities of team members in the event of a cybersecurity incident and to test and modify the plan as needed; •Ongoing security penetration testing and threat modeling of our network and web application; Ongoing security penetration testing and threat modeling of our network and web application; •Automated tools and manual review processes to ensure ongoing compliance with technical standards and identify configuration issues and technical vulnerabilities; Automated tools and manual review processes to ensure ongoing compliance with technical standards and identify configuration issues and technical vulnerabilities; •Encryption of all communications with our servers, which are configured to utilize only high-grade encryption algorithms; and Encryption of all communications with our servers, which are configured to utilize only high-grade encryption algorithms; and •Ongoing employee training related to information security and data privacy policies and standards, including periodic phishing, vishing, and social engineering exercises. Ongoing employee training related to information security and data privacy policies and standards, including periodic phishing, vishing, and social engineering exercises. We also have implemented and continue to maintain policies, procedures, systems, controls and technology to oversee and identify the cybersecurity risks associated with our use of third-party service providers. For example, we conduct thorough cybersecurity risk assessments of all third-party service providers prior to engagement and ongoing monitoring to ensure compliance with our robust cybersecurity requirements. The monitoring includes periodic audits of third-party systems and vendors. We engage third-party consultants and auditors in connection with assessing, identifying and managing material risks from cybersecurity threats. Our collaboration with these third parties includes independent audits, threat assessments, and consultation on security enhancements. For example, we conduct thorough cybersecurity risk assessments of all third-party service providers prior to engagement and ongoing monitoring to ensure compliance with our robust cybersecurity requirements. The monitoring includes periodic audits of third-party systems and vendors. engage"
    },
    {
      "status": "ADDED",
      "current_title": "Infrastructure; Network and Physical Security",
      "prior_title": null,
      "current_body": "Our IT infrastructure is secured and monitored using a number of leading practices and tools across physical and logical security. This security is also continually monitored by our information security department. We strictly regulate and limit all access to servers and networks at each of our facilities. Local network access is restricted by domain authentication, using stringent access control lists. Remote network access is restricted by a defense-in-depth approach that includes redundant firewalls, preventing unauthorized access from external networks to systems within our local network. We also employ (i) network and endpoint intrusion detection, intrusion prevention, and data loss prevention sensors throughout our infrastructure, (ii) systems that monitor our infrastructure and alert our continuously staffed security operations center of potential cybersecurity issues, and (iii) a seasoned process for managing and installing patches for third-party applications."
    },
    {
      "status": "ADDED",
      "current_title": "Incident Response",
      "prior_title": null,
      "current_body": "We maintain plans to address any cybersecurity incidents, including but not limited to a Crisis Management Plan, an Incident Response Plan, an Information Security Incident Management Policy and a Business Resiliency Policy. Information security continuity is embedded in our business continuity management system to minimize the risk that continuity operations could result in a compromise to our security standards. We conduct business continuity, crisis communications and disaster recovery exercises at least annually to test and modify the plan, as needed. The activities related to the business continuity management system are routinely reported to executive management as part of our IT security team’s ongoing metrics 35 35 reporting. In addition, reports related to activities and outcomes are provided to the audit committee of the Board of Directors on a quarterly basis.Certifications and AuditsWe maintain the following ISO certifications related to our information systems:•ISO 9001:2015 (standard for the implementation of quality management processes);•ISO 22301:2019 (standard for implementing and managing an effective business continuity management system);•ISO/IEC 27001:2022 (security standard for information security management systems, covering our production, quality assurance and implementation environments);•ISO/IEC 27701:2019 (standard for establishing, implementing, maintaining and continually improving a privacy information management system); and•ISO/IEC 42001:2023 (standard for establishing, implementing, maintaining and continually improving an AIMS).We voluntarily obtain third-party security examinations relating to our internal controls over financial reporting in accordance with SOC 1. Our SOC 1 examination is conducted every six months by an independent international auditing firm, and addresses, among other areas, our physical and environmental safeguards for production data centers, data availability and integrity procedures, change management procedures and logical security procedures. We also obtain third-party examinations relating to our internal controls over security and privacy in accordance with SOC 2. Our SOC 2 examination is conducted every year and addresses, among other areas, internal controls around security, availability, and processing integrity. We publish SOC 1 reports semiannually and SOC 2 and SOC 3 reports annually.Impact of Risks from Cybersecurity ThreatsWe have experienced cybersecurity incidents in the ordinary course of business and will continue to experience risks from cybersecurity threats that could have a material adverse effect on our business strategy, results of operations, or financial condition. Although prior cybersecurity incidents have not had a material adverse effect on us, our business strategy, results of operations, or financial condition to date, any actual or perceived breach of our security could damage our reputation, cause existing clients to discontinue the use of our solution, prevent us from attracting new clients, or subject us to third-party lawsuits, regulatory investigations and fines or other actions or liabilities, any of which could materially adversely affect us, our business strategy, results of operations, or financial condition.GovernanceBoth management and the Board of Directors are actively involved in the oversight of risks from cybersecurity threats. Our information security program is designed to ensure that management and the Board of Directors are adequately informed about, and provided with the tools necessary to monitor, (i) material risks from cybersecurity threats and (ii) our efforts related to the prevention, detection, mitigation, and remediation of cybersecurity incidents.Role of the Board of DirectorsThe Board of Directors has delegated to the audit committee primary responsibility for overseeing enterprise risk management, including oversight of risks from cybersecurity threats. The audit committee receives quarterly reports and updates from our Senior Director of IT and Information Security with respect to cybersecurity risk management. Such reports cover the Company’s information security program, including its current status, capabilities, objectives and plans, as well as the evolving cybersecurity threat landscape.Role of ManagementThe Senior Director of IT and Information Security oversees the activities of our IT and information security teams and is responsible for ensuring that both new implementations and ongoing operations comply with the policies, procedures, and guidelines of our information security program. Our Senior Director of IT and Information Security has been with Paycom for over a decade and has worked in technology development, improvement, infrastructure, and security for over 12 years. The Senior Director of IT and Information Security is supported by our Director of Information Security, who has worked in technology development, improvement, infrastructure, and security for over a decade. The Director of Information Security is responsible for the growth and implementation of the information security and data privacy programs and oversees the operations of the information security team. The Director of Information Security also provides oversight for information security and privacy policies and controls, oversees compliance activities, and provides metrics and guidance to executive management regarding the program. The aforementioned leaders and teams have a breadth of experience and manage programs related to governance, risk, and compliance; data privacy and security; vulnerability management; security operations; and application security. reporting. In addition, reports related to activities and outcomes are provided to the audit committee of the Board of Directors on a quarterly basis.Certifications and AuditsWe maintain the following ISO certifications related to our information systems:•ISO 9001:2015 (standard for the implementation of quality management processes);•ISO 22301:2019 (standard for implementing and managing an effective business continuity management system);•ISO/IEC 27001:2022 (security standard for information security management systems, covering our production, quality assurance and implementation environments);•ISO/IEC 27701:2019 (standard for establishing, implementing, maintaining and continually improving a privacy information management system); and•ISO/IEC 42001:2023 (standard for establishing, implementing, maintaining and continually improving an AIMS).We voluntarily obtain third-party security examinations relating to our internal controls over financial reporting in accordance with SOC 1. Our SOC 1 examination is conducted every six months by an independent international auditing firm, and addresses, among other areas, our physical and environmental safeguards for production data centers, data availability and integrity procedures, change management procedures and logical security procedures. We also obtain third-party examinations relating to our internal controls over security and privacy in accordance with SOC 2. Our SOC 2 examination is conducted every year and addresses, among other areas, internal controls around security, availability, and processing integrity. We publish SOC 1 reports semiannually and SOC 2 and SOC 3 reports annually.Impact of Risks from Cybersecurity ThreatsWe have experienced cybersecurity incidents in the ordinary course of business and will continue to experience risks from cybersecurity threats that could have a material adverse effect on our business strategy, results of operations, or financial condition. Although prior cybersecurity incidents have not had a material adverse effect on us, our business strategy, results of operations, or financial condition to date, any actual or perceived breach of our security could damage our reputation, cause existing clients to discontinue the use of our solution, prevent us from attracting new clients, or subject us to third-party lawsuits, regulatory investigations and fines or other actions or liabilities, any of which could materially adversely affect us, our business strategy, results of operations, or financial condition.GovernanceBoth management and the Board of Directors are actively involved in the oversight of risks from cybersecurity threats. Our information security program is designed to ensure that management and the Board of Directors are adequately informed about, and provided with the tools necessary to monitor, (i) material risks from cybersecurity threats and (ii) our efforts related to the prevention, detection, mitigation, and remediation of cybersecurity incidents.Role of the Board of DirectorsThe Board of Directors has delegated to the audit committee primary responsibility for overseeing enterprise risk management, including oversight of risks from cybersecurity threats. The audit committee receives quarterly reports and updates from our Senior Director of IT and Information Security with respect to cybersecurity risk management. Such reports cover the Company’s information security program, including its current status, capabilities, objectives and plans, as well as the evolving cybersecurity threat landscape.Role of ManagementThe Senior Director of IT and Information Security oversees the activities of our IT and information security teams and is responsible for ensuring that both new implementations and ongoing operations comply with the policies, procedures, and guidelines of our information security program. Our Senior Director of IT and Information Security has been with Paycom for over a decade and has worked in technology development, improvement, infrastructure, and security for over 12 years. The Senior Director of IT and Information Security is supported by our Director of Information Security, who has worked in technology development, improvement, infrastructure, and security for over a decade. The Director of Information Security is responsible for the growth and implementation of the information security and data privacy programs and oversees the operations of the information security team. The Director of Information Security also provides oversight for information security and privacy policies and controls, oversees compliance activities, and provides metrics and guidance to executive management regarding the program. The aforementioned leaders and teams have a breadth of experience and manage programs related to governance, risk, and compliance; data privacy and security; vulnerability management; security operations; and application security. reporting. In addition, reports related to activities and outcomes are provided to the audit committee of the Board of Directors on a quarterly basis."
    },
    {
      "status": "ADDED",
      "current_title": "Certifications and Audits",
      "prior_title": null,
      "current_body": "We maintain the following ISO certifications related to our information systems: •ISO 9001:2015 (standard for the implementation of quality management processes); ISO 9001:2015 (standard for the implementation of quality management processes); •ISO 22301:2019 (standard for implementing and managing an effective business continuity management system); ISO 22301:2019 (standard for implementing and managing an effective business continuity management system); •ISO/IEC 27001:2022 (security standard for information security management systems, covering our production, quality assurance and implementation environments); ISO/IEC 27001:2022 (security standard for information security management systems, covering our production, quality assurance and implementation environments); •ISO/IEC 27701:2019 (standard for establishing, implementing, maintaining and continually improving a privacy information management system); and ISO/IEC 27701:2019 (standard for establishing, implementing, maintaining and continually improving a privacy information management system); and •ISO/IEC 42001:2023 (standard for establishing, implementing, maintaining and continually improving an AIMS). ISO/IEC 42001:2023 (standard for establishing, implementing, maintaining and continually improving an AIMS). We voluntarily obtain third-party security examinations relating to our internal controls over financial reporting in accordance with SOC 1. Our SOC 1 examination is conducted every six months by an independent international auditing firm, and addresses, among other areas, our physical and environmental safeguards for production data centers, data availability and integrity procedures, change management procedures and logical security procedures. We also obtain third-party examinations relating to our internal controls over security and privacy in accordance with SOC 2. Our SOC 2 examination is conducted every year and addresses, among other areas, internal controls around security, availability, and processing integrity. We publish SOC 1 reports semiannually and SOC 2 and SOC 3 reports annually."
    },
    {
      "status": "ADDED",
      "current_title": "Impact of Risks from Cybersecurity Threats",
      "prior_title": null,
      "current_body": "We have experienced cybersecurity incidents in the ordinary course of business and will continue to experience risks from cybersecurity threats that could have a material adverse effect on our business strategy, results of operations, or financial condition. Although prior cybersecurity incidents have not had a material adverse effect on us, our business strategy, results of operations, or financial condition to date, any actual or perceived breach of our security could damage our reputation, cause existing clients to discontinue the use of our solution, prevent us from attracting new clients, or subject us to third-party lawsuits, regulatory investigations and fines or other actions or liabilities, any of which could materially adversely affect us, our business strategy, results of operations, or financial condition. prior cybersecurity incidents have not had a material adverse effect on us, our business strategy, results of operations, or financial condition GovernanceBoth management and the Board of Directors are actively involved in the oversight of risks from cybersecurity threats. Our information security program is designed to ensure that management and the Board of Directors are adequately informed about, and provided with the tools necessary to monitor, (i) material risks from cybersecurity threats and (ii) our efforts related to the prevention, detection, mitigation, and remediation of cybersecurity incidents.Role of the Board of DirectorsThe Board of Directors has delegated to the audit committee primary responsibility for overseeing enterprise risk management, including oversight of risks from cybersecurity threats. The audit committee receives quarterly reports and updates from our Senior Director of IT and Information Security with respect to cybersecurity risk management. Such reports cover the Company’s information security program, including its current status, capabilities, objectives and plans, as well as the evolving cybersecurity threat landscape."
    },
    {
      "status": "ADDED",
      "current_title": "Governance",
      "prior_title": null,
      "current_body": "Both management and the Board of Directors are actively involved in the oversight of risks from cybersecurity threats. Our information security program is designed to ensure that management and the Board of Directors are adequately informed about, and provided with the tools necessary to monitor, (i) material risks from cybersecurity threats and (ii) our efforts related to the prevention, detection, mitigation, and remediation of cybersecurity incidents."
    },
    {
      "status": "ADDED",
      "current_title": "Role of the Board of Directors",
      "prior_title": null,
      "current_body": "The Board of Directors has delegated to the audit committee primary responsibility for overseeing enterprise risk management, including oversight of risks from cybersecurity threats. The audit committee receives quarterly reports and updates from our Senior Director of IT and Information Security with respect to cybersecurity risk management. Such reports cover the Company’s information security program, including its current status, capabilities, objectives and plans, as well as the evolving cybersecurity threat landscape. The Board of Directors has delegated to the audit committee primary responsibility for overseeing enterprise risk management, including oversight of risks from cybersecurity threats. The audit committee receives quarterly reports and updates from our Senior Director of IT and Information Security with respect to cybersecurity risk management. Such reports cover the Company’s information security program, including its current status, capabilities, objectives and plans, as well as the evolving cybersecurity threat landscape. Role of ManagementThe Senior Director of IT and Information Security oversees the activities of our IT and information security teams and is responsible for ensuring that both new implementations and ongoing operations comply with the policies, procedures, and guidelines of our information security program. Our Senior Director of IT and Information Security has been with Paycom for over a decade and has worked in technology development, improvement, infrastructure, and security for over 12 years. The Senior Director of IT and Information Security is supported by our Director of Information Security, who has worked in technology development, improvement, infrastructure, and security for over a decade. The Director of Information Security is responsible for the growth and implementation of the information security and data privacy programs and oversees the operations of the information security team. The Director of Information Security also provides oversight for information security and privacy policies and controls, oversees compliance activities, and provides metrics and guidance to executive management regarding the program. The aforementioned leaders and teams have a breadth of experience and manage programs related to governance, risk, and compliance; data privacy and security; vulnerability management; security operations; and application security."
    },
    {
      "status": "ADDED",
      "current_title": "Role of Management",
      "prior_title": null,
      "current_body": "The Senior Director of IT and Information Security oversees the activities of our IT and information security teams and is responsible for ensuring that both new implementations and ongoing operations comply with the policies, procedures, and guidelines of our information security program. Our Senior Director of IT and Information Security has been with Paycom for over a decade and has worked in technology development, improvement, infrastructure, and security for over 12 years. The Senior Director of IT and Information Security is supported by our Director of Information Security, who has worked in technology development, improvement, infrastructure, and security for over a decade. The Director of Information Security is responsible for the growth and implementation of the information security and data privacy programs and oversees the operations of the information security team. The Director of Information Security also provides oversight for information security and privacy policies and controls, oversees compliance activities, and provides metrics and guidance to executive management regarding the program. The aforementioned leaders and teams have a breadth of experience and manage programs related to governance, risk, and compliance; data privacy and security; vulnerability management; security operations; and application security. The Senior Director of IT and Information Security oversees the activities of our IT and information security teams and is responsible for ensuring that both new implementations and ongoing operations comply with the policies, procedures, and guidelines of our information security program. is responsible for ensuring that both new implementations and ongoing operations comply with the policies, procedures, and guidelines of our information security program. Our Senior Director of IT and Information Security has been with Paycom for over a decade and has worked in technology development, improvement, infrastructure, and security for over 12 years. The aforementioned leaders and teams have a breadth of experience and manage programs related to governance, risk, and compliance; data privacy and security; vulnerability management; security operations; and application security. 36 36 The Senior Director of IT and Information Security is regularly informed about the latest developments in cybersecurity, including potential threats and innovative risk management techniques. This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. Our information systems are routinely reviewed for compliance with information security policies and standards. Outcomes of reviews and audits are reported to the Director of Information Security and the Senior Director of IT and Information Security. Relevant information about security nonconformities, incidents, and events are reported to the working group described below and to the Board of Directors. As discussed above, the Senior Director of IT and Information Security reports to the audit committee and the Board of Directors on cybersecurity matters at least quarterly.In addition, we have established a working group composed of senior leaders from various departments, including operations, finance, IT, information security, internal audit, and legal. This working group’s responsibilities include (i) ensuring that information security goals and objectives are identified, meet organizational and business requirements, and are integrated into relevant processes, (ii) reviewing the effectiveness of the information security program, (iii) providing clear direction and highly visible management support for security initiatives, (iv) providing resources required for information security projects and initiatives, (v) overseeing programs to maintain information security awareness, including training and team-specific guidance, and (vi) coordinating the information security aspects of supplier relationships.Item 2. Properties Our corporate headquarters is an approximately 815,000-square-foot campus located on over 150 acres of Company-owned property in Oklahoma City, Oklahoma. We also have an operations facility on approximately 14 acres of Company-owned property in Grapevine, Texas. We operate fully redundant data centers in Oklahoma, Texas and Arizona.As of December 31, 2025, we lease facilities in 29 states and in certain international locations. We believe that these facilities are suitable for our current operations and, upon the expiration of the terms of the leases, we believe we could renew these leases or find suitable space elsewhere on acceptable terms.Item 3. Legal ProceedingsFrom time to time, we are involved in various disputes, claims, suits, investigations and legal proceedings arising in the ordinary course of business, including commercial, intellectual property and employment-related matters, as well as stockholder derivative actions, class action lawsuits and other matters. The litigation matters described below involve issues or claims that may be of particular interest to our stockholders, regardless of whether any of these matters are material to our business or financial condition based upon the standard set forth in the SEC’s rules. We believe we have substantial defenses in each matter, and we intend to vigorously defend against the claims brought by plaintiffs in these lawsuits.Between November 2023 and January 2024, Company stockholders filed four federal securities lawsuits against the Company, Chad Richison, and Craig Boelte (the “Defendants”). On April 23, 2024, the United States District Court for the Western District of Oklahoma (the “Western District Court”) consolidated three of these lawsuits (styled Ventrillo, et al. v. Paycom Software, Inc., et al., Case No. 5:23-cv-01019-F; Caloto, et al. v. Paycom Software, Inc., et al., Case No. 5:24-cv-00019-F; and Minarik, et al. v. Paycom Software, Inc., et al., Case No. 5:24-cv-00014-F) and dismissed for procedural reasons the fourth complaint (styled Schoenrock, et al. v. Paycom Software, Inc., et al., Case No. 5:24-cv-00012-F). The consolidated action is styled In re Paycom Software, Inc. Securities Litigation, Case No. 5:23-cv-01019-F (the “Consolidated Securities Class Action”).On July 8, 2024, the lead plaintiff filed an amended complaint in the Consolidated Securities Class Action on behalf of a class of acquirers of Company securities between February 8, 2022 and October 31, 2023. In the amended complaint, the lead plaintiff asserts claims under Section 10(b) and 20(a) of the Exchange Act, alleging that the Defendants made materially false and misleading statements and failed to disclose facts regarding the impact of Beti on the Company’s services and revenues. The lead plaintiff is seeking remedies on behalf of the putative class that include, but are not limited to, compensatory damages, reimbursement of out-of-pocket costs, and injunctive relief.The Defendants filed their Motion to Dismiss Plaintiff’s Consolidated Complaint on September 6, 2024. The parties have fully briefed the Motion to Dismiss and are awaiting a decision from the Western District Court.In January and May 2024, three derivative lawsuits were filed by Company stockholders against the Company and the members of the Board of Directors for purported breaches of fiduciary duties, aiding and abetting, unjust enrichment, and waste of corporate assets based on similar allegations as in the Consolidated Securities Class Action. On May 23, 2024, the three derivative actions were consolidated into one master case, styled In re Paycom Software, Inc. Stockholder Derivative Litigation, Case No. 5:24-cv-00240-F, in the Western District Court (the “Consolidated Derivative Action”). The plaintiffs seek to recover unspecified monetary damages on behalf of the Company. The Western District Court has stayed all proceedings and deadlines in the Consolidated Derivative Action pending resolution of Defendants’ Motion to Dismiss in the Consolidated Securities Class Action.We believe that the resolution of current pending legal matters will not have a material adverse effect on our business, financial condition, results of operations or cash flows. Nonetheless, we cannot predict the outcome of these proceedings, as The Senior Director of IT and Information Security is regularly informed about the latest developments in cybersecurity, including potential threats and innovative risk management techniques. This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. Our information systems are routinely reviewed for compliance with information security policies and standards. Outcomes of reviews and audits are reported to the Director of Information Security and the Senior Director of IT and Information Security. Relevant information about security nonconformities, incidents, and events are reported to the working group described below and to the Board of Directors. As discussed above, the Senior Director of IT and Information Security reports to the audit committee and the Board of Directors on cybersecurity matters at least quarterly.In addition, we have established a working group composed of senior leaders from various departments, including operations, finance, IT, information security, internal audit, and legal. This working group’s responsibilities include (i) ensuring that information security goals and objectives are identified, meet organizational and business requirements, and are integrated into relevant processes, (ii) reviewing the effectiveness of the information security program, (iii) providing clear direction and highly visible management support for security initiatives, (iv) providing resources required for information security projects and initiatives, (v) overseeing programs to maintain information security awareness, including training and team-specific guidance, and (vi) coordinating the information security aspects of supplier relationships. The Senior Director of IT and Information Security is regularly informed about the latest developments in cybersecurity, including potential threats and innovative risk management techniques. This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. Our information systems are routinely reviewed for compliance with information security policies and standards. Outcomes of reviews and audits are reported to the Director of Information Security and the Senior Director of IT and Information Security. Relevant information about security nonconformities, incidents, and events are reported to the working group described below and to the Board of Directors. As discussed above, the Senior Director of IT and Information Security reports to the audit committee and the Board of Directors on cybersecurity matters at least quarterly.In addition, we have established a working group composed of senior leaders from various departments, including operations, finance, IT, information security, internal audit, and legal. This working group’s responsibilities include (i) ensuring that information security goals and objectives are identified, meet organizational and business requirements, and are integrated into relevant processes, (ii) reviewing the effectiveness of the information security program, (iii) providing clear direction and highly visible management support for security initiatives, (iv) providing resources required for information security projects and initiatives, (v) overseeing programs to maintain information security awareness, including training and team-specific guidance, and (vi) coordinating the information security aspects of supplier relationships. The Senior Director of IT and Information Security is regularly informed about the latest developments in cybersecurity, including potential threats and innovative risk management techniques. This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. Our information systems are routinely reviewed for compliance with information security policies and standards. Outcomes of reviews and audits are reported to the Director of Information Security and the Senior Director of IT and Information Security. Relevant information about security nonconformities, incidents, and events are reported to the working group described below and to the Board of Directors. As discussed above, the Senior Director of IT and Information Security reports to the audit committee and the Board of Directors on cybersecurity matters at least quarterly. As discussed above, the Senior Director of IT and Information Security reports to the audit committee and the Board of Directors on cybersecurity matters at least quarterly. In addition, we have established a working group composed of senior leaders from various departments, including operations, finance, IT, information security, internal audit, and legal. This working group’s responsibilities include (i) ensuring that information security goals and objectives are identified, meet organizational and business requirements, and are integrated into relevant processes, (ii) reviewing the effectiveness of the information security program, (iii) providing clear direction and highly visible management support for security initiatives, (iv) providing resources required for information security projects and initiatives, (v) overseeing programs to maintain information security awareness, including training and team-specific guidance, and (vi) coordinating the information security aspects of supplier relationships. Item 2. Properties Our corporate headquarters is an approximately 815,000-square-foot campus located on over 150 acres of Company-owned property in Oklahoma City, Oklahoma. We also have an operations facility on approximately 14 acres of Company-owned property in Grapevine, Texas. We operate fully redundant data centers in Oklahoma, Texas and Arizona. As of December 31, 2025, we lease facilities in 29 states and in certain international locations. We believe that these facilities are suitable for our current operations and, upon the expiration of the terms of the leases, we believe we could renew these leases or find suitable space elsewhere on acceptable terms. Item 3. Legal Proceedings From time to time, we are involved in various disputes, claims, suits, investigations and legal proceedings arising in the ordinary course of business, including commercial, intellectual property and employment-related matters, as well as stockholder derivative actions, class action lawsuits and other matters. The litigation matters described below involve issues or claims that may be of particular interest to our stockholders, regardless of whether any of these matters are material to our business or financial condition based upon the standard set forth in the SEC’s rules. We believe we have substantial defenses in each matter, and we intend to vigorously defend against the claims brought by plaintiffs in these lawsuits. Between November 2023 and January 2024, Company stockholders filed four federal securities lawsuits against the Company, Chad Richison, and Craig Boelte (the “Defendants”). On April 23, 2024, the United States District Court for the Western District of Oklahoma (the “Western District Court”) consolidated three of these lawsuits (styled Ventrillo, et al. v. Paycom Software, Inc., et al., Case No. 5:23-cv-01019-F; Caloto, et al. v. Paycom Software, Inc., et al., Case No. 5:24-cv-00019-F; and Minarik, et al. v. Paycom Software, Inc., et al., Case No. 5:24-cv-00014-F) and dismissed for procedural reasons the fourth complaint (styled Schoenrock, et al. v. Paycom Software, Inc., et al., Case No. 5:24-cv-00012-F). The consolidated action is styled In re Paycom Software, Inc. Securities Litigation, Case No. 5:23-cv-01019-F (the “Consolidated Securities Class Action”). On July 8, 2024, the lead plaintiff filed an amended complaint in the Consolidated Securities Class Action on behalf of a class of acquirers of Company securities between February 8, 2022 and October 31, 2023. In the amended complaint, the lead plaintiff asserts claims under Section 10(b) and 20(a) of the Exchange Act, alleging that the Defendants made materially false and misleading statements and failed to disclose facts regarding the impact of Beti on the Company’s services and revenues. The lead plaintiff is seeking remedies on behalf of the putative class that include, but are not limited to, compensatory damages, reimbursement of out-of-pocket costs, and injunctive relief. The Defendants filed their Motion to Dismiss Plaintiff’s Consolidated Complaint on September 6, 2024. The parties have fully briefed the Motion to Dismiss and are awaiting a decision from the Western District Court. In January and May 2024, three derivative lawsuits were filed by Company stockholders against the Company and the members of the Board of Directors for purported breaches of fiduciary duties, aiding and abetting, unjust enrichment, and waste of corporate assets based on similar allegations as in the Consolidated Securities Class Action. On May 23, 2024, the three derivative actions were consolidated into one master case, styled In re Paycom Software, Inc. Stockholder Derivative Litigation, Case No. 5:24-cv-00240-F, in the Western District Court (the “Consolidated Derivative Action”). The plaintiffs seek to recover unspecified monetary damages on behalf of the Company. The Western District Court has stayed all proceedings and deadlines in the Consolidated Derivative Action pending resolution of Defendants’ Motion to Dismiss in the Consolidated Securities Class Action. We believe that the resolution of current pending legal matters will not have a material adverse effect on our business, financial condition, results of operations or cash flows. Nonetheless, we cannot predict the outcome of these proceedings, as 37 37 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 or cash flows.Item 4. Mine Safety DisclosuresNone. 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 or cash flows. Item 4. Mine Safety Disclosures None. 38 38 PART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesOur common stock is traded on the NYSE under the symbol “PAYC.” As of February 10, 2026, there were approximately 2,862 holders of record of our common stock. This number is based on the actual number of holders registered at such date and does not include holders whose shares are held in “street name” by brokers and other nominees. DividendsIn May 2023, our Board of Directors adopted a dividend policy under which we intend to continue to pay quarterly cash dividends on our common stock.The following table summarizes quarterly dividends paid during 2025. Declaration Date Record Date Payment Date Per Share Dividend Total Cash Dividends Paid (in millions)(1) November 3, 2025 November 24, 2025 December 8, 2025 $ 0.375 $ 20.6 August 4, 2025 August 25, 2025 September 8, 2025 $ 0.375 $ 21.1 May 5, 2025 May 27, 2025 June 9, 2025 $ 0.375 $ 21.1 February 10, 2025 March 10, 2025 March 24, 2025 $ 0.375 $ 21.0 (1)All unvested equity incentive awards currently outstanding are entitled to receive dividends or dividend equivalents, provided that such dividends or dividend equivalents are withheld by the Company and distributed to the applicable holder upon vesting of the award. Dividends declared, as reported in the consolidated statements of stockholders’ equity, includes dividends and dividend equivalents payable to holders of unvested equity incentive awards and, as a result, exceeds the amount of total cash dividends paid presented in this column.On February 10, 2026, our Board of Directors declared a quarterly cash dividend of $0.375 per share of common stock payable on March 23, 2026 to stockholders of record at the close of business on March 9, 2026.The declaration, timing and amount of each quarterly cash dividend are subject to the approval of the Board of Directors, including a determination that the dividend policy and the declaration of dividends thereunder are in the best interests of our stockholders and are in compliance with applicable law. The Board of Directors retains the power to modify, suspend, or cancel the dividend policy in any manner and at any time that it may deem necessary or appropriate. PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NYSE under the symbol “PAYC.” As of February 10, 2026, there were approximately 2,862 holders of record of our common stock. This number is based on the actual number of holders registered at such date and does not include holders whose shares are held in “street name” by brokers and other nominees. Dividends In May 2023, our Board of Directors adopted a dividend policy under which we intend to continue to pay quarterly cash dividends on our common stock. The following table summarizes quarterly dividends paid during 2025."
    },
    {
      "status": "ADDED",
      "current_title": "Total Cash Dividends Paid (in millions)(1)",
      "prior_title": null,
      "current_body": "November 3, 2025 November 24, 2025 December 8, 2025 $ 0.375 $ 20.6 August 4, 2025 August 25, 2025 September 8, 2025 $ 0.375 $ 21.1 May 5, 2025 May 27, 2025 June 9, 2025 $ 0.375 $ 21.1 February 10, 2025 March 10, 2025 March 24, 2025 $ 0.375 $ 21.0 (1)All unvested equity incentive awards currently outstanding are entitled to receive dividends or dividend equivalents, provided that such dividends or dividend equivalents are withheld by the Company and distributed to the applicable holder upon vesting of the award. Dividends declared, as reported in the consolidated statements of stockholders’ equity, includes dividends and dividend equivalents payable to holders of unvested equity incentive awards and, as a result, exceeds the amount of total cash dividends paid presented in this column. All unvested equity incentive awards currently outstanding are entitled to receive dividends or dividend equivalents, provided that such dividends or dividend equivalents are withheld by the Company and distributed to the applicable holder upon vesting of the award. Dividends declared, as reported in the consolidated statements of stockholders’ equity, includes dividends and dividend equivalents payable to holders of unvested equity incentive awards and, as a result, exceeds the amount of total cash dividends paid presented in this column. On February 10, 2026, our Board of Directors declared a quarterly cash dividend of $0.375 per share of common stock payable on March 23, 2026 to stockholders of record at the close of business on March 9, 2026. The declaration, timing and amount of each quarterly cash dividend are subject to the approval of the Board of Directors, including a determination that the dividend policy and the declaration of dividends thereunder are in the best interests of our stockholders and are in compliance with applicable law. The Board of Directors retains the power to modify, suspend, or cancel the dividend policy in any manner and at any time that it may deem necessary or appropriate. 39 39 Performance GraphNotwithstanding any statement to the contrary in any of our filings with the SEC, the following performance graph shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act or “soliciting material” under the Exchange Act and shall not be incorporated by reference into any such filings irrespective of any general incorporation language contained in such filing.The following graph compares the cumulative total stockholder return on our common stock with the cumulative total return of the S&P 500 Index and the S&P 500 Software & Services Index during the five-year period commencing on December 31, 2020 and ending on December 31, 2025. The graph assumes that $100 was invested in our common stock and in each of the comparative indices at the beginning of the period, and assumes the reinvestment of any dividends. Historical stock price performance should not be relied upon as an indication of future stock price performance.Purchases of Equity SecuritiesThe number of shares of common stock repurchased by us during the three months ended December 31, 2025 is set forth below: Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(1) October 1 - 31, 2025(2) 503,962 $ 199.86 503,962 $ 1,116,986,000 November - 30, 2025(3) 50,264 $ 160.98 50,264 $ 1,108,894,000 December 1 - 31, 2025 — $ — — $ 1,108,894,000 Total 554,226 554,226 (1)Pursuant to a stock repurchase plan announced on November 20, 2018, we were authorized to purchase (in the aggregate) up to $150.0 million of our common stock in open market purchases, privately negotiated transactions or by other means. On May 13, 2021, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $300.0 million and extended the expiration date to May 13, 2023. On June 7, 2022, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $550.0 million and extended the expiration date to June 7, 2024. On August 15, 2022, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $1.1 billion and extended the expiration date to August 15, 2024. On July 31, 2024, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $1.5 billion and extended the expiration date to August 15, 2026.(2)Includes 3,527 shares withheld to satisfy tax withholding obligations for certain individuals upon the vesting of equity incentive awards.(3)Includes 8,583 shares withheld to satisfy tax withholding obligations for certain individuals upon the vesting of equity incentive awards.Item 6. Reserved"
    },
    {
      "status": "ADDED",
      "current_title": "Performance Graph",
      "prior_title": null,
      "current_body": "Notwithstanding any statement to the contrary in any of our filings with the SEC, the following performance graph shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act or “soliciting material” under the Exchange Act and shall not be incorporated by reference into any such filings irrespective of any general incorporation language contained in such filing. The following graph compares the cumulative total stockholder return on our common stock with the cumulative total return of the S&P 500 Index and the S&P 500 Software & Services Index during the five-year period commencing on December 31, 2020 and ending on December 31, 2025. The graph assumes that $100 was invested in our common stock and in each of the comparative indices at the beginning of the period, and assumes the reinvestment of any dividends. Historical stock price performance should not be relied upon as an indication of future stock price performance."
    },
    {
      "status": "ADDED",
      "current_title": "Purchases of Equity Securities",
      "prior_title": null,
      "current_body": "The number of shares of common stock repurchased by us during the three months ended December 31, 2025 is set forth below:"
    },
    {
      "status": "ADDED",
      "current_title": "Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(1)",
      "prior_title": null,
      "current_body": "October 1 - 31, 2025(2) 503,962 $ 199.86 503,962 $ 1,116,986,000 November - 30, 2025(3) 50,264 $ 160.98 50,264 $ 1,108,894,000 December 1 - 31, 2025 — $ — — $ 1,108,894,000 Total 554,226 554,226 (1)Pursuant to a stock repurchase plan announced on November 20, 2018, we were authorized to purchase (in the aggregate) up to $150.0 million of our common stock in open market purchases, privately negotiated transactions or by other means. On May 13, 2021, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $300.0 million and extended the expiration date to May 13, 2023. On June 7, 2022, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $550.0 million and extended the expiration date to June 7, 2024. On August 15, 2022, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $1.1 billion and extended the expiration date to August 15, 2024. On July 31, 2024, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $1.5 billion and extended the expiration date to August 15, 2026. Pursuant to a stock repurchase plan announced on November 20, 2018, we were authorized to purchase (in the aggregate) up to $150.0 million of our common stock in open market purchases, privately negotiated transactions or by other means. On May 13, 2021, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $300.0 million and extended the expiration date to May 13, 2023. On June 7, 2022, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $550.0 million and extended the expiration date to June 7, 2024. On August 15, 2022, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $1.1 billion and extended the expiration date to August 15, 2024. On July 31, 2024, we announced that our Board of Directors increased the availability under the existing stock repurchase plan to $1.5 billion and extended the expiration date to August 15, 2026. (2)Includes 3,527 shares withheld to satisfy tax withholding obligations for certain individuals upon the vesting of equity incentive awards. Includes 3,527 shares withheld to satisfy tax withholding obligations for certain individuals upon the vesting of equity incentive awards. (3)Includes 8,583 shares withheld to satisfy tax withholding obligations for certain individuals upon the vesting of equity incentive awards. Includes 8,583 shares withheld to satisfy tax withholding obligations for certain individuals upon the vesting of equity incentive awards. Item 6. Reserved 40 40 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThis Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with management’s perspective on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the audited consolidated financial statements (prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”)) and related notes included elsewhere in this Annual Report on Form 10-K (this “Form 10-K”). The following discussion contains forward-looking statements that are subject to risks and uncertainties. See “Cautionary Statements” for a discussion of the uncertainties, risks, and assumptions associated with those statements. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Form 10-K, particularly in the section entitled “Risk Factors.” Unless we state otherwise or the context otherwise requires, the terms “we,” “us,” “our” and the “Company” refer to Paycom Software, Inc. and its consolidated subsidiaries. All amounts presented in tables, other than per share amounts, are in millions unless otherwise noted.Overview We are a leading provider of a comprehensive, cloud-based human capital management solution delivered as Software-as-a-Service. We provide functionality and data analytics that businesses need to manage the complete employment lifecycle, from recruitment to retirement. Our solution requires virtually no customization and is based on a core system of record maintained in a single database for all human capital management (“HCM”) functions, including payroll, talent acquisition, talent management, human resources (“HR”) management and time and labor management applications. Our user-friendly software allows for easy adoption of our solution by employees, enabling self-management of their HCM activities in the cloud, which reduces the administrative burden on employers and increases employee productivity.Substantially all of our revenues are generated from (i) fixed amounts charged per billing period plus a fee per employee or transaction processed and (ii) fixed amounts charged per billing period. Our billing period varies by client and is typically based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly. Over time, an increasing number of clients will be billed on a monthly basis for certain HCM applications and services, regardless of the client’s payroll cycle. We serve a diverse client base in terms of size and industry. Our revenues are primarily generated through our sales force that solicits new clients and our client relations representatives (“CRRs”) who sell additional applications to existing clients.Our principal marketing efforts include national and local advertising campaigns, email campaigns, social and digital media campaigns, search engine marketing methods, sponsorships, tradeshows, print advertising and outbound marketing including personalized direct mail campaigns. In addition, we generate leads and build recognition of our brand and thought leadership with relevant and informative content, such as white papers, blogs, podcast episodes and webinars.Throughout our history, we have built strong relationships with our clients. As the HCM needs of our clients evolve, we believe that we are well-positioned to expand the HCM spending of our clients, and we believe this opportunity is significant. To be successful, we must continue to demonstrate the operational and economic benefits of our solution, as well as effectively hire, train, motivate and retain qualified personnel.Growth Outlook, Opportunities and ChallengesAs a result of our significant revenue growth and geographic expansion, we are presented with a variety of opportunities and challenges. Our payroll application is the foundation of our solution, and all of our clients are required to utilize this application in order to access our other applications. Consequently, we have historically generated the majority of our revenues from our payroll applications, although our revenue mix has evolved and will continue to evolve as we develop and add new non-payroll applications to our solution.We believe our strategy of focusing on incorporating artificial intelligence (“AI”) and automation across our full solution is an important differentiator for attracting new clients and key to long-term client satisfaction and client retention. Our software vision is that people should not perform payroll-related and HCM-related tasks that systems can automate. We have designed our software so users do not have to be system experts or even need training to access information. For example, our industry-first command-driven AI engine, IWant, provides an easy, automated avenue for seeking information about employee data without having to navigate through the software.Our continued growth depends on attracting new clients by continuing to leverage our sales force productivity, penetrating existing markets and expanding into new markets, targeting a high degree of client employee usage across our solution, and introducing new applications to our existing client base. Client adoption of new applications and, historically, client employee usage of both new and existing applications have been significant factors in our recurring revenue growth. We believe our ability to continue to develop new applications and to improve existing applications will enable us to increase recurring revenues in the future. In addition, we plan to open additional sales offices in the future to further expand our market presence. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with management’s perspective on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the audited consolidated financial statements (prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”)) and related notes included elsewhere in this Annual Report on Form 10-K (this “Form 10-K”). The following discussion contains forward-looking statements that are subject to risks and uncertainties. See “Cautionary Statements” for a discussion of the uncertainties, risks, and assumptions associated with those statements. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Form 10-K, particularly in the section entitled “Risk Factors.” Unless we state otherwise or the context otherwise requires, the terms “we,” “us,” “our” and the “Company” refer to Paycom Software, Inc. and its consolidated subsidiaries. All amounts presented in tables, other than per share amounts, are in millions unless otherwise noted. Overview We are a leading provider of a comprehensive, cloud-based human capital management solution delivered as Software-as-a-Service. We provide functionality and data analytics that businesses need to manage the complete employment lifecycle, from recruitment to retirement. Our solution requires virtually no customization and is based on a core system of record maintained in a single database for all human capital management (“HCM”) functions, including payroll, talent acquisition, talent management, human resources (“HR”) management and time and labor management applications. Our user-friendly software allows for easy adoption of our solution by employees, enabling self-management of their HCM activities in the cloud, which reduces the administrative burden on employers and increases employee productivity. Substantially all of our revenues are generated from (i) fixed amounts charged per billing period plus a fee per employee or transaction processed and (ii) fixed amounts charged per billing period. Our billing period varies by client and is typically based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly. Over time, an increasing number of clients will be billed on a monthly basis for certain HCM applications and services, regardless of the client’s payroll cycle. We serve a diverse client base in terms of size and industry. Our revenues are primarily generated through our sales force that solicits new clients and our client relations representatives (“CRRs”) who sell additional applications to existing clients. Our principal marketing efforts include national and local advertising campaigns, email campaigns, social and digital media campaigns, search engine marketing methods, sponsorships, tradeshows, print advertising and outbound marketing including personalized direct mail campaigns. In addition, we generate leads and build recognition of our brand and thought leadership with relevant and informative content, such as white papers, blogs, podcast episodes and webinars. Throughout our history, we have built strong relationships with our clients. As the HCM needs of our clients evolve, we believe that we are well-positioned to expand the HCM spending of our clients, and we believe this opportunity is significant. To be successful, we must continue to demonstrate the operational and economic benefits of our solution, as well as effectively hire, train, motivate and retain qualified personnel."
    },
    {
      "status": "ADDED",
      "current_title": "Growth Outlook, Opportunities and Challenges",
      "prior_title": null,
      "current_body": "As a result of our significant revenue growth and geographic expansion, we are presented with a variety of opportunities and challenges. Our payroll application is the foundation of our solution, and all of our clients are required to utilize this application in order to access our other applications. Consequently, we have historically generated the majority of our revenues from our payroll applications, although our revenue mix has evolved and will continue to evolve as we develop and add new non-payroll applications to our solution. We believe our strategy of focusing on incorporating artificial intelligence (“AI”) and automation across our full solution is an important differentiator for attracting new clients and key to long-term client satisfaction and client retention. Our software vision is that people should not perform payroll-related and HCM-related tasks that systems can automate. We have designed our software so users do not have to be system experts or even need training to access information. For example, our industry-first command-driven AI engine, IWant, provides an easy, automated avenue for seeking information about employee data without having to navigate through the software. Our continued growth depends on attracting new clients by continuing to leverage our sales force productivity, penetrating existing markets and expanding into new markets, targeting a high degree of client employee usage across our solution, and introducing new applications to our existing client base. Client adoption of new applications and, historically, client employee usage of both new and existing applications have been significant factors in our recurring revenue growth. We believe our ability to continue to develop new applications and to improve existing applications will enable us to increase recurring revenues in the future. In addition, we plan to open additional sales offices in the future to further expand our market presence. 41 41 The market for HCM software is highly competitive, rapidly evolving and fragmented. We expect competition to remain intense as new market entrants and disruptive technologies emerge and aggressive pricing and client retention strategies persist. These market pressures can directly affect our recurring revenue growth and our ability to attract and retain clients. We believe our long-term focused investments in automation, client ROI achievement, and world-class service can strengthen our recurring revenue growth and annual revenue retention rate.Our target client size is organizations with 50 to 10,000 or more employees. While we continue to serve a diversified client base ranging from small businesses to organizations with many thousands of employees, the average size of our clients has grown significantly as we have organically grown our operations and increased the number of applications we offer. We believe larger employers, such as organizations with greater than 1,000 employees, represent a substantial opportunity to increase our revenues per client, with limited incremental cost to us. With the launch of our Global HCM solution and expansion of payroll services into certain international markets, we expect that our ability to serve organizations with international employees makes our solution more attractive to larger companies, many of which have a global presence. Because we charge our clients on a per employee basis for certain services we provide, any increase or decrease in the number of employees of our clients will have a positive or negative impact, respectively, on our results of operations. As a result, the performance of certain of our offerings is sensitive to changes in the labor market. In addition, a multitude of macroeconomic pressures, such as inflation and changes in interest rates, impact our clients’ hiring practices to varying degrees and, in turn, impact our revenues.We believe the challenges of managing the ever-changing complexity of payroll and HR will continue to drive companies to turn to outsourced providers for help with their HCM needs. The HCM industry historically has been driven, in part, by legislation and regulatory action, including COBRA, changes to the minimum wage laws or overtime rules, and legislation from federal, state or municipal taxation authorities.Growing our business has resulted in, and will continue to result in, substantial investments in sales professionals, operating expenses, system development and programming costs (including those related our full solution automation and AI initiatives) and general and administrative expenses, which have increased and will continue to increase our expenses. Historically, our revenue growth and geographic expansion have driven increases in (i) facility costs related to data centers, the expansion of our corporate headquarters, operations facilities and additional sales office leases and (ii) salaries and benefits and stock-based compensation expense. Automating our core business systems is creating new efficiencies that have led to reductions in headcount and, as a result, contributed to a decrease in certain employee-related expenses during the year ended December 31, 2025. Due to lower headcount, we expect that certain employee-related expenses will be lower in 2026 as compared to 2025.Key Metrics In addition to the U.S. GAAP and non-GAAP metrics discussed elsewhere in this Form 10-K, we also monitor the following metrics to evaluate our business, measure our performance and identify trends affecting our business: Year Ended December 31, 2025 2024 2023 Key performance indicators: Clients 39,199 37,543 36,820 Clients (based on parent company grouping) 20,321 19,422 19,481 Sales teams 58 58 55 Annual revenue retention rate(1) 91 % 90 % 90 % •Clients. When we calculate the number of clients at period end, we treat client accounts with separate taxpayer identification numbers (or, in certain circumstances, separate client codes) as separate clients, which often separates client accounts that are affiliated with the same parent organization. We track the number of our clients to provide an accurate gauge of the size of our business. Unless we state otherwise or the context otherwise requires, references to clients throughout this Form 10-K refer to this metric.•Clients (based on parent company grouping). When we calculate the number of clients based on parent company grouping at period end, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers (or, in certain circumstances, separate client codes), which often combines client accounts that are affiliated with the same parent organization. We track the number of our clients based on parent company grouping to provide an alternate measure of the size of our business and clients.•Sales Teams. We monitor our sales professionals by the number of sales teams at period end. For the purposes of this metric, CRRs and emerging markets representatives are considered one sales team. Each outside sales team typically consists of a sales manager and approximately seven other sales professionals. Certain larger metropolitan areas can The market for HCM software is highly competitive, rapidly evolving and fragmented. We expect competition to remain intense as new market entrants and disruptive technologies emerge and aggressive pricing and client retention strategies persist. These market pressures can directly affect our recurring revenue growth and our ability to attract and retain clients. We believe our long-term focused investments in automation, client ROI achievement, and world-class service can strengthen our recurring revenue growth and annual revenue retention rate. Our target client size is organizations with 50 to 10,000 or more employees. While we continue to serve a diversified client base ranging from small businesses to organizations with many thousands of employees, the average size of our clients has grown significantly as we have organically grown our operations and increased the number of applications we offer. We believe larger employers, such as organizations with greater than 1,000 employees, represent a substantial opportunity to increase our revenues per client, with limited incremental cost to us. With the launch of our Global HCM solution and expansion of payroll services into certain international markets, we expect that our ability to serve organizations with international employees makes our solution more attractive to larger companies, many of which have a global presence. Because we charge our clients on a per employee basis for certain services we provide, any increase or decrease in the number of employees of our clients will have a positive or negative impact, respectively, on our results of operations. As a result, the performance of certain of our offerings is sensitive to changes in the labor market. In addition, a multitude of macroeconomic pressures, such as inflation and changes in interest rates, impact our clients’ hiring practices to varying degrees and, in turn, impact our revenues. We believe the challenges of managing the ever-changing complexity of payroll and HR will continue to drive companies to turn to outsourced providers for help with their HCM needs. The HCM industry historically has been driven, in part, by legislation and regulatory action, including COBRA, changes to the minimum wage laws or overtime rules, and legislation from federal, state or municipal taxation authorities. Growing our business has resulted in, and will continue to result in, substantial investments in sales professionals, operating expenses, system development and programming costs (including those related our full solution automation and AI initiatives) and general and administrative expenses, which have increased and will continue to increase our expenses. Historically, our revenue growth and geographic expansion have driven increases in (i) facility costs related to data centers, the expansion of our corporate headquarters, operations facilities and additional sales office leases and (ii) salaries and benefits and stock-based compensation expense. Automating our core business systems is creating new efficiencies that have led to reductions in headcount and, as a result, contributed to a decrease in certain employee-related expenses during the year ended December 31, 2025. Due to lower headcount, we expect that certain employee-related expenses will be lower in 2026 as compared to 2025."
    },
    {
      "status": "ADDED",
      "current_title": "Key Metrics",
      "prior_title": null,
      "current_body": "In addition to the U.S. GAAP and non-GAAP metrics discussed elsewhere in this Form 10-K, we also monitor the following metrics to evaluate our business, measure our performance and identify trends affecting our business:"
    },
    {
      "status": "ADDED",
      "current_title": "Year Ended December 31,",
      "prior_title": null,
      "current_body": "2025 2024 2023 Key performance indicators: Clients 39,199 37,543 36,820 Clients (based on parent company grouping) 20,321 19,422 19,481 Sales teams 58 58 55 Annual revenue retention rate(1) 91 % 90 % 90 % •Clients. When we calculate the number of clients at period end, we treat client accounts with separate taxpayer identification numbers (or, in certain circumstances, separate client codes) as separate clients, which often separates client accounts that are affiliated with the same parent organization. We track the number of our clients to provide an accurate gauge of the size of our business. Unless we state otherwise or the context otherwise requires, references to clients throughout this Form 10-K refer to this metric. Clients. When we calculate the number of clients at period end, we treat client accounts with separate taxpayer identification numbers (or, in certain circumstances, separate client codes) as separate clients, which often separates client accounts that are affiliated with the same parent organization. We track the number of our clients to provide an accurate gauge of the size of our business. Unless we state otherwise or the context otherwise requires, references to clients throughout this Form 10-K refer to this metric. •Clients (based on parent company grouping). When we calculate the number of clients based on parent company grouping at period end, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers (or, in certain circumstances, separate client codes), which often combines client accounts that are affiliated with the same parent organization. We track the number of our clients based on parent company grouping to provide an alternate measure of the size of our business and clients. Clients (based on parent company grouping). When we calculate the number of clients based on parent company grouping at period end, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers (or, in certain circumstances, separate client codes), which often combines client accounts that are affiliated with the same parent organization. We track the number of our clients based on parent company grouping to provide an alternate measure of the size of our business and clients. •Sales Teams. We monitor our sales professionals by the number of sales teams at period end. For the purposes of this metric, CRRs and emerging markets representatives are considered one sales team. Each outside sales team typically consists of a sales manager and approximately seven other sales professionals. Certain larger metropolitan areas can Sales Teams. We monitor our sales professionals by the number of sales teams at period end. For the purposes of this metric, CRRs and emerging markets representatives are considered one sales team. Each outside sales team typically consists of a sales manager and approximately seven other sales professionals. Certain larger metropolitan areas can 42 42 support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods.•Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods.We calculate annual revenue retention rate for any 12-month period (a “Measurement Period”) as follows:Recurring and Other Revenues – TTM Revenue AttritionRecurring and Other RevenuesThe trailing 12-month value of revenue from clients lost during the Measurement Period (“TTM Revenue Attrition”) is equal to the actual recurring fees paid by such lost clients during the 12 months preceding the respective dates on which they last processed payroll with us. The point at which a client is deemed “lost” is determined based on the terms of our standard services agreement with clients. As described in Note 2 “Summary of Significant Accounting Policies”, for the year ended December 31, 2024, we changed the presentation of revenues on the consolidated statements of comprehensive income to disaggregate interest on funds held for clients and combine recurring and other revenues. Reclassifications for the presentation of revenue did not impact the calculation of our annual retention rate.Components of Results of OperationsSources of Revenues Revenues consist of recurring and other revenues, and interest on funds held for clients. We expect our revenues to increase as we introduce new applications, expand our client base and renew and expand relationships with existing clients.Recurring and Other RevenuesRecurring revenues are derived primarily from our payroll, talent acquisition, talent management, HR management and time and labor management applications, fees charged for form filings and delivery of client payroll checks and reports, and revenues associated with background checks and income and employment verification services. The client’s use of our applications routinely fluctuates based upon factors that include the number of payrolls run and changes in the client’s employee population.Substantially all of our revenues are generated from (i) fixed amounts charged per billing period plus a fee per employee or transaction processed and (ii) fixed amounts charged per billing period. Our billing period varies by client and is typically based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly. Over time, an increasing number of clients will be billed on a monthly basis for certain HCM applications and services, regardless of the client’s payroll cycle. Because recurring revenues are based, in part, on fees for use of our applications and the delivery of checks and reports that are levied on a per-employee basis, our recurring revenues can fluctuate in relation to changes to client employee count. Furthermore, because the timing of revenue recognition is driven by the processing of the client’s payroll, it can vary based upon changes in client payroll dates and the impact that weekends or public holidays may have in prompting a client to accelerate or delay the processing of payroll.Recurring revenues include revenues relating to the annual processing of payroll tax filing forms and Affordable Care Act (“ACA”) form filing requirements and revenues from processing unscheduled payroll runs (such as bonuses) for our clients. These payroll forms are typically processed in the first quarter of the year, and many of our clients are subject to ACA form filing requirements in the first quarter, which positively impacts first quarter revenues and margins. We anticipate our revenues will continue to exhibit this seasonal pattern related to ACA form filings for so long as the ACA (or replacement legislation) includes employer reporting requirements. In addition, our recurring revenues during the fourth quarter are positively impacted by unscheduled payroll runs for our clients that occur before the end of the year. Nonetheless, we expect the magnitude of these seasonal fluctuations in our revenues to decrease to the extent clients utilize more of our non-payroll applications.Other revenues consist of implementation fees for the deployment of our solution and revenues from sales of time clocks as part of our time and attendance services. Non-refundable implementation fees are charged to new clients at contract inception. These fees generally range from 10% to 30% of the annualized value of the transaction. Implementation fees are deferred and recognized as revenue over the life of the client, which is estimated to be 10 years. Revenues from the sale of time clocks are recognized when control is transferred to the client upon delivery of the product.Interest on Funds Held For ClientsWe earn interest income on funds held for clients. Funds held for clients are amounts collected from clients in advance of either the applicable due date for payroll tax submissions or the applicable disbursement date for employee payment services. These collections from clients are typically disbursed from one to 30 days after receipt, with some funds being held for up to 120 days. We typically invest funds held for clients in money market funds, demand deposit accounts, certificates of deposit, support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods. support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods. •Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods. Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods. We calculate annual revenue retention rate for any 12-month period (a “Measurement Period”) as follows: Recurring and Other Revenues – TTM Revenue Attrition Recurring and Other Revenues The trailing 12-month value of revenue from clients lost during the Measurement Period (“TTM Revenue Attrition”) is equal to the actual recurring fees paid by such lost clients during the 12 months preceding the respective dates on which they last processed payroll with us. The point at which a client is deemed “lost” is determined based on the terms of our standard services agreement with clients. As described in Note 2 “Summary of Significant Accounting Policies”, for the year ended December 31, 2024, we changed the presentation of revenues on the consolidated statements of comprehensive income to disaggregate interest on funds held for clients and combine recurring and other revenues. Reclassifications for the presentation of revenue did not impact the calculation of our annual retention rate."
    },
    {
      "status": "ADDED",
      "current_title": "Sources of Revenues",
      "prior_title": null,
      "current_body": "Revenues consist of recurring and other revenues, and interest on funds held for clients. We expect our revenues to increase as we introduce new applications, expand our client base and renew and expand relationships with existing clients. Recurring and Other Revenues Recurring revenues are derived primarily from our payroll, talent acquisition, talent management, HR management and time and labor management applications, fees charged for form filings and delivery of client payroll checks and reports, and revenues associated with background checks and income and employment verification services. The client’s use of our applications routinely fluctuates based upon factors that include the number of payrolls run and changes in the client’s employee population. Substantially all of our revenues are generated from (i) fixed amounts charged per billing period plus a fee per employee or transaction processed and (ii) fixed amounts charged per billing period. Our billing period varies by client and is typically based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly. Over time, an increasing number of clients will be billed on a monthly basis for certain HCM applications and services, regardless of the client’s payroll cycle. Because recurring revenues are based, in part, on fees for use of our applications and the delivery of checks and reports that are levied on a per-employee basis, our recurring revenues can fluctuate in relation to changes to client employee count. Furthermore, because the timing of revenue recognition is driven by the processing of the client’s payroll, it can vary based upon changes in client payroll dates and the impact that weekends or public holidays may have in prompting a client to accelerate or delay the processing of payroll. Recurring revenues include revenues relating to the annual processing of payroll tax filing forms and Affordable Care Act (“ACA”) form filing requirements and revenues from processing unscheduled payroll runs (such as bonuses) for our clients. These payroll forms are typically processed in the first quarter of the year, and many of our clients are subject to ACA form filing requirements in the first quarter, which positively impacts first quarter revenues and margins. We anticipate our revenues will continue to exhibit this seasonal pattern related to ACA form filings for so long as the ACA (or replacement legislation) includes employer reporting requirements. In addition, our recurring revenues during the fourth quarter are positively impacted by unscheduled payroll runs for our clients that occur before the end of the year. Nonetheless, we expect the magnitude of these seasonal fluctuations in our revenues to decrease to the extent clients utilize more of our non-payroll applications. Other revenues consist of implementation fees for the deployment of our solution and revenues from sales of time clocks as part of our time and attendance services. Non-refundable implementation fees are charged to new clients at contract inception. These fees generally range from 10% to 30% of the annualized value of the transaction. Implementation fees are deferred and recognized as revenue over the life of the client, which is estimated to be 10 years. Revenues from the sale of time clocks are recognized when control is transferred to the client upon delivery of the product. Interest on Funds Held For Clients We earn interest income on funds held for clients. Funds held for clients are amounts collected from clients in advance of either the applicable due date for payroll tax submissions or the applicable disbursement date for employee payment services. These collections from clients are typically disbursed from one to 30 days after receipt, with some funds being held for up to 120 days. We typically invest funds held for clients in money market funds, demand deposit accounts, certificates of deposit, 43 43 commercial paper and U.S. treasury securities until they are paid to the applicable tax or regulatory agencies or to client employees. As we introduce new applications, expand our client base and renew and expand relationships with existing clients, we expect our average funds held for clients balance and, accordingly, interest earned on funds held for clients, will increase; however, the amount of interest we earn is positively or negatively impacted by changes in interest rates.Cost of RevenuesCost of revenues consists of expenses related to hosting and supporting our applications, hardware costs, systems support and technology and depreciation and amortization. These costs include employee-related expenses (including non-cash stock-based compensation expenses) and other expenses related to client support, bank charges for processing automated clearing house transactions, certain implementation expenses, delivery charges and paper costs. They also include our cost for time clocks sold and ongoing technology and support costs related to our systems. The amount of depreciation and amortization of property and equipment allocated to cost of revenues is determined based upon an estimate of assets used to support our operations.Administrative ExpensesAdministrative expenses consist of sales and marketing expenses, research and development expenses, general and administrative expenses and depreciation and amortization expenses. Sales and marketing expenses consist primarily of employee-related expenses for our direct sales and marketing staff (such as the amortization of commissions and bonuses and non-cash stock-based compensation expenses), marketing expenses and other related costs. Research and development expenses consist primarily of employee-related expenses (including non-cash stock-based compensation expenses) for our development staff, net of capitalized software costs for internally developed software. General and administrative expenses consist of employee-related expenses for finance and accounting, legal, human resources and management information systems personnel (including non-cash stock-based compensation expenses), legal costs, professional fees and other corporate expenses. Depreciation and amortization expenses consist of (i) the amount of depreciation and amortization of property and equipment allocated to administrative expenses (based upon an estimate of assets used to support our selling, general and administrative functions) and (ii) amortization of intangible assets.Interest ExpenseInterest expense includes interest on our long-term debt. Prior to the repayment of our long-term debt in November 2023, we capitalized interest costs incurred for indebtedness related to construction in progress. See Note 6 “Long-Term Debt” for discussion of the repayment of our debt.Other Income, netOther income, net includes interest earned on our own funds, any gain or loss on the sale or disposal of fixed assets, any costs associated with the early repayment of debt, any loss on the extinguishment of debt, and any gain on the modification of the naming rights agreement.Provision for Income TaxesOur consolidated financial statements include a provision for income taxes incurred for the anticipated tax consequences of the reported results of operations using the asset and liability method. Under this method, we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for any operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. We recognize a valuation allowance to reduce deferred tax assets to the net amount we believe is more likely than not to be realized. commercial paper and U.S. treasury securities until they are paid to the applicable tax or regulatory agencies or to client employees. As we introduce new applications, expand our client base and renew and expand relationships with existing clients, we expect our average funds held for clients balance and, accordingly, interest earned on funds held for clients, will increase; however, the amount of interest we earn is positively or negatively impacted by changes in interest rates."
    },
    {
      "status": "ADDED",
      "current_title": "Cost of Revenues",
      "prior_title": null,
      "current_body": "Cost of revenues consists of expenses related to hosting and supporting our applications, hardware costs, systems support and technology and depreciation and amortization. These costs include employee-related expenses (including non-cash stock-based compensation expenses) and other expenses related to client support, bank charges for processing automated clearing house transactions, certain implementation expenses, delivery charges and paper costs. They also include our cost for time clocks sold and ongoing technology and support costs related to our systems. The amount of depreciation and amortization of property and equipment allocated to cost of revenues is determined based upon an estimate of assets used to support our operations."
    },
    {
      "status": "ADDED",
      "current_title": "Administrative Expenses",
      "prior_title": null,
      "current_body": "Administrative expenses consist of sales and marketing expenses, research and development expenses, general and administrative expenses and depreciation and amortization expenses. Sales and marketing expenses consist primarily of employee-related expenses for our direct sales and marketing staff (such as the amortization of commissions and bonuses and non-cash stock-based compensation expenses), marketing expenses and other related costs. Research and development expenses consist primarily of employee-related expenses (including non-cash stock-based compensation expenses) for our development staff, net of capitalized software costs for internally developed software. General and administrative expenses consist of employee-related expenses for finance and accounting, legal, human resources and management information systems personnel (including non-cash stock-based compensation expenses), legal costs, professional fees and other corporate expenses. Depreciation and amortization expenses consist of (i) the amount of depreciation and amortization of property and equipment allocated to administrative expenses (based upon an estimate of assets used to support our selling, general and administrative functions) and (ii) amortization of intangible assets."
    },
    {
      "status": "ADDED",
      "current_title": "Interest Expense",
      "prior_title": null,
      "current_body": "Interest expense includes interest on our long-term debt. Prior to the repayment of our long-term debt in November 2023, we capitalized interest costs incurred for indebtedness related to construction in progress. See Note 6 “Long-Term Debt” for discussion of the repayment of our debt."
    },
    {
      "status": "ADDED",
      "current_title": "Other Income, net",
      "prior_title": null,
      "current_body": "Other income, net includes interest earned on our own funds, any gain or loss on the sale or disposal of fixed assets, any costs associated with the early repayment of debt, any loss on the extinguishment of debt, and any gain on the modification of the naming rights agreement."
    },
    {
      "status": "ADDED",
      "current_title": "Provision for Income Taxes",
      "prior_title": null,
      "current_body": "Our consolidated financial statements include a provision for income taxes incurred for the anticipated tax consequences of the reported results of operations using the asset and liability method. Under this method, we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for any operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. We recognize a valuation allowance to reduce deferred tax assets to the net amount we believe is more likely than not to be realized. 44 44 Results of OperationsThe following table sets forth selected consolidated statements of income data and such data as a percentage of total revenues for each of the periods indicated, as well as year-over-year changes with respect to each line item. Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the “SEC”) on February 20, 2025, for a discussion of results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023. Year Ended December 31, 2025 2024 % Change Revenues Recurring and other $ 1,938.7 94.5 % $ 1,758.3 93.4 % 10.3% Interest on funds held for clients 113.0 5.5 % 124.9 6.6 % -9.6% Total revenues 2,051.7 100.0 % 1,883.2 100.0 % 9.0% Cost of revenues Operating expenses 263.0 12.8 % 267.4 14.2 % -1.6% Depreciation and amortization 82.4 4.0 % 67.2 3.6 % 22.5% Total cost of revenues 345.4 16.8 % 334.6 17.8 % 3.2% Administrative expenses Sales and marketing 482.8 23.5 % 434.4 23.1 % 11.2% Research and development 283.4 13.8 % 242.6 12.9 % 16.8% General and administrative 279.0 13.6 % 158.6 8.4 % 75.9% Depreciation and amortization 93.9 4.6 % 78.7 4.2 % 19.3% Total administrative expenses 1,139.1 55.5 % 914.3 48.6 % 24.6% Total operating expenses 1,484.5 72.4 % 1,248.9 66.3 % 18.9% Operating income 567.2 27.6 % 634.3 33.7 % -10.6% Interest expense (3.4 ) -0.2 % (3.4 ) -0.2 % 1.9% Other income, net 55.6 2.7 % 18.1 1.0 % 207.2% Income before income taxes 619.4 30.2 % 649.0 34.5 % -4.6% Provision for income taxes 166.0 8.1 % 147.0 7.8 % 13.0% Net income $ 453.4 22.1 % $ 502.0 26.7 % -9.7% RevenuesRecurring and Other RevenuesThe increase in recurring and other revenues for the year ended December 31, 2025 from the year ended December 31, 2024 was the result of the addition of new clients, increased revenue from sales of additional applications and services to existing clients, additions and increased usage of existing products and services, and the realization of pricing strategies. Client attrition, particularly among smaller clients, partially offset the favorable impact of these revenue drivers.Interest on Funds Held For ClientsThe impact of lower interest rates during the year ended December 31, 2025 as compared to the prior year was partially offset by an increase in average funds held for client balances, but nonetheless resulted in decreased interest earned on funds held for clients for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The average daily balance of funds held for clients was $2.7 billion and $2.4 billion the years ended December 31, 2025 and 2024, respectively.ExpensesCost of RevenuesDuring the year ended December 31, 2025, operating expenses decreased from the prior year by $4.3 million, primarily due to an $8.2 million decrease in employee-related expenses, which was partially offset by a $2.5 million increase in shipping and supplies fees and a $1.1 million increase in banking related fees. Depreciation and amortization expense increased $15.2 million primarily due to the development of additional technology, purchases of other related fixed assets, and the impact of our corporate headquarters expansion that was placed into service in April 2024, which increases were partially offset by the impact of an increase in the estimated useful lives of servers and network equipment."
    },
    {
      "status": "ADDED",
      "current_title": "Results of Operations",
      "prior_title": null,
      "current_body": "The following table sets forth selected consolidated statements of income data and such data as a percentage of total revenues for each of the periods indicated, as well as year-over-year changes with respect to each line item. Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the “SEC”) on February 20, 2025, for a discussion of results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023. Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the “SEC”) on February 20, 2025"
    },
    {
      "status": "ADDED",
      "current_title": "Year Ended December 31,",
      "prior_title": null,
      "current_body": "2025 2024 2023 Key performance indicators: Clients 39,199 37,543 36,820 Clients (based on parent company grouping) 20,321 19,422 19,481 Sales teams 58 58 55 Annual revenue retention rate(1) 91 % 90 % 90 % •Clients. When we calculate the number of clients at period end, we treat client accounts with separate taxpayer identification numbers (or, in certain circumstances, separate client codes) as separate clients, which often separates client accounts that are affiliated with the same parent organization. We track the number of our clients to provide an accurate gauge of the size of our business. Unless we state otherwise or the context otherwise requires, references to clients throughout this Form 10-K refer to this metric. Clients. When we calculate the number of clients at period end, we treat client accounts with separate taxpayer identification numbers (or, in certain circumstances, separate client codes) as separate clients, which often separates client accounts that are affiliated with the same parent organization. We track the number of our clients to provide an accurate gauge of the size of our business. Unless we state otherwise or the context otherwise requires, references to clients throughout this Form 10-K refer to this metric. •Clients (based on parent company grouping). When we calculate the number of clients based on parent company grouping at period end, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers (or, in certain circumstances, separate client codes), which often combines client accounts that are affiliated with the same parent organization. We track the number of our clients based on parent company grouping to provide an alternate measure of the size of our business and clients. Clients (based on parent company grouping). When we calculate the number of clients based on parent company grouping at period end, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers (or, in certain circumstances, separate client codes), which often combines client accounts that are affiliated with the same parent organization. We track the number of our clients based on parent company grouping to provide an alternate measure of the size of our business and clients. •Sales Teams. We monitor our sales professionals by the number of sales teams at period end. For the purposes of this metric, CRRs and emerging markets representatives are considered one sales team. Each outside sales team typically consists of a sales manager and approximately seven other sales professionals. Certain larger metropolitan areas can Sales Teams. We monitor our sales professionals by the number of sales teams at period end. For the purposes of this metric, CRRs and emerging markets representatives are considered one sales team. Each outside sales team typically consists of a sales manager and approximately seven other sales professionals. Certain larger metropolitan areas can 42 42 support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods.•Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods.We calculate annual revenue retention rate for any 12-month period (a “Measurement Period”) as follows:Recurring and Other Revenues – TTM Revenue AttritionRecurring and Other RevenuesThe trailing 12-month value of revenue from clients lost during the Measurement Period (“TTM Revenue Attrition”) is equal to the actual recurring fees paid by such lost clients during the 12 months preceding the respective dates on which they last processed payroll with us. The point at which a client is deemed “lost” is determined based on the terms of our standard services agreement with clients. As described in Note 2 “Summary of Significant Accounting Policies”, for the year ended December 31, 2024, we changed the presentation of revenues on the consolidated statements of comprehensive income to disaggregate interest on funds held for clients and combine recurring and other revenues. Reclassifications for the presentation of revenue did not impact the calculation of our annual retention rate.Components of Results of OperationsSources of Revenues Revenues consist of recurring and other revenues, and interest on funds held for clients. We expect our revenues to increase as we introduce new applications, expand our client base and renew and expand relationships with existing clients.Recurring and Other RevenuesRecurring revenues are derived primarily from our payroll, talent acquisition, talent management, HR management and time and labor management applications, fees charged for form filings and delivery of client payroll checks and reports, and revenues associated with background checks and income and employment verification services. The client’s use of our applications routinely fluctuates based upon factors that include the number of payrolls run and changes in the client’s employee population.Substantially all of our revenues are generated from (i) fixed amounts charged per billing period plus a fee per employee or transaction processed and (ii) fixed amounts charged per billing period. Our billing period varies by client and is typically based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly. Over time, an increasing number of clients will be billed on a monthly basis for certain HCM applications and services, regardless of the client’s payroll cycle. Because recurring revenues are based, in part, on fees for use of our applications and the delivery of checks and reports that are levied on a per-employee basis, our recurring revenues can fluctuate in relation to changes to client employee count. Furthermore, because the timing of revenue recognition is driven by the processing of the client’s payroll, it can vary based upon changes in client payroll dates and the impact that weekends or public holidays may have in prompting a client to accelerate or delay the processing of payroll.Recurring revenues include revenues relating to the annual processing of payroll tax filing forms and Affordable Care Act (“ACA”) form filing requirements and revenues from processing unscheduled payroll runs (such as bonuses) for our clients. These payroll forms are typically processed in the first quarter of the year, and many of our clients are subject to ACA form filing requirements in the first quarter, which positively impacts first quarter revenues and margins. We anticipate our revenues will continue to exhibit this seasonal pattern related to ACA form filings for so long as the ACA (or replacement legislation) includes employer reporting requirements. In addition, our recurring revenues during the fourth quarter are positively impacted by unscheduled payroll runs for our clients that occur before the end of the year. Nonetheless, we expect the magnitude of these seasonal fluctuations in our revenues to decrease to the extent clients utilize more of our non-payroll applications.Other revenues consist of implementation fees for the deployment of our solution and revenues from sales of time clocks as part of our time and attendance services. Non-refundable implementation fees are charged to new clients at contract inception. These fees generally range from 10% to 30% of the annualized value of the transaction. Implementation fees are deferred and recognized as revenue over the life of the client, which is estimated to be 10 years. Revenues from the sale of time clocks are recognized when control is transferred to the client upon delivery of the product.Interest on Funds Held For ClientsWe earn interest income on funds held for clients. Funds held for clients are amounts collected from clients in advance of either the applicable due date for payroll tax submissions or the applicable disbursement date for employee payment services. These collections from clients are typically disbursed from one to 30 days after receipt, with some funds being held for up to 120 days. We typically invest funds held for clients in money market funds, demand deposit accounts, certificates of deposit, support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods. support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods. •Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods. Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods. We calculate annual revenue retention rate for any 12-month period (a “Measurement Period”) as follows: Recurring and Other Revenues – TTM Revenue Attrition Recurring and Other Revenues The trailing 12-month value of revenue from clients lost during the Measurement Period (“TTM Revenue Attrition”) is equal to the actual recurring fees paid by such lost clients during the 12 months preceding the respective dates on which they last processed payroll with us. The point at which a client is deemed “lost” is determined based on the terms of our standard services agreement with clients. As described in Note 2 “Summary of Significant Accounting Policies”, for the year ended December 31, 2024, we changed the presentation of revenues on the consolidated statements of comprehensive income to disaggregate interest on funds held for clients and combine recurring and other revenues. Reclassifications for the presentation of revenue did not impact the calculation of our annual retention rate."
    },
    {
      "status": "ADDED",
      "current_title": "Cost of revenues",
      "prior_title": null,
      "current_body": "Operating expenses 263.0 12.8 % 267.4 14.2 % -1.6% Depreciation and amortization 82.4 4.0 % 67.2 3.6 % 22.5% Total cost of revenues 345.4 16.8 % 334.6 17.8 % 3.2%"
    },
    {
      "status": "ADDED",
      "current_title": "Administrative expenses",
      "prior_title": null,
      "current_body": "Sales and marketing 482.8 23.5 % 434.4 23.1 % 11.2% Research and development 283.4 13.8 % 242.6 12.9 % 16.8% General and administrative 279.0 13.6 % 158.6 8.4 % 75.9% Depreciation and amortization 93.9 4.6 % 78.7 4.2 % 19.3% Total administrative expenses 1,139.1 55.5 % 914.3 48.6 % 24.6% Total operating expenses 1,484.5 72.4 % 1,248.9 66.3 % 18.9% Operating income 567.2 27.6 % 634.3 33.7 % -10.6% Interest expense (3.4 ) -0.2 % (3.4 ) -0.2 % 1.9% Other income, net 55.6 2.7 % 18.1 1.0 % 207.2% Income before income taxes 619.4 30.2 % 649.0 34.5 % -4.6% Provision for income taxes 166.0 8.1 % 147.0 7.8 % 13.0% Net income $ 453.4 22.1 % $ 502.0 26.7 % -9.7% Revenues Recurring and Other Revenues The increase in recurring and other revenues for the year ended December 31, 2025 from the year ended December 31, 2024 was the result of the addition of new clients, increased revenue from sales of additional applications and services to existing clients, additions and increased usage of existing products and services, and the realization of pricing strategies. Client attrition, particularly among smaller clients, partially offset the favorable impact of these revenue drivers. Interest on Funds Held For Clients The impact of lower interest rates during the year ended December 31, 2025 as compared to the prior year was partially offset by an increase in average funds held for client balances, but nonetheless resulted in decreased interest earned on funds held for clients for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The average daily balance of funds held for clients was $2.7 billion and $2.4 billion the years ended December 31, 2025 and 2024, respectively. Expenses"
    },
    {
      "status": "ADDED",
      "current_title": "Cost of Revenues",
      "prior_title": null,
      "current_body": "Cost of revenues consists of expenses related to hosting and supporting our applications, hardware costs, systems support and technology and depreciation and amortization. These costs include employee-related expenses (including non-cash stock-based compensation expenses) and other expenses related to client support, bank charges for processing automated clearing house transactions, certain implementation expenses, delivery charges and paper costs. They also include our cost for time clocks sold and ongoing technology and support costs related to our systems. The amount of depreciation and amortization of property and equipment allocated to cost of revenues is determined based upon an estimate of assets used to support our operations."
    },
    {
      "status": "ADDED",
      "current_title": "Administrative Expenses",
      "prior_title": null,
      "current_body": "Administrative expenses consist of sales and marketing expenses, research and development expenses, general and administrative expenses and depreciation and amortization expenses. Sales and marketing expenses consist primarily of employee-related expenses for our direct sales and marketing staff (such as the amortization of commissions and bonuses and non-cash stock-based compensation expenses), marketing expenses and other related costs. Research and development expenses consist primarily of employee-related expenses (including non-cash stock-based compensation expenses) for our development staff, net of capitalized software costs for internally developed software. General and administrative expenses consist of employee-related expenses for finance and accounting, legal, human resources and management information systems personnel (including non-cash stock-based compensation expenses), legal costs, professional fees and other corporate expenses. Depreciation and amortization expenses consist of (i) the amount of depreciation and amortization of property and equipment allocated to administrative expenses (based upon an estimate of assets used to support our selling, general and administrative functions) and (ii) amortization of intangible assets."
    },
    {
      "status": "ADDED",
      "current_title": "Year Ended December 31,",
      "prior_title": null,
      "current_body": "2025 2024 2023 Key performance indicators: Clients 39,199 37,543 36,820 Clients (based on parent company grouping) 20,321 19,422 19,481 Sales teams 58 58 55 Annual revenue retention rate(1) 91 % 90 % 90 % •Clients. When we calculate the number of clients at period end, we treat client accounts with separate taxpayer identification numbers (or, in certain circumstances, separate client codes) as separate clients, which often separates client accounts that are affiliated with the same parent organization. We track the number of our clients to provide an accurate gauge of the size of our business. Unless we state otherwise or the context otherwise requires, references to clients throughout this Form 10-K refer to this metric. Clients. When we calculate the number of clients at period end, we treat client accounts with separate taxpayer identification numbers (or, in certain circumstances, separate client codes) as separate clients, which often separates client accounts that are affiliated with the same parent organization. We track the number of our clients to provide an accurate gauge of the size of our business. Unless we state otherwise or the context otherwise requires, references to clients throughout this Form 10-K refer to this metric. •Clients (based on parent company grouping). When we calculate the number of clients based on parent company grouping at period end, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers (or, in certain circumstances, separate client codes), which often combines client accounts that are affiliated with the same parent organization. We track the number of our clients based on parent company grouping to provide an alternate measure of the size of our business and clients. Clients (based on parent company grouping). When we calculate the number of clients based on parent company grouping at period end, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers (or, in certain circumstances, separate client codes), which often combines client accounts that are affiliated with the same parent organization. We track the number of our clients based on parent company grouping to provide an alternate measure of the size of our business and clients. •Sales Teams. We monitor our sales professionals by the number of sales teams at period end. For the purposes of this metric, CRRs and emerging markets representatives are considered one sales team. Each outside sales team typically consists of a sales manager and approximately seven other sales professionals. Certain larger metropolitan areas can Sales Teams. We monitor our sales professionals by the number of sales teams at period end. For the purposes of this metric, CRRs and emerging markets representatives are considered one sales team. Each outside sales team typically consists of a sales manager and approximately seven other sales professionals. Certain larger metropolitan areas can 42 42 support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods.•Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods.We calculate annual revenue retention rate for any 12-month period (a “Measurement Period”) as follows:Recurring and Other Revenues – TTM Revenue AttritionRecurring and Other RevenuesThe trailing 12-month value of revenue from clients lost during the Measurement Period (“TTM Revenue Attrition”) is equal to the actual recurring fees paid by such lost clients during the 12 months preceding the respective dates on which they last processed payroll with us. The point at which a client is deemed “lost” is determined based on the terms of our standard services agreement with clients. As described in Note 2 “Summary of Significant Accounting Policies”, for the year ended December 31, 2024, we changed the presentation of revenues on the consolidated statements of comprehensive income to disaggregate interest on funds held for clients and combine recurring and other revenues. Reclassifications for the presentation of revenue did not impact the calculation of our annual retention rate.Components of Results of OperationsSources of Revenues Revenues consist of recurring and other revenues, and interest on funds held for clients. We expect our revenues to increase as we introduce new applications, expand our client base and renew and expand relationships with existing clients.Recurring and Other RevenuesRecurring revenues are derived primarily from our payroll, talent acquisition, talent management, HR management and time and labor management applications, fees charged for form filings and delivery of client payroll checks and reports, and revenues associated with background checks and income and employment verification services. The client’s use of our applications routinely fluctuates based upon factors that include the number of payrolls run and changes in the client’s employee population.Substantially all of our revenues are generated from (i) fixed amounts charged per billing period plus a fee per employee or transaction processed and (ii) fixed amounts charged per billing period. Our billing period varies by client and is typically based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly. Over time, an increasing number of clients will be billed on a monthly basis for certain HCM applications and services, regardless of the client’s payroll cycle. Because recurring revenues are based, in part, on fees for use of our applications and the delivery of checks and reports that are levied on a per-employee basis, our recurring revenues can fluctuate in relation to changes to client employee count. Furthermore, because the timing of revenue recognition is driven by the processing of the client’s payroll, it can vary based upon changes in client payroll dates and the impact that weekends or public holidays may have in prompting a client to accelerate or delay the processing of payroll.Recurring revenues include revenues relating to the annual processing of payroll tax filing forms and Affordable Care Act (“ACA”) form filing requirements and revenues from processing unscheduled payroll runs (such as bonuses) for our clients. These payroll forms are typically processed in the first quarter of the year, and many of our clients are subject to ACA form filing requirements in the first quarter, which positively impacts first quarter revenues and margins. We anticipate our revenues will continue to exhibit this seasonal pattern related to ACA form filings for so long as the ACA (or replacement legislation) includes employer reporting requirements. In addition, our recurring revenues during the fourth quarter are positively impacted by unscheduled payroll runs for our clients that occur before the end of the year. Nonetheless, we expect the magnitude of these seasonal fluctuations in our revenues to decrease to the extent clients utilize more of our non-payroll applications.Other revenues consist of implementation fees for the deployment of our solution and revenues from sales of time clocks as part of our time and attendance services. Non-refundable implementation fees are charged to new clients at contract inception. These fees generally range from 10% to 30% of the annualized value of the transaction. Implementation fees are deferred and recognized as revenue over the life of the client, which is estimated to be 10 years. Revenues from the sale of time clocks are recognized when control is transferred to the client upon delivery of the product.Interest on Funds Held For ClientsWe earn interest income on funds held for clients. Funds held for clients are amounts collected from clients in advance of either the applicable due date for payroll tax submissions or the applicable disbursement date for employee payment services. These collections from clients are typically disbursed from one to 30 days after receipt, with some funds being held for up to 120 days. We typically invest funds held for clients in money market funds, demand deposit accounts, certificates of deposit, support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods. support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods. •Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods. Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods. We calculate annual revenue retention rate for any 12-month period (a “Measurement Period”) as follows: Recurring and Other Revenues – TTM Revenue Attrition Recurring and Other Revenues The trailing 12-month value of revenue from clients lost during the Measurement Period (“TTM Revenue Attrition”) is equal to the actual recurring fees paid by such lost clients during the 12 months preceding the respective dates on which they last processed payroll with us. The point at which a client is deemed “lost” is determined based on the terms of our standard services agreement with clients. As described in Note 2 “Summary of Significant Accounting Policies”, for the year ended December 31, 2024, we changed the presentation of revenues on the consolidated statements of comprehensive income to disaggregate interest on funds held for clients and combine recurring and other revenues. Reclassifications for the presentation of revenue did not impact the calculation of our annual retention rate."
    },
    {
      "status": "ADDED",
      "current_title": "Non-Cash Stock-Based Compensation Expense",
      "prior_title": null,
      "current_body": "The following table presents the non-cash stock-based compensation expense that is included within the specified line items in our consolidated statements of comprehensive income:"
    },
    {
      "status": "ADDED",
      "current_title": "Year Ended December 31,",
      "prior_title": null,
      "current_body": "2025 2024 2023 Key performance indicators: Clients 39,199 37,543 36,820 Clients (based on parent company grouping) 20,321 19,422 19,481 Sales teams 58 58 55 Annual revenue retention rate(1) 91 % 90 % 90 % •Clients. When we calculate the number of clients at period end, we treat client accounts with separate taxpayer identification numbers (or, in certain circumstances, separate client codes) as separate clients, which often separates client accounts that are affiliated with the same parent organization. We track the number of our clients to provide an accurate gauge of the size of our business. Unless we state otherwise or the context otherwise requires, references to clients throughout this Form 10-K refer to this metric. Clients. When we calculate the number of clients at period end, we treat client accounts with separate taxpayer identification numbers (or, in certain circumstances, separate client codes) as separate clients, which often separates client accounts that are affiliated with the same parent organization. We track the number of our clients to provide an accurate gauge of the size of our business. Unless we state otherwise or the context otherwise requires, references to clients throughout this Form 10-K refer to this metric. •Clients (based on parent company grouping). When we calculate the number of clients based on parent company grouping at period end, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers (or, in certain circumstances, separate client codes), which often combines client accounts that are affiliated with the same parent organization. We track the number of our clients based on parent company grouping to provide an alternate measure of the size of our business and clients. Clients (based on parent company grouping). When we calculate the number of clients based on parent company grouping at period end, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers (or, in certain circumstances, separate client codes), which often combines client accounts that are affiliated with the same parent organization. We track the number of our clients based on parent company grouping to provide an alternate measure of the size of our business and clients. •Sales Teams. We monitor our sales professionals by the number of sales teams at period end. For the purposes of this metric, CRRs and emerging markets representatives are considered one sales team. Each outside sales team typically consists of a sales manager and approximately seven other sales professionals. Certain larger metropolitan areas can Sales Teams. We monitor our sales professionals by the number of sales teams at period end. For the purposes of this metric, CRRs and emerging markets representatives are considered one sales team. Each outside sales team typically consists of a sales manager and approximately seven other sales professionals. Certain larger metropolitan areas can 42 42 support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods.•Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods.We calculate annual revenue retention rate for any 12-month period (a “Measurement Period”) as follows:Recurring and Other Revenues – TTM Revenue AttritionRecurring and Other RevenuesThe trailing 12-month value of revenue from clients lost during the Measurement Period (“TTM Revenue Attrition”) is equal to the actual recurring fees paid by such lost clients during the 12 months preceding the respective dates on which they last processed payroll with us. The point at which a client is deemed “lost” is determined based on the terms of our standard services agreement with clients. As described in Note 2 “Summary of Significant Accounting Policies”, for the year ended December 31, 2024, we changed the presentation of revenues on the consolidated statements of comprehensive income to disaggregate interest on funds held for clients and combine recurring and other revenues. Reclassifications for the presentation of revenue did not impact the calculation of our annual retention rate.Components of Results of OperationsSources of Revenues Revenues consist of recurring and other revenues, and interest on funds held for clients. We expect our revenues to increase as we introduce new applications, expand our client base and renew and expand relationships with existing clients.Recurring and Other RevenuesRecurring revenues are derived primarily from our payroll, talent acquisition, talent management, HR management and time and labor management applications, fees charged for form filings and delivery of client payroll checks and reports, and revenues associated with background checks and income and employment verification services. The client’s use of our applications routinely fluctuates based upon factors that include the number of payrolls run and changes in the client’s employee population.Substantially all of our revenues are generated from (i) fixed amounts charged per billing period plus a fee per employee or transaction processed and (ii) fixed amounts charged per billing period. Our billing period varies by client and is typically based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly. Over time, an increasing number of clients will be billed on a monthly basis for certain HCM applications and services, regardless of the client’s payroll cycle. Because recurring revenues are based, in part, on fees for use of our applications and the delivery of checks and reports that are levied on a per-employee basis, our recurring revenues can fluctuate in relation to changes to client employee count. Furthermore, because the timing of revenue recognition is driven by the processing of the client’s payroll, it can vary based upon changes in client payroll dates and the impact that weekends or public holidays may have in prompting a client to accelerate or delay the processing of payroll.Recurring revenues include revenues relating to the annual processing of payroll tax filing forms and Affordable Care Act (“ACA”) form filing requirements and revenues from processing unscheduled payroll runs (such as bonuses) for our clients. These payroll forms are typically processed in the first quarter of the year, and many of our clients are subject to ACA form filing requirements in the first quarter, which positively impacts first quarter revenues and margins. We anticipate our revenues will continue to exhibit this seasonal pattern related to ACA form filings for so long as the ACA (or replacement legislation) includes employer reporting requirements. In addition, our recurring revenues during the fourth quarter are positively impacted by unscheduled payroll runs for our clients that occur before the end of the year. Nonetheless, we expect the magnitude of these seasonal fluctuations in our revenues to decrease to the extent clients utilize more of our non-payroll applications.Other revenues consist of implementation fees for the deployment of our solution and revenues from sales of time clocks as part of our time and attendance services. Non-refundable implementation fees are charged to new clients at contract inception. These fees generally range from 10% to 30% of the annualized value of the transaction. Implementation fees are deferred and recognized as revenue over the life of the client, which is estimated to be 10 years. Revenues from the sale of time clocks are recognized when control is transferred to the client upon delivery of the product.Interest on Funds Held For ClientsWe earn interest income on funds held for clients. Funds held for clients are amounts collected from clients in advance of either the applicable due date for payroll tax submissions or the applicable disbursement date for employee payment services. These collections from clients are typically disbursed from one to 30 days after receipt, with some funds being held for up to 120 days. We typically invest funds held for clients in money market funds, demand deposit accounts, certificates of deposit, support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods. support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods. •Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods. Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods. We calculate annual revenue retention rate for any 12-month period (a “Measurement Period”) as follows: Recurring and Other Revenues – TTM Revenue Attrition Recurring and Other Revenues The trailing 12-month value of revenue from clients lost during the Measurement Period (“TTM Revenue Attrition”) is equal to the actual recurring fees paid by such lost clients during the 12 months preceding the respective dates on which they last processed payroll with us. The point at which a client is deemed “lost” is determined based on the terms of our standard services agreement with clients. As described in Note 2 “Summary of Significant Accounting Policies”, for the year ended December 31, 2024, we changed the presentation of revenues on the consolidated statements of comprehensive income to disaggregate interest on funds held for clients and combine recurring and other revenues. Reclassifications for the presentation of revenue did not impact the calculation of our annual retention rate."
    },
    {
      "status": "ADDED",
      "current_title": "Depreciation and Amortization",
      "prior_title": null,
      "current_body": "During the year ended December 31, 2025, depreciation and amortization expense increased from the prior year primarily due to the development of additional technology, purchases of other related fixed assets, and the impact of our corporate headquarters expansion that was placed into service in April 2024, which increases were partially offset by the impact of an increase in the estimated useful lives of servers and network equipment."
    },
    {
      "status": "ADDED",
      "current_title": "Interest Expense",
      "prior_title": null,
      "current_body": "Interest expense includes interest on our long-term debt. Prior to the repayment of our long-term debt in November 2023, we capitalized interest costs incurred for indebtedness related to construction in progress. See Note 6 “Long-Term Debt” for discussion of the repayment of our debt."
    },
    {
      "status": "ADDED",
      "current_title": "Other Income, net",
      "prior_title": null,
      "current_body": "Other income, net includes interest earned on our own funds, any gain or loss on the sale or disposal of fixed assets, any costs associated with the early repayment of debt, any loss on the extinguishment of debt, and any gain on the modification of the naming rights agreement."
    },
    {
      "status": "ADDED",
      "current_title": "Provision for Income Taxes",
      "prior_title": null,
      "current_body": "Our consolidated financial statements include a provision for income taxes incurred for the anticipated tax consequences of the reported results of operations using the asset and liability method. Under this method, we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for any operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. We recognize a valuation allowance to reduce deferred tax assets to the net amount we believe is more likely than not to be realized. 44 44 Results of OperationsThe following table sets forth selected consolidated statements of income data and such data as a percentage of total revenues for each of the periods indicated, as well as year-over-year changes with respect to each line item. Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the “SEC”) on February 20, 2025, for a discussion of results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023. Year Ended December 31, 2025 2024 % Change Revenues Recurring and other $ 1,938.7 94.5 % $ 1,758.3 93.4 % 10.3% Interest on funds held for clients 113.0 5.5 % 124.9 6.6 % -9.6% Total revenues 2,051.7 100.0 % 1,883.2 100.0 % 9.0% Cost of revenues Operating expenses 263.0 12.8 % 267.4 14.2 % -1.6% Depreciation and amortization 82.4 4.0 % 67.2 3.6 % 22.5% Total cost of revenues 345.4 16.8 % 334.6 17.8 % 3.2% Administrative expenses Sales and marketing 482.8 23.5 % 434.4 23.1 % 11.2% Research and development 283.4 13.8 % 242.6 12.9 % 16.8% General and administrative 279.0 13.6 % 158.6 8.4 % 75.9% Depreciation and amortization 93.9 4.6 % 78.7 4.2 % 19.3% Total administrative expenses 1,139.1 55.5 % 914.3 48.6 % 24.6% Total operating expenses 1,484.5 72.4 % 1,248.9 66.3 % 18.9% Operating income 567.2 27.6 % 634.3 33.7 % -10.6% Interest expense (3.4 ) -0.2 % (3.4 ) -0.2 % 1.9% Other income, net 55.6 2.7 % 18.1 1.0 % 207.2% Income before income taxes 619.4 30.2 % 649.0 34.5 % -4.6% Provision for income taxes 166.0 8.1 % 147.0 7.8 % 13.0% Net income $ 453.4 22.1 % $ 502.0 26.7 % -9.7% RevenuesRecurring and Other RevenuesThe increase in recurring and other revenues for the year ended December 31, 2025 from the year ended December 31, 2024 was the result of the addition of new clients, increased revenue from sales of additional applications and services to existing clients, additions and increased usage of existing products and services, and the realization of pricing strategies. Client attrition, particularly among smaller clients, partially offset the favorable impact of these revenue drivers.Interest on Funds Held For ClientsThe impact of lower interest rates during the year ended December 31, 2025 as compared to the prior year was partially offset by an increase in average funds held for client balances, but nonetheless resulted in decreased interest earned on funds held for clients for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The average daily balance of funds held for clients was $2.7 billion and $2.4 billion the years ended December 31, 2025 and 2024, respectively.ExpensesCost of RevenuesDuring the year ended December 31, 2025, operating expenses decreased from the prior year by $4.3 million, primarily due to an $8.2 million decrease in employee-related expenses, which was partially offset by a $2.5 million increase in shipping and supplies fees and a $1.1 million increase in banking related fees. Depreciation and amortization expense increased $15.2 million primarily due to the development of additional technology, purchases of other related fixed assets, and the impact of our corporate headquarters expansion that was placed into service in April 2024, which increases were partially offset by the impact of an increase in the estimated useful lives of servers and network equipment."
    },
    {
      "status": "ADDED",
      "current_title": "Liquidity and Capital Resources",
      "prior_title": null,
      "current_body": "Our principal sources of capital and liquidity are our operating cash flow and cash and cash equivalents. Our cash and cash equivalents consist primarily of demand deposit accounts and money market funds. Additionally, we maintain a $1.0 billion senior secured revolving credit facility (the “Revolving Credit Facility”), which can be accessed as needed to supplement our operating cash flow and cash balances. As of December 31, 2025, we did not have any outstanding borrowings under the Revolving Credit Facility. We fund our operations primarily from cash flows generated from operations. We are funding our ongoing capital expenditures from available cash. Further, to date, all cash dividends and purchases under our stock repurchase plan have been funded from available cash, although we may determine that it is appropriate to fund future stock repurchases or other capital requirements from a combination of available cash and borrowings under the Revolving Credit Facility. We believe our existing cash and cash equivalents, cash generated from operations and available sources of liquidity will be sufficient to maintain operations, make necessary capital expenditures, pay dividends and opportunistically repurchase shares for at least the next 12 months. In addition, based on our strong profitability and continued growth, we expect to meet our longer-term liquidity needs with cash flows from operations and, as needed, financing arrangements. Credit Agreement. We are party to a credit agreement (as amended from time to time, the “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 “Lenders”), and JPMorgan Chase Bank, N.A., as the administrative agent. The Credit Agreement provides for the Revolving Credit Facility in the aggregate principal amount of up to $1.0 billion. In addition, we may request an incremental facility of up to an additional $500.0 million, subject to obtaining additional lender commitments and approvals and satisfying certain other conditions. All loans under the Credit Agreement will mature on July 29, 2027 (the “Scheduled Maturity Date”). Subject to certain conditions set forth in the Credit Agreement, we may borrow, prepay and reborrow under the Revolving Credit Facility and terminate or reduce the Lenders’ commitments at any time prior to the Scheduled Maturity Date. We are required to pay a quarterly commitment fee on the daily amount of the undrawn portion of the revolving commitments under the Revolving Credit Facility 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. Under the Credit Agreement, we are required to maintain as of the end of each fiscal quarter a consolidated interest coverage ratio of not less than 3.0 to 1.0 and a consolidated leverage ratio of not greater than 3.0 to 1.0. Stock Repurchase Plan and Withholding Shares to Cover Taxes. In August 2022, our Board of Directors authorized a stock repurchase plan allowing for the repurchase up to $1.1 billion of shares of our common stock in open market transactions at prevailing market prices, in privately negotiated transactions (including accelerated share repurchases) or by other means in accordance with federal securities laws, including Rule 10b5-1 programs. The stock repurchase plan was set to expire on August 15, 2024. In July 2024, our Board of Directors increased and extended the stock repurchase plan, such that $1.5 billion is available for repurchases through August 15, 2026. As of December 31, 2025, there was $1.11 billion 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 equity incentive awards and other corporate considerations. During the year ended December 31, 2025, we repurchased an aggregate of 1,730,720 shares of our common stock at an average cost of $213.81 per share, including 184,752 shares withheld to satisfy tax withholding obligations for certain individuals upon the vesting of equity incentive awards. Our payment of the taxes on behalf of those individuals resulted in an aggregate cash expenditure of $44.5 million and, as such, we generally subtract the amounts attributable to such withheld shares from the aggregate amount available for future purchases under our stock repurchase plan. Dividends on Common Stock. For a discussion of our dividends, see “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.” 47 47 Cash Flow AnalysisOur cash flows from operating activities have historically been significantly impacted by profitability, implementation revenues received but deferred, our investment in sales and marketing to drive growth, and research and development. Our ability to meet future liquidity needs will be driven by our operating performance and the extent of continued investment in our operations. Failure to generate sufficient revenues and related cash flows could have a material adverse effect on our ability to meet our liquidity needs and achieve our business objectives.We completed an expansion of our corporate headquarters, which was placed into service in the second quarter of 2024. Our capital expenditures will fluctuate based on our strategic initiatives. Depending on certain growth opportunities, we may choose to accelerate investments in sales and marketing, acquisitions, technology and services. Actual future capital requirements will depend on many factors, including our future revenues, cash from operating activities and the level of expenditures in all areas of our business.In addition, we purchased the naming rights to the downtown Oklahoma City arena that is currently home to the Oklahoma City Thunder National Basketball Association franchise. Under the terms of the naming rights agreement, we committed to make escalating annual sponsorship fee payments from 2021 to 2035. The payments are due in the fourth quarter of each year. In July 2025, the naming rights agreement was amended to provide, among other things, that the agreement and our obligation to make the previously disclosed annual sponsorship fee payments thereunder will terminate on the earlier of (i) September 30, 2028 or (ii) the date of the last event hosted or presented at the current arena (subject to earlier termination in certain limited circumstances), with a reduction in the sponsorship fee if the term of the agreement ends prior to September 30, 2028 and in certain other limited circumstances. The amendment did not otherwise impact our obligation to make the previously disclosed annual sponsorship fee payments for the remainder of the amended agreement term.On July 4, 2025, H.R. 1, the “One Big Beautiful Bill Act” (the “OBBBA”) was signed into law, bringing significant amendments to the U.S. tax code. The OBBBA allows an immediate deduction for domestic research and development expenditures and reinstates 100% bonus depreciation. Our cash tax remittances decreased in the second half of 2025, and we anticipate that continued reductions will positively impact cash flows in future periods.As part of our payroll and payroll tax filing services, we collect funds from our clients for employment taxes and payroll obligations, which we remit to the appropriate tax agencies and accounts designated by our clients. We typically invest these funds in money market funds, demand deposit accounts, certificates of deposit, commercial paper and U.S. treasury securities from which we earn interest income during the period between receipt and disbursement of such funds.Our cash flows from investing and financing activities are influenced by the amount of funds held for clients, which can vary significantly from quarter to quarter. The balance of the funds we hold depends on our clients’ payroll calendars. As a result, the balance changes from period to period in alignment with the timing of each payroll cycle.Our cash flows from financing activities are also affected by the extent to which we use available cash to purchase shares of common stock under our stock repurchase plan as well as equity incentive award vesting events that result in net share settlements and the Company paying withholding taxes on behalf of certain employees. Additionally, we intend to continue to pay a quarterly cash dividend, subject to the discretion of the Board of Directors.The following table summarizes the consolidated statements of cash flows for the years ended December 31, 2025 and 2024: Year Ended December 31, 2025 2024 % Change Net cash provided by (used in): Operating activities $ 678.9 $ 533.9 27% Investing activities (611.2 ) (22.2 ) 2653% Financing activities 1,022.0 1,108.3 -8% Increase in cash, cash equivalents, restricted cash and restricted cash equivalents $ 1,089.7 $ 1,620.0 -33% Operating ActivitiesCash provided by operating activities for the year ended December 31, 2025 primarily consisted of payments received from our clients and interest earned on funds held for clients. Cash used in operating activities primarily consisted of personnel-related expenditures to support the growth and infrastructure of our business. These payments included costs of operations, advertising and other sales and marketing efforts, information technology infrastructure development, product research and development and security and administrative costs. Compared to the year ended December 31, 2024, our operating cash flows for the year ended December 31, 2025 were positively impacted by changes in working capital."
    },
    {
      "status": "ADDED",
      "current_title": "Cash Flow Analysis",
      "prior_title": null,
      "current_body": "Our cash flows from operating activities have historically been significantly impacted by profitability, implementation revenues received but deferred, our investment in sales and marketing to drive growth, and research and development. Our ability to meet future liquidity needs will be driven by our operating performance and the extent of continued investment in our operations. Failure to generate sufficient revenues and related cash flows could have a material adverse effect on our ability to meet our liquidity needs and achieve our business objectives. We completed an expansion of our corporate headquarters, which was placed into service in the second quarter of 2024. Our capital expenditures will fluctuate based on our strategic initiatives. Depending on certain growth opportunities, we may choose to accelerate investments in sales and marketing, acquisitions, technology and services. Actual future capital requirements will depend on many factors, including our future revenues, cash from operating activities and the level of expenditures in all areas of our business. In addition, we purchased the naming rights to the downtown Oklahoma City arena that is currently home to the Oklahoma City Thunder National Basketball Association franchise. Under the terms of the naming rights agreement, we committed to make escalating annual sponsorship fee payments from 2021 to 2035. The payments are due in the fourth quarter of each year. In July 2025, the naming rights agreement was amended to provide, among other things, that the agreement and our obligation to make the previously disclosed annual sponsorship fee payments thereunder will terminate on the earlier of (i) September 30, 2028 or (ii) the date of the last event hosted or presented at the current arena (subject to earlier termination in certain limited circumstances), with a reduction in the sponsorship fee if the term of the agreement ends prior to September 30, 2028 and in certain other limited circumstances. The amendment did not otherwise impact our obligation to make the previously disclosed annual sponsorship fee payments for the remainder of the amended agreement term. On July 4, 2025, H.R. 1, the “One Big Beautiful Bill Act” (the “OBBBA”) was signed into law, bringing significant amendments to the U.S. tax code. The OBBBA allows an immediate deduction for domestic research and development expenditures and reinstates 100% bonus depreciation. Our cash tax remittances decreased in the second half of 2025, and we anticipate that continued reductions will positively impact cash flows in future periods. As part of our payroll and payroll tax filing services, we collect funds from our clients for employment taxes and payroll obligations, which we remit to the appropriate tax agencies and accounts designated by our clients. We typically invest these funds in money market funds, demand deposit accounts, certificates of deposit, commercial paper and U.S. treasury securities from which we earn interest income during the period between receipt and disbursement of such funds. Our cash flows from investing and financing activities are influenced by the amount of funds held for clients, which can vary significantly from quarter to quarter. The balance of the funds we hold depends on our clients’ payroll calendars. As a result, the balance changes from period to period in alignment with the timing of each payroll cycle. Our cash flows from financing activities are also affected by the extent to which we use available cash to purchase shares of common stock under our stock repurchase plan as well as equity incentive award vesting events that result in net share settlements and the Company paying withholding taxes on behalf of certain employees. Additionally, we intend to continue to pay a quarterly cash dividend, subject to the discretion of the Board of Directors. The following table summarizes the consolidated statements of cash flows for the years ended December 31, 2025 and 2024:"
    },
    {
      "status": "ADDED",
      "current_title": "Year Ended December 31,",
      "prior_title": null,
      "current_body": "2025 2024 2023 Key performance indicators: Clients 39,199 37,543 36,820 Clients (based on parent company grouping) 20,321 19,422 19,481 Sales teams 58 58 55 Annual revenue retention rate(1) 91 % 90 % 90 % •Clients. When we calculate the number of clients at period end, we treat client accounts with separate taxpayer identification numbers (or, in certain circumstances, separate client codes) as separate clients, which often separates client accounts that are affiliated with the same parent organization. We track the number of our clients to provide an accurate gauge of the size of our business. Unless we state otherwise or the context otherwise requires, references to clients throughout this Form 10-K refer to this metric. Clients. When we calculate the number of clients at period end, we treat client accounts with separate taxpayer identification numbers (or, in certain circumstances, separate client codes) as separate clients, which often separates client accounts that are affiliated with the same parent organization. We track the number of our clients to provide an accurate gauge of the size of our business. Unless we state otherwise or the context otherwise requires, references to clients throughout this Form 10-K refer to this metric. •Clients (based on parent company grouping). When we calculate the number of clients based on parent company grouping at period end, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers (or, in certain circumstances, separate client codes), which often combines client accounts that are affiliated with the same parent organization. We track the number of our clients based on parent company grouping to provide an alternate measure of the size of our business and clients. Clients (based on parent company grouping). When we calculate the number of clients based on parent company grouping at period end, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers (or, in certain circumstances, separate client codes), which often combines client accounts that are affiliated with the same parent organization. We track the number of our clients based on parent company grouping to provide an alternate measure of the size of our business and clients. •Sales Teams. We monitor our sales professionals by the number of sales teams at period end. For the purposes of this metric, CRRs and emerging markets representatives are considered one sales team. Each outside sales team typically consists of a sales manager and approximately seven other sales professionals. Certain larger metropolitan areas can Sales Teams. We monitor our sales professionals by the number of sales teams at period end. For the purposes of this metric, CRRs and emerging markets representatives are considered one sales team. Each outside sales team typically consists of a sales manager and approximately seven other sales professionals. Certain larger metropolitan areas can 42 42 support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods.•Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods.We calculate annual revenue retention rate for any 12-month period (a “Measurement Period”) as follows:Recurring and Other Revenues – TTM Revenue AttritionRecurring and Other RevenuesThe trailing 12-month value of revenue from clients lost during the Measurement Period (“TTM Revenue Attrition”) is equal to the actual recurring fees paid by such lost clients during the 12 months preceding the respective dates on which they last processed payroll with us. The point at which a client is deemed “lost” is determined based on the terms of our standard services agreement with clients. As described in Note 2 “Summary of Significant Accounting Policies”, for the year ended December 31, 2024, we changed the presentation of revenues on the consolidated statements of comprehensive income to disaggregate interest on funds held for clients and combine recurring and other revenues. Reclassifications for the presentation of revenue did not impact the calculation of our annual retention rate.Components of Results of OperationsSources of Revenues Revenues consist of recurring and other revenues, and interest on funds held for clients. We expect our revenues to increase as we introduce new applications, expand our client base and renew and expand relationships with existing clients.Recurring and Other RevenuesRecurring revenues are derived primarily from our payroll, talent acquisition, talent management, HR management and time and labor management applications, fees charged for form filings and delivery of client payroll checks and reports, and revenues associated with background checks and income and employment verification services. The client’s use of our applications routinely fluctuates based upon factors that include the number of payrolls run and changes in the client’s employee population.Substantially all of our revenues are generated from (i) fixed amounts charged per billing period plus a fee per employee or transaction processed and (ii) fixed amounts charged per billing period. Our billing period varies by client and is typically based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly. Over time, an increasing number of clients will be billed on a monthly basis for certain HCM applications and services, regardless of the client’s payroll cycle. Because recurring revenues are based, in part, on fees for use of our applications and the delivery of checks and reports that are levied on a per-employee basis, our recurring revenues can fluctuate in relation to changes to client employee count. Furthermore, because the timing of revenue recognition is driven by the processing of the client’s payroll, it can vary based upon changes in client payroll dates and the impact that weekends or public holidays may have in prompting a client to accelerate or delay the processing of payroll.Recurring revenues include revenues relating to the annual processing of payroll tax filing forms and Affordable Care Act (“ACA”) form filing requirements and revenues from processing unscheduled payroll runs (such as bonuses) for our clients. These payroll forms are typically processed in the first quarter of the year, and many of our clients are subject to ACA form filing requirements in the first quarter, which positively impacts first quarter revenues and margins. We anticipate our revenues will continue to exhibit this seasonal pattern related to ACA form filings for so long as the ACA (or replacement legislation) includes employer reporting requirements. In addition, our recurring revenues during the fourth quarter are positively impacted by unscheduled payroll runs for our clients that occur before the end of the year. Nonetheless, we expect the magnitude of these seasonal fluctuations in our revenues to decrease to the extent clients utilize more of our non-payroll applications.Other revenues consist of implementation fees for the deployment of our solution and revenues from sales of time clocks as part of our time and attendance services. Non-refundable implementation fees are charged to new clients at contract inception. These fees generally range from 10% to 30% of the annualized value of the transaction. Implementation fees are deferred and recognized as revenue over the life of the client, which is estimated to be 10 years. Revenues from the sale of time clocks are recognized when control is transferred to the client upon delivery of the product.Interest on Funds Held For ClientsWe earn interest income on funds held for clients. Funds held for clients are amounts collected from clients in advance of either the applicable due date for payroll tax submissions or the applicable disbursement date for employee payment services. These collections from clients are typically disbursed from one to 30 days after receipt, with some funds being held for up to 120 days. We typically invest funds held for clients in money market funds, demand deposit accounts, certificates of deposit, support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods. support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods. •Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods. Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods. We calculate annual revenue retention rate for any 12-month period (a “Measurement Period”) as follows: Recurring and Other Revenues – TTM Revenue Attrition Recurring and Other Revenues The trailing 12-month value of revenue from clients lost during the Measurement Period (“TTM Revenue Attrition”) is equal to the actual recurring fees paid by such lost clients during the 12 months preceding the respective dates on which they last processed payroll with us. The point at which a client is deemed “lost” is determined based on the terms of our standard services agreement with clients. As described in Note 2 “Summary of Significant Accounting Policies”, for the year ended December 31, 2024, we changed the presentation of revenues on the consolidated statements of comprehensive income to disaggregate interest on funds held for clients and combine recurring and other revenues. Reclassifications for the presentation of revenue did not impact the calculation of our annual retention rate."
    },
    {
      "status": "ADDED",
      "current_title": "Contractual Obligations",
      "prior_title": null,
      "current_body": "Our principal commitments primarily consist of leases for office space and the naming rights agreement. For additional information regarding our naming rights agreement, leases, and our commitments and contingencies, see Note 4 “Goodwill and Intangible Assets, Net”, Note 5 “Leases” and Note 12” Commitments and Contingencies”. We plan to continue to lease additional office space to support our growth. In addition, many of our existing lease agreements provide us with the option to renew. When applicable, our future operating lease obligations include payments due during any renewal period provided for in the lease where the lease imposes a penalty for failure to renew. Additional details on our leases, including the related future cash outflows, are included within Note 5 “Leases” in the notes to our consolidated financial statements included elsewhere within this Form 10-K."
    },
    {
      "status": "ADDED",
      "current_title": "Critical Accounting Policies and Estimates",
      "prior_title": null,
      "current_body": "Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. Estimates made in accordance with U.S. GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition are described below. On an ongoing basis, we evaluate our estimates and assumptions to ensure that management believes them to be reasonable under the then-current facts and circumstances. Actual amounts and results may materially differ from these estimates made by management under different assumptions and conditions. Certain accounting policies that require significant management estimates, and are deemed critical to our results of operations or financial position, are described below. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. In the third quarter of 2025, we completed an assessment of the useful lives of our servers and network equipment. Based on this assessment, we increased the estimated useful lives of these assets from three years to six years, effective as of the beginning of the third quarter of 2025. Refer to Note 2 “Summary of Significant Accounting Policies” in the notes to the consolidated financial statements included elsewhere in this Form 10-K for more information."
    },
    {
      "status": "ADDED",
      "current_title": "Revenue Recognition",
      "prior_title": null,
      "current_body": "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. Substantially all of our revenues are derived from contracts with clients. Sales and other applicable taxes are excluded from revenues. Recurring revenues are derived primarily from our payroll, talent acquisition, talent management, HR management and time and labor management applications, fees charged for form filings and delivery of client payroll checks and reports, and revenues associated with background checks and income and employment verification services. For a description of our applications, refer to Part I, Item 1, “Business,” of this Form 10-K. The client’s use of our applications routinely fluctuates based upon factors that include the number of payrolls run and changes in the client’s employee population. These usage-based fluctuations do not change our core performance obligation to stand ready to provide the customer with services for the remainder of the contractual term. The performance obligations related to recurring revenues are generally satisfied and recognized during each client’s payroll period, with the agreed-upon fee being charged and collected as part of our processing of the client’s payroll. Collectability is reasonably assured as the fees are generally collected through an automated clearing house as part of the client’s payroll cycle or through direct wire transfer, which minimizes the default risk. The contract period for the majority of contracts associated with these revenues is one month due to the fact that both we and the client typically have the unilateral right to terminate a wholly unperformed contract without compensating the other 49 49 party by providing 30 days’ notice of termination. We consider the total price charged to a client in a given period to be indicative of the standalone selling price, as the total amount charged is within a reasonable range of prices typically charged for our goods and services for comparable classes of client groups, which we periodically assess for price adjustments.Other revenues consist of nonrefundable implementation fees, which are charged upfront to new clients to offset the expense of new client set-up, as well as revenues from the sale of time clocks as part of our time and attendance application. Although these revenues are related to our recurring revenues, they represent distinct performance obligations. The nonrefundable upfront fee charged to our clients results in an implied performance obligation in the form of a material right to the client related to the client’s option to renew at the end of the contract period. The nonrefundable upfront fee is typically collected upon contract inception and is deferred and recognized ratably over the period that our client realizes the benefits from the material right (i.e., 10-year estimated client life). We conduct an annual analysis of client retention data to support our client life estimate. A change in our client life estimate could have a material impact on the timing and amounts recognized as revenue for nonrefundable upfront fees.Revenues from the sale of time clocks are recognized when control is transferred to the client upon delivery of the product. We estimate the standalone selling price for the time clocks by maximizing the use of observable inputs such as our specific pricing practices for time clocks.Interest income on funds held for clients is earned on funds that are collected from clients in advance of either the applicable due date for payroll tax submissions or the applicable disbursement date for employee payment services. The interest earned on these funds is included in revenues in the consolidated statements of comprehensive income as the collection, holding, and remittance of these funds are essential components of providing these services.Assets Recognized from the Costs to Obtain and Costs to Fulfill Revenue Contracts We recognize an asset for the incremental costs of obtaining a contract with a client if we expect the amortization period to be longer than one year. We also recognize an asset for the costs to fulfill a contract with a client if such costs are specifically identifiable, generate or enhance resources used to satisfy future performance obligations, and are expected to be recovered. We have determined that substantially all costs related to implementation activities are administrative in nature and also meet the capitalization criteria under Accounting Standards Codification 340-40, “Other Assets and Deferred Costs”. These capitalized costs to fulfill principally relate to upfront direct costs that are expected to be recovered through margin and that enhance our ability to satisfy future performance obligations. The assets related to both costs to obtain, and costs to fulfill, contracts with clients are accounted for utilizing a portfolio approach and are capitalized and amortized ratably over the expected period of benefit, which we have determined to be the estimated life of the client relationship of 10 years primarily because we incur no new costs to obtain, or costs to fulfill, a contract upon renewal. A change in our client life estimate could have a material impact on the timing and amounts recognized as amortization expense. Additional commission costs may be incurred when an existing client purchases additional applications; however, these commission costs relate solely to the additional applications purchased and are not related to contract renewal. Furthermore, additional fulfillment costs associated with existing clients purchasing additional applications are minimized by our seamless single-database platform. The assets related to both costs to obtain, and costs to fulfill, contracts with customers are presented as deferred contract costs in the accompanying consolidated balance sheets. Amortization expense related to costs to obtain and costs to fulfill a contract is included in sales and marketing expenses and general and administrative expenses in the accompanying consolidated statements of comprehensive income. We regularly review our assets recognized from the costs to obtain and costs to fulfill client contracts for potential impairment and did not recognize an impairment loss during the years ended December 31, 2025 or December 31, 2024.Stock-Based Compensation AwardsHistorically, our stock-based compensation programs have included restricted stock awards and restricted stock unit (“RSU”) awards. We issue stock-based compensation awards with three different types of vesting requirements including awards that vest solely based on condition of service, awards that vest based on achieving certain performance metrics such as revenue or adjusted EBITDA targets, and awards that vest based on achieving certain market conditions such as relative total stockholder return or volume weighted average price targets.We measure the fair value of awards that vest solely based on condition of service, such as our time-based shares of restricted stock and time-based RSUs, and the fair value of awards that vest based on achieving certain performance metrics, by using the closing market price on the date of grant.We measure the fair value of awards that vest based on achieving certain market conditions, such as relative total stockholder return or volume weighted average price targets, by using a Monte Carlo simulation model. Stock-based compensation cost is recognized only for those awards expected to meet the requisite service and performance vesting conditions. Stock-based compensation cost is recognized on a straight-line basis over the requisite or derived service period of the award, which is generally the vesting period of the award, with forfeitures recognized as incurred. party by providing 30 days’ notice of termination. We consider the total price charged to a client in a given period to be indicative of the standalone selling price, as the total amount charged is within a reasonable range of prices typically charged for our goods and services for comparable classes of client groups, which we periodically assess for price adjustments. Other revenues consist of nonrefundable implementation fees, which are charged upfront to new clients to offset the expense of new client set-up, as well as revenues from the sale of time clocks as part of our time and attendance application. Although these revenues are related to our recurring revenues, they represent distinct performance obligations. The nonrefundable upfront fee charged to our clients results in an implied performance obligation in the form of a material right to the client related to the client’s option to renew at the end of the contract period. The nonrefundable upfront fee is typically collected upon contract inception and is deferred and recognized ratably over the period that our client realizes the benefits from the material right (i.e., 10-year estimated client life). We conduct an annual analysis of client retention data to support our client life estimate. A change in our client life estimate could have a material impact on the timing and amounts recognized as revenue for nonrefundable upfront fees. Revenues from the sale of time clocks are recognized when control is transferred to the client upon delivery of the product. We estimate the standalone selling price for the time clocks by maximizing the use of observable inputs such as our specific pricing practices for time clocks. Interest income on funds held for clients is earned on funds that are collected from clients in advance of either the applicable due date for payroll tax submissions or the applicable disbursement date for employee payment services. The interest earned on these funds is included in revenues in the consolidated statements of comprehensive income as the collection, holding, and remittance of these funds are essential components of providing these services."
    },
    {
      "status": "ADDED",
      "current_title": "Assets Recognized from the Costs to Obtain and Costs to Fulfill Revenue Contracts",
      "prior_title": null,
      "current_body": "We recognize an asset for the incremental costs of obtaining a contract with a client if we expect the amortization period to be longer than one year. We also recognize an asset for the costs to fulfill a contract with a client if such costs are specifically identifiable, generate or enhance resources used to satisfy future performance obligations, and are expected to be recovered. We have determined that substantially all costs related to implementation activities are administrative in nature and also meet the capitalization criteria under Accounting Standards Codification 340-40, “Other Assets and Deferred Costs”. These capitalized costs to fulfill principally relate to upfront direct costs that are expected to be recovered through margin and that enhance our ability to satisfy future performance obligations. The assets related to both costs to obtain, and costs to fulfill, contracts with clients are accounted for utilizing a portfolio approach and are capitalized and amortized ratably over the expected period of benefit, which we have determined to be the estimated life of the client relationship of 10 years primarily because we incur no new costs to obtain, or costs to fulfill, a contract upon renewal. A change in our client life estimate could have a material impact on the timing and amounts recognized as amortization expense. Additional commission costs may be incurred when an existing client purchases additional applications; however, these commission costs relate solely to the additional applications purchased and are not related to contract renewal. Furthermore, additional fulfillment costs associated with existing clients purchasing additional applications are minimized by our seamless single-database platform. The assets related to both costs to obtain, and costs to fulfill, contracts with customers are presented as deferred contract costs in the accompanying consolidated balance sheets. Amortization expense related to costs to obtain and costs to fulfill a contract is included in sales and marketing expenses and general and administrative expenses in the accompanying consolidated statements of comprehensive income. We regularly review our assets recognized from the costs to obtain and costs to fulfill client contracts for potential impairment and did not recognize an impairment loss during the years ended December 31, 2025 or December 31, 2024."
    },
    {
      "status": "ADDED",
      "current_title": "Stock-Based Compensation Awards",
      "prior_title": null,
      "current_body": "Historically, our stock-based compensation programs have included restricted stock awards and restricted stock unit (“RSU”) awards. We issue stock-based compensation awards with three different types of vesting requirements including awards that vest solely based on condition of service, awards that vest based on achieving certain performance metrics such as revenue or adjusted EBITDA targets, and awards that vest based on achieving certain market conditions such as relative total stockholder return or volume weighted average price targets. We measure the fair value of awards that vest solely based on condition of service, such as our time-based shares of restricted stock and time-based RSUs, and the fair value of awards that vest based on achieving certain performance metrics, by using the closing market price on the date of grant. We measure the fair value of awards that vest based on achieving certain market conditions, such as relative total stockholder return or volume weighted average price targets, by using a Monte Carlo simulation model. Stock-based compensation cost is recognized only for those awards expected to meet the requisite service and performance vesting conditions. Stock-based compensation cost is recognized on a straight-line basis over the requisite or derived service period of the award, which is generally the vesting period of the award, with forfeitures recognized as incurred. 50 50 The Monte Carlo simulation model used to determine the fair value of awards that vest based on market conditions considers various subjective assumptions as inputs, which involve inherent uncertainties and the application of our judgment as it relates to market volatilities, the historical volatility of our stock price, risk-free rates, expected performance period, dividend yield, and correlation to benchmark (for total stockholder return based awards). Determining these assumptions is subjective and complex, and therefore, a change in the assumptions utilized could impact the calculation of the fair value of our awards that vest based on achieving certain market conditions and the associated stock-based compensation cost. Refer to Note 11 “Stock-Based Compensation” in the notes to our consolidated financial statements for further information regarding our stock-based compensation awards.Recent Accounting PronouncementsRefer to Note 2 “Summary of Significant Accounting Policies” in the notes to the consolidated financial statements for a full description of recent accounting pronouncements.Non-GAAP Financial MeasuresManagement uses adjusted EBITDA and non-GAAP net income as supplemental measures to review and assess the performance of our core business operations and for planning purposes. We define (i) adjusted EBITDA as net income plus interest expense, taxes, depreciation and amortization, non-cash stock-based compensation expense, certain transaction expenses that are not core to our operations (if any) and any loss on the extinguishment of debt, less any gain on modification of the naming rights agreement, and (ii) non-GAAP net income as net income plus non-cash stock-based compensation expense, certain transaction expenses that are not core to our operations (if any) and any loss on the extinguishment of debt, less any gain on modification of the naming rights agreement, all of which are adjusted for the effect of income taxes. Adjusted EBITDA and non-GAAP net income are metrics that provide investors with greater transparency to the information used by management in its financial and operational decision-making. We believe these metrics are useful to investors because they facilitate comparisons of our core business operations across periods on a consistent basis, as well as comparisons with the results of peer companies, many of which use similar non-GAAP financial measures to supplement results under U.S. GAAP. In addition, adjusted EBITDA is a measure that provides useful information to management about the amount of cash available for reinvestment in our business, paying dividends, repurchasing common stock and other purposes. Management believes that the non-GAAP measures presented in this Form 10-K, when viewed in combination with our results prepared in accordance with U.S. GAAP, provide a more complete understanding of the factors and trends affecting our business and performance.Adjusted EBITDA and non-GAAP net income are not measures of financial performance under U.S. GAAP, and should not be considered a substitute for net income, which we consider to be the most directly comparable U.S. GAAP measure. Adjusted EBITDA and non-GAAP net income have limitations as analytical tools, and when assessing our operating performance, you should not consider adjusted EBITDA or non-GAAP net income in isolation, or as a substitute for net income or other consolidated statements of comprehensive income data prepared in accordance with U.S. GAAP. Adjusted EBITDA and non-GAAP net income may not be comparable to similarly titled measures of other companies, and other companies may not calculate such measures in the same manner as we do.The following tables reconcile net income to adjusted EBITDA, net income to non-GAAP net income and earnings per share to non-GAAP net income per share on a basic and diluted basis. Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 20, 2025, for a presentation of the amounts for the year ended December 31, 2023. Year Ended December 31, 2025 2024 Net income to adjusted EBITDA: Net income $ 453.4 $ 502.0 Interest expense 3.4 3.4 Provision for income taxes 166.0 147.0 Depreciation and amortization 176.3 145.9 EBITDA 799.2 798.3 Non-cash stock-based compensation expense 118.7 (22.9 ) Gain on modification of naming rights agreement (35.6 ) — Adjusted EBITDA $ 882.3 $ 775.4 The Monte Carlo simulation model used to determine the fair value of awards that vest based on market conditions considers various subjective assumptions as inputs, which involve inherent uncertainties and the application of our judgment as it relates to market volatilities, the historical volatility of our stock price, risk-free rates, expected performance period, dividend yield, and correlation to benchmark (for total stockholder return based awards). Determining these assumptions is subjective and complex, and therefore, a change in the assumptions utilized could impact the calculation of the fair value of our awards that vest based on achieving certain market conditions and the associated stock-based compensation cost. Refer to Note 11 “Stock-Based Compensation” in the notes to our consolidated financial statements for further information regarding our stock-based compensation awards."
    },
    {
      "status": "ADDED",
      "current_title": "Recent Accounting Pronouncements",
      "prior_title": null,
      "current_body": "Refer to Note 2 “Summary of Significant Accounting Policies” in the notes to the consolidated financial statements for a full description of recent accounting pronouncements."
    },
    {
      "status": "ADDED",
      "current_title": "Non-GAAP Financial Measures",
      "prior_title": null,
      "current_body": "Management uses adjusted EBITDA and non-GAAP net income as supplemental measures to review and assess the performance of our core business operations and for planning purposes. We define (i) adjusted EBITDA as net income plus interest expense, taxes, depreciation and amortization, non-cash stock-based compensation expense, certain transaction expenses that are not core to our operations (if any) and any loss on the extinguishment of debt, less any gain on modification of the naming rights agreement, and (ii) non-GAAP net income as net income plus non-cash stock-based compensation expense, certain transaction expenses that are not core to our operations (if any) and any loss on the extinguishment of debt, less any gain on modification of the naming rights agreement, all of which are adjusted for the effect of income taxes. Adjusted EBITDA and non-GAAP net income are metrics that provide investors with greater transparency to the information used by management in its financial and operational decision-making. We believe these metrics are useful to investors because they facilitate comparisons of our core business operations across periods on a consistent basis, as well as comparisons with the results of peer companies, many of which use similar non-GAAP financial measures to supplement results under U.S. GAAP. In addition, adjusted EBITDA is a measure that provides useful information to management about the amount of cash available for reinvestment in our business, paying dividends, repurchasing common stock and other purposes. Management believes that the non-GAAP measures presented in this Form 10-K, when viewed in combination with our results prepared in accordance with U.S. GAAP, provide a more complete understanding of the factors and trends affecting our business and performance. Adjusted EBITDA and non-GAAP net income are not measures of financial performance under U.S. GAAP, and should not be considered a substitute for net income, which we consider to be the most directly comparable U.S. GAAP measure. Adjusted EBITDA and non-GAAP net income have limitations as analytical tools, and when assessing our operating performance, you should not consider adjusted EBITDA or non-GAAP net income in isolation, or as a substitute for net income or other consolidated statements of comprehensive income data prepared in accordance with U.S. GAAP. Adjusted EBITDA and non-GAAP net income may not be comparable to similarly titled measures of other companies, and other companies may not calculate such measures in the same manner as we do. The following tables reconcile net income to adjusted EBITDA, net income to non-GAAP net income and earnings per share to non-GAAP net income per share on a basic and diluted basis. Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 20, 2025, for a presentation of the amounts for the year ended December 31, 2023. Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 20, 2025"
    },
    {
      "status": "ADDED",
      "current_title": "Net income to adjusted EBITDA:",
      "prior_title": null,
      "current_body": "Net income $ 453.4 $ 502.0 Interest expense 3.4 3.4 Provision for income taxes 166.0 147.0 Depreciation and amortization 176.3 145.9 EBITDA 799.2 798.3 Non-cash stock-based compensation expense 118.7 (22.9 ) Gain on modification of naming rights agreement (35.6 ) — Adjusted EBITDA $ 882.3 $ 775.4 51 51 Year Ended December 31, 2025 2024 Net income to non-GAAP net income: Net income $ 453.4 $ 502.0 Non-cash stock-based compensation expense 118.7 (22.9 ) Gain on modification of naming rights agreement (35.6 ) — Income tax effect on non-GAAP adjustments (17.9 ) (17.1 ) Non-GAAP net income $ 518.6 $ 462.0 Weighted average shares outstanding: Basic 55.8 56.2 Diluted 56.1 56.3 Earnings per share, basic $ 8.13 $ 8.93 Earnings per share, diluted $ 8.08 $ 8.92 Non-GAAP net income per share, basic $ 9.30 $ 8.22 Non-GAAP net income per share, diluted $ 9.24 $ 8.21 Year Ended December 31, 2025 2024 Earnings per share to non-GAAP net income per share, basic: Earnings per share, basic $ 8.13 $ 8.93 Non-cash stock-based compensation expense 2.13 (0.41 ) Gain on modification of naming rights agreement (0.64 ) — Income tax effect on non-GAAP adjustments (0.32 ) (0.30 ) Non-GAAP net income per share, basic $ 9.30 $ 8.22 Year Ended December 31, 2025 2024 Earnings per share to non-GAAP net income per share, diluted: Earnings per share, diluted $ 8.08 $ 8.92 Non-cash stock-based compensation expense 2.12 (0.41 ) Gain on modification of naming rights agreement (0.64 ) — Income tax effect on non-GAAP adjustments (0.32 ) (0.30 ) Non-GAAP net income per share, diluted $ 9.24 $ 8.21 Item 7A. Quantitative and Qualitative Disclosures About Market RiskInterest Rate SensitivityAs of December 31, 2025, we had corporate cash and cash equivalents totaling $370.0 million and funds held for clients cash and cash equivalents totaling $4.8 billion. These amounts are invested primarily in demand deposit accounts and money market funds. We consider all highly liquid debt instruments with an original maturity of three months or less and SEC-registered money market mutual funds to be cash equivalents. Additionally, we had available-for-sale securities totaling $374.5 million included within funds held for clients on the consolidated balance sheets as of December 31, 2025. Our available-for-sale securities consisted of U.S. treasury securities with original maturities of two years or less and a certificate of deposit. 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 investments 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"
    },
    {
      "status": "ADDED",
      "current_title": "Net income to non-GAAP net income:",
      "prior_title": null,
      "current_body": "Net income $ 453.4 $ 502.0 Non-cash stock-based compensation expense 118.7 (22.9 ) Gain on modification of naming rights agreement (35.6 ) — Income tax effect on non-GAAP adjustments (17.9 ) (17.1 ) Non-GAAP net income $ 518.6 $ 462.0 Weighted average shares outstanding: Basic 55.8 56.2 Diluted 56.1 56.3 Earnings per share, basic $ 8.13 $ 8.93 Earnings per share, diluted $ 8.08 $ 8.92 Non-GAAP net income per share, basic $ 9.30 $ 8.22 Non-GAAP net income per share, diluted $ 9.24 $ 8.21"
    },
    {
      "status": "ADDED",
      "current_title": "Earnings per share to non-GAAP net income per share, basic:",
      "prior_title": null,
      "current_body": "Earnings per share, basic $ 8.13 $ 8.93 Non-cash stock-based compensation expense 2.13 (0.41 ) Gain on modification of naming rights agreement (0.64 ) — Income tax effect on non-GAAP adjustments (0.32 ) (0.30 ) Non-GAAP net income per share, basic $ 9.30 $ 8.22"
    },
    {
      "status": "ADDED",
      "current_title": "Earnings per share to non-GAAP net income per share, diluted:",
      "prior_title": null,
      "current_body": "Earnings per share, diluted $ 8.08 $ 8.92 Non-cash stock-based compensation expense 2.12 (0.41 ) Gain on modification of naming rights agreement (0.64 ) — Income tax effect on non-GAAP adjustments (0.32 ) (0.30 ) Non-GAAP net income per share, diluted $ 9.24 $ 8.21 Item 7A. Quantitative and Qualitative Disclosures About Market Risk"
    },
    {
      "status": "ADDED",
      "current_title": "Interest Rate Sensitivity",
      "prior_title": null,
      "current_body": "As of December 31, 2025, we had corporate cash and cash equivalents totaling $370.0 million and funds held for clients cash and cash equivalents totaling $4.8 billion. These amounts are invested primarily in demand deposit accounts and money market funds. We consider all highly liquid debt instruments with an original maturity of three months or less and SEC-registered money market mutual funds to be cash equivalents. Additionally, we had available-for-sale securities totaling $374.5 million included within funds held for clients on the consolidated balance sheets as of December 31, 2025. Our available-for-sale securities consisted of U.S. treasury securities with original maturities of two years or less and a certificate of deposit. 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 investments 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 52 52 in interest rates. We classify all debt securities with an original maturity greater than three months as available-for-sale and, as a result, no gains or losses are recognized due to changes in interest rates until such securities are sold or decreases in fair value are determined to be nonrecoverable. To date, we have not recorded any credit impairment losses on our portfolio.As of December 31, 2025, a hypothetical increase or decrease in interest rates of 100 basis points would result in an approximately $22.1 million increase or decrease, respectively, in interest earned on funds held for clients over the ensuing 12-month period. There are no incremental costs of revenue associated with changes in interest earned on funds held for clients.An immediate increase in interest rates of 100 basis points would have resulted in a $1.7 million reduction in the aggregate market value of our available-for-sale securities as of December 31, 2025. An immediate decrease in interest rates of 100 basis points would have resulted in a $1.7 million increase in the aggregate market value of our available-for-sale securities as of December 31, 2025. These estimates are based on a sensitivity model that measures market value changes when changes in interest rates occur. in interest rates. We classify all debt securities with an original maturity greater than three months as available-for-sale and, as a result, no gains or losses are recognized due to changes in interest rates until such securities are sold or decreases in fair value are determined to be nonrecoverable. To date, we have not recorded any credit impairment losses on our portfolio. As of December 31, 2025, a hypothetical increase or decrease in interest rates of 100 basis points would result in an approximately $22.1 million increase or decrease, respectively, in interest earned on funds held for clients over the ensuing 12-month period. There are no incremental costs of revenue associated with changes in interest earned on funds held for clients. An immediate increase in interest rates of 100 basis points would have resulted in a $1.7 million reduction in the aggregate market value of our available-for-sale securities as of December 31, 2025. An immediate decrease in interest rates of 100 basis points would have resulted in a $1.7 million increase in the aggregate market value of our available-for-sale securities as of December 31, 2025. These estimates are based on a sensitivity model that measures market value changes when changes in interest rates occur. 53 53 Item 8. Financial Statements and Supplementary DataINDEX TO CONSOLIDATED FINANCIAL STATEMENTS Paycom Software, Inc. Consolidated Annual Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248) 55 Consolidated Balance Sheets as of December 31, 2025 and 2024 57 Consolidated Statements of Comprehensive Income, Years Ended December 31, 2025, 2024 and 2023 58 Consolidated Statements of Stockholders’ Equity, Years Ended December 31, 2025, 2024 and 2023 59 Consolidated Statements of Cash Flows, Years Ended December 31, 2025, 2024 and 2023 60 Notes to the Consolidated Financial Statements 62 Item 8. Financial Statements and Supplementary Data"
    },
    {
      "status": "ADDED",
      "current_title": "Paycom Software, Inc.",
      "prior_title": null,
      "current_body": "Consolidated Annual Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248) Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248 248 ) 55 Consolidated Balance Sheets as of December 31, 2025 and 2024 Consolidated Balance Sheets as of December 31, 2025 and 2024 57 Consolidated Statements of Comprehensive Income, Years Ended December 31, 2025, 2024 and 2023 Consolidated Statements of Comprehensive Income, Years Ended December 31, 2025, 2024 and 2023 58 Consolidated Statements of Stockholders’ Equity, Years Ended December 31, 2025, 2024 and 2023 Consolidated Statements of Stockholders’ Equity, Years Ended December 31, 2025, 2024 and 2023 59 Consolidated Statements of Cash Flows, Years Ended December 31, 2025, 2024 and 2023 Consolidated Statements of Cash Flows, Years Ended December 31, 2025, 2024 and 2023 60 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements 62 54 54 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and StockholdersPaycom Software, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Paycom Software, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 19, 2026 expressed an unqualified opinion.Basis for opinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical audit matterThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.Deferred implementation revenue and contract costs amortization periodAs described further in Note 2 “Summary of Significant Accounting Policies” to the consolidated financial statements, the Company capitalizes costs associated with obtaining and fulfilling revenue contracts when it expects the amortization period to be longer than one year. The resulting assets are amortized over the expected period of benefit of 10 years, which the Company has determined to be the estimated life of a client relationship. The Company also uses the estimated client relationship period in recognizing deferred implementation revenue. We identified the amortization period of both the deferred contract costs as well as the deferred implementation revenue as a critical audit matter.The principal considerations for our determination that the amortization period of both the deferred contract costs as well as the deferred implementation revenue is a critical audit matter are as follows. Given the materiality of the balances of deferred contract costs and deferred implementation revenue, this assumption is considered sensitive as a change could yield a material impact on the consolidated financial statements. Auditing the estimated life of the Company’s client relationships required significant auditor judgment in planning and executing the appropriate audit procedures."
    },
    {
      "status": "ADDED",
      "current_title": "REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM",
      "prior_title": null,
      "current_body": "Board of Directors and Stockholders Paycom Software, Inc."
    },
    {
      "status": "ADDED",
      "current_title": "Opinion on the financial statements",
      "prior_title": null,
      "current_body": "We have audited the accompanying consolidated balance sheets of Paycom Software, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 19, 2026 expressed an unqualified opinion. Basis for opinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion."
    },
    {
      "status": "ADDED",
      "current_title": "Basis for opinion",
      "prior_title": null,
      "current_body": "These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion."
    },
    {
      "status": "ADDED",
      "current_title": "Critical audit matter",
      "prior_title": null,
      "current_body": "The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Deferred implementation revenue and contract costs amortization period As described further in Note 2 “Summary of Significant Accounting Policies” to the consolidated financial statements, the Company capitalizes costs associated with obtaining and fulfilling revenue contracts when it expects the amortization period to be longer than one year. The resulting assets are amortized over the expected period of benefit of 10 years, which the Company has determined to be the estimated life of a client relationship. The Company also uses the estimated client relationship period in recognizing deferred implementation revenue. We identified the amortization period of both the deferred contract costs as well as the deferred implementation revenue as a critical audit matter. The principal considerations for our determination that the amortization period of both the deferred contract costs as well as the deferred implementation revenue is a critical audit matter are as follows. Given the materiality of the balances of deferred contract costs and deferred implementation revenue, this assumption is considered sensitive as a change could yield a material impact on the consolidated financial statements. Auditing the estimated life of the Company’s client relationships required significant auditor judgment in planning and executing the appropriate audit procedures. 55 55 Our audit procedures related to the estimated life of the Company’s client relationships included the following, among others. We tested the design and operating effectiveness of controls relating to management’s annual review of the reasonableness of the estimated life of a client relationship, including controls over the completeness of key inputs in the calculation and the review of the methodology applied by the Company’s third-party specialist. With the assistance of a valuation specialist, we tested the methodologies used in determining the appropriateness of the estimated life by evaluating the relationship between the average life of a client and the associated attrition rate for reasonableness. This included reperforming the calculation and verifying that all provided historical data was utilized in the analysis. We also performed procedures over the data utilized in the analysis, including comparing a sample of historical data to previously audited information. /s/ GRANT THORNTON LLPWe have served as the Company’s auditor since 2009.Oklahoma City, OklahomaFebruary 19, 2026 Our audit procedures related to the estimated life of the Company’s client relationships included the following, among others. We tested the design and operating effectiveness of controls relating to management’s annual review of the reasonableness of the estimated life of a client relationship, including controls over the completeness of key inputs in the calculation and the review of the methodology applied by the Company’s third-party specialist. With the assistance of a valuation specialist, we tested the methodologies used in determining the appropriateness of the estimated life by evaluating the relationship between the average life of a client and the associated attrition rate for reasonableness. This included reperforming the calculation and verifying that all provided historical data was utilized in the analysis. We also performed procedures over the data utilized in the analysis, including comparing a sample of historical data to previously audited information. /s/ GRANT THORNTON LLP GRANT THORNTON LLP We have served as the Company’s auditor since 2009. Oklahoma City, Oklahoma Oklahoma City, Oklahoma February 19, 2026 56 56 Paycom Software, Inc. Consolidated Balance Sheets(in millions, except per share amounts) December 31, 2025 December 31, 2024 Assets Current assets: Cash and cash equivalents $ 370.0 $ 402.0 Accounts receivable 44.9 39.2 Prepaid expenses 47.5 44.4 Inventory 1.7 1.4 Income tax receivable 78.2 11.9 Deferred contract costs 159.5 140.4 Current assets before funds held for clients 701.8 639.3 Funds held for clients 5,137.0 3,665.5 Total current assets 5,838.8 4,304.8 Property and equipment, net 687.3 561.4 Intangible assets, net 37.4 46.2 Goodwill 51.9 51.9 Long-term deferred contract costs 857.4 783.6 Operating lease right-of-use assets 89.4 80.6 Other assets 36.5 31.4 Total assets $ 7,598.7 $ 5,859.9 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 6.6 $ 23.9 Accrued commissions and bonuses 28.2 33.0 Accrued payroll and vacation 60.1 59.0 Deferred revenue 28.3 30.0 Operating lease liabilities 28.4 20.4 Accrued expenses and other current liabilities 79.8 74.8 Current liabilities before client funds obligation 231.4 241.1 Client funds obligation 5,137.0 3,665.7 Total current liabilities 5,368.4 3,906.8 Deferred income tax liabilities, net 304.4 149.7 Long-term deferred revenue 121.9 114.6 Long-term operating lease liabilities 61.9 63.0 Other long-term liabilities 10.6 49.9 Total long-term liabilities 498.8 377.2 Total liabilities 5,867.2 4,284.0 Commitments and contingencies (Note 12 “Commitments and Contingencies”) Stockholders’ equity: Common stock, $0.01 par value (100.0 shares authorized, 63.6 and 63.0 shares issued at December 31, 2025 and December 31, 2024, respectively; 54.8 and 55.9 shares outstanding at December 31, 2025 and December 31, 2024, respectively) 0.6 0.6 Additional paid-in capital 878.4 724.8 Retained earnings 2,255.6 1,887.5 Accumulated other comprehensive earnings (loss) 0.3 (0.6 ) Treasury stock, at cost (8.8 and 7.1 shares at December 31, 2025 and December 31, 2024, respectively) (1,403.4 ) (1,036.4 ) Total stockholders’ equity 1,731.5 1,575.9 Total liabilities and stockholders’ equity $ 7,598.7 $ 5,859.9 See accompanying notes to the consolidated financial statements."
    },
    {
      "status": "ADDED",
      "current_title": "December 31, 2024",
      "prior_title": null,
      "current_body": "Assets Current assets: Cash and cash equivalents $ 370.0 $ 402.0 Accounts receivable 44.9 39.2 Prepaid expenses 47.5 44.4 Inventory 1.7 1.4 Income tax receivable 78.2 11.9 Deferred contract costs 159.5 140.4 Current assets before funds held for clients 701.8 639.3 Funds held for clients 5,137.0 3,665.5 Total current assets 5,838.8 4,304.8 Property and equipment, net 687.3 561.4 Intangible assets, net 37.4 46.2 Goodwill 51.9 51.9 Long-term deferred contract costs 857.4 783.6 Operating lease right-of-use assets 89.4 80.6 Other assets 36.5 31.4 Total assets $ 7,598.7 $ 5,859.9"
    },
    {
      "status": "ADDED",
      "current_title": "Liabilities and Stockholders’ Equity",
      "prior_title": null,
      "current_body": "Current liabilities: Accounts payable $ 6.6 $ 23.9 Accrued commissions and bonuses 28.2 33.0 Accrued payroll and vacation 60.1 59.0 Deferred revenue 28.3 30.0 Operating lease liabilities 28.4 20.4 Accrued expenses and other current liabilities 79.8 74.8 Current liabilities before client funds obligation 231.4 241.1 Client funds obligation 5,137.0 3,665.7 Total current liabilities 5,368.4 3,906.8 Deferred income tax liabilities, net 304.4 149.7 Long-term deferred revenue 121.9 114.6 Long-term operating lease liabilities 61.9 63.0 Other long-term liabilities 10.6 49.9 Total long-term liabilities 498.8 377.2 Total liabilities 5,867.2 4,284.0 Commitments and contingencies (Note 12 “Commitments and Contingencies”) Commitments and contingencies (Note 12 “Commitments and Contingencies”) Commitments and contingencies (Note 12 “Commitments and Contingencies”) Commitments and contingencies (Note 12 “Commitments and Contingencies”) Stockholders’ equity: Common stock, $0.01 par value (100.0 shares authorized, 63.6 and 63.0 shares issued at December 31, 2025 and December 31, 2024, respectively; 54.8 and 55.9 shares outstanding at December 31, 2025 and December 31, 2024, respectively) authorized 0.6 0.6 Additional paid-in capital 878.4 724.8 Retained earnings 2,255.6 1,887.5 Accumulated other comprehensive earnings (loss) 0.3 (0.6 ) Treasury stock, at cost (8.8 and 7.1 shares at December 31, 2025 and December 31, 2024, respectively) (1,403.4 ) (1,036.4 ) Total stockholders’ equity 1,731.5 1,575.9 Total liabilities and stockholders’ equity $ 7,598.7 $ 5,859.9 See accompanying notes to the consolidated financial statements. 57 57 Paycom Software, Inc.Consolidated Statements of Comprehensive Income(in millions, except per share amounts) Year Ended December 31, 2025 2024 2023 Revenues Recurring and other $ 1,938.7 $ 1,758.3 $ 1,585.7 Interest on funds held for clients 113.0 124.9 108.0 Total revenues 2,051.7 1,883.2 1,693.7 Cost of revenues Operating expenses 263.0 267.4 223.7 Depreciation and amortization 82.4 67.2 52.6 Total cost of revenues 345.4 334.6 276.3 Administrative expenses Sales and marketing 482.8 434.4 417.6 Research and development 283.4 242.6 199.0 General and administrative 279.0 158.6 288.1 Depreciation and amortization 93.9 78.7 61.4 Total administrative expenses 1,139.1 914.3 966.1 Total operating expenses 1,484.5 1,248.9 1,242.4 Operating income 567.2 634.3 451.3 Interest expense (3.4 ) (3.4 ) (1.9 ) Other income, net 55.6 18.1 23.0 Income before income taxes 619.4 649.0 472.4 Provision for income taxes 166.0 147.0 131.6 Net income $ 453.4 $ 502.0 $ 340.8 Earnings per share, basic $ 8.13 $ 8.93 $ 5.91 Earnings per share, diluted $ 8.08 $ 8.92 $ 5.88 Weighted average shares outstanding: Basic 55.8 56.2 57.7 Diluted 56.1 56.3 58.0 Comprehensive earnings: Net income $ 453.4 $ 502.0 $ 340.8 Unrealized net gains on available-for-sale securities 1.0 1.0 3.5 Tax effect (0.1 ) (0.6 ) (0.8 ) Other comprehensive income, net of tax 0.9 0.4 2.7 Comprehensive earnings $ 454.3 $ 502.4 $ 343.5 See accompanying notes to the consolidated financial statements."
    },
    {
      "status": "ADDED",
      "current_title": "Year Ended December 31,",
      "prior_title": null,
      "current_body": "2025 2024 2023 Key performance indicators: Clients 39,199 37,543 36,820 Clients (based on parent company grouping) 20,321 19,422 19,481 Sales teams 58 58 55 Annual revenue retention rate(1) 91 % 90 % 90 % •Clients. When we calculate the number of clients at period end, we treat client accounts with separate taxpayer identification numbers (or, in certain circumstances, separate client codes) as separate clients, which often separates client accounts that are affiliated with the same parent organization. We track the number of our clients to provide an accurate gauge of the size of our business. Unless we state otherwise or the context otherwise requires, references to clients throughout this Form 10-K refer to this metric. Clients. When we calculate the number of clients at period end, we treat client accounts with separate taxpayer identification numbers (or, in certain circumstances, separate client codes) as separate clients, which often separates client accounts that are affiliated with the same parent organization. We track the number of our clients to provide an accurate gauge of the size of our business. Unless we state otherwise or the context otherwise requires, references to clients throughout this Form 10-K refer to this metric. •Clients (based on parent company grouping). When we calculate the number of clients based on parent company grouping at period end, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers (or, in certain circumstances, separate client codes), which often combines client accounts that are affiliated with the same parent organization. We track the number of our clients based on parent company grouping to provide an alternate measure of the size of our business and clients. Clients (based on parent company grouping). When we calculate the number of clients based on parent company grouping at period end, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers (or, in certain circumstances, separate client codes), which often combines client accounts that are affiliated with the same parent organization. We track the number of our clients based on parent company grouping to provide an alternate measure of the size of our business and clients. •Sales Teams. We monitor our sales professionals by the number of sales teams at period end. For the purposes of this metric, CRRs and emerging markets representatives are considered one sales team. Each outside sales team typically consists of a sales manager and approximately seven other sales professionals. Certain larger metropolitan areas can Sales Teams. We monitor our sales professionals by the number of sales teams at period end. For the purposes of this metric, CRRs and emerging markets representatives are considered one sales team. Each outside sales team typically consists of a sales manager and approximately seven other sales professionals. Certain larger metropolitan areas can 42 42 support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods.•Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods.We calculate annual revenue retention rate for any 12-month period (a “Measurement Period”) as follows:Recurring and Other Revenues – TTM Revenue AttritionRecurring and Other RevenuesThe trailing 12-month value of revenue from clients lost during the Measurement Period (“TTM Revenue Attrition”) is equal to the actual recurring fees paid by such lost clients during the 12 months preceding the respective dates on which they last processed payroll with us. The point at which a client is deemed “lost” is determined based on the terms of our standard services agreement with clients. As described in Note 2 “Summary of Significant Accounting Policies”, for the year ended December 31, 2024, we changed the presentation of revenues on the consolidated statements of comprehensive income to disaggregate interest on funds held for clients and combine recurring and other revenues. Reclassifications for the presentation of revenue did not impact the calculation of our annual retention rate.Components of Results of OperationsSources of Revenues Revenues consist of recurring and other revenues, and interest on funds held for clients. We expect our revenues to increase as we introduce new applications, expand our client base and renew and expand relationships with existing clients.Recurring and Other RevenuesRecurring revenues are derived primarily from our payroll, talent acquisition, talent management, HR management and time and labor management applications, fees charged for form filings and delivery of client payroll checks and reports, and revenues associated with background checks and income and employment verification services. The client’s use of our applications routinely fluctuates based upon factors that include the number of payrolls run and changes in the client’s employee population.Substantially all of our revenues are generated from (i) fixed amounts charged per billing period plus a fee per employee or transaction processed and (ii) fixed amounts charged per billing period. Our billing period varies by client and is typically based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly. Over time, an increasing number of clients will be billed on a monthly basis for certain HCM applications and services, regardless of the client’s payroll cycle. Because recurring revenues are based, in part, on fees for use of our applications and the delivery of checks and reports that are levied on a per-employee basis, our recurring revenues can fluctuate in relation to changes to client employee count. Furthermore, because the timing of revenue recognition is driven by the processing of the client’s payroll, it can vary based upon changes in client payroll dates and the impact that weekends or public holidays may have in prompting a client to accelerate or delay the processing of payroll.Recurring revenues include revenues relating to the annual processing of payroll tax filing forms and Affordable Care Act (“ACA”) form filing requirements and revenues from processing unscheduled payroll runs (such as bonuses) for our clients. These payroll forms are typically processed in the first quarter of the year, and many of our clients are subject to ACA form filing requirements in the first quarter, which positively impacts first quarter revenues and margins. We anticipate our revenues will continue to exhibit this seasonal pattern related to ACA form filings for so long as the ACA (or replacement legislation) includes employer reporting requirements. In addition, our recurring revenues during the fourth quarter are positively impacted by unscheduled payroll runs for our clients that occur before the end of the year. Nonetheless, we expect the magnitude of these seasonal fluctuations in our revenues to decrease to the extent clients utilize more of our non-payroll applications.Other revenues consist of implementation fees for the deployment of our solution and revenues from sales of time clocks as part of our time and attendance services. Non-refundable implementation fees are charged to new clients at contract inception. These fees generally range from 10% to 30% of the annualized value of the transaction. Implementation fees are deferred and recognized as revenue over the life of the client, which is estimated to be 10 years. Revenues from the sale of time clocks are recognized when control is transferred to the client upon delivery of the product.Interest on Funds Held For ClientsWe earn interest income on funds held for clients. Funds held for clients are amounts collected from clients in advance of either the applicable due date for payroll tax submissions or the applicable disbursement date for employee payment services. These collections from clients are typically disbursed from one to 30 days after receipt, with some funds being held for up to 120 days. We typically invest funds held for clients in money market funds, demand deposit accounts, certificates of deposit, support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods. support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods. •Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods. Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods. We calculate annual revenue retention rate for any 12-month period (a “Measurement Period”) as follows: Recurring and Other Revenues – TTM Revenue Attrition Recurring and Other Revenues The trailing 12-month value of revenue from clients lost during the Measurement Period (“TTM Revenue Attrition”) is equal to the actual recurring fees paid by such lost clients during the 12 months preceding the respective dates on which they last processed payroll with us. The point at which a client is deemed “lost” is determined based on the terms of our standard services agreement with clients. As described in Note 2 “Summary of Significant Accounting Policies”, for the year ended December 31, 2024, we changed the presentation of revenues on the consolidated statements of comprehensive income to disaggregate interest on funds held for clients and combine recurring and other revenues. Reclassifications for the presentation of revenue did not impact the calculation of our annual retention rate."
    },
    {
      "status": "ADDED",
      "current_title": "Cost of revenues",
      "prior_title": null,
      "current_body": "Operating expenses 263.0 12.8 % 267.4 14.2 % -1.6% Depreciation and amortization 82.4 4.0 % 67.2 3.6 % 22.5% Total cost of revenues 345.4 16.8 % 334.6 17.8 % 3.2%"
    },
    {
      "status": "ADDED",
      "current_title": "Administrative expenses",
      "prior_title": null,
      "current_body": "Sales and marketing 482.8 23.5 % 434.4 23.1 % 11.2% Research and development 283.4 13.8 % 242.6 12.9 % 16.8% General and administrative 279.0 13.6 % 158.6 8.4 % 75.9% Depreciation and amortization 93.9 4.6 % 78.7 4.2 % 19.3% Total administrative expenses 1,139.1 55.5 % 914.3 48.6 % 24.6% Total operating expenses 1,484.5 72.4 % 1,248.9 66.3 % 18.9% Operating income 567.2 27.6 % 634.3 33.7 % -10.6% Interest expense (3.4 ) -0.2 % (3.4 ) -0.2 % 1.9% Other income, net 55.6 2.7 % 18.1 1.0 % 207.2% Income before income taxes 619.4 30.2 % 649.0 34.5 % -4.6% Provision for income taxes 166.0 8.1 % 147.0 7.8 % 13.0% Net income $ 453.4 22.1 % $ 502.0 26.7 % -9.7% Revenues Recurring and Other Revenues The increase in recurring and other revenues for the year ended December 31, 2025 from the year ended December 31, 2024 was the result of the addition of new clients, increased revenue from sales of additional applications and services to existing clients, additions and increased usage of existing products and services, and the realization of pricing strategies. Client attrition, particularly among smaller clients, partially offset the favorable impact of these revenue drivers. Interest on Funds Held For Clients The impact of lower interest rates during the year ended December 31, 2025 as compared to the prior year was partially offset by an increase in average funds held for client balances, but nonetheless resulted in decreased interest earned on funds held for clients for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The average daily balance of funds held for clients was $2.7 billion and $2.4 billion the years ended December 31, 2025 and 2024, respectively. Expenses"
    },
    {
      "status": "ADDED",
      "current_title": "Comprehensive earnings:",
      "prior_title": null,
      "current_body": "Net income $ 453.4 $ 502.0 $ 340.8 Unrealized net gains on available-for-sale securities 1.0 1.0 3.5 Tax effect (0.1 ) (0.6 ) (0.8 ) Other comprehensive income, net of tax 0.9 0.4 2.7 Comprehensive earnings $ 454.3 $ 502.4 $ 343.5 See accompanying notes to the consolidated financial statements. 58 58 Paycom Software, Inc.Consolidated Statements of Stockholders’ Equity(in millions) Year Ended December 31, 2025 2024 2023 Common stock: Balance at beginning of period $ 0.6 $ 0.6 $ 0.6 Vesting of restricted stock — — — Balance at end of period 0.6 0.6 0.6 Additional paid-in capital: Balance at beginning of period 724.8 724.4 576.6 Stock-based compensation 152.4 0.4 147.8 Employee stock purchase program 1.2 — — Balance at end of period 878.4 724.8 724.4 Retained earnings: Balance at beginning of period 1,887.5 1,470.0 1,197.0 Net income 453.4 502.0 340.8 Dividends declared ($0.375 per share) (85.3 ) (84.5 ) (67.8 ) Balance at end of period 2,255.6 1,887.5 1,470.0 Accumulated other comprehensive earnings (loss): Balance at beginning of period (0.6 ) (1.0 ) (3.7 ) Other comprehensive earnings, net of tax 0.9 0.4 2.7 Balance at end of period 0.3 (0.6 ) (1.0 ) Treasury stock: Balance at beginning of period (1,036.4 ) (891.0 ) (587.9 ) Repurchases of common stock (372.2 ) (145.4 ) (303.1 ) Employee stock purchase program 5.2 — — Balance at end of period (1,403.4 ) (1,036.4 ) (891.0 ) Total stockholders’ equity $ 1,731.5 $ 1,575.9 $ 1,303.0 Year Ended December 31, 2025 2024 2023 Common stock: Shares at beginning of period 63.0 62.7 62.5 Vesting of restricted stock 0.6 0.3 0.2 Shares at end of period 63.6 63.0 62.7 Treasury stock: Shares at beginning of period 7.1 6.1 4.7 Repurchases of common stock 1.7 1.0 1.4 Employee stock purchase program(1) — — — Shares at end of period 8.8 7.1 6.1 Shares outstanding at end of period 54.8 55.9 56.5 (1)During the year ended December 31, 2025, we issued 33,700 shares of common stock from treasury shares for purchases under our employee stock purchase plan. During the years ended December 31, 2024 and 2023, all shares of common stock purchased under our employee stock purchase plan were purchased in the open market.See accompanying notes to the consolidated financial statements."
    },
    {
      "status": "ADDED",
      "current_title": "Common stock:",
      "prior_title": null,
      "current_body": "Balance at beginning of period $ 0.6 $ 0.6 $ 0.6 Vesting of restricted stock — — — Balance at end of period 0.6 0.6 0.6"
    },
    {
      "status": "ADDED",
      "current_title": "Additional paid-in capital:",
      "prior_title": null,
      "current_body": "Balance at beginning of period 724.8 724.4 576.6 Stock-based compensation 152.4 0.4 147.8 Employee stock purchase program 1.2 — — Balance at end of period 878.4 724.8 724.4"
    },
    {
      "status": "ADDED",
      "current_title": "Retained earnings:",
      "prior_title": null,
      "current_body": "Balance at beginning of period 1,887.5 1,470.0 1,197.0 Net income 453.4 502.0 340.8 Dividends declared ($0.375 per share) (85.3 ) (84.5 ) (67.8 ) Balance at end of period 2,255.6 1,887.5 1,470.0"
    },
    {
      "status": "ADDED",
      "current_title": "Accumulated other comprehensive earnings (loss):",
      "prior_title": null,
      "current_body": "Balance at beginning of period (0.6 ) (1.0 ) (3.7 ) Other comprehensive earnings, net of tax 0.9 0.4 2.7 Balance at end of period 0.3 (0.6 ) (1.0 )"
    },
    {
      "status": "ADDED",
      "current_title": "Treasury stock:",
      "prior_title": null,
      "current_body": "Balance at beginning of period (1,036.4 ) (891.0 ) (587.9 ) Repurchases of common stock (372.2 ) (145.4 ) (303.1 ) Employee stock purchase program 5.2 — — Balance at end of period (1,403.4 ) (1,036.4 ) (891.0 ) Total stockholders’ equity $ 1,731.5 $ 1,575.9 $ 1,303.0"
    },
    {
      "status": "ADDED",
      "current_title": "Common stock:",
      "prior_title": null,
      "current_body": "Balance at beginning of period $ 0.6 $ 0.6 $ 0.6 Vesting of restricted stock — — — Balance at end of period 0.6 0.6 0.6"
    },
    {
      "status": "ADDED",
      "current_title": "Treasury stock:",
      "prior_title": null,
      "current_body": "Balance at beginning of period (1,036.4 ) (891.0 ) (587.9 ) Repurchases of common stock (372.2 ) (145.4 ) (303.1 ) Employee stock purchase program 5.2 — — Balance at end of period (1,403.4 ) (1,036.4 ) (891.0 ) Total stockholders’ equity $ 1,731.5 $ 1,575.9 $ 1,303.0"
    },
    {
      "status": "ADDED",
      "current_title": "Cash flows from operating activities",
      "prior_title": null,
      "current_body": "Net income $ 453.4 $ 502.0 $ 340.8 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 176.3 145.9 113.9 Stock-based compensation expense 118.7 (22.9 ) 129.8 Amortization of debt issuance costs 1.4 1.1 1.2 Loss on extinguishment of debt — — 1.2 Gain on disposition of property and equipment (0.1 ) — — Accretion of discount on available-for-sale securities (13.0 ) (0.1 ) (0.5 ) Non-cash marketing expense 1.0 1.6 1.7 Deferred income taxes, net 154.4 5.8 2.6 Gain on modification of naming rights agreement (35.6 ) — — Other 0.8 (0.5 ) 0.1 Changes in operating assets and liabilities: Accounts receivable (5.7 ) (22.8 ) 6.4 Prepaid expenses 1.7 (6.7 ) (6.6 ) Inventory (0.3 ) — 0.2 Other assets (6.5 ) (2.7 ) (9.6 ) Deferred contract costs (89.5 ) (120.0 ) (127.7 ) Income taxes, net (66.3 ) 6.5 (12.8 ) Accounts payable (16.2 ) 9.1 (5.2 ) Accrued commissions and bonuses (4.8 ) 2.5 2.1 Accrued payroll and vacation 1.1 2.9 11.1 Deferred revenue 5.6 14.1 13.1 Accrued expenses and other liabilities 4.5 17.4 22.2 Net change in operating right-of-use assets and operating lease liabilities (2.0 ) 0.7 1.0 Net cash provided by operating activities 678.9 533.9 485.0"
    },
    {
      "status": "ADDED",
      "current_title": "Cash flows from investing activities",
      "prior_title": null,
      "current_body": "Purchases of investments from funds held for clients (835.9 ) (24.9 ) (25.0 ) Proceeds from investments from funds held for clients 500.0 200.0 25.0 Purchases of intangible assets (4.5 ) (4.4 ) (4.2 ) Purchases of property and equipment (270.9 ) (192.9 ) (192.6 ) Proceeds from sale of property and equipment 0.1 — 0.1 Net cash used in investing activities (611.2 ) (22.2 ) (196.7 )"
    },
    {
      "status": "ADDED",
      "current_title": "Cash flows from financing activities",
      "prior_title": null,
      "current_body": "Repurchases of common stock (325.5 ) (122.8 ) (286.6 ) Withholding taxes paid related to net share settlements (44.5 ) (21.7 ) (13.9 ) Payments on long-term debt — — (29.0 ) Dividends paid (84.8 ) (84.8 ) (64.8 ) Proceeds from employee stock purchase plan 5.5 — — Net change in client funds obligation 1,471.3 1,337.6 120.4 Payment of debt issuance costs — — (0.7 ) Net cash provided by (used in) financing activities 1,022.0 1,108.3 (274.6 ) Increase in cash, cash equivalents, restricted cash and restricted cash equivalents 1,089.7 1,620.0 13.7"
    },
    {
      "status": "ADDED",
      "current_title": "Cash, cash equivalents, restricted cash and restricted cash equivalents",
      "prior_title": null,
      "current_body": "Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period 4,042.8 2,422.8 2,409.1 Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period $ 5,132.5 $ 4,042.8 $ 2,422.8 See accompanying notes to the consolidated financial statements. 60 60 Paycom Software, Inc.Consolidated Statements of Cash Flows, continued(in millions) Year Ended December 31, 2025 2024 2023 Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents Cash and cash equivalents $ 370.0 $ 402.0 $ 294.0 Restricted cash included in funds held for clients 4,762.5 3,640.8 2,128.8 Total cash, cash equivalents, restricted cash and restricted cash equivalents, end of period $ 5,132.5 $ 4,042.8 $ 2,422.8 Supplemental disclosures of cash flow information: Cash paid for interest, net of amounts capitalized $ 2.1 $ 2.0 $ 1.0 Cash paid for income taxes, net of income tax refunds(1) $ 78.1 $ 134.8 $ 138.8 Non-cash investing and financing activities: Purchases of property and equipment, accrued but not paid $ 1.2 $ 3.9 $ 9.0 Stock-based compensation for capitalized software $ 25.2 $ 17.5 $ 14.7 Right-of-use assets obtained in exchange for operating lease liabilities $ 24.3 $ 25.1 $ 50.3 (1) Disclosures for cash paid for income taxes in 2024 and 2023 were reduced for net refunds received of $2.1 million and $1.1 million, respectively, due to retrospective application of ASU 2023-09, as described in Note 2 “Summary of Significant Accounting Policies.” See accompanying notes to the consolidated financial statements."
    },
    {
      "status": "ADDED",
      "current_title": "Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents",
      "prior_title": null,
      "current_body": "Cash and cash equivalents $ 370.0 $ 402.0 $ 294.0 Restricted cash included in funds held for clients 4,762.5 3,640.8 2,128.8 Total cash, cash equivalents, restricted cash and restricted cash equivalents, end of period $ 5,132.5 $ 4,042.8 $ 2,422.8"
    },
    {
      "status": "ADDED",
      "current_title": "Supplemental disclosures of cash flow information:",
      "prior_title": null,
      "current_body": "Cash paid for interest, net of amounts capitalized $ 2.1 $ 2.0 $ 1.0 Cash paid for income taxes, net of income tax refunds(1) $ 78.1 $ 134.8 $ 138.8 Non-cash investing and financing activities: Purchases of property and equipment, accrued but not paid $ 1.2 $ 3.9 $ 9.0 Stock-based compensation for capitalized software $ 25.2 $ 17.5 $ 14.7 Right-of-use assets obtained in exchange for operating lease liabilities $ 24.3 $ 25.1 $ 50.3 (1) Disclosures for cash paid for income taxes in 2024 and 2023 were reduced for net refunds received of $2.1 million and $1.1 million, respectively, due to retrospective application of ASU 2023-09, as described in Note 2 “Summary of Significant Accounting Policies.” See accompanying notes to the consolidated financial statements. 61 61 Paycom Software, Inc.Notes to the Consolidated Financial Statements(tabular dollars and shares in millions, except per share and per unit amounts) Paycom Software, Inc. Notes to the Consolidated Financial Statements (tabular dollars and shares in millions, except per share and per unit amounts) 1.ORGANIZATION AND DESCRIPTION OF BUSINESSDescription of BusinessPaycom Software, Inc. (“Software”), together with its wholly owned subsidiaries (collectively, the “Company”), is a leading provider of a comprehensive, cloud-based human capital management solution (“HCM”) delivered as Software-as-a-Service. Unless we state otherwise or the context otherwise requires, the terms “we,” “our,” “us” and the “Company” refer to Software and its consolidated subsidiaries.We provide functionality and data analytics that businesses need to manage the complete employment lifecycle, from recruitment to retirement. Our solution requires virtually no customization and is based on a core system of record maintained in a single database for all HCM functions, including payroll, talent acquisition, talent management, human resources (“HR”) management and time and labor management applications.2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of PresentationOur consolidated financial statements include the financial results of Software and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, the accompanying consolidated financial statements include all adjustments necessary for the fair presentation of our results for the periods presented.In 2024, the Office of the Comptroller of the Currency (the “OCC”) issued final approval to Paycom National Trust Bank, National Association (the “Paycom National Trust Bank”), our wholly owned subsidiary, to operate as a national trust bank pursuant to the National Bank Act and relevant OCC regulations. The Paycom National Trust Bank is the primary trustee of Paycom Client Trust, our grantor trust (the “Client Trust”), which now holds substantially all client payroll and related funds and is responsible for the oversight and management of those client funds. We have determined that the Client Trust is a variable interest entity that meets the criteria established for consolidation in accordance with Accounting Standards Codification (“ASC”) 810, “Consolidation”. We are the sole beneficial owner of the Client Trust, and we have the power to direct its activities and a controlling financial interest in its economic performance.For the year ended December 31, 2024, we changed the presentation of revenues on the consolidated statements of comprehensive income to disaggregate interest on funds held for clients and combine recurring and other revenues. Prior period amounts have been reclassified to conform to this presentation. Reclassifications for the presentation of revenue did not have a material impact on previously reported amounts or change total revenues. In the fourth quarter of 2024, we adopted the presentation of dollar amounts in millions, except amounts per share. As a result, amounts presented for prior periods may differ immaterially from those reported in previous filings and some amounts may not sum or recalculate exactly due to rounding. All percentages have been calculated using unrounded amounts.Recently Adopted Accounting PronouncementsIn November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 expands reportable segment disclosure requirements for public business entities by requiring disclosures of significant reportable segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment’s profit or loss. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We adopted this ASU retrospectively on December 31, 2024. See Note 14 “Segment Reporting” for further information.In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information on income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We adopted this ASU using a retrospective application approach on December 31, 2025. See Note 13 “Income Taxes” for further information.Use of EstimatesThe preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates include income taxes, loss contingencies, the useful life of property and equipment and intangible assets, the life of 1.ORGANIZATION AND DESCRIPTION OF BUSINESSDescription of BusinessPaycom Software, Inc. (“Software”), together with its wholly owned subsidiaries (collectively, the “Company”), is a leading provider of a comprehensive, cloud-based human capital management solution (“HCM”) delivered as Software-as-a-Service. Unless we state otherwise or the context otherwise requires, the terms “we,” “our,” “us” and the “Company” refer to Software and its consolidated subsidiaries.We provide functionality and data analytics that businesses need to manage the complete employment lifecycle, from recruitment to retirement. Our solution requires virtually no customization and is based on a core system of record maintained in a single database for all HCM functions, including payroll, talent acquisition, talent management, human resources (“HR”) management and time and labor management applications."
    },
    {
      "status": "ADDED",
      "current_title": "Description of Business",
      "prior_title": null,
      "current_body": "Paycom Software, Inc. (“Software”), together with its wholly owned subsidiaries (collectively, the “Company”), is a leading provider of a comprehensive, cloud-based human capital management solution (“HCM”) delivered as Software-as-a-Service. Unless we state otherwise or the context otherwise requires, the terms “we,” “our,” “us” and the “Company” refer to Software and its consolidated subsidiaries. We provide functionality and data analytics that businesses need to manage the complete employment lifecycle, from recruitment to retirement. Our solution requires virtually no customization and is based on a core system of record maintained in a single database for all HCM functions, including payroll, talent acquisition, talent management, human resources (“HR”) management and time and labor management applications. 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of PresentationOur consolidated financial statements include the financial results of Software and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, the accompanying consolidated financial statements include all adjustments necessary for the fair presentation of our results for the periods presented.In 2024, the Office of the Comptroller of the Currency (the “OCC”) issued final approval to Paycom National Trust Bank, National Association (the “Paycom National Trust Bank”), our wholly owned subsidiary, to operate as a national trust bank pursuant to the National Bank Act and relevant OCC regulations. The Paycom National Trust Bank is the primary trustee of Paycom Client Trust, our grantor trust (the “Client Trust”), which now holds substantially all client payroll and related funds and is responsible for the oversight and management of those client funds. We have determined that the Client Trust is a variable interest entity that meets the criteria established for consolidation in accordance with Accounting Standards Codification (“ASC”) 810, “Consolidation”. We are the sole beneficial owner of the Client Trust, and we have the power to direct its activities and a controlling financial interest in its economic performance.For the year ended December 31, 2024, we changed the presentation of revenues on the consolidated statements of comprehensive income to disaggregate interest on funds held for clients and combine recurring and other revenues. Prior period amounts have been reclassified to conform to this presentation. Reclassifications for the presentation of revenue did not have a material impact on previously reported amounts or change total revenues. In the fourth quarter of 2024, we adopted the presentation of dollar amounts in millions, except amounts per share. As a result, amounts presented for prior periods may differ immaterially from those reported in previous filings and some amounts may not sum or recalculate exactly due to rounding. All percentages have been calculated using unrounded amounts.Recently Adopted Accounting PronouncementsIn November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 expands reportable segment disclosure requirements for public business entities by requiring disclosures of significant reportable segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment’s profit or loss. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We adopted this ASU retrospectively on December 31, 2024. See Note 14 “Segment Reporting” for further information.In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information on income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We adopted this ASU using a retrospective application approach on December 31, 2025. See Note 13 “Income Taxes” for further information.Use of EstimatesThe preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates include income taxes, loss contingencies, the useful life of property and equipment and intangible assets, the life of"
    },
    {
      "status": "ADDED",
      "current_title": "SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES",
      "prior_title": null,
      "current_body": "Basis of PresentationOur consolidated financial statements include the financial results of Software and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, the accompanying consolidated financial statements include all adjustments necessary for the fair presentation of our results for the periods presented.In 2024, the Office of the Comptroller of the Currency (the “OCC”) issued final approval to Paycom National Trust Bank, National Association (the “Paycom National Trust Bank”), our wholly owned subsidiary, to operate as a national trust bank pursuant to the National Bank Act and relevant OCC regulations. The Paycom National Trust Bank is the primary trustee of Paycom Client Trust, our grantor trust (the “Client Trust”), which now holds substantially all client payroll and related funds and is responsible for the oversight and management of those client funds. We have determined that the Client Trust is a variable interest entity that meets the criteria established for consolidation in accordance with Accounting Standards Codification (“ASC”) 810, “Consolidation”. We are the sole beneficial owner of the Client Trust, and we have the power to direct its activities and a controlling financial interest in its economic performance.For the year ended December 31, 2024, we changed the presentation of revenues on the consolidated statements of comprehensive income to disaggregate interest on funds held for clients and combine recurring and other revenues. Prior period amounts have been reclassified to conform to this presentation. Reclassifications for the presentation of revenue did not have a material impact on previously reported amounts or change total revenues. In the fourth quarter of 2024, we adopted the presentation of dollar amounts in millions, except amounts per share. As a result, amounts presented for prior periods may differ immaterially from those reported in previous filings and some amounts may not sum or recalculate exactly due to rounding. All percentages have been calculated using unrounded amounts."
    },
    {
      "status": "ADDED",
      "current_title": "Basis of Presentation",
      "prior_title": null,
      "current_body": "Our consolidated financial statements include the financial results of Software and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, the accompanying consolidated financial statements include all adjustments necessary for the fair presentation of our results for the periods presented. In 2024, the Office of the Comptroller of the Currency (the “OCC”) issued final approval to Paycom National Trust Bank, National Association (the “Paycom National Trust Bank”), our wholly owned subsidiary, to operate as a national trust bank pursuant to the National Bank Act and relevant OCC regulations. The Paycom National Trust Bank is the primary trustee of Paycom Client Trust, our grantor trust (the “Client Trust”), which now holds substantially all client payroll and related funds and is responsible for the oversight and management of those client funds. We have determined that the Client Trust is a variable interest entity that meets the criteria established for consolidation in accordance with Accounting Standards Codification (“ASC”) 810, “Consolidation”. We are the sole beneficial owner of the Client Trust, and we have the power to direct its activities and a controlling financial interest in its economic performance. For the year ended December 31, 2024, we changed the presentation of revenues on the consolidated statements of comprehensive income to disaggregate interest on funds held for clients and combine recurring and other revenues. Prior period amounts have been reclassified to conform to this presentation. Reclassifications for the presentation of revenue did not have a material impact on previously reported amounts or change total revenues. In the fourth quarter of 2024, we adopted the presentation of dollar amounts in millions, except amounts per share. As a result, amounts presented for prior periods may differ immaterially from those reported in previous filings and some amounts may not sum or recalculate exactly due to rounding. All percentages have been calculated using unrounded amounts. Recently Adopted Accounting PronouncementsIn November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 expands reportable segment disclosure requirements for public business entities by requiring disclosures of significant reportable segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment’s profit or loss. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We adopted this ASU retrospectively on December 31, 2024. See Note 14 “Segment Reporting” for further information.In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information on income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We adopted this ASU using a retrospective application approach on December 31, 2025. See Note 13 “Income Taxes” for further information."
    },
    {
      "status": "ADDED",
      "current_title": "Recently Adopted Accounting Pronouncements",
      "prior_title": null,
      "current_body": "In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 expands reportable segment disclosure requirements for public business entities by requiring disclosures of significant reportable segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment’s profit or loss. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We adopted this ASU retrospectively on December 31, 2024. See Note 14 “Segment Reporting” for further information. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information on income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We adopted this ASU using a retrospective application approach on December 31, 2025. See Note 13 “Income Taxes” for further information. Use of EstimatesThe preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates include income taxes, loss contingencies, the useful life of property and equipment and intangible assets, the life of"
    },
    {
      "status": "ADDED",
      "current_title": "Use of Estimates",
      "prior_title": null,
      "current_body": "The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates include income taxes, loss contingencies, the useful life of property and equipment and intangible assets, the life of 62 62 Paycom Software, Inc.Notes to the Consolidated Financial Statements(tabular dollars and shares in millions, except per share and per unit amounts) Paycom Software, Inc. Notes to the Consolidated Financial Statements (tabular dollars and shares in millions, except per share and per unit amounts) 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.In the third quarter of 2025, we completed an assessment of the useful lives of our servers and network equipment. Based on this assessment, we increased the estimated useful lives of these assets from three years to six years, effective as of the beginning of the third quarter of 2025. This change in accounting estimate has been applied prospectively and resulted in an immaterial decrease to depreciation and amortization expense for the year ended December 31, 2025.SeasonalityOur revenues are seasonal in nature. Generally, we expect our first and fourth quarter recurring revenues to be higher than other quarters during the year because payroll tax filing forms and Affordable Care Act forms are typically processed in the first quarter, and unscheduled payroll runs (such as bonuses) for our clients are typically concentrated in the fourth quarter. In addition, these seasonal fluctuations in recurring revenues impact operating income. Historical results impacted by these seasonal trends should not be considered a reliable indicator of our future results of operations.Segment InformationWe operate in a single operating segment and a single reporting segment. Operating segments are defined as components of an enterprise about which separate financial information is regularly evaluated by the CODM function (which is fulfilled by our Chief Executive Officer) in deciding how to allocate resources and in assessing performance. Our Chief Executive Officer allocates resources and assesses performance based upon financial information at the consolidated level. See Note 14 “Segment Reporting” for additional information.Cash EquivalentsWe consider all highly liquid instruments with an original maturity of three months or less and SEC-registered money market mutual funds to be cash equivalents. We maintain cash and cash equivalents in demand deposit accounts and money market funds, which may not be federally insured. The fair value of our cash and cash equivalents approximates carrying value. We have not experienced any losses in such accounts and do not believe there is exposure to any significant credit risk on such accounts.Accounts ReceivableWe generally collect revenues from our clients through an automatic deduction from the clients’ bank accounts at the time payroll processing occurs. Accounts receivable on our consolidated balance sheets generally consists of revenue-related receivables, including processing fees, interest income receivable, and revenue fees related to the last business day of the year, which are collected on the following business day. As accounts receivable are regularly collected via automatic deduction on the following business day, the Company has not recognized an allowance for doubtful accounts.Property and EquipmentProperty and equipment is stated at cost, net of accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows: Software and capitalized software development costs 3 years Buildings 30 years Computer equipment 3 to 6 years Rental clocks 5 years Furniture, fixtures and equipment 5 years Land improvements 15 years Leasehold improvements 5 years Vehicles 3 years (1)During the third quarter of 2025, we completed an assessment of the useful lives of our servers and networking equipment. Based on this assessment, we increased the estimated useful lives of these assets from three years to six years, effective as of the beginning of the third quarter of 2025.Costs incurred during construction of long-lived assets are recorded as construction in progress and are not depreciated until the asset is placed in service.Prior to the repayment of our debt on November 21, 2023, we capitalized interest costs incurred for indebtedness related to construction in progress. For the years ended December 31, 2025, 2024 and 2023, we incurred interest costs of $3.4 million, $3.4 million and $5.3 million, respectively. For the years ended December 31, 2025 and 2024, no interest costs were 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.In the third quarter of 2025, we completed an assessment of the useful lives of our servers and network equipment. Based on this assessment, we increased the estimated useful lives of these assets from three years to six years, effective as of the beginning of the third quarter of 2025. This change in accounting estimate has been applied prospectively and resulted in an immaterial decrease to depreciation and amortization expense for the year ended December 31, 2025.SeasonalityOur revenues are seasonal in nature. Generally, we expect our first and fourth quarter recurring revenues to be higher than other quarters during the year because payroll tax filing forms and Affordable Care Act forms are typically processed in the first quarter, and unscheduled payroll runs (such as bonuses) for our clients are typically concentrated in the fourth quarter. In addition, these seasonal fluctuations in recurring revenues impact operating income. Historical results impacted by these seasonal trends should not be considered a reliable indicator of our future results of operations.Segment InformationWe operate in a single operating segment and a single reporting segment. Operating segments are defined as components of an enterprise about which separate financial information is regularly evaluated by the CODM function (which is fulfilled by our Chief Executive Officer) in deciding how to allocate resources and in assessing performance. Our Chief Executive Officer allocates resources and assesses performance based upon financial information at the consolidated level. See Note 14 “Segment Reporting” for additional information.Cash EquivalentsWe consider all highly liquid instruments with an original maturity of three months or less and SEC-registered money market mutual funds to be cash equivalents. We maintain cash and cash equivalents in demand deposit accounts and money market funds, which may not be federally insured. The fair value of our cash and cash equivalents approximates carrying value. We have not experienced any losses in such accounts and do not believe there is exposure to any significant credit risk on such accounts.Accounts ReceivableWe generally collect revenues from our clients through an automatic deduction from the clients’ bank accounts at the time payroll processing occurs. Accounts receivable on our consolidated balance sheets generally consists of revenue-related receivables, including processing fees, interest income receivable, and revenue fees related to the last business day of the year, which are collected on the following business day. As accounts receivable are regularly collected via automatic deduction on the following business day, the Company has not recognized an allowance for doubtful accounts.Property and EquipmentProperty and equipment is stated at cost, net of accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows: Software and capitalized software development costs 3 years Buildings 30 years Computer equipment 3 to 6 years Rental clocks 5 years Furniture, fixtures and equipment 5 years Land improvements 15 years Leasehold improvements 5 years Vehicles 3 years (1)During the third quarter of 2025, we completed an assessment of the useful lives of our servers and networking equipment. Based on this assessment, we increased the estimated useful lives of these assets from three years to six years, effective as of the beginning of the third quarter of 2025.Costs incurred during construction of long-lived assets are recorded as construction in progress and are not depreciated until the asset is placed in service.Prior to the repayment of our debt on November 21, 2023, we capitalized interest costs incurred for indebtedness related to construction in progress. For the years ended December 31, 2025, 2024 and 2023, we incurred interest costs of $3.4 million, $3.4 million and $5.3 million, respectively. For the years ended December 31, 2025 and 2024, no interest costs were 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.In the third quarter of 2025, we completed an assessment of the useful lives of our servers and network equipment. Based on this assessment, we increased the estimated useful lives of these assets from three years to six years, effective as of the beginning of the third quarter of 2025. This change in accounting estimate has been applied prospectively and resulted in an immaterial decrease to depreciation and amortization expense for the year ended December 31, 2025. 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. In the third quarter of 2025, we completed an assessment of the useful lives of our servers and network equipment. Based on this assessment, we increased the estimated useful lives of these assets from three years to six years, effective as of the beginning of the third quarter of 2025. This change in accounting estimate has been applied prospectively and resulted in an immaterial decrease to depreciation and amortization expense for the year ended December 31, 2025. SeasonalityOur revenues are seasonal in nature. Generally, we expect our first and fourth quarter recurring revenues to be higher than other quarters during the year because payroll tax filing forms and Affordable Care Act forms are typically processed in the first quarter, and unscheduled payroll runs (such as bonuses) for our clients are typically concentrated in the fourth quarter. In addition, these seasonal fluctuations in recurring revenues impact operating income. Historical results impacted by these seasonal trends should not be considered a reliable indicator of our future results of operations."
    },
    {
      "status": "ADDED",
      "current_title": "Seasonality",
      "prior_title": null,
      "current_body": "Our revenues are seasonal in nature. Generally, we expect our first and fourth quarter recurring revenues to be higher than other quarters during the year because payroll tax filing forms and Affordable Care Act forms are typically processed in the first quarter, and unscheduled payroll runs (such as bonuses) for our clients are typically concentrated in the fourth quarter. In addition, these seasonal fluctuations in recurring revenues impact operating income. Historical results impacted by these seasonal trends should not be considered a reliable indicator of our future results of operations. Segment InformationWe operate in a single operating segment and a single reporting segment. Operating segments are defined as components of an enterprise about which separate financial information is regularly evaluated by the CODM function (which is fulfilled by our Chief Executive Officer) in deciding how to allocate resources and in assessing performance. Our Chief Executive Officer allocates resources and assesses performance based upon financial information at the consolidated level. See Note 14 “Segment Reporting” for additional information."
    },
    {
      "status": "ADDED",
      "current_title": "Segment Information",
      "prior_title": null,
      "current_body": "We operate in a single operating segment and a single reporting segment. Operating segments are defined as components of an enterprise about which separate financial information is regularly evaluated by the CODM function (which is fulfilled by our Chief Executive Officer) in deciding how to allocate resources and in assessing performance. Our Chief Executive Officer allocates resources and assesses performance based upon financial information at the consolidated level. See Note 14 “Segment Reporting” for additional information. a a a a Cash EquivalentsWe consider all highly liquid instruments with an original maturity of three months or less and SEC-registered money market mutual funds to be cash equivalents. We maintain cash and cash equivalents in demand deposit accounts and money market funds, which may not be federally insured. The fair value of our cash and cash equivalents approximates carrying value. We have not experienced any losses in such accounts and do not believe there is exposure to any significant credit risk on such accounts."
    },
    {
      "status": "ADDED",
      "current_title": "Cash Equivalents",
      "prior_title": null,
      "current_body": "We consider all highly liquid instruments with an original maturity of three months or less and SEC-registered money market mutual funds to be cash equivalents. We maintain cash and cash equivalents in demand deposit accounts and money market funds, which may not be federally insured. The fair value of our cash and cash equivalents approximates carrying value. We have not experienced any losses in such accounts and do not believe there is exposure to any significant credit risk on such accounts. Accounts ReceivableWe generally collect revenues from our clients through an automatic deduction from the clients’ bank accounts at the time payroll processing occurs. Accounts receivable on our consolidated balance sheets generally consists of revenue-related receivables, including processing fees, interest income receivable, and revenue fees related to the last business day of the year, which are collected on the following business day. As accounts receivable are regularly collected via automatic deduction on the following business day, the Company has not recognized an allowance for doubtful accounts."
    },
    {
      "status": "ADDED",
      "current_title": "Accounts Receivable",
      "prior_title": null,
      "current_body": "We generally collect revenues from our clients through an automatic deduction from the clients’ bank accounts at the time payroll processing occurs. Accounts receivable on our consolidated balance sheets generally consists of revenue-related receivables, including processing fees, interest income receivable, and revenue fees related to the last business day of the year, which are collected on the following business day. As accounts receivable are regularly collected via automatic deduction on the following business day, the Company has not recognized an allowance for doubtful accounts. Property and EquipmentProperty and equipment is stated at cost, net of accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows: Software and capitalized software development costs 3 years Buildings 30 years Computer equipment 3 to 6 years Rental clocks 5 years Furniture, fixtures and equipment 5 years Land improvements 15 years Leasehold improvements 5 years Vehicles 3 years (1)During the third quarter of 2025, we completed an assessment of the useful lives of our servers and networking equipment. Based on this assessment, we increased the estimated useful lives of these assets from three years to six years, effective as of the beginning of the third quarter of 2025.Costs incurred during construction of long-lived assets are recorded as construction in progress and are not depreciated until the asset is placed in service.Prior to the repayment of our debt on November 21, 2023, we capitalized interest costs incurred for indebtedness related to construction in progress. For the years ended December 31, 2025, 2024 and 2023, we incurred interest costs of $3.4 million, $3.4 million and $5.3 million, respectively. For the years ended December 31, 2025 and 2024, no interest costs were"
    },
    {
      "status": "ADDED",
      "current_title": "Property and Equipment",
      "prior_title": null,
      "current_body": "Property and equipment is stated at cost, net of accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows: Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows: Software and capitalized software development costs 3 years Buildings 30 years Computer equipment 3 to 6 years Rental clocks 5 years Furniture, fixtures and equipment 5 years Land improvements 15 years Leasehold improvements 5 years Vehicles 3 years (1)During the third quarter of 2025, we completed an assessment of the useful lives of our servers and networking equipment. Based on this assessment, we increased the estimated useful lives of these assets from three years to six years, effective as of the beginning of the third quarter of 2025. Software and capitalized software development costs 3 years 3 Buildings 30 years 30 Computer equipment 3 to 6 years 3 6 Rental clocks 5 years 5 Furniture, fixtures and equipment 5 years 5 Land improvements 15 years 15 Leasehold improvements 5 years 5 Vehicles 3 years 3 (1)During the third quarter of 2025, we completed an assessment of the useful lives of our servers and networking equipment. Based on this assessment, we increased the estimated useful lives of these assets from three years to six years, effective as of the beginning of the third quarter of 2025. During the third quarter of 2025, we completed an assessment of the useful lives of our servers and networking equipment. Based on this assessment, we increased the estimated useful lives of these assets from three years to six years, effective as of the beginning of the third quarter of 2025. three years six years Costs incurred during construction of long-lived assets are recorded as construction in progress and are not depreciated until the asset is placed in service. Prior to the repayment of our debt on November 21, 2023, we capitalized interest costs incurred for indebtedness related to construction in progress. For the years ended December 31, 2025, 2024 and 2023, we incurred interest costs of $3.4 million, $3.4 million and $5.3 million, respectively. For the years ended December 31, 2025 and 2024, no interest costs were 63 63 Paycom Software, Inc.Notes to the Consolidated Financial Statements(tabular dollars and shares in millions, except per share and per unit amounts) Paycom Software, Inc. Notes to the Consolidated Financial Statements (tabular dollars and shares in millions, except per share and per unit amounts) capitalized. For the year ended December 31, 2023, interest costs of $3.4 million were capitalized. See Note 6 “Long-Term Debt” for discussion of repayment of our indebtedness.LeasesOur leases primarily consist of noncancellable operating leases for office space. We recognize a right-of-use asset and operating lease liability on the lease commencement date based on the present value of the lease payments over the lease term. Operating lease liabilities are measured by discounting future lease payments at an estimated incremental borrowing rate. Right-of-use assets are amortized over the lease term and include adjustments related to prepaid rent.Internal Use SoftwareCapitalized costs include costs for services associated with developing or obtaining internal use software and certain payroll and payroll-related costs for employees who are directly associated with internal use software projects. The amount of payroll costs that are capitalized with respect to these employees is limited to the time directly spent on such projects. Expenditures for software purchases and software developed or obtained for internal use are capitalized and amortized over a three-year period on a straight-line basis. Costs associated with preliminary project stage activities, training, maintenance and all other post-implementation stage activities are expensed as incurred. We also expense internal costs related to minor upgrades and enhancements, as it is impractical to separate these costs from normal maintenance activities.The total capitalized software development costs were $152.9 million, $125.7 million and $96.7 million during the years ended December 31, 2025, 2024 and 2023, respectively, and are included in property and equipment. Amortization expense of capitalized software development costs was $109.0 million, $83.1 million and $61.9 million for the years ended December 31, 2025, 2024 and 2023, respectively.Goodwill and Other Intangible AssetsGoodwill is not amortized, but we are required to test the carrying value of goodwill for impairment at least annually, or earlier if, at the reporting unit level, an indicator of impairment arises. Our business is largely homogeneous and, as a result, goodwill is associated with one reporting unit. We have selected June 30 as our annual goodwill impairment testing date. A review of goodwill may be initiated before or after conducting the annual analysis if events or changes in circumstances indicate the carrying value of goodwill may no longer be recoverable. The Company performed a qualitative assessment to determine if it is more-likely-than-not that the fair value of the reporting unit had declined below its carrying value. In the qualitative assessment, we consider macroeconomic conditions, including any deterioration of general economic conditions; industry and market conditions, including any deterioration in the environment where the reporting unit operates; changes in the products/services; regulatory and political developments; cost of doing business; overall financial performance; and other relevant reporting unit specific facts, such as changes in management or key personnel or pending litigation. Based on our assessment, there was no impairment recorded as of June 30, 2025. For the years ended December 31, 2025, 2024 and 2023, there were no indicators of impairment. Intangible assets with definite lives are amortized on a straight-line basis over their estimated useful lives.Impairment of Long-Lived AssetsLong-lived assets, including intangible assets with definite lives, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset. We have determined that there was no impairment of long-lived assets including intangible assets with definite lives, for the years ended December 31, 2025, 2024 and 2023.Funds Held for Clients and Client Funds ObligationAs part of our payroll and payroll tax filing services, we collect funds from our clients for employment taxes, which we remit to the appropriate tax agencies and accounts designated by our clients. We typically invest these funds and earn interest income during the period between receipt and disbursement of such funds.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. We typically invest funds held for clients in money market funds, demand deposit accounts, certificates of deposit, commercial paper and U.S. treasury securities. Short-term investments in instruments with an original maturity of less than three months are classified as cash and cash equivalents within funds held for clients in the consolidated capitalized. For the year ended December 31, 2023, interest costs of $3.4 million were capitalized. See Note 6 “Long-Term Debt” for discussion of repayment of our indebtedness.LeasesOur leases primarily consist of noncancellable operating leases for office space. We recognize a right-of-use asset and operating lease liability on the lease commencement date based on the present value of the lease payments over the lease term. Operating lease liabilities are measured by discounting future lease payments at an estimated incremental borrowing rate. Right-of-use assets are amortized over the lease term and include adjustments related to prepaid rent.Internal Use SoftwareCapitalized costs include costs for services associated with developing or obtaining internal use software and certain payroll and payroll-related costs for employees who are directly associated with internal use software projects. The amount of payroll costs that are capitalized with respect to these employees is limited to the time directly spent on such projects. Expenditures for software purchases and software developed or obtained for internal use are capitalized and amortized over a three-year period on a straight-line basis. Costs associated with preliminary project stage activities, training, maintenance and all other post-implementation stage activities are expensed as incurred. We also expense internal costs related to minor upgrades and enhancements, as it is impractical to separate these costs from normal maintenance activities.The total capitalized software development costs were $152.9 million, $125.7 million and $96.7 million during the years ended December 31, 2025, 2024 and 2023, respectively, and are included in property and equipment. Amortization expense of capitalized software development costs was $109.0 million, $83.1 million and $61.9 million for the years ended December 31, 2025, 2024 and 2023, respectively.Goodwill and Other Intangible AssetsGoodwill is not amortized, but we are required to test the carrying value of goodwill for impairment at least annually, or earlier if, at the reporting unit level, an indicator of impairment arises. Our business is largely homogeneous and, as a result, goodwill is associated with one reporting unit. We have selected June 30 as our annual goodwill impairment testing date. A review of goodwill may be initiated before or after conducting the annual analysis if events or changes in circumstances indicate the carrying value of goodwill may no longer be recoverable. The Company performed a qualitative assessment to determine if it is more-likely-than-not that the fair value of the reporting unit had declined below its carrying value. In the qualitative assessment, we consider macroeconomic conditions, including any deterioration of general economic conditions; industry and market conditions, including any deterioration in the environment where the reporting unit operates; changes in the products/services; regulatory and political developments; cost of doing business; overall financial performance; and other relevant reporting unit specific facts, such as changes in management or key personnel or pending litigation. Based on our assessment, there was no impairment recorded as of June 30, 2025. For the years ended December 31, 2025, 2024 and 2023, there were no indicators of impairment. Intangible assets with definite lives are amortized on a straight-line basis over their estimated useful lives.Impairment of Long-Lived AssetsLong-lived assets, including intangible assets with definite lives, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset. We have determined that there was no impairment of long-lived assets including intangible assets with definite lives, for the years ended December 31, 2025, 2024 and 2023.Funds Held for Clients and Client Funds ObligationAs part of our payroll and payroll tax filing services, we collect funds from our clients for employment taxes, which we remit to the appropriate tax agencies and accounts designated by our clients. We typically invest these funds and earn interest income during the period between receipt and disbursement of such funds.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. We typically invest funds held for clients in money market funds, demand deposit accounts, certificates of deposit, commercial paper and U.S. treasury securities. Short-term investments in instruments with an original maturity of less than three months are classified as cash and cash equivalents within funds held for clients in the consolidated capitalized. For the year ended December 31, 2023, interest costs of $3.4 million were capitalized. See Note 6 “Long-Term Debt” for discussion of repayment of our indebtedness. capitalized. For the year ended December 31, 2023, interest costs of $3.4 million were capitalized. See Note 6 “Long-Term Debt” for discussion of repayment of our indebtedness. LeasesOur leases primarily consist of noncancellable operating leases for office space. We recognize a right-of-use asset and operating lease liability on the lease commencement date based on the present value of the lease payments over the lease term. Operating lease liabilities are measured by discounting future lease payments at an estimated incremental borrowing rate. Right-of-use assets are amortized over the lease term and include adjustments related to prepaid rent. Leases Our leases primarily consist of noncancellable operating leases for office space. We recognize a right-of-use asset and operating lease liability on the lease commencement date based on the present value of the lease payments over the lease term. Operating lease liabilities are measured by discounting future lease payments at an estimated incremental borrowing rate. Right-of-use assets are amortized over the lease term and include adjustments related to prepaid rent. Internal Use SoftwareCapitalized costs include costs for services associated with developing or obtaining internal use software and certain payroll and payroll-related costs for employees who are directly associated with internal use software projects. The amount of payroll costs that are capitalized with respect to these employees is limited to the time directly spent on such projects. Expenditures for software purchases and software developed or obtained for internal use are capitalized and amortized over a three-year period on a straight-line basis. Costs associated with preliminary project stage activities, training, maintenance and all other post-implementation stage activities are expensed as incurred. We also expense internal costs related to minor upgrades and enhancements, as it is impractical to separate these costs from normal maintenance activities."
    },
    {
      "status": "ADDED",
      "current_title": "Internal Use Software",
      "prior_title": null,
      "current_body": "Capitalized costs include costs for services associated with developing or obtaining internal use software and certain payroll and payroll-related costs for employees who are directly associated with internal use software projects. The amount of payroll costs that are capitalized with respect to these employees is limited to the time directly spent on such projects. Expenditures for software purchases and software developed or obtained for internal use are capitalized and amortized over a three-year period on a straight-line basis. Costs associated with preliminary project stage activities, training, maintenance and all other post-implementation stage activities are expensed as incurred. We also expense internal costs related to minor upgrades and enhancements, as it is impractical to separate these costs from normal maintenance activities. three-year The total capitalized software development costs were $152.9 million, $125.7 million and $96.7 million during the years ended December 31, 2025, 2024 and 2023, respectively, and are included in property and equipment. Amortization expense of capitalized software development costs was $109.0 million, $83.1 million and $61.9 million for the years ended December 31, 2025, 2024 and 2023, respectively. The total capitalized software development costs were $ 152.9 million, $ 125.7 million and $ 96.7 million during the years ended December 31, 2025, 2024 and 2023 , respectively, and are included in property and equipment. Amortization expense of capitalized software development costs was $ 109.0 million, $ 83.1 million and $ 61.9 million for the years ended December 31, 2025, 2024 and 2023 , respectively Goodwill and Other Intangible AssetsGoodwill is not amortized, but we are required to test the carrying value of goodwill for impairment at least annually, or earlier if, at the reporting unit level, an indicator of impairment arises. Our business is largely homogeneous and, as a result, goodwill is associated with one reporting unit. We have selected June 30 as our annual goodwill impairment testing date. A review of goodwill may be initiated before or after conducting the annual analysis if events or changes in circumstances indicate the carrying value of goodwill may no longer be recoverable. The Company performed a qualitative assessment to determine if it is more-likely-than-not that the fair value of the reporting unit had declined below its carrying value. In the qualitative assessment, we consider macroeconomic conditions, including any deterioration of general economic conditions; industry and market conditions, including any deterioration in the environment where the reporting unit operates; changes in the products/services; regulatory and political developments; cost of doing business; overall financial performance; and other relevant reporting unit specific facts, such as changes in management or key personnel or pending litigation. Based on our assessment, there was no impairment recorded as of June 30, 2025. For the years ended December 31, 2025, 2024 and 2023, there were no indicators of impairment. Intangible assets with definite lives are amortized on a straight-line basis over their estimated useful lives."
    },
    {
      "status": "ADDED",
      "current_title": "Goodwill and Other Intangible Assets",
      "prior_title": null,
      "current_body": "Goodwill is not amortized, but we are required to test the carrying value of goodwill for impairment at least annually, or earlier if, at the reporting unit level, an indicator of impairment arises. Our business is largely homogeneous and, as a result, goodwill is associated with one reporting unit. We have selected June 30 as our annual goodwill impairment testing date. A review of goodwill may be initiated before or after conducting the annual analysis if events or changes in circumstances indicate the carrying value of goodwill may no longer be recoverable. The Company performed a qualitative assessment to determine if it is more-likely-than-not that the fair value of the reporting unit had declined below its carrying value. In the qualitative assessment, we consider macroeconomic conditions, including any deterioration of general economic conditions; industry and market conditions, including any deterioration in the environment where the reporting unit operates; changes in the products/services; regulatory and political developments; cost of doing business; overall financial performance; and other relevant reporting unit specific facts, such as changes in management or key personnel or pending litigation. Based on our assessment, there was no impairment recorded as of June 30, 2025. For the years ended December 31, 2025, 2024 and 2023, there were no indicators of impairment. Intangible assets with definite lives are amortized on a straight-line basis over their estimated useful lives. Impairment of Long-Lived AssetsLong-lived assets, including intangible assets with definite lives, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset. We have determined that there was no impairment of long-lived assets including intangible assets with definite lives, for the years ended December 31, 2025, 2024 and 2023."
    },
    {
      "status": "ADDED",
      "current_title": "Impairment of Long-Lived Assets",
      "prior_title": null,
      "current_body": "Long-lived assets, including intangible assets with definite lives, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset. We have determined that there was no impairment of long-lived assets including intangible assets with definite lives, for the years ended December 31, 2025, 2024 and 2023. Funds Held for Clients and Client Funds ObligationAs part of our payroll and payroll tax filing services, we collect funds from our clients for employment taxes, which we remit to the appropriate tax agencies and accounts designated by our clients. We typically invest these funds and earn interest income during the period between receipt and disbursement of such funds.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. We typically invest funds held for clients in money market funds, demand deposit accounts, certificates of deposit, commercial paper and U.S. treasury securities. Short-term investments in instruments with an original maturity of less than three months are classified as cash and cash equivalents within funds held for clients in the consolidated"
    },
    {
      "status": "ADDED",
      "current_title": "Funds Held for Clients and Client Funds Obligation",
      "prior_title": null,
      "current_body": "As part of our payroll and payroll tax filing services, we collect funds from our clients for employment taxes, which we remit to the appropriate tax agencies and accounts designated by our clients. We typically invest these funds and earn interest income during the period between receipt and disbursement of such funds. 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. We typically invest funds held for clients in money market funds, demand deposit accounts, certificates of deposit, commercial paper and U.S. treasury securities. Short-term investments in instruments with an original maturity of less than three months are classified as cash and cash equivalents within funds held for clients in the consolidated 64 64 Paycom Software, Inc.Notes to the Consolidated Financial Statements(tabular dollars and shares in millions, except per share and per unit amounts) Paycom Software, Inc. Notes to the Consolidated Financial Statements (tabular dollars and shares in millions, except per share and per unit amounts) balance sheets. Investments in instruments with an original maturity greater than three months are classified as available-for-sale securities and are also included within funds held for clients in the consolidated balance sheets. These available-for-sale securities are recorded 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) on available-for-sale securities, and are included within comprehensive earnings (loss) in the consolidated statements of comprehensive income.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.We report the cash flows related to the purchases of investments from funds held for clients and related to the proceeds from the maturities of investments from funds held for clients on a gross basis in the cash flows from investing activities section of the consolidated statements of cash flows. Additionally, we report cash flows related to cash received from and paid on behalf of clients on a net basis within net change in client funds obligation in the cash flows from financing activities section of the consolidated statements of cash flows.Stock Repurchase PlanIn May 2016, our Board of Directors authorized a stock repurchase plan allowing for the repurchase of shares of our common stock in open market transactions at prevailing market prices, in privately negotiated transactions (including accelerated share repurchases) or by other means in accordance with federal securities laws, including Rule 10b5-1 programs. 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 July 2024, our Board of Directors authorized the repurchase of up to $1.5 billion of our common stock. As of December 31, 2025, there was $1.11 billion 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 equity incentive awards and other corporate considerations. The current stock repurchase plan will expire on August 15, 2026.During the year ended December 31, 2025, we repurchased an aggregate of 1,730,720 shares of our common stock at an average cost of $213.81 per share, including 184,752 shares withheld to satisfy tax withholding obligations for certain individuals upon the vesting of equity incentive awards. During the year ended December 31, 2024, we repurchased an aggregate of 924,493 shares of our common stock at an average cost of $156.29 per share, including 112,288 shares withheld to satisfy tax withholding obligations for certain individuals upon the vesting of equity incentive awards.Revenue RecognitionRevenues 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. Substantially all of our revenues are derived from contracts with clients. Sales and other applicable taxes are excluded from revenues.Recurring and Other RevenuesRecurring revenues are derived primarily from our payroll, talent acquisition, talent management, HR management and time and labor management applications, fees charged for form filings and delivery of client payroll checks and reports, and revenues associated with background checks and income and employment verification services. For a description of our applications, refer to Part I, Item 1, “Business,” of this Form 10-K.We consider our commitment in our customer contracts to be a series of distinct services that together constitute a single performance obligation that is generally satisfied over time and recognized during each client’s payroll period. The agreed-upon fee is variable consideration that is determined by client usage, billed and collected as part of our processing of the client’s payroll. The client’s use of our applications routinely fluctuates based upon factors that include the number of payrolls run and changes in the client’s employee population. These usage-based fluctuations do not change our core performance obligation to stand ready to provide the customer with services for the remainder of the contractual term. Collectability is reasonably assured as the fees are generally collected through an automated clearing house as part of the client’s payroll cycle or through direct wire transfer, which minimizes the default risk.The contract period for the majority of contracts associated with these revenues is one month due to the fact that both we and the client typically have the unilateral right to terminate a wholly unperformed contract without compensating the other party by providing 30 days’ notice of termination. We consider the total price charged to a client in a given period to be indicative of the standalone selling price, as the total amount charged is within a reasonable range of prices typically charged for our goods and services for comparable classes of client groups, which we periodically assess for price adjustments. Because the balance sheets. Investments in instruments with an original maturity greater than three months are classified as available-for-sale securities and are also included within funds held for clients in the consolidated balance sheets. These available-for-sale securities are recorded 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) on available-for-sale securities, and are included within comprehensive earnings (loss) in the consolidated statements of comprehensive income.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.We report the cash flows related to the purchases of investments from funds held for clients and related to the proceeds from the maturities of investments from funds held for clients on a gross basis in the cash flows from investing activities section of the consolidated statements of cash flows. Additionally, we report cash flows related to cash received from and paid on behalf of clients on a net basis within net change in client funds obligation in the cash flows from financing activities section of the consolidated statements of cash flows.Stock Repurchase PlanIn May 2016, our Board of Directors authorized a stock repurchase plan allowing for the repurchase of shares of our common stock in open market transactions at prevailing market prices, in privately negotiated transactions (including accelerated share repurchases) or by other means in accordance with federal securities laws, including Rule 10b5-1 programs. 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 July 2024, our Board of Directors authorized the repurchase of up to $1.5 billion of our common stock. As of December 31, 2025, there was $1.11 billion 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 equity incentive awards and other corporate considerations. The current stock repurchase plan will expire on August 15, 2026.During the year ended December 31, 2025, we repurchased an aggregate of 1,730,720 shares of our common stock at an average cost of $213.81 per share, including 184,752 shares withheld to satisfy tax withholding obligations for certain individuals upon the vesting of equity incentive awards. During the year ended December 31, 2024, we repurchased an aggregate of 924,493 shares of our common stock at an average cost of $156.29 per share, including 112,288 shares withheld to satisfy tax withholding obligations for certain individuals upon the vesting of equity incentive awards.Revenue RecognitionRevenues 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. Substantially all of our revenues are derived from contracts with clients. Sales and other applicable taxes are excluded from revenues.Recurring and Other RevenuesRecurring revenues are derived primarily from our payroll, talent acquisition, talent management, HR management and time and labor management applications, fees charged for form filings and delivery of client payroll checks and reports, and revenues associated with background checks and income and employment verification services. For a description of our applications, refer to Part I, Item 1, “Business,” of this Form 10-K.We consider our commitment in our customer contracts to be a series of distinct services that together constitute a single performance obligation that is generally satisfied over time and recognized during each client’s payroll period. The agreed-upon fee is variable consideration that is determined by client usage, billed and collected as part of our processing of the client’s payroll. The client’s use of our applications routinely fluctuates based upon factors that include the number of payrolls run and changes in the client’s employee population. These usage-based fluctuations do not change our core performance obligation to stand ready to provide the customer with services for the remainder of the contractual term. Collectability is reasonably assured as the fees are generally collected through an automated clearing house as part of the client’s payroll cycle or through direct wire transfer, which minimizes the default risk.The contract period for the majority of contracts associated with these revenues is one month due to the fact that both we and the client typically have the unilateral right to terminate a wholly unperformed contract without compensating the other party by providing 30 days’ notice of termination. We consider the total price charged to a client in a given period to be indicative of the standalone selling price, as the total amount charged is within a reasonable range of prices typically charged for our goods and services for comparable classes of client groups, which we periodically assess for price adjustments. Because the balance sheets. Investments in instruments with an original maturity greater than three months are classified as available-for-sale securities and are also included within funds held for clients in the consolidated balance sheets. These available-for-sale securities are recorded 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) on available-for-sale securities, and are included within comprehensive earnings (loss) in the consolidated statements of comprehensive income.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.We report the cash flows related to the purchases of investments from funds held for clients and related to the proceeds from the maturities of investments from funds held for clients on a gross basis in the cash flows from investing activities section of the consolidated statements of cash flows. Additionally, we report cash flows related to cash received from and paid on behalf of clients on a net basis within net change in client funds obligation in the cash flows from financing activities section of the consolidated statements of cash flows. balance sheets. Investments in instruments with an original maturity greater than three months are classified as available-for-sale securities and are also included within funds held for clients in the consolidated balance sheets. These available-for-sale securities are recorded 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) on available-for-sale securities, and are included within comprehensive earnings (loss) in the consolidated statements of comprehensive income. 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. We report the cash flows related to the purchases of investments from funds held for clients and related to the proceeds from the maturities of investments from funds held for clients on a gross basis in the cash flows from investing activities section of the consolidated statements of cash flows. Additionally, we report cash flows related to cash received from and paid on behalf of clients on a net basis within net change in client funds obligation in the cash flows from financing activities section of the consolidated statements of cash flows. Stock Repurchase PlanIn May 2016, our Board of Directors authorized a stock repurchase plan allowing for the repurchase of shares of our common stock in open market transactions at prevailing market prices, in privately negotiated transactions (including accelerated share repurchases) or by other means in accordance with federal securities laws, including Rule 10b5-1 programs. 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 July 2024, our Board of Directors authorized the repurchase of up to $1.5 billion of our common stock. As of December 31, 2025, there was $1.11 billion 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 equity incentive awards and other corporate considerations. The current stock repurchase plan will expire on August 15, 2026.During the year ended December 31, 2025, we repurchased an aggregate of 1,730,720 shares of our common stock at an average cost of $213.81 per share, including 184,752 shares withheld to satisfy tax withholding obligations for certain individuals upon the vesting of equity incentive awards. During the year ended December 31, 2024, we repurchased an aggregate of 924,493 shares of our common stock at an average cost of $156.29 per share, including 112,288 shares withheld to satisfy tax withholding obligations for certain individuals upon the vesting of equity incentive awards."
    },
    {
      "status": "ADDED",
      "current_title": "Stock Repurchase Plan",
      "prior_title": null,
      "current_body": "In May 2016, our Board of Directors authorized a stock repurchase plan allowing for the repurchase of shares of our common stock in open market transactions at prevailing market prices, in privately negotiated transactions (including accelerated share repurchases) or by other means in accordance with federal securities laws, including Rule 10b5-1 programs. 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 July 2024, our Board of Directors authorized the repurchase of up to $1.5 billion of our common stock. As of December 31, 2025, there was $1.11 billion 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 equity incentive awards and other corporate considerations. The current stock repurchase plan will expire on August 15, 2026. August 15, 2026 During the year ended December 31, 2025, we repurchased an aggregate of 1,730,720 shares of our common stock at an average cost of $213.81 per share, including 184,752 shares withheld to satisfy tax withholding obligations for certain individuals upon the vesting of equity incentive awards. During the year ended December 31, 2024, we repurchased an aggregate of 924,493 shares of our common stock at an average cost of $156.29 per share, including 112,288 shares withheld to satisfy tax withholding obligations for certain individuals upon the vesting of equity incentive awards. Revenue RecognitionRevenues 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. Substantially all of our revenues are derived from contracts with clients. Sales and other applicable taxes are excluded from revenues.Recurring and Other RevenuesRecurring revenues are derived primarily from our payroll, talent acquisition, talent management, HR management and time and labor management applications, fees charged for form filings and delivery of client payroll checks and reports, and revenues associated with background checks and income and employment verification services. For a description of our applications, refer to Part I, Item 1, “Business,” of this Form 10-K.We consider our commitment in our customer contracts to be a series of distinct services that together constitute a single performance obligation that is generally satisfied over time and recognized during each client’s payroll period. The agreed-upon fee is variable consideration that is determined by client usage, billed and collected as part of our processing of the client’s payroll. The client’s use of our applications routinely fluctuates based upon factors that include the number of payrolls run and changes in the client’s employee population. These usage-based fluctuations do not change our core performance obligation to stand ready to provide the customer with services for the remainder of the contractual term. Collectability is reasonably assured as the fees are generally collected through an automated clearing house as part of the client’s payroll cycle or through direct wire transfer, which minimizes the default risk.The contract period for the majority of contracts associated with these revenues is one month due to the fact that both we and the client typically have the unilateral right to terminate a wholly unperformed contract without compensating the other party by providing 30 days’ notice of termination. We consider the total price charged to a client in a given period to be indicative of the standalone selling price, as the total amount charged is within a reasonable range of prices typically charged for our goods and services for comparable classes of client groups, which we periodically assess for price adjustments. Because the"
    },
    {
      "status": "ADDED",
      "current_title": "Revenue Recognition",
      "prior_title": null,
      "current_body": "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. Substantially all of our revenues are derived from contracts with clients. Sales and other applicable taxes are excluded from revenues. Recurring revenues are derived primarily from our payroll, talent acquisition, talent management, HR management and time and labor management applications, fees charged for form filings and delivery of client payroll checks and reports, and revenues associated with background checks and income and employment verification services. For a description of our applications, refer to Part I, Item 1, “Business,” of this Form 10-K. The client’s use of our applications routinely fluctuates based upon factors that include the number of payrolls run and changes in the client’s employee population. These usage-based fluctuations do not change our core performance obligation to stand ready to provide the customer with services for the remainder of the contractual term. The performance obligations related to recurring revenues are generally satisfied and recognized during each client’s payroll period, with the agreed-upon fee being charged and collected as part of our processing of the client’s payroll. Collectability is reasonably assured as the fees are generally collected through an automated clearing house as part of the client’s payroll cycle or through direct wire transfer, which minimizes the default risk. The contract period for the majority of contracts associated with these revenues is one month due to the fact that both we and the client typically have the unilateral right to terminate a wholly unperformed contract without compensating the other 49 49 party by providing 30 days’ notice of termination. We consider the total price charged to a client in a given period to be indicative of the standalone selling price, as the total amount charged is within a reasonable range of prices typically charged for our goods and services for comparable classes of client groups, which we periodically assess for price adjustments.Other revenues consist of nonrefundable implementation fees, which are charged upfront to new clients to offset the expense of new client set-up, as well as revenues from the sale of time clocks as part of our time and attendance application. Although these revenues are related to our recurring revenues, they represent distinct performance obligations. The nonrefundable upfront fee charged to our clients results in an implied performance obligation in the form of a material right to the client related to the client’s option to renew at the end of the contract period. The nonrefundable upfront fee is typically collected upon contract inception and is deferred and recognized ratably over the period that our client realizes the benefits from the material right (i.e., 10-year estimated client life). We conduct an annual analysis of client retention data to support our client life estimate. A change in our client life estimate could have a material impact on the timing and amounts recognized as revenue for nonrefundable upfront fees.Revenues from the sale of time clocks are recognized when control is transferred to the client upon delivery of the product. We estimate the standalone selling price for the time clocks by maximizing the use of observable inputs such as our specific pricing practices for time clocks.Interest income on funds held for clients is earned on funds that are collected from clients in advance of either the applicable due date for payroll tax submissions or the applicable disbursement date for employee payment services. The interest earned on these funds is included in revenues in the consolidated statements of comprehensive income as the collection, holding, and remittance of these funds are essential components of providing these services.Assets Recognized from the Costs to Obtain and Costs to Fulfill Revenue Contracts We recognize an asset for the incremental costs of obtaining a contract with a client if we expect the amortization period to be longer than one year. We also recognize an asset for the costs to fulfill a contract with a client if such costs are specifically identifiable, generate or enhance resources used to satisfy future performance obligations, and are expected to be recovered. We have determined that substantially all costs related to implementation activities are administrative in nature and also meet the capitalization criteria under Accounting Standards Codification 340-40, “Other Assets and Deferred Costs”. These capitalized costs to fulfill principally relate to upfront direct costs that are expected to be recovered through margin and that enhance our ability to satisfy future performance obligations. The assets related to both costs to obtain, and costs to fulfill, contracts with clients are accounted for utilizing a portfolio approach and are capitalized and amortized ratably over the expected period of benefit, which we have determined to be the estimated life of the client relationship of 10 years primarily because we incur no new costs to obtain, or costs to fulfill, a contract upon renewal. A change in our client life estimate could have a material impact on the timing and amounts recognized as amortization expense. Additional commission costs may be incurred when an existing client purchases additional applications; however, these commission costs relate solely to the additional applications purchased and are not related to contract renewal. Furthermore, additional fulfillment costs associated with existing clients purchasing additional applications are minimized by our seamless single-database platform. The assets related to both costs to obtain, and costs to fulfill, contracts with customers are presented as deferred contract costs in the accompanying consolidated balance sheets. Amortization expense related to costs to obtain and costs to fulfill a contract is included in sales and marketing expenses and general and administrative expenses in the accompanying consolidated statements of comprehensive income. We regularly review our assets recognized from the costs to obtain and costs to fulfill client contracts for potential impairment and did not recognize an impairment loss during the years ended December 31, 2025 or December 31, 2024.Stock-Based Compensation AwardsHistorically, our stock-based compensation programs have included restricted stock awards and restricted stock unit (“RSU”) awards. We issue stock-based compensation awards with three different types of vesting requirements including awards that vest solely based on condition of service, awards that vest based on achieving certain performance metrics such as revenue or adjusted EBITDA targets, and awards that vest based on achieving certain market conditions such as relative total stockholder return or volume weighted average price targets.We measure the fair value of awards that vest solely based on condition of service, such as our time-based shares of restricted stock and time-based RSUs, and the fair value of awards that vest based on achieving certain performance metrics, by using the closing market price on the date of grant.We measure the fair value of awards that vest based on achieving certain market conditions, such as relative total stockholder return or volume weighted average price targets, by using a Monte Carlo simulation model. Stock-based compensation cost is recognized only for those awards expected to meet the requisite service and performance vesting conditions. Stock-based compensation cost is recognized on a straight-line basis over the requisite or derived service period of the award, which is generally the vesting period of the award, with forfeitures recognized as incurred. party by providing 30 days’ notice of termination. We consider the total price charged to a client in a given period to be indicative of the standalone selling price, as the total amount charged is within a reasonable range of prices typically charged for our goods and services for comparable classes of client groups, which we periodically assess for price adjustments. Other revenues consist of nonrefundable implementation fees, which are charged upfront to new clients to offset the expense of new client set-up, as well as revenues from the sale of time clocks as part of our time and attendance application. Although these revenues are related to our recurring revenues, they represent distinct performance obligations. The nonrefundable upfront fee charged to our clients results in an implied performance obligation in the form of a material right to the client related to the client’s option to renew at the end of the contract period. The nonrefundable upfront fee is typically collected upon contract inception and is deferred and recognized ratably over the period that our client realizes the benefits from the material right (i.e., 10-year estimated client life). We conduct an annual analysis of client retention data to support our client life estimate. A change in our client life estimate could have a material impact on the timing and amounts recognized as revenue for nonrefundable upfront fees. Revenues from the sale of time clocks are recognized when control is transferred to the client upon delivery of the product. We estimate the standalone selling price for the time clocks by maximizing the use of observable inputs such as our specific pricing practices for time clocks. Interest income on funds held for clients is earned on funds that are collected from clients in advance of either the applicable due date for payroll tax submissions or the applicable disbursement date for employee payment services. The interest earned on these funds is included in revenues in the consolidated statements of comprehensive income as the collection, holding, and remittance of these funds are essential components of providing these services."
    },
    {
      "status": "ADDED",
      "current_title": "Contract Balances",
      "prior_title": null,
      "current_body": "The timing of revenue recognition for recurring services is consistent with the invoicing of clients as they both occur during the respective client payroll period for which the services are provided. Therefore, we generally do not recognize a contract asset or liability resulting from the timing of revenue recognition and invoicing. Changes in deferred revenue for the years ended December 31, 2025 and 2024 were as follows: Year Ended December 31, 2025 2024 Balance, beginning of period $ 144.6 $ 130.5 Recognition of revenue included in beginning of period balance (38.3 ) (21.9 ) Contract balance, net of revenue recognized during the period 43.9 36.0 Balance, end of period $ 150.2 $ 144.6 Changes in deferred revenue for the years ended December 31, 2025 and 2024 were as follows:"
    },
    {
      "status": "ADDED",
      "current_title": "Year Ended December 31,",
      "prior_title": null,
      "current_body": "2025 2024 2023 Key performance indicators: Clients 39,199 37,543 36,820 Clients (based on parent company grouping) 20,321 19,422 19,481 Sales teams 58 58 55 Annual revenue retention rate(1) 91 % 90 % 90 % •Clients. When we calculate the number of clients at period end, we treat client accounts with separate taxpayer identification numbers (or, in certain circumstances, separate client codes) as separate clients, which often separates client accounts that are affiliated with the same parent organization. We track the number of our clients to provide an accurate gauge of the size of our business. Unless we state otherwise or the context otherwise requires, references to clients throughout this Form 10-K refer to this metric. Clients. When we calculate the number of clients at period end, we treat client accounts with separate taxpayer identification numbers (or, in certain circumstances, separate client codes) as separate clients, which often separates client accounts that are affiliated with the same parent organization. We track the number of our clients to provide an accurate gauge of the size of our business. Unless we state otherwise or the context otherwise requires, references to clients throughout this Form 10-K refer to this metric. •Clients (based on parent company grouping). When we calculate the number of clients based on parent company grouping at period end, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers (or, in certain circumstances, separate client codes), which often combines client accounts that are affiliated with the same parent organization. We track the number of our clients based on parent company grouping to provide an alternate measure of the size of our business and clients. Clients (based on parent company grouping). When we calculate the number of clients based on parent company grouping at period end, we combine client accounts that have identified the same person(s) as their decision-maker regardless of whether the client accounts have separate taxpayer identification numbers (or, in certain circumstances, separate client codes), which often combines client accounts that are affiliated with the same parent organization. We track the number of our clients based on parent company grouping to provide an alternate measure of the size of our business and clients. •Sales Teams. We monitor our sales professionals by the number of sales teams at period end. For the purposes of this metric, CRRs and emerging markets representatives are considered one sales team. Each outside sales team typically consists of a sales manager and approximately seven other sales professionals. Certain larger metropolitan areas can Sales Teams. We monitor our sales professionals by the number of sales teams at period end. For the purposes of this metric, CRRs and emerging markets representatives are considered one sales team. Each outside sales team typically consists of a sales manager and approximately seven other sales professionals. Certain larger metropolitan areas can 42 42 support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods.•Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods.We calculate annual revenue retention rate for any 12-month period (a “Measurement Period”) as follows:Recurring and Other Revenues – TTM Revenue AttritionRecurring and Other RevenuesThe trailing 12-month value of revenue from clients lost during the Measurement Period (“TTM Revenue Attrition”) is equal to the actual recurring fees paid by such lost clients during the 12 months preceding the respective dates on which they last processed payroll with us. The point at which a client is deemed “lost” is determined based on the terms of our standard services agreement with clients. As described in Note 2 “Summary of Significant Accounting Policies”, for the year ended December 31, 2024, we changed the presentation of revenues on the consolidated statements of comprehensive income to disaggregate interest on funds held for clients and combine recurring and other revenues. Reclassifications for the presentation of revenue did not impact the calculation of our annual retention rate.Components of Results of OperationsSources of Revenues Revenues consist of recurring and other revenues, and interest on funds held for clients. We expect our revenues to increase as we introduce new applications, expand our client base and renew and expand relationships with existing clients.Recurring and Other RevenuesRecurring revenues are derived primarily from our payroll, talent acquisition, talent management, HR management and time and labor management applications, fees charged for form filings and delivery of client payroll checks and reports, and revenues associated with background checks and income and employment verification services. The client’s use of our applications routinely fluctuates based upon factors that include the number of payrolls run and changes in the client’s employee population.Substantially all of our revenues are generated from (i) fixed amounts charged per billing period plus a fee per employee or transaction processed and (ii) fixed amounts charged per billing period. Our billing period varies by client and is typically based on when each client pays its employees, which may be weekly, bi-weekly, semi-monthly or monthly. Over time, an increasing number of clients will be billed on a monthly basis for certain HCM applications and services, regardless of the client’s payroll cycle. Because recurring revenues are based, in part, on fees for use of our applications and the delivery of checks and reports that are levied on a per-employee basis, our recurring revenues can fluctuate in relation to changes to client employee count. Furthermore, because the timing of revenue recognition is driven by the processing of the client’s payroll, it can vary based upon changes in client payroll dates and the impact that weekends or public holidays may have in prompting a client to accelerate or delay the processing of payroll.Recurring revenues include revenues relating to the annual processing of payroll tax filing forms and Affordable Care Act (“ACA”) form filing requirements and revenues from processing unscheduled payroll runs (such as bonuses) for our clients. These payroll forms are typically processed in the first quarter of the year, and many of our clients are subject to ACA form filing requirements in the first quarter, which positively impacts first quarter revenues and margins. We anticipate our revenues will continue to exhibit this seasonal pattern related to ACA form filings for so long as the ACA (or replacement legislation) includes employer reporting requirements. In addition, our recurring revenues during the fourth quarter are positively impacted by unscheduled payroll runs for our clients that occur before the end of the year. Nonetheless, we expect the magnitude of these seasonal fluctuations in our revenues to decrease to the extent clients utilize more of our non-payroll applications.Other revenues consist of implementation fees for the deployment of our solution and revenues from sales of time clocks as part of our time and attendance services. Non-refundable implementation fees are charged to new clients at contract inception. These fees generally range from 10% to 30% of the annualized value of the transaction. Implementation fees are deferred and recognized as revenue over the life of the client, which is estimated to be 10 years. Revenues from the sale of time clocks are recognized when control is transferred to the client upon delivery of the product.Interest on Funds Held For ClientsWe earn interest income on funds held for clients. Funds held for clients are amounts collected from clients in advance of either the applicable due date for payroll tax submissions or the applicable disbursement date for employee payment services. These collections from clients are typically disbursed from one to 30 days after receipt, with some funds being held for up to 120 days. We typically invest funds held for clients in money market funds, demand deposit accounts, certificates of deposit, support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods. support more than one outside sales team. We believe the number of sales teams is an indicator of potential revenues for future periods. •Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods. Annual Revenue Retention Rate. Our annual revenue retention rate tracks the percentage of revenues that we retain from our existing clients. We monitor this metric because it is an indicator of client satisfaction and revenues for future periods. We calculate annual revenue retention rate for any 12-month period (a “Measurement Period”) as follows: Recurring and Other Revenues – TTM Revenue Attrition Recurring and Other Revenues The trailing 12-month value of revenue from clients lost during the Measurement Period (“TTM Revenue Attrition”) is equal to the actual recurring fees paid by such lost clients during the 12 months preceding the respective dates on which they last processed payroll with us. The point at which a client is deemed “lost” is determined based on the terms of our standard services agreement with clients. As described in Note 2 “Summary of Significant Accounting Policies”, for the year ended December 31, 2024, we changed the presentation of revenues on the consolidated statements of comprehensive income to disaggregate interest on funds held for clients and combine recurring and other revenues. Reclassifications for the presentation of revenue did not impact the calculation of our annual retention rate."
    },
    {
      "status": "ADDED",
      "current_title": "Assets Recognized from the Costs to Obtain and Costs to Fulfill Revenue Contracts",
      "prior_title": null,
      "current_body": "We recognize an asset for the incremental costs of obtaining a contract with a client if we expect the amortization period to be longer than one year. We also recognize an asset for the costs to fulfill a contract with a client if such costs are specifically identifiable, generate or enhance resources used to satisfy future performance obligations, and are expected to be recovered. We have determined that substantially all costs related to implementation activities are administrative in nature and also meet the capitalization criteria under Accounting Standards Codification 340-40, “Other Assets and Deferred Costs”. These capitalized costs to fulfill principally relate to upfront direct costs that are expected to be recovered through margin and that enhance our ability to satisfy future performance obligations. The assets related to both costs to obtain, and costs to fulfill, contracts with clients are accounted for utilizing a portfolio approach and are capitalized and amortized ratably over the expected period of benefit, which we have determined to be the estimated life of the client relationship of 10 years primarily because we incur no new costs to obtain, or costs to fulfill, a contract upon renewal. A change in our client life estimate could have a material impact on the timing and amounts recognized as amortization expense. Additional commission costs may be incurred when an existing client purchases additional applications; however, these commission costs relate solely to the additional applications purchased and are not related to contract renewal. Furthermore, additional fulfillment costs associated with existing clients purchasing additional applications are minimized by our seamless single-database platform. The assets related to both costs to obtain, and costs to fulfill, contracts with customers are presented as deferred contract costs in the accompanying consolidated balance sheets. Amortization expense related to costs to obtain and costs to fulfill a contract is included in sales and marketing expenses and general and administrative expenses in the accompanying consolidated statements of comprehensive income. We regularly review our assets recognized from the costs to obtain and costs to fulfill client contracts for potential impairment and did not recognize an impairment loss during the years ended December 31, 2025 or December 31, 2024."
    },
    {
      "status": "ADDED",
      "current_title": "EndingBalance",
      "prior_title": null,
      "current_body": "Costs to obtain a contract $ 425.7 $ 116.6 $ (73.2 ) $ 469.1 Costs to fulfill a contract $ 498.3 $ 128.3 $ (78.8 ) $ 547.8"
    },
    {
      "status": "ADDED",
      "current_title": "EndingBalance",
      "prior_title": null,
      "current_body": "Costs to obtain a contract $ 425.7 $ 116.6 $ (73.2 ) $ 469.1 Costs to fulfill a contract $ 498.3 $ 128.3 $ (78.8 ) $ 547.8"
    },
    {
      "status": "ADDED",
      "current_title": "Cost of Revenues",
      "prior_title": null,
      "current_body": "Cost of revenues consists of expenses related to hosting and supporting our applications, hardware costs, systems support and technology and depreciation and amortization. These costs include employee-related expenses (including non-cash stock-based compensation expenses) and other expenses related to client support, bank charges for processing automated clearing house transactions, certain implementation expenses, delivery charges and paper costs. They also include our cost for time clocks sold and ongoing technology and support costs related to our systems. The amount of depreciation and amortization of property and equipment allocated to cost of revenues is determined based upon an estimate of assets used to support our operations."
    },
    {
      "status": "ADDED",
      "current_title": "Advertising Costs",
      "prior_title": null,
      "current_body": "Advertising costs are expensed the first time that advertising takes place. Advertising costs for the years ended December 31, 2025, 2024 and 2023 were $125.5 million, $86.3 million and $106.8 million, respectively. Sales TaxesWe collect and remit sales tax on sales of time clocks and on payroll and HCM services in certain states. These taxes are recognized on a net basis, and therefore, excluded from revenues. For the years ended December 31, 2025, 2024 and 2023, sales taxes collected were $21.3 million, $19.3 million and $17.6 million, respectively."
    },
    {
      "status": "ADDED",
      "current_title": "Sales Taxes",
      "prior_title": null,
      "current_body": "We collect and remit sales tax on sales of time clocks and on payroll and HCM services in certain states. These taxes are recognized on a net basis, and therefore, excluded from revenues. For the years ended December 31, 2025, 2024 and 2023, sales taxes collected were $21.3 million, $19.3 million and $17.6 million, respectively. Stock-Based CompensationHistorically, our stock-based compensation programs have included restricted stock awards and RSU awards. We issue stock-based compensation awards with three different types of vesting requirements including awards that vest solely based on condition of service, awards that vest based on achieving certain performance metrics such as revenue or adjusted EBITDA targets, and awards that vest based on achieving certain market conditions such as relative total stockholder return or volume weighted average price targets.We measure the fair value of awards that vest solely based on condition of service, such as our time-based shares of restricted stock and time-based RSUs, and the fair value of awards that vest based on achieving certain performance metrics by using the closing market price on the date of grant.We measure the fair value of awards that vest based on achieving certain market conditions, such as relative total stockholder return or volume weighted average price targets, by using a Monte Carlo simulation model.Stock-based compensation cost is recognized only for those awards expected to meet the requisite service and performance vesting conditions. Stock-based compensation cost is recognized as compensation costs in the consolidated statements of comprehensive income on a straight-line basis over the requisite or derived service period of the award, which is generally the vesting period of the award, with forfeitures recognized as incurred.For additional information, see Note 11 “Stock-Based Compensation”."
    },
    {
      "status": "ADDED",
      "current_title": "Stock-Based Compensation",
      "prior_title": null,
      "current_body": "Historically, our stock-based compensation programs have included restricted stock awards and RSU awards. We issue stock-based compensation awards with three different types of vesting requirements including awards that vest solely based on condition of service, awards that vest based on achieving certain performance metrics such as revenue or adjusted EBITDA targets, and awards that vest based on achieving certain market conditions such as relative total stockholder return or volume weighted average price targets. We measure the fair value of awards that vest solely based on condition of service, such as our time-based shares of restricted stock and time-based RSUs, and the fair value of awards that vest based on achieving certain performance metrics by using the closing market price on the date of grant. We measure the fair value of awards that vest based on achieving certain market conditions, such as relative total stockholder return or volume weighted average price targets, by using a Monte Carlo simulation model. Stock-based compensation cost is recognized only for those awards expected to meet the requisite service and performance vesting conditions. Stock-based compensation cost is recognized as compensation costs in the consolidated statements of comprehensive income on a straight-line basis over the requisite or derived service period of the award, which is generally the vesting period of the award, with forfeitures recognized as incurred. For additional information, see Note 11 “Stock-Based Compensation”. 67 67 Paycom Software, Inc.Notes to the Consolidated Financial Statements(tabular dollars and shares in millions, except per share and per unit amounts) Paycom Software, Inc. Notes to the Consolidated Financial Statements (tabular dollars and shares in millions, except per share and per unit amounts) Employee Stock Purchase PlanAn award issued under the Paycom Software, Inc. Employee Stock Purchase Plan (the “ESPP”) is classified as a share-based liability and recognized at the fair value of the award. Expense is recognized, net of estimated forfeitures, on a straight-line basis over the requisite service period.Income TaxesOur consolidated financial statements include a provision for income taxes incurred for the anticipated tax consequences of the reported results of operations using the asset and liability method. Under this method, we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. We recognize a valuation allowance to reduce our deferred tax assets to the net amount that we believe is more likely than not to be realized.We file income tax returns with the United States federal government and various state jurisdictions. We evaluate tax positions taken or expected to be taken in the course of preparing our tax returns and disallow the recognition of tax positions not deemed to meet a “more-likely-than-not” threshold of being sustained by the applicable tax authority. We believe there is one tax position taken within the consolidated financial statements that does not meet this threshold. Our policy is to recognize interest and penalties, if any, related to uncertain tax positions as a component of general and administrative expenses. With few exceptions, we are no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years prior to 2022.Recently Issued Accounting PronouncementsIn November 2024, the FASB issued ASU No. 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”). ASU 2024-03 requires public business disclose additional information about specific expense categories in the notes to the financial statements. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.In September 2025, the FASB issued ASU No. 2025-06, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software” (“ASU 2025-06”). ASU 2025-06 removes all references to software development stages and requires capitalization of software costs when management has committed to the software project and it is probable the software will be completed and perform its intended use. This ASU is effective for fiscal years beginning after December 15, 2027, and interim periods within those years, with early adoption permitted. The guidance allows for adoption using either a prospective or retrospective transition method. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.3.PROPERTY AND EQUIPMENTProperty and equipment and accumulated depreciation and amortization were as follows: December 31, 2025 December 31, 2024 Property and equipment Software and capitalized software development costs $ 667.6 $ 497.2 Buildings 304.4 275.6 Computer equipment 303.7 203.2 Rental clocks 53.1 48.0 Furniture, fixtures and equipment 43.3 41.9 Other 21.0 20.7 1,393.1 1,086.6 Less: accumulated depreciation and amortization (743.5 ) (576.4 ) 649.6 510.2 Construction in progress 1.2 14.7 Land 36.5 36.5 Property and equipment, net $ 687.3 $ 561.4 Employee Stock Purchase PlanAn award issued under the Paycom Software, Inc. Employee Stock Purchase Plan (the “ESPP”) is classified as a share-based liability and recognized at the fair value of the award. Expense is recognized, net of estimated forfeitures, on a straight-line basis over the requisite service period.Income TaxesOur consolidated financial statements include a provision for income taxes incurred for the anticipated tax consequences of the reported results of operations using the asset and liability method. Under this method, we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. We recognize a valuation allowance to reduce our deferred tax assets to the net amount that we believe is more likely than not to be realized.We file income tax returns with the United States federal government and various state jurisdictions. We evaluate tax positions taken or expected to be taken in the course of preparing our tax returns and disallow the recognition of tax positions not deemed to meet a “more-likely-than-not” threshold of being sustained by the applicable tax authority. We believe there is one tax position taken within the consolidated financial statements that does not meet this threshold. Our policy is to recognize interest and penalties, if any, related to uncertain tax positions as a component of general and administrative expenses. With few exceptions, we are no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years prior to 2022.Recently Issued Accounting PronouncementsIn November 2024, the FASB issued ASU No. 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”). ASU 2024-03 requires public business disclose additional information about specific expense categories in the notes to the financial statements. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.In September 2025, the FASB issued ASU No. 2025-06, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software” (“ASU 2025-06”). ASU 2025-06 removes all references to software development stages and requires capitalization of software costs when management has committed to the software project and it is probable the software will be completed and perform its intended use. This ASU is effective for fiscal years beginning after December 15, 2027, and interim periods within those years, with early adoption permitted. The guidance allows for adoption using either a prospective or retrospective transition method. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures. Employee Stock Purchase PlanAn award issued under the Paycom Software, Inc. Employee Stock Purchase Plan (the “ESPP”) is classified as a share-based liability and recognized at the fair value of the award. Expense is recognized, net of estimated forfeitures, on a straight-line basis over the requisite service period."
    },
    {
      "status": "ADDED",
      "current_title": "Employee Stock Purchase Plan",
      "prior_title": null,
      "current_body": "An award issued under the Paycom Software, Inc. Employee Stock Purchase Plan (the “ESPP”) is classified as a share-based liability and recognized at the fair value of the award. Expense is recognized, net of estimated forfeitures, on a straight-line basis over the requisite service period. Income TaxesOur consolidated financial statements include a provision for income taxes incurred for the anticipated tax consequences of the reported results of operations using the asset and liability method. Under this method, we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. We recognize a valuation allowance to reduce our deferred tax assets to the net amount that we believe is more likely than not to be realized.We file income tax returns with the United States federal government and various state jurisdictions. We evaluate tax positions taken or expected to be taken in the course of preparing our tax returns and disallow the recognition of tax positions not deemed to meet a “more-likely-than-not” threshold of being sustained by the applicable tax authority. We believe there is one tax position taken within the consolidated financial statements that does not meet this threshold. Our policy is to recognize interest and penalties, if any, related to uncertain tax positions as a component of general and administrative expenses. With few exceptions, we are no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years prior to 2022."
    },
    {
      "status": "ADDED",
      "current_title": "Income Taxes",
      "prior_title": null,
      "current_body": "Our consolidated financial statements include a provision for income taxes incurred for the anticipated tax consequences of the reported results of operations using the asset and liability method. Under this method, we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. We recognize a valuation allowance to reduce our deferred tax assets to the net amount that we believe is more likely than not to be realized. We file income tax returns with the United States federal government and various state jurisdictions. We evaluate tax positions taken or expected to be taken in the course of preparing our tax returns and disallow the recognition of tax positions not deemed to meet a “more-likely-than-not” threshold of being sustained by the applicable tax authority. We believe there is one tax position taken within the consolidated financial statements that does not meet this threshold. Our policy is to recognize interest and penalties, if any, related to uncertain tax positions as a component of general and administrative expenses. With few exceptions, we are no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years prior to 2022. Recently Issued Accounting PronouncementsIn November 2024, the FASB issued ASU No. 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”). ASU 2024-03 requires public business disclose additional information about specific expense categories in the notes to the financial statements. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.In September 2025, the FASB issued ASU No. 2025-06, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software” (“ASU 2025-06”). ASU 2025-06 removes all references to software development stages and requires capitalization of software costs when management has committed to the software project and it is probable the software will be completed and perform its intended use. This ASU is effective for fiscal years beginning after December 15, 2027, and interim periods within those years, with early adoption permitted. The guidance allows for adoption using either a prospective or retrospective transition method. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures."
    },
    {
      "status": "ADDED",
      "current_title": "Recently Issued Accounting Pronouncements",
      "prior_title": null,
      "current_body": "In November 2024, the FASB issued ASU No. 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”). ASU 2024-03 requires public business disclose additional information about specific expense categories in the notes to the financial statements. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures. In September 2025, the FASB issued ASU No. 2025-06, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software” (“ASU 2025-06”). ASU 2025-06 removes all references to software development stages and requires capitalization of software costs when management has committed to the software project and it is probable the software will be completed and perform its intended use. This ASU is effective for fiscal years beginning after December 15, 2027, and interim periods within those years, with early adoption permitted. The guidance allows for adoption using either a prospective or retrospective transition method. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures. 3.PROPERTY AND EQUIPMENTProperty and equipment and accumulated depreciation and amortization were as follows: December 31, 2025 December 31, 2024 Property and equipment Software and capitalized software development costs $ 667.6 $ 497.2 Buildings 304.4 275.6 Computer equipment 303.7 203.2 Rental clocks 53.1 48.0 Furniture, fixtures and equipment 43.3 41.9 Other 21.0 20.7 1,393.1 1,086.6 Less: accumulated depreciation and amortization (743.5 ) (576.4 ) 649.6 510.2 Construction in progress 1.2 14.7 Land 36.5 36.5 Property and equipment, net $ 687.3 $ 561.4"
    },
    {
      "status": "ADDED",
      "current_title": "PROPERTY AND EQUIPMENT",
      "prior_title": null,
      "current_body": "Property and equipment and accumulated depreciation and amortization were as follows: December 31, 2025 December 31, 2024 Property and equipment Software and capitalized software development costs $ 667.6 $ 497.2 Buildings 304.4 275.6 Computer equipment 303.7 203.2 Rental clocks 53.1 48.0 Furniture, fixtures and equipment 43.3 41.9 Other 21.0 20.7 1,393.1 1,086.6 Less: accumulated depreciation and amortization (743.5 ) (576.4 ) 649.6 510.2 Construction in progress 1.2 14.7 Land 36.5 36.5 Property and equipment, net $ 687.3 $ 561.4 Property and equipment and accumulated depreciation and amortization were as follows:"
    },
    {
      "status": "ADDED",
      "current_title": "December 31, 2024",
      "prior_title": null,
      "current_body": "Assets Current assets: Cash and cash equivalents $ 370.0 $ 402.0 Accounts receivable 44.9 39.2 Prepaid expenses 47.5 44.4 Inventory 1.7 1.4 Income tax receivable 78.2 11.9 Deferred contract costs 159.5 140.4 Current assets before funds held for clients 701.8 639.3 Funds held for clients 5,137.0 3,665.5 Total current assets 5,838.8 4,304.8 Property and equipment, net 687.3 561.4 Intangible assets, net 37.4 46.2 Goodwill 51.9 51.9 Long-term deferred contract costs 857.4 783.6 Operating lease right-of-use assets 89.4 80.6 Other assets 36.5 31.4 Total assets $ 7,598.7 $ 5,859.9"
    },
    {
      "status": "ADDED",
      "current_title": "GOODWILL AND INTANGIBLE ASSETS, NET",
      "prior_title": null,
      "current_body": "As of both December 31, 2025 and 2024, goodwill totaled $51.9 million. We have selected June 30 as our annual goodwill impairment testing date. We performed a qualitative impairment test of our goodwill and concluded that, as of June 30, 2025, it was more likely than not that the fair value exceeded the carrying value and therefore goodwill was not impaired. As of December 31, 2025 and 2024, there were no indicators of impairment. In June 2021, in connection with our marketing initiatives, we purchased the naming rights to the downtown Oklahoma City arena that is currently home to the Oklahoma City Thunder National Basketball Association franchise. Under the terms of the naming rights agreement, we committed to make escalating annual sponsorship fee payments from 2021 to 2035. In July 2025, the naming rights agreement was amended to provide, among other things, that the agreement and our obligation to make the previously disclosed annual sponsorship fee payments thereunder will terminate on the earlier of (i) September 30, 2028 or (ii) the date of the last event hosted or presented at the current arena (subject to earlier termination in certain limited circumstances), with a reduction in the sponsorship fee if the term of the agreement ends prior to September 30, 2028 and in certain other limited circumstances. The amendment did not otherwise impact our obligation to make the previously disclosed annual sponsorship fee payments for the remainder of the amended agreement term. 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 remainder of the agreement term on a straight-line basis. 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 remainder of the agreement term. As a result of the amendment to the naming rights agreement, the Company recognized a $35.6 million gain with respect to the released portion of the liability. The gain is included in other income, net in the consolidated statements of comprehensive income. All of our intangible assets other than goodwill are considered to have definite lives and, as such, are subject to amortization. The following tables present the components of intangible assets within our consolidated balance sheets: December 31, 2025 Weighted Average Remaining Useful Life Gross Accumulated Amortization Net (Years) Intangibles: Naming rights 2.8 $ 60.2 $ (22.8 ) $ 37.4 December 31, 2024 Weighted Average Remaining Useful Life Gross Accumulated Amortization Net (Years) Intangibles: Naming rights 11.8 $ 60.2 $ (14.0 ) $ 46.2 All of our intangible assets other than goodwill are considered to have definite lives and, as such, are subject to amortization. The following tables present the components of intangible assets within our consolidated balance sheets:"
    },
    {
      "status": "ADDED",
      "current_title": "Accumulated Amortization",
      "prior_title": null,
      "current_body": "Net (Years) Intangibles: Naming rights 2.8 2.8 $ 60.2 $ (22.8 ) $ 37.4"
    },
    {
      "status": "ADDED",
      "current_title": "Accumulated Amortization",
      "prior_title": null,
      "current_body": "Net (Years) Intangibles: Naming rights 2.8 2.8 $ 60.2 $ (22.8 ) $ 37.4"
    },
    {
      "status": "ADDED",
      "current_title": "December 31, 2024",
      "prior_title": null,
      "current_body": "Assets Current assets: Cash and cash equivalents $ 370.0 $ 402.0 Accounts receivable 44.9 39.2 Prepaid expenses 47.5 44.4 Inventory 1.7 1.4 Income tax receivable 78.2 11.9 Deferred contract costs 159.5 140.4 Current assets before funds held for clients 701.8 639.3 Funds held for clients 5,137.0 3,665.5 Total current assets 5,838.8 4,304.8 Property and equipment, net 687.3 561.4 Intangible assets, net 37.4 46.2 Goodwill 51.9 51.9 Long-term deferred contract costs 857.4 783.6 Operating lease right-of-use assets 89.4 80.6 Other assets 36.5 31.4 Total assets $ 7,598.7 $ 5,859.9"
    },
    {
      "status": "ADDED",
      "current_title": "LONG-TERM DEBT",
      "prior_title": null,
      "current_body": "On July 29, 2022 (the “Facility Closing Date”), Paycom Payroll, LLC, Software, and certain other subsidiaries of Software (collectively, the “Loan Parties”) entered into a credit agreement (as amended from time to time, the “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 “Lenders”), and JPMorgan Chase Bank, N.A., as the administrative agent. July 29, 2022 The Credit Agreement initially provided for a senior secured revolving credit facility (the “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 approvals and satisfying certain other conditions. The Credit Agreement also initially provided for a senior secured delayed draw term loan (the “Term Loan Facility”) in the aggregate amount of up to $750.0 million. All loans under the Credit Agreement will mature on July 29, 2027 (the “Scheduled July 29, 2027"
    },
    {
      "status": "REMOVED",
      "current_title": null,
      "prior_title": "If our security measures are breached, or unauthorized access to sensitive data is otherwise obtained, our solution may not be perceived as being secure, clients may reduce the use of or stop using our solution, our ability to attract new clients may be harmed and we may incur significant liabilities.",
      "prior_body": "Our solution involves the collection, storage and transmission of confidential and proprietary information belonging to our clients, their current, former and potential employees and, in certain cases, dependents and beneficiaries of clients’ current and former employees. This information includes personal identifying information, as well as financial and payroll data. HCM software is often targeted, and we have been targeted, in cyber-attacks, including computer viruses, phishing attacks, malicious software programs (including distributed denial of services (DDoS) attacks) and other information security breaches, which could result in unauthorized access to or release, gathering, monitoring, misuse, loss or destruction of our or our clients’ sensitive data or otherwise disrupt our or our clients’ business operations. If threat actors are able to circumvent our security measures and we are unable to detect or contain such intrusion into our system, our or our clients’ sensitive data (including client employees’ personal data) may be compromised. Further, in order to provide our services, certain of our employees have access to sensitive information about our clients’ employees. While we conduct background checks of our employees and limit access to systems and data, it is possible that one or more of these individuals may circumvent these controls, resulting in a security breach. In certain limited circumstances, we utilize relationships with third parties to aid in data management and transaction processing. Certain third parties with which we do business have been subject to cyber-attacks, one of which resulted in unauthorized access to data of certain Company clients and their employees as well as Company data and employee records. These third parties may be sources of cybersecurity or other technological risks in the future, including operational errors, system interruptions or breaches, unauthorized disclosure of confidential information and misuse of intellectual property. Even without a direct breach of our systems, cyber-attacks on such third-party vendors or on our clients could adversely impact our business and reputation. Although we have security measures in place to protect client information and prevent data loss and other security breaches, these measures have been in the past and in the future may be breached as a result of third-party action, employee error, third-party or employee malfeasance or otherwise. Globally, cybersecurity attacks are increasing in number and the threat actors are increasingly organized and well financed, or at times supported by state actors. In addition, geopolitical tensions or conflicts, such as Russia’s invasion of Ukraine, the ongoing conflict between Israel and Hamas, or increasing tension with China, may create a heightened risk of cybersecurity attacks. Because the techniques used to obtain unauthorized access or to sabotage systems change frequently, we may not be able to anticipate these techniques and implement adequate preventative or protective measures. While we currently maintain a cyber liability insurance policy, cyber liability insurance may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our cyber liability insurance policy may cover only a portion of losses incurred in investigating or remediating an incident, if at all, and may not cover all claims made against us. Undergoing a government investigation or defending a lawsuit, regardless of merit, could be costly and divert management’s attention from our business and operations. Any actual or perceived breach of our security could damage our reputation, cause existing clients to discontinue the use of our solution, prevent us from attracting new clients, or subject us to third-party lawsuits, regulatory investigations and fines or other actions or liabilities, any of which could adversely affect our business, operating results or financial condition."
    },
    {
      "status": "REMOVED",
      "current_title": null,
      "prior_title": "Any damage, failure or disruption of our SaaS network infrastructure or data centers could impair our ability to effectively provide our solution, harm our reputation and adversely affect our business.",
      "prior_body": "Our SaaS network infrastructure is a critical part of our business operations. Our clients access our solution through standard web browsers, smart phones, tablets and other web-enabled devices and depend on us for fast and reliable access to our solution. We serve all of our clients from our three fully redundant data centers located in Oklahoma and Texas. Our SaaS network infrastructure and data centers are vulnerable to damage, failure and disruption. In the future, we may experience issues with our computing and communications infrastructure or data centers caused by the following factors: •human error; human error; •telecommunications failures or outages from third-party providers; telecommunications failures or outages from third-party providers; •computer viruses or cyber-attacks; computer viruses or cyber-attacks; 18 18 18 •break-ins or other security breaches; break-ins or other security breaches; •acts of terrorism, sabotage, intentional acts of vandalism or other misconduct; acts of terrorism, sabotage, intentional acts of vandalism or other misconduct; •tornadoes, fires, earthquakes, hurricanes, floods and other natural disasters; tornadoes, fires, earthquakes, hurricanes, floods and other natural disasters; •power loss; and power loss; and •other unforeseen interruptions or damages. other unforeseen interruptions or damages. If our SaaS network infrastructure or our clients’ ability to access our solution is interrupted, client and employee data from recent transactions may be permanently lost, and we could be exposed to significant claims by clients, particularly if the access interruption is associated with problems in the timely delivery of funds payable to employees or tax authorities. Further, any adverse changes in service levels at our data centers resulting from damage to or failure of our data centers could result in disruptions in our services. Any significant instances of system downtime or performance problems at our data centers could negatively affect our reputation and ability to attract new clients, prevent us from gaining new or additional business from our current clients, or cause our current clients to terminate their use of our solution, any of which would adversely impact our revenues. In addition, if our network infrastructure and data centers fail to support increased capacity due to growth in our business, our clients may experience interruptions in the availability of our solution. Such interruptions may reduce our revenues, cause us to issue refunds to clients or adversely affect our retention of existing clients, any of which could have a negative impact on our business, operating results or financial condition."
    },
    {
      "status": "REMOVED",
      "current_title": null,
      "prior_title": "If our goodwill or other intangible assets become impaired, we may be required to record a significant charge to earnings.",
      "prior_body": "We are required to test goodwill for impairment at least annually or earlier if events or changes in circumstances indicate the carrying value may not be recoverable. As of December 31, 2024, we had recorded a total of $51.9 million of goodwill and $46.2 million of other intangible assets, net. An adverse change in domestic or global market conditions, particularly if such change has the effect of changing one of our critical assumptions or estimates made in connection with the impairment testing of goodwill or intangible assets, could result in a change to the estimation of fair value that could result in an impairment charge to our goodwill or other intangible assets. Any such material charges may have a negative impact on our operating results or financial condition."
    },
    {
      "status": "REMOVED",
      "current_title": null,
      "prior_title": "Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.",
      "prior_body": "Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results and could affect the reporting of transactions completed before the announcement of a change."
    },
    {
      "status": "REMOVED",
      "current_title": null,
      "prior_title": "We may not continue to pay dividends at the same rate or at all.",
      "prior_body": "Our payment of dividends, as well as the rate at which we pay dividends, are solely at the discretion of our Board of Directors. Further, dividend payments, if any, are subject to our financial results and the availability of statutory surplus. These factors could result in a change to our dividend policy."
    },
    {
      "status": "MODIFIED",
      "current_title": "Failure to comply with privacy, data protection and cybersecurity laws and regulations could have a materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences.",
      "prior_title": "Failure to comply with privacy, data protection and cybersecurity laws and regulations could have a materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences.",
      "similarity_score": 0.893,
      "confidence": "high",
      "key_changes": [
        "Reworded sentence: \"Our applications and services are subject to various complex laws and regulations on the federal, state, local, and foreign levels, including those governing data security, privacy, and AI which have become significant compliance issues globally.\"",
        "Reworded sentence: \"In the United States, these include numerous state-level consumer privacy laws, such as California’s CCPA, Texas’ Data Privacy and Security Act, Illinois’ IBIPA, rules and regulations promulgated under the authority of the Federal Trade Commission, the Health Insurance Portability and Accountability Act of 1996, the Family Medical Leave Act of 1993, the ACA, the Financial Services Modernization Act of 1999 (the “GLBA”), the Fair Credit Reporting Act (“FCRA”), federal and state labor and employment laws, state data breach notification laws, and state cybersecurity laws such as the New York Stop Hacks and Improve Electronic Data Security (SHIELD) Act.\"",
        "Reworded sentence: \"Because some of our clients are located in Mexico and other clients have establishments internationally, Canada’s PIPEDA, Mexico’s Federal Law on the Protection of Personal Data, and other foreign data privacy laws, such as the EU GDPR, may impact our processing of certain client and employee information.\"",
        "Reworded sentence: \"Numerous other states have now enacted their own consumer data privacy statutes, many of which are modeled on the CCPA, including states like Colorado, Connecticut, Delaware, Oregon, Montana, Nebraska, New Hampshire, New Jersey, Utah, Virginia, Iowa, and Tennessee.\"",
        "Added sentence: \"On May 21, 2024, the European Union legislators approved the EU AI Act, which establishes a comprehensive, risk-based governance framework for AI in the EU market.\""
      ],
      "current_body": "Our applications and services are subject to various complex laws and regulations on the federal, state, local, and foreign levels, including those governing data security, privacy, and AI which have become significant compliance issues globally. The regulatory framework for privacy of personal data is rapidly evolving and is likely to remain uncertain for the foreseeable future. Many federal, state and foreign government bodies and agencies have adopted or are considering adopting laws and regulations regarding the collection, use and disclosure of personal information. In the United States, these include numerous state-level consumer privacy laws, such as California’s CCPA, Texas’ Data Privacy and Security Act, Illinois’ IBIPA, rules and regulations promulgated under the authority of the Federal Trade Commission, the Health Insurance Portability and Accountability Act of 1996, the Family Medical Leave Act of 1993, the ACA, the Financial Services Modernization Act of 1999 (the “GLBA”), the Fair Credit Reporting Act (“FCRA”), federal and state labor and employment laws, state data breach notification laws, and state cybersecurity laws such as the New York Stop Hacks and Improve Electronic Data Security (SHIELD) Act. As we continue to expand our operations outside the United States, our applications and services are or will be subject to additional laws governing data security and privacy in relevant jurisdictions, such as Canada’s PIPEDA and Mexico’s Federal Law on the Protection of Personal Data held by Private Parties, as well as the EU GDPR and United Kingdom’s 27 27 General Data Protection Regulation, which are applicable in the European Economic Area and the United Kingdom, respectively.Many of these newer state-level consumer privacy laws give consumers located in those states certain rights, including the right to be informed of, opt-out of, and request deletion of the personal information that we hold, similar to those rights provided by the EU GDPR. Notably, the GLBA is enforced under the authority of the Federal Trade Commission and requires our payment card services to adhere to a privacy notice and take certain measures to protect related personal information from unauthorized use and threats to data security. The FCRA places certain requirements and duties on our business as a furnisher of information to certain consumer reporting agencies with which we share limited amounts of data. Because some of our clients are located in Mexico and other clients have establishments internationally, Canada’s PIPEDA, Mexico’s Federal Law on the Protection of Personal Data, and other foreign data privacy laws, such as the EU GDPR, may impact our processing of certain client and employee information. Failure to comply with data protection and privacy laws and regulations could result in regulatory scrutiny and increased exposure to the risk of litigation or the imposition of consent orders, injunctions against data processing or data exporting, or civil and criminal penalties, including fines, which could have an adverse effect on our results of operations or financial condition. Moreover, allegations of non-compliance with privacy laws, whether or not true, could be costly, time consuming, distracting to management, and cause reputational harm. The landscape of privacy laws applicable to our various products and services is evolving quickly. The CPRA, which expands upon the CCPA, went into effect in 2023. Numerous other states have now enacted their own consumer data privacy statutes, many of which are modeled on the CCPA, including states like Colorado, Connecticut, Delaware, Oregon, Montana, Nebraska, New Hampshire, New Jersey, Utah, Virginia, Iowa, and Tennessee. In addition, there are a number of other legislative proposals in jurisdictions across the world for comprehensive privacy laws affecting consumer and employee personal information, which could impose additional and potentially conflicting obligations in areas affecting our business. Newly-passed legislative and regulatory initiatives may adversely affect the ability of our clients to process, handle, store, use and transmit demographic and personal information from their employees, which could reduce demand for our services.On May 21, 2024, the European Union legislators approved the EU AI Act, which establishes a comprehensive, risk-based governance framework for AI in the EU market. The EU AI Act went into effect on August 2, 2024, and the majority of the substantive requirements will go into effect on August 2, 2026. The EU AI Act, and developing interpretation and application of the EU GDPR in respect of automated decision making, together with developing guidance and/or decisions in this area, may affect our use of AI technologies and our ability to provide, improve or commercialize our business, require additional compliance measures and changes to our operations and processes, result in increased compliance costs and potential increases in civil claims against us, and could adversely affect our business, operations and financial condition.In addition to government regulation, privacy advocates and industry groups may propose and adopt new and different self-regulatory standards. Because the interpretation and application of many privacy and data protection laws are still uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our solution. Any failure to comply with government regulations that apply to our applications, including privacy and data protection laws, could subject us to liability. In addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change our business activities and practices or modify our solution, which could have an adverse effect on our business, operating results or financial condition. Any inability to adequately address privacy concerns and claims, even if unfounded, or inability to comply with applicable privacy or data protection laws, regulations and policies, could result in additional cost and liability to us, damage to our reputation, reductions in our sales and other adverse effects on our business, operating results or financial condition.Furthermore, privacy concerns may cause our clients’ employees to resist providing the personal data necessary to allow our clients and their employees to use our applications and services effectively. Even the perception of privacy concerns, whether or not valid, may inhibit market adoption of our applications and services in certain industries.Certain of our products and services use data-driven insights to help our clients manage their businesses more efficiently. Our business increasingly relies on AI and machine learning to model and create these insights. Use of these methods has recently come under increased regulatory scrutiny. New laws, guidance and court decisions in this area may limit our ability to use AI tools, or require us to make changes to our application or services that may decrease our operational efficiency, result in an increase to operating costs and hinder our ability to improve our services. For example, rules on the use of automated decision-making under enacted and proposed data protection laws may require us to disclose the existence of automated decision-making to the data subject with an explanation of the logic used in such decision-making, and may require us to implement certain safeguards, including the right to obtain human intervention and to contest any decision. Regulatory and legislative authorities in the United States and other countries have proposed similar types of legislation that imposes or would impose restrictions on the development of generative AI and machine learning. Our ability to provide data-driven insights using generative AI or machine learning may be constrained by current or future regulatory requirements, statutes or ethical considerations that could restrict or impose burdensome and costly requirements on our ability to leverage data in innovative ways. As we continue to pursue such new technologies, our failure to adequately address legal risks relating to the use of generative AI and machine learning in our applications could result in litigation or private action that could result in liability for the Company. Any actual or alleged noncompliance with these new laws and regulations, or failure to meet client expectations General Data Protection Regulation, which are applicable in the European Economic Area and the United Kingdom, respectively. Many of these newer state-level consumer privacy laws give consumers located in those states certain rights, including the right to be informed of, opt-out of, and request deletion of the personal information that we hold, similar to those rights provided by the EU GDPR. Notably, the GLBA is enforced under the authority of the Federal Trade Commission and requires our payment card services to adhere to a privacy notice and take certain measures to protect related personal information from unauthorized use and threats to data security. The FCRA places certain requirements and duties on our business as a furnisher of information to certain consumer reporting agencies with which we share limited amounts of data. Because some of our clients are located in Mexico and other clients have establishments internationally, Canada’s PIPEDA, Mexico’s Federal Law on the Protection of Personal Data, and other foreign data privacy laws, such as the EU GDPR, may impact our processing of certain client and employee information. Failure to comply with data protection and privacy laws and regulations could result in regulatory scrutiny and increased exposure to the risk of litigation or the imposition of consent orders, injunctions against data processing or data exporting, or civil and criminal penalties, including fines, which could have an adverse effect on our results of operations or financial condition. Moreover, allegations of non-compliance with privacy laws, whether or not true, could be costly, time consuming, distracting to management, and cause reputational harm. The landscape of privacy laws applicable to our various products and services is evolving quickly. The CPRA, which expands upon the CCPA, went into effect in 2023. Numerous other states have now enacted their own consumer data privacy statutes, many of which are modeled on the CCPA, including states like Colorado, Connecticut, Delaware, Oregon, Montana, Nebraska, New Hampshire, New Jersey, Utah, Virginia, Iowa, and Tennessee. In addition, there are a number of other legislative proposals in jurisdictions across the world for comprehensive privacy laws affecting consumer and employee personal information, which could impose additional and potentially conflicting obligations in areas affecting our business. Newly-passed legislative and regulatory initiatives may adversely affect the ability of our clients to process, handle, store, use and transmit demographic and personal information from their employees, which could reduce demand for our services. On May 21, 2024, the European Union legislators approved the EU AI Act, which establishes a comprehensive, risk-based governance framework for AI in the EU market. The EU AI Act went into effect on August 2, 2024, and the majority of the substantive requirements will go into effect on August 2, 2026. The EU AI Act, and developing interpretation and application of the EU GDPR in respect of automated decision making, together with developing guidance and/or decisions in this area, may affect our use of AI technologies and our ability to provide, improve or commercialize our business, require additional compliance measures and changes to our operations and processes, result in increased compliance costs and potential increases in civil claims against us, and could adversely affect our business, operations and financial condition. In addition to government regulation, privacy advocates and industry groups may propose and adopt new and different self-regulatory standards. Because the interpretation and application of many privacy and data protection laws are still uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our solution. Any failure to comply with government regulations that apply to our applications, including privacy and data protection laws, could subject us to liability. In addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change our business activities and practices or modify our solution, which could have an adverse effect on our business, operating results or financial condition. Any inability to adequately address privacy concerns and claims, even if unfounded, or inability to comply with applicable privacy or data protection laws, regulations and policies, could result in additional cost and liability to us, damage to our reputation, reductions in our sales and other adverse effects on our business, operating results or financial condition. Furthermore, privacy concerns may cause our clients’ employees to resist providing the personal data necessary to allow our clients and their employees to use our applications and services effectively. Even the perception of privacy concerns, whether or not valid, may inhibit market adoption of our applications and services in certain industries. Certain of our products and services use data-driven insights to help our clients manage their businesses more efficiently. Our business increasingly relies on AI and machine learning to model and create these insights. Use of these methods has recently come under increased regulatory scrutiny. New laws, guidance and court decisions in this area may limit our ability to use AI tools, or require us to make changes to our application or services that may decrease our operational efficiency, result in an increase to operating costs and hinder our ability to improve our services. For example, rules on the use of automated decision-making under enacted and proposed data protection laws may require us to disclose the existence of automated decision-making to the data subject with an explanation of the logic used in such decision-making, and may require us to implement certain safeguards, including the right to obtain human intervention and to contest any decision. Regulatory and legislative authorities in the United States and other countries have proposed similar types of legislation that imposes or would impose restrictions on the development of generative AI and machine learning. Our ability to provide data-driven insights using generative AI or machine learning may be constrained by current or future regulatory requirements, statutes or ethical considerations that could restrict or impose burdensome and costly requirements on our ability to leverage data in innovative ways. As we continue to pursue such new technologies, our failure to adequately address legal risks relating to the use of generative AI and machine learning in our applications could result in litigation or private action that could result in liability for the Company. Any actual or alleged noncompliance with these new laws and regulations, or failure to meet client expectations 28 28 with respect to the use of generative AI and machine learning, could also result in negative publicity or harm to our reputation, subject us to investigations and expose us to significant fines, penalties and other damages.The adoption of new, or adverse interpretations of existing U.S. state, U.S. federal, or foreign money transmitter, money services business, or payment services statutes or regulations could subject us to additional regulation and related expenses and require changes to our business.The adoption of new money transmitter, money services business, or payment services statutes or regulations in jurisdictions, changes in regulators’ interpretation of existing U.S. state, U.S. federal, or foreign money transmitter, money services business, or payments services statutes or regulations, or disagreements by regulatory authorities with our interpretation of such statutes or regulations, have subjected us to registration or licensing and could limit business activities until we are appropriately licensed. These occurrences could also require changes to the manner in which we conduct certain aspects of our business or invest client funds, which could adversely impact the amount of interest income we receive from investing client funds before such funds are remitted to the appropriate taxing authorities and accounts designated by our clients.As the Paycom National Trust Bank now manages U.S. client money movement activity, these transmissions are federally exempt from state money transmitter regulation, and we have surrendered all historically maintained state money transmitter licenses. Outside of the United States, we maintain certain “money services business” registrations and intend to apply for, where necessary, money services business, money transmitter, payment services provider, or similarly named applicable licenses.Should other U.S. state, U.S. federal, or foreign regulators make a determination that we have operated as an unlicensed money services business, money transmitter, or payment services provider, we could be subject to civil and criminal fines, penalties, costs of registration, legal fees, reputational damage or other negative consequences, any of which may have an adverse effect on our business operating results or financial condition.While we maintain we are not a money services business or money transmitter in the United States and other jurisdictions, our operations in certain jurisdictions in and outside of the U.S. are subject to AML laws and regulations, including, for example, the BSA. Among other things, the BSA requires certain financial institutions, including banks and money services businesses, to develop and implement risk-based AML programs, report large cash transactions and suspicious activity, and maintain transaction records. We have adopted an AML compliance program to mitigate the risk of our application being used for illegal or illicit activity and to help detect and prevent fraud. Our AML compliance program is designed to foster trust in our application and services. However, there can be no assurance that our employees, consultants, or agents will not take actions in violation of our policies for which we may be ultimately responsible, or that our policies and procedures will be adequate or will be determined to be adequate by regulators. Any violation of applicable AML laws or regulations could limit certain of our business activities until they are satisfactorily remediated and could result in civil and criminal penalties, including fines, which could damage our reputation and have a materially adverse effect on our results of operations and financial condition.Further, bank regulators continue to impose additional and stricter requirements on banks to ensure they are meeting their BSA obligations, and banks are increasingly viewing money services businesses and third-party senders to be higher risk customers for money laundering. Thus, our banking partners that assist in processing our money movement transactions may limit the scope of services they provide to us or may impose additional material requirements on us. These regulatory restrictions on banks and changes to banks’ internal risk-based policies and procedures may result in a decrease in the number of banks willing to do business with us, may require us to materially change the manner in which we conduct some aspects of our business, may decrease our revenues and earnings and could have a material adverse effect on our results of operations or financial condition.Adverse tax laws or regulations could be enacted or existing laws could be applied to us or our clients, which could increase the costs of our solution and applications and could adversely affect our business, operating results or financial condition.As a vendor of services, we are ordinarily held responsible by taxing authorities for collecting and paying any applicable sales or other similar taxes. Additionally, the application of tax laws to services provided electronically like ours is evolving. New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time (possibly with retroactive effect), and could be applied solely or disproportionately to services and applications provided over the internet. These enactments could adversely affect our sales activity, due to the inherent cost increase the taxes would represent, and ultimately could adversely affect our business, operating results or financial condition.Each jurisdiction has different rules and regulations governing sales and use taxes, and these rules and regulations are subject to varying interpretations that change over time. We review these rules and regulations periodically and, when we believe we are subject to sales and use taxes in a particular jurisdiction, we may voluntarily engage the applicable tax authorities in order to determine how to comply with that jurisdiction’s rules and regulations. We cannot ensure that we will not be subject to sales and use taxes or related penalties for past sales in jurisdictions where we currently believe no such taxes are required. with respect to the use of generative AI and machine learning, could also result in negative publicity or harm to our reputation, subject us to investigations and expose us to significant fines, penalties and other damages.",
      "prior_body": "Our applications and services are subject to various complex laws and regulations on the federal, state, local, and foreign levels, including those governing data security and privacy, which have become significant compliance issues globally. The regulatory framework for privacy of personal data is rapidly evolving and is likely to remain uncertain for the foreseeable future. Many federal, state and foreign government bodies and agencies have adopted or are considering adopting laws and regulations regarding the collection, use and disclosure of personal information. In the United States, these include numerous state-level consumer privacy laws, such as California’s CCPA and Texas’ Data Privacy and Security Act, Illinois’ IBIPA, rules and regulations promulgated under the authority of the Federal Trade Commission, the Health Insurance Portability and Accountability Act of 1996, the Family Medical Leave Act of 1993, the ACA, the Financial Services Modernization Act of 1999 (the “GLBA”), the Fair Credit Reporting Act (“FCRA”), federal and state labor and employment laws, state data breach notification laws, and state cybersecurity laws such as the New York Stop Hacks and Improve Electronic Data Security (SHIELD) Act. As we continue to expand our operations outside the United States, our applications and services are or will be subject to additional laws governing data security and privacy in relevant jurisdictions, such as Canada’s PIPEDA and Mexico’s Federal Law on the Protection of Personal Data held by Private Parties, as well as the GDPR, which is applicable in the European Economic Area and the United Kingdom. Many of these newer state-level consumer privacy laws give consumers located in those states certain rights to be informed of, opt-out of, and request deletion of the personal information that we hold, similar to those rights provided by the European Union’s GDPR. Notably, the GLBA is enforced under the authority of the Federal Trade Commission and requires our payment card services to adhere to a privacy notice and take certain measures to protect related personal information from unauthorized use and threats to data security. The FCRA places certain requirements and duties on our business as a furnisher of information to certain consumer reporting agencies with which we share limited amounts of data. Because some of our clients are located in Mexico and other clients have establishments internationally, Canada’s PIPEDA, Mexico’s Federal Law on the Protection of Personal Data, and other foreign data privacy laws, such as the GDPR, may impact our processing of certain client and employee information. Failure to comply with data protection and privacy laws and regulations could result in regulatory scrutiny and increased exposure to the risk of litigation or the imposition of consent orders, injunctions against data processing or data exporting, or civil and criminal penalties, including fines, which could have an adverse effect on our results of operations or financial condition. Moreover, allegations of non-compliance with privacy laws, whether or not true, could be costly, time consuming, distracting to management, and cause reputational harm. The landscape of privacy laws applicable to our various products and services is evolving quickly. The CPRA, which expands upon the CCPA, went into effect in 2023. Fourteen other states have now enacted their own consumer data privacy statutes, many of which are modeled on the CCPA. New data privacy statutes are slated to go into effect later this year in Delaware, Iowa, Nebraska, New Hampshire, and New Jersey. In addition, there are a number of other legislative proposals worldwide for comprehensive privacy laws affecting consumer and employee personal information, which could impose additional and potentially conflicting obligations in areas affecting our business. Newly-passed legislative and regulatory initiatives may adversely affect the ability of our clients to process, handle, store, use and transmit demographic and personal information from their employees, which could reduce demand for our services. In addition to government regulation, privacy advocates and industry groups may propose and adopt new and different self-regulatory standards. Because the interpretation and application of many privacy and data protection laws are still uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our solution. Any failure to comply with government regulations that apply to our applications, including privacy and data protection laws, could subject us to liability. In addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change our business activities and practices or modify our solution, which could have an adverse effect on our business, operating results or financial condition. Any inability to adequately address privacy concerns and claims, even if unfounded, or inability to comply with applicable privacy or data protection laws, regulations and policies, could result in additional cost and liability to us, damage to our reputation, reductions in our sales and other adverse effects on our business, operating results or financial condition. Furthermore, privacy concerns may cause our clients’ employees to resist providing the personal data necessary to allow our clients and their employees to use our applications and services effectively. Even the perception of privacy concerns, whether or not valid, may inhibit market adoption of our applications and services in certain industries. Certain of our products and services use data-driven insights to help our clients manage their businesses more efficiently. Our business increasingly relies on AI and machine learning to model and create these insights. Use of these methods has recently come 26 26 26 under increased regulatory scrutiny. New laws, guidance and court decisions in this area may limit our ability to use AI tools, or require us to make changes to our application or services that may decrease our operational efficiency, result in an increase to operating costs and hinder our ability to improve our services. For example, rules on the use of automated decision-making under enacted and proposed data protection laws may require us to disclose the existence of automated decision-making to the data subject with an explanation of the logic used in such decision-making, and may require us to implement certain safeguards, including the right to obtain human intervention and to contest any decision. Regulatory and legislative authorities in the United States and other countries have proposed similar types of legislation that imposes or would impose restrictions on the development of generative AI and machine learning. Our ability to provide data-driven insights using generative AI or machine learning may be constrained by current or future regulatory requirements, statutes or ethical considerations that could restrict or impose burdensome and costly requirements on our ability to leverage data in innovative ways. As we continue to pursue such new technologies, our failure to adequately address legal risks relating to the use of generative AI and machine learning in our applications could result in litigation or private action that could result in liability for the Company. Any actual or alleged noncompliance with these new laws and regulations, or failure to meet client expectations with respect to the use of generative AI and machine learning, could also result in negative publicity or harm to our reputation, subject us to investigations and expose us to significant fines, penalties and other damages."
    },
    {
      "status": "MODIFIED",
      "current_title": "The use of open-source software in our applications may expose us to additional risks and harm our intellectual property rights.",
      "prior_title": "The use of open source software in our applications may expose us to additional risks and harm our intellectual property rights.",
      "similarity_score": 0.886,
      "confidence": "high",
      "key_changes": [
        "Reworded sentence: \"Some of our applications use software and models covered by open-source licenses.\"",
        "Reworded sentence: \"In addition, if we were to combine our applications with open-source software in a certain manner, we could, under certain types of open-source licenses, be required to release the source code of our applications.\""
      ],
      "current_body": "Some of our applications use software and models covered by open-source licenses. Usage of open-source software can lead to greater risks than use of third-party commercial software, as open-source licensors generally do not provide warranties, maintenance and support, other contractual protections or controls on the origin of the software. Furthermore, the license terms for certain open-source software or AI models may change, requiring us to pay for a commercial license or re-engineer all or a portion of certain applications or tools, resulting in significant additional costs for us. Open-source software may also present a heightened risk of security vulnerabilities, including due to the intentional acts of malicious actors who inject such vulnerabilities into the code, or to older versions of the software not remaining current with applicable updates and patches to address vulnerabilities or other bugs. From time to time, there have been claims challenging the ownership or use of certain types of open-source software against companies that incorporate such software into their products or applications. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open-source software. Similarly, open-source AI models may be trained on data of unknown or uncertain provenance, which could include copyrighted or otherwise proprietary, confidential, or private information. If our applications incorporate such models, we could face claims for copyright infringement and other violations. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition or require us to devote additional development resources to change our applications. In addition, if we were to combine our applications with open-source software in a certain manner, we could, under certain types of open-source licenses, be required to release the source code of our applications. If we inappropriately use open-source software, we may be required to redesign our applications or software, discontinue the sale of our applications or software or take other remedial actions, which could adversely impact our business, operating results or financial condition.",
      "prior_body": "Some of our applications use software covered by open source licenses. From time to time, there have been claims challenging the ownership or use of certain types of open source software against companies that incorporate such software into their products or applications. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition or require us to devote additional development resources to change our applications. In addition, if we were to combine our applications with open source software in a certain manner, we could, under certain types of open source licenses, be required to release the source code of our applications. If we inappropriately use open source software, we may be required to redesign our applications, discontinue the sale of our applications or take other remedial actions, which could adversely impact our business, operating results or financial condition."
    },
    {
      "status": "MODIFIED",
      "current_title": "We may not continue to pay dividends at the same rate or at all.",
      "prior_title": "Adverse economic and market conditions could affect our business, operating results or financial condition.",
      "similarity_score": 0.876,
      "confidence": "high",
      "key_changes": [
        "Reworded sentence: \"Our payment of dividends, as well as the rate at which we pay dividends, are solely at the discretion of our Board of Directors.\"",
        "Reworded sentence: \"In addition, global and regional macroeconomic developments, such as changes in global trade policies and tariffs, increased unemployment, decreased income, uncertainty related to future economic activity, reduced access to credit, increased interest rates, inflation, volatility in capital markets, and decreased liquidity, among other possible factors, could negatively affect our ability to conduct business.\"",
        "Reworded sentence: \"In addition, HCM spending levels may not increase following any recovery.Further, as part of our payroll and payroll tax filing services, we collect and then remit client funds to taxing authorities and accounts designated by our clients.\"",
        "Reworded sentence: \"A stable or rising interest rate environment would sustain the additional interest earned on funds held for clients and interest earned on our corporate funds, whereas a decreasing interest rate environment would compress the additional interest earnings and potentially adversely affect our operating results.In recent years, there have been several instances when there has been uncertainty regarding the ability of Congress and the President collectively to reach agreement on federal budgetary and spending matters.\"",
        "Reworded sentence: \"Additionally, because certain of our clients rely on government resources to fund their operations, a prolonged government shutdown may affect such clients’ ability to make timely payments to us, which could adversely affect our operations results or financial condition.Item 1B.\""
      ],
      "current_body": "Our payment of dividends, as well as the rate at which we pay dividends, are solely at the discretion of our Board of Directors. Further, dividend payments, if any, are subject to our financial results and the availability of statutory surplus. These factors could result in a change to our dividend policy. 33 33 General RisksAdverse economic and market conditions could affect our business, operating results or financial condition.Our business depends on the overall demand for HCM applications and on the economic health of our current and prospective clients. If economic conditions in the United States or in global markets deteriorate, clients may cease their operations, eliminate or reduce unscheduled payroll runs (such as bonuses), reduce headcount, delay or reduce their spending on HCM and other outsourcing services or attempt to renegotiate their contracts with us. In addition, global and regional macroeconomic developments, such as changes in global trade policies and tariffs, increased unemployment, decreased income, uncertainty related to future economic activity, reduced access to credit, increased interest rates, inflation, volatility in capital markets, and decreased liquidity, among other possible factors, could negatively affect our ability to conduct business. Furthermore, the impact of such macroeconomic developments may be exacerbated by geopolitical events and ongoing military conflicts throughout the world. An economic decline could result in reductions in sales of our applications, decreased revenue from unscheduled payroll runs and fees charged on a per-employee basis, longer sales cycles, slower adoption of new technologies and increased price competition, any of which could adversely affect our business, operating results or financial condition. In addition, HCM spending levels may not increase following any recovery.Further, as part of our payroll and payroll tax filing services, we collect and then remit client funds to taxing authorities and accounts designated by our clients. During the interval between receipt and disbursement, we typically invest such funds in money market funds, demand deposit accounts, certificates of deposit, U.S. treasury securities and commercial paper. These investments are subject to general market, interest rate, credit and liquidity risks, and such risks may be exacerbated during periods of unusual financial market volatility. Any loss of or inability to access such funds could have an adverse impact on our cash position and results of operations and could require us to obtain additional sources of liquidity, which may not be available on terms that are acceptable to us, if at all. Furthermore, although increased interest rates may have a negative impact on certain clients, increased interest rates have resulted in increased interest earned on funds held for clients and additional income earned on our corporate funds. Changes in interest rates will impact potential earnings of future investments. A stable or rising interest rate environment would sustain the additional interest earned on funds held for clients and interest earned on our corporate funds, whereas a decreasing interest rate environment would compress the additional interest earnings and potentially adversely affect our operating results.In recent years, there have been several instances when there has been uncertainty regarding the ability of Congress and the President collectively to reach agreement on federal budgetary and spending matters. A period of failure to reach agreement on these matters, particularly if accompanied by an actual or threatened government shutdown, may have an adverse impact on the U.S. economy. Additionally, because certain of our clients rely on government resources to fund their operations, a prolonged government shutdown may affect such clients’ ability to make timely payments to us, which could adversely affect our operations results or financial condition.Item 1B. Unresolved Staff CommentsNone.",
      "prior_body": "Our business depends on the overall demand for HCM applications and on the economic health of our current and prospective clients. If economic conditions in the United States or in global markets deteriorate, clients may cease their operations, eliminate or reduce unscheduled payroll runs (such as bonuses), reduce headcount, delay or reduce their spending on HCM and other outsourcing services or attempt to renegotiate their contracts with us. In addition, global and regional macroeconomic developments, such as increased unemployment, decreased income, uncertainty related to future economic activity, reduced access to credit, increased interest rates, inflation, volatility in capital markets, and decreased liquidity, among other possible factors, could negatively affect our ability to conduct business. Furthermore, the impact of such macroeconomic developments may be exacerbated by geopolitical events such as the ongoing military conflict in Ukraine and the ongoing conflict between Israel and Hamas. An economic decline could result in reductions in sales of our applications, decreased revenue from unscheduled payroll runs and fees charged on a per-employee basis, longer sales cycles, slower adoption of new technologies and increased price competition, any of which could adversely affect our business, operating results or financial condition. In addition, HCM spending levels may not increase following any recovery. Further, as part of our payroll and payroll tax filing services, we collect and then remit client funds to taxing authorities and accounts designated by our clients. During the interval between receipt and disbursement, we typically invest such funds in money market funds, demand deposit accounts, certificates of deposit, U.S. treasury securities and commercial paper. These investments are subject to general market, interest rate, credit and liquidity risks, and such risks may be exacerbated during periods of unusual financial market volatility. Any loss of or inability to access such funds could have an adverse impact on our cash position and results of operations and could require us to obtain additional sources of liquidity, which may not be available on terms that are acceptable to us, if at all. Furthermore, although increased interest rates may have a negative impact on certain clients, increased interest rates have resulted in increased interest earned on funds held for clients and additional income earned on our corporate funds. Changes in interest rates will impact potential earnings of future investments. A stable or rising interest rate environment would sustain the additional interest earned on funds held for clients and interest earned on our corporate funds, whereas a decreasing interest rate environment would compress the additional interest earnings and potentially adversely affect our operating results. In recent years, there have been several instances when there has been uncertainty regarding the ability of Congress and the President collectively to reach agreement on federal budgetary and spending matters. A period of failure to reach agreement on these matters, particularly if accompanied by an actual or threatened government shutdown, may have an adverse impact on the U.S. economy. Additionally, because certain of our clients rely on government resources to fund their operations, a prolonged government shutdown may affect such clients’ ability to make timely payments to us, which could adversely affect our operations results or financial condition."
    },
    {
      "status": "MODIFIED",
      "current_title": "Our background check business is subject to significant governmental regulation, and changes in law or regulation, or a failure to correctly identify, interpret, comply with and reconcile the laws and regulations to which it is subject, could materially adversely affect our revenue or profitability.",
      "prior_title": "Our background check business is subject to significant governmental regulation, and changes in law or regulation, or a failure to correctly identify, interpret, comply with and reconcile the laws and regulations to which it is subject, could materially adversely affect our revenue or profitability.",
      "similarity_score": 0.838,
      "confidence": "high",
      "key_changes": [
        "Reworded sentence: \"For example, numerous state and local authorities have implemented “ban the box” and “fair chance” hiring laws that limit or prohibit employers from inquiring or using a candidate’s criminal history to make employment decisions, and many of these authorities have in recent years amended these laws to increase the restrictions on the use of such information.\"",
        "Reworded sentence: \"Our potential exposure to lawsuits or government investigations may increase depending in part on our clients’ compliance with these laws 30 30 and regulations and applicable employment laws in their procurement and use of our background checks as part of their hiring process, which is generally outside of our control.\"",
        "Added sentence: \"Industry and Financial RisksOur financial results may fluctuate due to many factors, some of which may be beyond our control.Our results of operations, including our revenues, costs of revenues, administrative expenses, operating income, cash flow and deferred revenue, may vary significantly in the future, and the results of any one period should not be relied upon as an indication of future performance.\"",
        "Added sentence: \"Fluctuations in our financial results may negatively impact the value of our common stock.\"",
        "Added sentence: \"Our financial results may fluctuate as a result of a variety of factors, many of which are outside of our control, and as a result, may not fully reflect the underlying performance of our business.\""
      ],
      "current_body": "We offer a background screening application called Enhanced Background Checks. In the course of providing background checks, we search and report public and non-public consumer information and records, including criminal records, employment and education history, credit history, driving records and drug screening results. Consequently, we are subject to extensive, evolving and often complex laws and governmental regulations, such as the FCRA, the Drivers’ Privacy Protection Act, state consumer reporting agency laws, state licensing and registration requirements, and various other foreign, federal, state and local laws and regulations. These laws and regulations set forth restrictions and process requirements concerning what may be reported about an individual, when, to whom, and for what purposes, and how the subjects of background checks are to be treated. Compliance with these laws and regulations requires significant expense and resources, which could increase significantly as these laws and regulations evolve. Such increase in restrictions and compliance costs could negatively affect our ability to provide other services expected by our clients and adversely affect our offerings and revenue. Changes in law, regulation, or administrative enforcement and interpretations or other limitations and prohibitions related to the provision of consumer information and records could materially adversely affect our revenue and profitability. For example, numerous state and local authorities have implemented “ban the box” and “fair chance” hiring laws that limit or prohibit employers from inquiring or using a candidate’s criminal history to make employment decisions, and many of these authorities have in recent years amended these laws to increase the restrictions on the use of such information. In addition, redaction of personal identifying information in criminal records (such as date of birth), and court rules or lawsuits that limit or restrict access to identifiers in criminal records, may negatively impact our ability to perform complete criminal background checks. The enactment of new restrictive legislation and the requirements, restrictions, and limitations imposed by changing interpretations and court decisions on such laws and regulations could prevent our customers from using the full functionality of our background screening application, which may reduce demand for such solution. Furthermore, we face potential liability from individuals, classes of individuals, clients or regulatory bodies for claims based on the nature, content or accuracy of our background check services and the information we use and report. Our potential exposure to lawsuits or government investigations may increase depending in part on our clients’ compliance with these laws 30 30 and regulations and applicable employment laws in their procurement and use of our background checks as part of their hiring process, which is generally outside of our control. Our potential liability includes claims of non-compliance with the FCRA, U.S. state consumer reporting agency laws or regulations, foreign regulations or applicable employment laws, as well as other claims of defamation, invasion of privacy, negligence, copyright, patent or trademark infringement. In some cases, we may be subject to strict liability. Industry and Financial RisksOur financial results may fluctuate due to many factors, some of which may be beyond our control.Our results of operations, including our revenues, costs of revenues, administrative expenses, operating income, cash flow and deferred revenue, may vary significantly in the future, and the results of any one period should not be relied upon as an indication of future performance. Fluctuations in our financial results may negatively impact the value of our common stock. Our financial results may fluctuate as a result of a variety of factors, many of which are outside of our control, and as a result, may not fully reflect the underlying performance of our business. Factors that may cause our financial results to fluctuate from period to period include, without limitation:•our ability to attract new clients or sell additional applications to our existing clients;•the number of new clients and their employees, as compared to the number of existing clients and their employees in a particular period;•the mix of clients between small, mid-sized and large organizations;•the extent to which we retain existing clients and the expansion or contraction of our relationships with them;•the mix of applications sold during a period;•changes in our pricing policies or those of our competitors;•seasonal factors affecting payroll processing, demand for our applications or potential clients’ purchasing decisions;•the amount and timing of operating expenses, including those related to the maintenance and expansion of our business, operations and infrastructure;•the timing and success of new applications introduced by us and the timing of expenses related to the development of new applications and technologies;•the timing and success of current and new competitive products and services offered by our competitors;•economic conditions affecting our clients, including their ability to outsource HCM solutions and hire employees;•changes in laws, regulations or policies affecting our clients’ legal obligations and, as a result, demand for certain applications;•changes in the competitive dynamics of our industry, including consolidation among competitors or clients;•our ability to manage our existing business and future growth, including expenses related to our data centers and the expansion of such data centers and the addition of new offices;•the effects and expenses of acquisition of third-party technologies or businesses and any potential future charges for impairment of goodwill resulting from those acquisitions;•business disruptions caused by widespread public health crises, natural disasters, such as tornadoes, hurricanes, fires, earthquakes and floods (including as a result of climate change), acts of war, terrorism, or other catastrophic events;•network outages or security breaches; and•general economic, industry and market conditions.Certain of our operating results and financial metrics may be difficult to predict as a result of seasonality.We have historically experienced seasonality in our revenues. A significant portion of our recurring revenues relate to the annual processing of payroll tax filing forms such as Form W-2 and Form 1099 and the annual processing and filing of ACA-related forms. These forms are typically processed in the first quarter of the year and, as a result, positively impact first quarter recurring revenues. In addition, unscheduled payroll runs at the end of the year (such as bonuses) have a positive impact on our recurring revenues in the fourth quarter. Although we expect the magnitude of seasonal fluctuations in our revenues to decrease in the future to the extent clients utilize more of our non-payroll applications, seasonal fluctuations in certain of our operating results and financial metrics may make such results and metrics difficult to predict. and regulations and applicable employment laws in their procurement and use of our background checks as part of their hiring process, which is generally outside of our control. Our potential liability includes claims of non-compliance with the FCRA, U.S. state consumer reporting agency laws or regulations, foreign regulations or applicable employment laws, as well as other claims of defamation, invasion of privacy, negligence, copyright, patent or trademark infringement. In some cases, we may be subject to strict liability.",
      "prior_body": "We offer a background screening application called Enhanced Background Checks. In the course of providing background checks, we search and report public and non-public consumer information and records, including criminal records, employment and education history, credit history, driving records and drug screening results. Consequently, we are subject to extensive, evolving and often complex laws and governmental regulations, such as the FCRA, the Drivers’ Privacy Protection Act, state consumer reporting agency laws, state licensing and registration requirements, and various other foreign, federal, state and local laws and regulations. These laws and regulations set forth restrictions and process requirements concerning what may be reported about an individual, when, to whom, and for what purposes, and how the subjects of background checks are to be treated. Compliance with these laws and regulations requires significant expense and resources, which could increase significantly as these laws and regulations evolve. Such increase in restrictions and compliance costs could negatively affect our ability to provide other services expected by our clients and adversely affect our offerings and revenue. Changes in law, regulation, or administrative enforcement and interpretations or other limitations and prohibitions related to the provision of consumer information and records could materially adversely affect our revenue and profitability. For example, numerous 28 28 28 state and local authorities have implemented “ban the box” and “fair chance” hiring laws that limit or prohibit employers from inquiring or using a candidate’s criminal history to make employment decisions, and many of these authorities have in recent years amended these laws to increase the restrictions on the use of such information. In addition, redaction of personal identifying information in criminal records (such as date of birth), and court rules or lawsuits that limit or restrict access to identifiers in criminal records, may negatively impact our ability to perform complete criminal background checks. The enactment of new restrictive legislation and the requirements, restrictions, and limitations imposed by changing interpretations and court decisions on such laws and regulations could prevent our customers from using the full functionality of our background screening application, which may reduce demand for such solution. Furthermore, we face potential liability from individuals, classes of individuals, clients or regulatory bodies for claims based on the nature, content or accuracy of our background check services and the information we use and report. Our potential exposure to lawsuits or government investigations may increase depending in part on our clients’ compliance with these laws and regulations and applicable employment laws in their procurement and use of our background checks as part of their hiring process, which is generally outside of our control. Our potential liability includes claims of non-compliance with the FCRA, U.S. state consumer reporting agency laws or regulations, foreign regulations or applicable employment laws, as well as other claims of defamation, invasion of privacy, negligence, copyright, patent or trademark infringement. In some cases, we may be subject to strict liability."
    },
    {
      "status": "MODIFIED",
      "current_title": "We employ third-party licensed software for use in our applications and the inability to maintain these licenses or errors in the software we license could result in increased costs or reduced service levels, which could adversely affect our business.",
      "prior_title": "We employ third-party licensed software for use in our applications and the inability to maintain these licenses or errors in the software we license could result in increased costs or reduced service levels, which could adversely affect our business.",
      "similarity_score": 0.811,
      "confidence": "high",
      "key_changes": [
        "Reworded sentence: \"If the third-party software we currently license becomes unavailable, we may be unable to identify commercially reasonable alternatives without significant cost or difficulty, or 24 24 available alternatives may not meet our internal cybersecurity requirements.\"",
        "Reworded sentence: \"Also, to the extent that our applications depend upon the successful operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software could prevent the deployment or impair the functionality of our applications, delay new application introductions, or result in a failure of our applications and harm our reputation.We have licensed and deployed a third-party large language model (“LLM”) on our own internal network and AI-powered tools.\"",
        "Reworded sentence: \"Unauthorized access to or a breach of this LLM software could lead to significant legal and financial repercussions for us.\"",
        "Reworded sentence: \"Rapid advancements in technology could quickly render our existing LLM-powered tools obsolete, requiring the licensing and training of a replacement LLM at significant cost to us.\""
      ],
      "current_body": "Our applications incorporate certain third-party software obtained under licenses from other companies. For example, we rely on third-party software to support our background checks application. We anticipate that we will continue to rely on third-party software and development tools from third parties in the future. If the third-party software we currently license becomes unavailable, we may be unable to identify commercially reasonable alternatives without significant cost or difficulty, or 24 24 available alternatives may not meet our internal cybersecurity requirements. In addition, incorporating the software used in our applications with new third-party software may require significant work and substantial investment of our time and resources. Also, to the extent that our applications depend upon the successful operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software could prevent the deployment or impair the functionality of our applications, delay new application introductions, or result in a failure of our applications and harm our reputation.We have licensed and deployed a third-party large language model (“LLM”) on our own internal network and AI-powered tools. This LLM processes a large amount of employee and customer data, including potentially sensitive information. Unauthorized access to or a breach of this LLM software could lead to significant legal and financial repercussions for us. Also, failure to comply with continually evolving privacy, cybersecurity, and AI regulations during our use of this LLM could lead to substantial fines and damage to our reputation. Rapid advancements in technology could quickly render our existing LLM-powered tools obsolete, requiring the licensing and training of a replacement LLM at significant cost to us. The third-party LLM we license was trained on large datasets that may contain biases, and these biases can be reflected in the output of our LLM, leading to potential harm to our employees and/or customers. The third-party LLM may also produce incorrect or inaccurate outcomes, also known as “hallucinations”. The ongoing accuracy of the output of our LLM is critical for its effectiveness, and inaccurate or unreliable outputs could lead to customer dissatisfaction and potential legal liabilities.The use of open-source software in our applications may expose us to additional risks and harm our intellectual property rights.Some of our applications use software and models covered by open-source licenses. Usage of open-source software can lead to greater risks than use of third-party commercial software, as open-source licensors generally do not provide warranties, maintenance and support, other contractual protections or controls on the origin of the software. Furthermore, the license terms for certain open-source software or AI models may change, requiring us to pay for a commercial license or re-engineer all or a portion of certain applications or tools, resulting in significant additional costs for us. Open-source software may also present a heightened risk of security vulnerabilities, including due to the intentional acts of malicious actors who inject such vulnerabilities into the code, or to older versions of the software not remaining current with applicable updates and patches to address vulnerabilities or other bugs. From time to time, there have been claims challenging the ownership or use of certain types of open-source software against companies that incorporate such software into their products or applications. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open-source software. Similarly, open-source AI models may be trained on data of unknown or uncertain provenance, which could include copyrighted or otherwise proprietary, confidential, or private information. If our applications incorporate such models, we could face claims for copyright infringement and other violations. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition or require us to devote additional development resources to change our applications. In addition, if we were to combine our applications with open-source software in a certain manner, we could, under certain types of open-source licenses, be required to release the source code of our applications. If we inappropriately use open-source software, we may be required to redesign our applications or software, discontinue the sale of our applications or software or take other remedial actions, which could adversely impact our business, operating results or financial condition.Our increasing focus on, and investments in, automation expose us to a number of risks.A key part of our strategy is our focus on automation. We currently utilize automation and machine learning in certain of our products and services to deliver a better experience for our clients and their employees or customers, and we expect to automate more functions within our solution in the future. We also leverage AI internally to make certain business processes more efficient. While we believe the use of these emerging technologies can present significant benefits, it also creates risks and challenges.The development and implementation of such advanced technologies is complex. We have invested, and intend to continue to invest, significant time and resources in our automation initiatives, some or all of which may not result in new products or enhancements to our solution or services or, even if deployed, may not materially improve client or client employee experience. Furthermore, existing and prospective clients may be hesitant to adopt products that rely on automation, particularly those that utilize AI. Data sourcing, technology, integration and process issues, programmed bias in decision-making algorithms, concerns over intellectual property, concerns over incorrect or inaccurate outputs, security concerns, and the protection of privacy could impair the adoption and acceptance of our automated solutions. There also may be real or perceived social harm, unfairness, or other outcomes that undermine public confidence in the use and deployment of AI. If our investments in automation initiatives do not result in marketable products or services, or the resulting solutions do not gain market acceptance or we otherwise do not fully realize the intended benefits of these significant investments, our operating results and financial condition may suffer. In addition, we may incur additional compliance costs to the extent our automation initiatives utilize tools and technologies that are the subject of increasing regulatory and legal scrutiny, such as our AI-powered tools. These laws and regulations are developing and vary from one jurisdiction to another. Future legislative and regulatory action, court decisions or other governmental action may adversely impact our ability to pursue our automation strategy and, in turn, may adversely impact our operations and financial results. available alternatives may not meet our internal cybersecurity requirements. In addition, incorporating the software used in our applications with new third-party software may require significant work and substantial investment of our time and resources. Also, to the extent that our applications depend upon the successful operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software could prevent the deployment or impair the functionality of our applications, delay new application introductions, or result in a failure of our applications and harm our reputation. We have licensed and deployed a third-party large language model (“LLM”) on our own internal network and AI-powered tools. This LLM processes a large amount of employee and customer data, including potentially sensitive information. Unauthorized access to or a breach of this LLM software could lead to significant legal and financial repercussions for us. Also, failure to comply with continually evolving privacy, cybersecurity, and AI regulations during our use of this LLM could lead to substantial fines and damage to our reputation. Rapid advancements in technology could quickly render our existing LLM-powered tools obsolete, requiring the licensing and training of a replacement LLM at significant cost to us. The third-party LLM we license was trained on large datasets that may contain biases, and these biases can be reflected in the output of our LLM, leading to potential harm to our employees and/or customers. The third-party LLM may also produce incorrect or inaccurate outcomes, also known as “hallucinations”. The ongoing accuracy of the output of our LLM is critical for its effectiveness, and inaccurate or unreliable outputs could lead to customer dissatisfaction and potential legal liabilities.",
      "prior_body": "Our applications incorporate certain third-party software obtained under licenses from other companies. For example, we rely on third-party software to support our background checks application. We anticipate that we will continue to rely on third-party software and development tools from third parties in the future. If the third-party software we currently license becomes unavailable, we may be unable to identify commercially reasonable alternatives without significant cost or difficulty, or available alternatives may not meet our internal cybersecurity requirements. In addition, incorporating the software used in our applications with new third-party software may require significant work and substantial investment of our time and resources. Also, to the extent that our applications depend upon the successful operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software could prevent the deployment or impair the functionality of our applications, delay new application introductions, result in a failure of our applications and harm our reputation. We have licensed and deployed a third-party large language model (“LLM”) on our own internal network. This LLM processes a large amount of employee and customer data, including potentially sensitive information. Unauthorized access to or a breach of this LLM software could lead to significant legal and financial repercussions to us. Also, failure to comply with continually evolving privacy, cybersecurity, and AI regulations during our use of this LLM could lead to substantial fines and damage to our reputation. Rapid advancements in technology could quickly render our existing LLM obsolete, requiring the licensing and training of a replacement LLM at significant cost to us. The third-party LLM we license was trained on large datasets that may contain biases, and these biases can be reflected in the output of our LLM, leading to ethical concerns and potential harm to our employees and/or customers. The ongoing accuracy of the output of our LLM is critical for its effectiveness, and inaccurate or unreliable outputs could lead to customer dissatisfaction and potential legal liabilities."
    },
    {
      "status": "MODIFIED",
      "current_title": "We may acquire other businesses, applications or technologies, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results.",
      "prior_title": "We may acquire other businesses, applications or technologies, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results.",
      "similarity_score": 0.81,
      "confidence": "high",
      "key_changes": [
        "Reworded sentence: \"We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including: •the inability to integrate or benefit from acquired applications or services in a profitable manner; the inability to integrate or benefit from acquired applications or services in a profitable manner; •unanticipated costs or liabilities associated with the acquisition; unanticipated costs or liabilities associated with the acquisition; •the incurrence of acquisition-related costs; the incurrence of acquisition-related costs; •difficulty integrating the accounting systems, operations and personnel of the acquired business; difficulty integrating the accounting systems, operations and personnel of the acquired business; •difficulty and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; difficulty and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; •difficulty converting the clients of the acquired business onto our solution, including disparities in the revenues, licensing, support or services of the acquired company; difficulty converting the clients of the acquired business onto our solution, including disparities in the revenues, licensing, support or services of the acquired company; •diversion of management’s attention from other business concerns; diversion of management’s attention from other business concerns; •harm to our existing relationships with clients as a result of the acquisition; harm to our existing relationships with clients as a result of the acquisition; 26 26 •the potential loss of key employees;•the use of resources that are needed in other parts of our business; and•the use of substantial portions of our available cash to consummate the acquisition.In addition, a significant portion of the purchase price of any companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually.\""
      ],
      "current_body": "In the future, we may seek to acquire or invest in businesses, applications or technologies that we believe complement or expand our applications, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are ultimately consummated. We do not have any experience in acquiring other businesses. If we acquire additional businesses, we may not be able to integrate the acquired personnel, operations and technologies successfully or to effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including: •the inability to integrate or benefit from acquired applications or services in a profitable manner; the inability to integrate or benefit from acquired applications or services in a profitable manner; •unanticipated costs or liabilities associated with the acquisition; unanticipated costs or liabilities associated with the acquisition; •the incurrence of acquisition-related costs; the incurrence of acquisition-related costs; •difficulty integrating the accounting systems, operations and personnel of the acquired business; difficulty integrating the accounting systems, operations and personnel of the acquired business; •difficulty and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; difficulty and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; •difficulty converting the clients of the acquired business onto our solution, including disparities in the revenues, licensing, support or services of the acquired company; difficulty converting the clients of the acquired business onto our solution, including disparities in the revenues, licensing, support or services of the acquired company; •diversion of management’s attention from other business concerns; diversion of management’s attention from other business concerns; •harm to our existing relationships with clients as a result of the acquisition; harm to our existing relationships with clients as a result of the acquisition; 26 26 •the potential loss of key employees;•the use of resources that are needed in other parts of our business; and•the use of substantial portions of our available cash to consummate the acquisition.In addition, a significant portion of the purchase price of any companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could harm our results of operations. Acquisitions could also result in the incurrence of debt or issuances of equity securities, which would result in dilution to our stockholders.Legal and Regulatory RisksChanges in laws, government regulations and policies could have a material adverse effect on our business and results of operations.Many of our applications are designed to assist our clients in complying with government regulations that continually change. The introduction of new regulatory requirements, or new interpretations of existing laws or regulations, could increase our cost of doing business, decrease our revenues and net income or require us to make changes to our applications. Moreover, changing regulatory requirements may make the introduction of new applications and enhancements more costly or more time-consuming than we currently anticipate or could prevent the introduction of new applications and enhancements by us altogether. For example, a change in tax laws and regulations resulting in a decrease in the amount of taxes required to be withheld or accelerating the deadline to remit taxes to appropriate tax agencies would adversely impact our average balance of funds held for clients and, as a result, adversely impact the interest income we earn on such funds during the period between receipt and disbursement. Changes in laws, regulations or policies could also affect the extent and type of benefits employers are required, or may choose, to provide employees or the amount and type of taxes employers and employees are required to pay. Such changes could reduce or eliminate the need for certain of our existing applications or services, which would result in decreased revenues. Further, we may spend time and money developing new applications and enhancements that, due to regulatory changes, become unnecessary prior to being released. In addition, any failure to educate and assist our clients with respect to new or revised legislation that impacts them could have an adverse effect on our reputation, and any failure to modify our applications or develop new applications in a timely fashion in response to regulatory changes could have an adverse effect on our business and results of operations. Additionally, new regulations or changes to existing regulations could be unclear, difficult to interpret or conflict with other applicable regulations. Our or our clients’ failure to comply with new or modified laws or regulations could result in financial penalties, legal proceedings or reputational harm. Finally, a negative audit or other investigations by the U.S. Government could adversely affect our ability to receive U.S. Government contracts and could result in financial or reputational harm.In addition, federal, state and foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the internet as a commercial medium. Changes in these laws or regulations could require us to modify our applications. Further, government agencies or private organizations may impose taxes, fees or other charges for accessing the internet or commerce conducted via the internet. These laws or charges could limit the growth of internet-related commerce or communications generally or could result in reductions in the demand for internet-based applications such as ours.Failure to comply with privacy, data protection and cybersecurity laws and regulations could have a materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences.Our applications and services are subject to various complex laws and regulations on the federal, state, local, and foreign levels, including those governing data security, privacy, and AI which have become significant compliance issues globally. The regulatory framework for privacy of personal data is rapidly evolving and is likely to remain uncertain for the foreseeable future. Many federal, state and foreign government bodies and agencies have adopted or are considering adopting laws and regulations regarding the collection, use and disclosure of personal information. In the United States, these include numerous state-level consumer privacy laws, such as California’s CCPA, Texas’ Data Privacy and Security Act, Illinois’ IBIPA, rules and regulations promulgated under the authority of the Federal Trade Commission, the Health Insurance Portability and Accountability Act of 1996, the Family Medical Leave Act of 1993, the ACA, the Financial Services Modernization Act of 1999 (the “GLBA”), the Fair Credit Reporting Act (“FCRA”), federal and state labor and employment laws, state data breach notification laws, and state cybersecurity laws such as the New York Stop Hacks and Improve Electronic Data Security (SHIELD) Act. As we continue to expand our operations outside the United States, our applications and services are or will be subject to additional laws governing data security and privacy in relevant jurisdictions, such as Canada’s PIPEDA and Mexico’s Federal Law on the Protection of Personal Data held by Private Parties, as well as the EU GDPR and United Kingdom’s •the potential loss of key employees; the potential loss of key employees; •the use of resources that are needed in other parts of our business; and the use of resources that are needed in other parts of our business; and •the use of substantial portions of our available cash to consummate the acquisition. the use of substantial portions of our available cash to consummate the acquisition. In addition, a significant portion of the purchase price of any companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could harm our results of operations. Acquisitions could also result in the incurrence of debt or issuances of equity securities, which would result in dilution to our stockholders.",
      "prior_body": "In the future, we may seek to acquire or invest in businesses, applications or technologies that we believe complement or expand our applications, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are ultimately consummated. We do not have any experience in acquiring other businesses. If we acquire additional businesses, we may not be able to integrate the acquired personnel, operations and technologies successfully or to effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including: •the inability to integrate or benefit from acquired applications or services in a profitable manner; the inability to integrate or benefit from acquired applications or services in a profitable manner; •unanticipated costs or liabilities associated with the acquisition; unanticipated costs or liabilities associated with the acquisition; •the incurrence of acquisition-related costs; the incurrence of acquisition-related costs; •difficulty integrating the accounting systems, operations and personnel of the acquired business; difficulty integrating the accounting systems, operations and personnel of the acquired business; •difficulty and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; difficulty and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; •difficulty converting the clients of the acquired business onto our solution, including disparities in the revenues, licensing, support or services of the acquired company; difficulty converting the clients of the acquired business onto our solution, including disparities in the revenues, licensing, support or services of the acquired company; •diversion of management’s attention from other business concerns; diversion of management’s attention from other business concerns; •harm to our existing relationships with clients as a result of the acquisition; harm to our existing relationships with clients as a result of the acquisition; •the potential loss of key employees; the potential loss of key employees; •the use of resources that are needed in other parts of our business; and the use of resources that are needed in other parts of our business; and •the use of substantial portions of our available cash to consummate the acquisition. the use of substantial portions of our available cash to consummate the acquisition. In addition, a significant portion of the purchase price of any companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could harm our results of operations. Acquisitions could also result in the incurrence of debt or issuances of equity securities, which would result in dilution to our stockholders."
    },
    {
      "status": "MODIFIED",
      "current_title": "Adverse tax laws or regulations could be enacted or existing laws could be applied to us or our clients, which could increase the costs of our solution and applications and could adversely affect our business, operating results or financial condition.",
      "prior_title": "Adverse tax laws or regulations could be enacted or existing laws could be applied to us or our clients, which could increase the costs of our solution and applications and could adversely affect our business, operating results or financial condition.",
      "similarity_score": 0.78,
      "confidence": "high",
      "key_changes": [
        "Reworded sentence: \"New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time (possibly with retroactive effect), and could be applied solely or disproportionately to services and applications provided over the internet.\"",
        "Reworded sentence: \"29 29 In addition, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us (possibly with retroactive effect), which could require us or our clients to pay additional tax amounts, as well as require us or our clients to pay fines or penalties and substantial interest for past amounts.\""
      ],
      "current_body": "As a vendor of services, we are ordinarily held responsible by taxing authorities for collecting and paying any applicable sales or other similar taxes. Additionally, the application of tax laws to services provided electronically like ours is evolving. New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time (possibly with retroactive effect), and could be applied solely or disproportionately to services and applications provided over the internet. These enactments could adversely affect our sales activity, due to the inherent cost increase the taxes would represent, and ultimately could adversely affect our business, operating results or financial condition. Each jurisdiction has different rules and regulations governing sales and use taxes, and these rules and regulations are subject to varying interpretations that change over time. We review these rules and regulations periodically and, when we believe we are subject to sales and use taxes in a particular jurisdiction, we may voluntarily engage the applicable tax authorities in order to determine how to comply with that jurisdiction’s rules and regulations. We cannot ensure that we will not be subject to sales and use taxes or related penalties for past sales in jurisdictions where we currently believe no such taxes are required. 29 29 In addition, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us (possibly with retroactive effect), which could require us or our clients to pay additional tax amounts, as well as require us or our clients to pay fines or penalties and substantial interest for past amounts. If we are unsuccessful in collecting such taxes from our clients, we could be held liable for such costs, thereby adversely affecting our business, operating results or financial condition. Additionally, the imposition of such taxes on us would effectively increase the cost of our software and services we provide to clients and would likely have a negative impact on our ability to retain existing clients or to gain new clients in the jurisdictions in which such taxes are imposed.Compliance with employment-related laws and regulations could increase our cost of doing business and violations of such laws and regulations could subject us to fines and lawsuits.Our operations are subject to a variety of federal, state, local and international employment-related laws and regulations, including, but not limited to, the U.S. Fair Labor Standards Act, which governs such matters as minimum wages, the Family Medical Leave Act, overtime pay, compensable time, recordkeeping and other working conditions, Title VII of the Civil Rights Act, the Employee Retirement Income Security Act, the Americans with Disabilities Act, the National Labor Relations Act, regulations of the Equal Employment Opportunity Commission, regulations of the Office of Civil Rights, regulations of the Department of Labor, regulations of state attorneys general, federal and state wage and hour laws, and a variety of similar laws enacted by the federal and state governments that govern these and other employment-related matters. As our employees are located in a number of states and countries, compliance with evolving laws and regulations could substantially increase our cost of doing business. In recent years, we have been subject to threatened and filed lawsuits, including class action lawsuits, alleging violations of federal and state law regarding workplace and employment matters, overtime wage policies, discrimination and similar matters. We may incur damages and expenses resulting from lawsuits of this type, which could have a material adverse effect on our business, financial condition or results of operations. We are currently subject to employee-related legal proceedings in the ordinary course of business. While we believe that we have adequate reserves for those losses that we believe are probable and can be reasonably estimated, the ultimate results of legal proceedings and claims cannot be predicted with certainty.While none of our employees are currently represented by a union, our employees have the right under the National Labor Relations Act to form or affiliate with a union. If a significant portion of our employees were to become unionized, our labor costs could increase and our business could be negatively affected by other requirements and expectations that could increase our costs, change our employee culture, impact corporate flexibility and disrupt our business. Additionally, our responses to any union organizing efforts could negatively impact perception of our brand and have adverse effects on our business, including on our financial results. These responses could also expose us to legal risk, causing us to incur costs related to defending legal and regulatory actions, potential penalties and restrictions or reputational harm.Our background check business is subject to significant governmental regulation, and changes in law or regulation, or a failure to correctly identify, interpret, comply with and reconcile the laws and regulations to which it is subject, could materially adversely affect our revenue or profitability.We offer a background screening application called Enhanced Background Checks. In the course of providing background checks, we search and report public and non-public consumer information and records, including criminal records, employment and education history, credit history, driving records and drug screening results. Consequently, we are subject to extensive, evolving and often complex laws and governmental regulations, such as the FCRA, the Drivers’ Privacy Protection Act, state consumer reporting agency laws, state licensing and registration requirements, and various other foreign, federal, state and local laws and regulations. These laws and regulations set forth restrictions and process requirements concerning what may be reported about an individual, when, to whom, and for what purposes, and how the subjects of background checks are to be treated. Compliance with these laws and regulations requires significant expense and resources, which could increase significantly as these laws and regulations evolve. Such increase in restrictions and compliance costs could negatively affect our ability to provide other services expected by our clients and adversely affect our offerings and revenue.Changes in law, regulation, or administrative enforcement and interpretations or other limitations and prohibitions related to the provision of consumer information and records could materially adversely affect our revenue and profitability. For example, numerous state and local authorities have implemented “ban the box” and “fair chance” hiring laws that limit or prohibit employers from inquiring or using a candidate’s criminal history to make employment decisions, and many of these authorities have in recent years amended these laws to increase the restrictions on the use of such information. In addition, redaction of personal identifying information in criminal records (such as date of birth), and court rules or lawsuits that limit or restrict access to identifiers in criminal records, may negatively impact our ability to perform complete criminal background checks. The enactment of new restrictive legislation and the requirements, restrictions, and limitations imposed by changing interpretations and court decisions on such laws and regulations could prevent our customers from using the full functionality of our background screening application, which may reduce demand for such solution.Furthermore, we face potential liability from individuals, classes of individuals, clients or regulatory bodies for claims based on the nature, content or accuracy of our background check services and the information we use and report. Our potential exposure to lawsuits or government investigations may increase depending in part on our clients’ compliance with these laws In addition, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us (possibly with retroactive effect), which could require us or our clients to pay additional tax amounts, as well as require us or our clients to pay fines or penalties and substantial interest for past amounts. If we are unsuccessful in collecting such taxes from our clients, we could be held liable for such costs, thereby adversely affecting our business, operating results or financial condition. Additionally, the imposition of such taxes on us would effectively increase the cost of our software and services we provide to clients and would likely have a negative impact on our ability to retain existing clients or to gain new clients in the jurisdictions in which such taxes are imposed.",
      "prior_body": "As a vendor of services, we are ordinarily held responsible by taxing authorities for collecting and paying any applicable sales or other similar taxes. Additionally, the application of tax laws to services provided electronically like ours is evolving. New income, 27 27 27 sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time (possibly with retroactive effect), and could be applied solely or disproportionately to services and applications provided over the internet. These enactments could adversely affect our sales activity, due to the inherent cost increase the taxes would represent, and ultimately could adversely affect our business, operating results or financial condition. Each jurisdiction has different rules and regulations governing sales and use taxes, and these rules and regulations are subject to varying interpretations that change over time. We review these rules and regulations periodically and, when we believe we are subject to sales and use taxes in a particular jurisdiction, we may voluntarily engage the applicable tax authorities in order to determine how to comply with that jurisdiction’s rules and regulations. We cannot ensure that we will not be subject to sales and use taxes or related penalties for past sales in jurisdictions where we currently believe no such taxes are required. In addition, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us (possibly with retroactive effect), which could require us or our clients to pay additional tax amounts, as well as require us or our clients to pay fines or penalties and substantial interest for past amounts. If we are unsuccessful in collecting such taxes from our clients, we could be held liable for such costs, thereby adversely affecting our business, operating results or financial condition. Additionally, the imposition of such taxes on us would effectively increase the cost of our software and services we provide to clients and would likely have a negative impact on our ability to retain existing clients or to gain new clients in the jurisdictions in which such taxes are imposed."
    },
    {
      "status": "MODIFIED",
      "current_title": "Our actual operating results may differ significantly from our guidance.",
      "prior_title": "Our actual operating results may differ significantly from our guidance.",
      "similarity_score": 0.74,
      "confidence": "medium",
      "key_changes": [
        "Reworded sentence: \"The principal reason that we release guidance is to provide a basis for our management to discuss our 32 32 business outlook with analysts and investors.\""
      ],
      "current_body": "We have released, and may continue to release, guidance in our earnings conference calls, earnings releases, or otherwise, regarding our future performance, which represents our estimates as of the date of release. This guidance, which includes forward-looking statements, has been and will be based on projections prepared by our management. These projections are not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, and neither our registered public accountants nor any other independent expert or outside party compiles or examines the projections. Accordingly, no such person expresses any opinion or any other form of assurance with respect to the projections. Projections are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control. Projections are also based upon specific assumptions with respect to future business decisions, some of which will change. The principal reason that we release guidance is to provide a basis for our management to discuss our 32 32 business outlook with analysts and investors. We do not accept any responsibility for any projections or reports published by any third parties.Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the guidance furnished by us will vary significantly from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release. Actual results have in the past, and may in the future, vary from our guidance, and the variations may be material. In light of the foregoing, investors are urged not to rely upon our guidance in making an investment decision regarding our common stock.Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances set forth in this “Risk Factors” section in this Form 10-K could result in the actual operating results being different from our guidance, and the differences may be adverse and material.Risks Related to Ownership of Our SecuritiesThe issuance of additional stock in connection with acquisitions, our stock incentive plans, warrants or otherwise will dilute all other stockholders.Our certificate of incorporation authorizes us to issue up to 100 million shares of common stock and up to 10 million shares of preferred stock with such rights and preferences as may be determined by our board of directors. Subject to compliance with applicable rules and regulations, we may issue all of these shares that are not already outstanding without any action or approval by our stockholders. We intend to continue to evaluate strategic acquisitions in the future. We may pay for such acquisitions, in part or in full, through the issuance of additional equity securities.Any issuance of shares in connection with an acquisition, the exercise of stock options or warrants, the award of shares of restricted stock or otherwise would dilute the percentage ownership held by our existing stockholders.Anti-takeover provisions in our charter documents and Delaware law may delay or prevent an acquisition of our company.Our certificate of incorporation, bylaws and Delaware law contain provisions that may have the effect of delaying or preventing a change in control of us or changes in our management. These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.Any provision of our certificate of incorporation, bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could affect the price that some investors are willing to pay for our common stock.Our certificate of incorporation contains an exclusive forum provision that may discourage lawsuits against us and our directors and officers.Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or if no Court of Chancery located within the State of Delaware has jurisdiction, the Federal District Court for the District of Delaware) will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of Delaware law or our certificate of incorporation or our bylaws (as either may be amended from time to time) or any action asserting a claim against us or any of our directors, officers or other employees governed by the internal affairs doctrine. This exclusive forum provision applies to state and federal law claims, although our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. In addition, this exclusive forum selection provision will not apply to claims under the Exchange Act. Moreover, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce our forum selection provision as written in connection with claims arising under the Securities Act. This forum selection provision may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us. It is also possible that, notwithstanding the forum selection clause included in our certificate of incorporation, a court could rule that such a provision is inapplicable or unenforceable.We may not continue to pay dividends at the same rate or at all.Our payment of dividends, as well as the rate at which we pay dividends, are solely at the discretion of our Board of Directors. Further, dividend payments, if any, are subject to our financial results and the availability of statutory surplus. These factors could result in a change to our dividend policy. business outlook with analysts and investors. We do not accept any responsibility for any projections or reports published by any third parties. Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the guidance furnished by us will vary significantly from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release. Actual results have in the past, and may in the future, vary from our guidance, and the variations may be material. In light of the foregoing, investors are urged not to rely upon our guidance in making an investment decision regarding our common stock. Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances set forth in this “Risk Factors” section in this Form 10-K could result in the actual operating results being different from our guidance, and the differences may be adverse and material.",
      "prior_body": "We have released, and may continue to release, guidance in our earnings conference calls, earnings releases, or otherwise, regarding our future performance, which represents our estimates as of the date of release. This guidance, which includes forward-looking statements, has been and will be based on projections prepared by our management. These projections are not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, and neither our registered public accountants nor any other independent expert or outside party compiles or examines the projections. Accordingly, no such person expresses any opinion or any other form of assurance with respect to the projections. Projections are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control. Projections are also based upon specific assumptions with respect to future business decisions, some of which will change. The principal reason that we release guidance is to provide a basis for our management to discuss our business outlook with analysts and investors. We do not accept any responsibility for any projections or reports published by any third parties. Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the guidance furnished by us will vary significantly from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release. Actual results have in the past, and may in the future, vary from our guidance, and the variations may be material. In light of the foregoing, investors are urged not to rely upon our guidance in making an investment decision regarding our common stock. Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances set forth in this “Risk Factors” section in this Form 10-K could result in the actual operating results being different from our guidance, and the differences may be adverse and material."
    },
    {
      "status": "MODIFIED",
      "current_title": "We are dependent on the leadership of our key executives and, if we fail to retain such key executives, our business could be adversely affected.",
      "prior_title": "We are dependent on the leadership of our key executives and, if we fail to retain such key executives, our business could be adversely affected.",
      "similarity_score": 0.735,
      "confidence": "medium",
      "key_changes": [
        "Reworded sentence: \"We believe the success of our business and execution of our strategy depend, in part, on the leadership of Chad Richison, our founder, Chief Executive Officer and Chairman of the Board of Directors, and that of our other key executive officers and 22 22 employees.\""
      ],
      "current_body": "We believe the success of our business and execution of our strategy depend, in part, on the leadership of Chad Richison, our founder, Chief Executive Officer and Chairman of the Board of Directors, and that of our other key executive officers and 22 22 employees. The loss of their leadership, expertise and experience could adversely impact our operations. Effective succession planning is also important to our long-term success. Changes in our management team may be disruptive to our business, and any failure to ensure effective transfer of knowledge or successfully integrate key new hires or promoted employees could adversely affect our business and results of operations. The loss of the services of any of our executive officers or other key employees, or our inability to attract highly qualified senior management and other key personnel, could harm our business. In addition, legal and regulatory developments may affect our ability to enforce post-termination obligations of certain employees with respect to non-competition, non-solicitation and protection of confidential information. Our business could be adversely affected if a key executive leaves Paycom and interferes with our client, employee and/or other business relationships. We do not maintain key man life insurance on any of our executive officers.If we are unable to attract and retain qualified personnel, including software developers, product managers and skilled IT, sales, marketing and operational personnel, our ability to develop and market new and existing products and, in turn, increase our revenue and profitability could be adversely affected.Our future success is dependent on our ability to continue to enhance and introduce new applications. As a result, we are heavily dependent on our ability to attract and retain qualified software developers, product managers and IT personnel with the requisite education, background and industry experience. In addition, to continue to execute our growth strategy, we must also attract and retain qualified sales, marketing and operational personnel capable of supporting a larger and more diverse client base. The technology industry is characterized by a high level of employee mobility and aggressive recruiting among competitors, and competition is particularly intense for qualified software developers, product managers and IT personnel. In addition, the nature of the office environment is changing as employers continue to offer various remote or hybrid work arrangements, which can be an important factor in a candidate’s decision on employment. We maintain an office-centric operational model. Certain companies with which we compete for talent offer work arrangements more flexible than ours, which may impact our ability to attract and retain qualified personnel if potential or current employees prefer such policies.The competition for qualified personnel has been amplified by new immigration laws and policies that limit software companies’ ability to recruit internationally. Although such changes in immigration laws and policies have not had a significant direct impact on our workforce to date, the ensuing increase in demand for software developers and IT personnel could impair our ability to attract or retain skilled employees and/or significantly increase our costs to do so. Furthermore, identifying and recruiting qualified personnel and training them in the use of our applications requires significant time, expense and attention, and it can take a substantial amount of time before our employees are fully trained and productive. The unplanned loss of the services of a significant number of skilled employees could be disruptive to our development efforts, which may adversely affect our business by causing us to lose clients, increase operating expenses or divert management’s attention to recruit replacements for the departed employees.Our business and operations have experienced significant growth and organizational change. If we fail to manage such growth and change effectively, we may be unable to execute our business plan, maintain high levels of service or adequately address competitive challenges.We have experienced, and may continue to experience, significant growth in our operations, which has placed, and may continue to place, significant demands on our management, operational and financial resources. We have also experienced significant growth in the number of clients and transactions and the amount of client and employee data that our infrastructure supports. As a result, our organizational structure and recording systems and procedures are becoming more complex as we improve our operational, financial and management controls. Our success depends, in part, on our ability to manage this growth and organizational change effectively. Moreover, our international expansion efforts are exacerbating many of these challenges. To manage the effects of our growth, we must continue to improve our operational, financial and management controls and our reporting systems and procedures. The failure to effectively manage growth could result in (i) declines in the quality of, or client satisfaction with, our applications or service delivery, (ii) increases in costs, (iii) difficulties or delays in introducing new applications or (iv) other operational difficulties, any of which could adversely affect our business by impairing our ability to retain and attract clients or sell additional applications to our existing clients. In addition, our ability to expand our sales force may be constrained by the willingness and availability of qualified personnel to staff and manage new offices and our success in recruiting and training sales personnel. If our expansion efforts are unsuccessful, our business, operating results or financial condition could be adversely affected.The failure to develop and maintain our brand cost-effectively could have an adverse effect on our business.We believe that developing and maintaining widespread awareness of our brand in a cost-effective manner is critical to achieving widespread acceptance of our solution and is an important element in attracting new clients and retaining existing clients. Successful promotion of our brand depends largely on the effectiveness of our marketing efforts and on our ability to provide reliable and useful applications at competitive prices. Brand promotion activities, including increased spending on our national media campaigns, may not yield increased revenues, and even if they do, any increased revenues may not offset the expenses incurred in building our brand. If we fail to successfully promote and maintain our brand, or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new clients or retain our existing employees. The loss of their leadership, expertise and experience could adversely impact our operations. Effective succession planning is also important to our long-term success. Changes in our management team may be disruptive to our business, and any failure to ensure effective transfer of knowledge or successfully integrate key new hires or promoted employees could adversely affect our business and results of operations. The loss of the services of any of our executive officers or other key employees, or our inability to attract highly qualified senior management and other key personnel, could harm our business. In addition, legal and regulatory developments may affect our ability to enforce post-termination obligations of certain employees with respect to non-competition, non-solicitation and protection of confidential information. Our business could be adversely affected if a key executive leaves Paycom and interferes with our client, employee and/or other business relationships. We do not maintain key man life insurance on any of our executive officers.",
      "prior_body": "We believe the success of our business and execution of our strategy depend, in part, on the leadership of Chad Richison, our founder, Chief Executive Officer, President and Chairman of the Board of Directors, and that of our other key executive officers and employees. The loss of their leadership, expertise and experience could adversely impact our operations. Effective succession planning is also important to our long-term success. Changes in our management team may be disruptive to our business, and any failure to ensure effective transfer of knowledge or successfully integrate key new hires or promoted employees could adversely affect our business and results of operations. The loss of the services of any of our executive officers or other key employees, or our inability to attract highly qualified senior management and other key personnel, could harm our business. In addition, legal and regulatory developments may affect our ability to enforce post-termination obligations of certain employees with respect to non-competition, non-solicitation and protection of confidential information. Our business could be adversely affected if a key executive leaves Paycom and interferes with our client, employee and/or other business relationships. We do not maintain key man life insurance on any of our executive officers."
    },
    {
      "status": "MODIFIED",
      "current_title": "Our business depends on our clients’ continued use of our applications, their purchases of additional applications from us and our ability to add new clients. Any decline in our clients’ continued use of our applications or purchases of additional applications could adversely affect our business, operating results or financial condition.",
      "prior_title": "Our business depends on our clients’ continued use of our applications, their purchases of additional applications from us and our ability to add new clients. Any decline in our clients’ continued use of our applications or purchases of additional applications could adversely affect our business, operating results or financial condition.",
      "similarity_score": 0.731,
      "confidence": "medium",
      "key_changes": [
        "Reworded sentence: \"Our annual revenue retention rate fluctuates as a result of a number of factors, including but not limited to the level of client satisfaction with our applications, pricing, the prices of competing products or services, mergers and acquisitions affecting our client base, reduced hiring by our clients or reductions in our clients’ spending levels.\"",
        "Reworded sentence: \"Because we charge our clients on a per employee basis for certain services we provide, the performance of certain of our offerings is sensitive to changes in the labor market.\""
      ],
      "current_body": "In order for us to maintain or improve our operating results, it is important that our current clients continue to use our applications and purchase additional applications from us, and that we add new clients. Our annual revenue retention rate fluctuates as a result of a number of factors, including but not limited to the level of client satisfaction with our applications, pricing, the prices of competing products or services, mergers and acquisitions affecting our client base, reduced hiring by our clients or reductions in our clients’ spending levels. Many of our clients have the right to cancel their agreements with us for any or no reason by providing 30 days’ prior written notice. Moreover, from time to time, clients choose not to continue to use our applications at the same or higher level of service, if at all. Because we charge our clients on a per employee basis for certain services we provide, the performance of certain of our offerings is sensitive to changes in the labor market. Any increase or decrease in the number of employees of our clients will have a positive or negative impact, respectively, on our results of operations. As technology continues to evolve, more tasks historically performed by people have been and may continue to be replaced by automation, robotics, AI and other technological advances outside of our control, which may reduce our clients’ need for existing or future employees who are or would be potential users of our solution. If our clients reduce headcount, do not continue to use our applications, renew on less favorable terms or fail to purchase additional applications, or if we fail to add new clients, our annual revenue retention rate may decline and our business, operating results or financial condition could be adversely affected. 21 21 Our business, operating results or financial condition could be adversely affected if our solution fails to perform properly or our clients are not satisfied with our services.Our solution is inherently complex and may in the future contain, or develop, undetected defects or errors. Any defects in our applications could adversely affect our reputation, impair our ability to sell our applications in the future and result in significant costs to us. The costs incurred to correct any application defects may be substantial and could adversely affect our business, operating results or financial condition. Any defects in functionality or defects that cause interruptions in the availability of our applications could result in:•loss or delayed market acceptance and sales of our applications;•termination of service agreements or loss of clients;•credits, refunds or other liability to clients, including reimbursements for any fees or penalties assessed by regulatory agencies;•breach of contract, breach of warranty or indemnification claims against us, which may result in litigation;•diversion of development and service resources;•increased scrutiny of our solution from regulatory agencies; and•injury to our reputation. Because of the large amount of data that we collect and manage, it is possible that hardware failures or errors in our applications could result in data loss or corruption or cause the information that we collect to be incomplete or contain inaccuracies that our clients regard as significant. From time to time, our clients assert claims against us alleging that they suffered damages due to a defect, error, or other failure of our solution. We also face potential liability from our clients, and possibly third parties, in the event we fail to report information, particularly wage and earnings information, criminal records or other potentially negative information, or wrongly report such information. From time to time, we have been subject to claims and lawsuits by current and potential employees of our clients, alleging that we provided to our clients inaccurate or improper information that negatively affected the clients. Although the resolutions of these lawsuits have not had a material adverse effect on us to date, the costs of such claims, including settlement amounts or punitive damages, could be material in the future, could cause adverse publicity and reputational damage, could divert the attention of our management, could subject us to equitable remedies relating to the operation of our business and provision of services and result in significant legal expenses, all of which could have a material adverse effect on our business, financial condition and results of operations and adverse publicity, and could result in the loss of existing clients and make it difficult to attract new clients. Our errors and omissions insurance may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our policy may not cover all claims made against us, and defending a suit, regardless of its merit, could be costly and divert management’s attention. Any failures in the performance of our solution could harm our reputation and our ability to retain existing clients and attract new clients, which would have an adverse impact on our business, operating results or financial condition. Furthermore, our business depends on our ability to satisfy our clients, both with respect to our applications and the technical support provided to help our clients use the applications that address the needs of their businesses. We use our in-house deployment personnel to implement and configure our solution and provide support to our clients. If a client is not satisfied with the quality of our solution, the applications delivered or the support provided, we could incur additional costs to address the situation, our profitability might be negatively affected, and the client’s dissatisfaction with our deployment or support service could harm our ability to sell additional applications to that client. In addition, our sales process is highly dependent on the reputation of our solution and applications and on positive recommendations from our existing clients. Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality technical support, could adversely affect client retention, our reputation, our ability to sell our applications to existing and prospective clients, and, as a result, our business, operating results or financial condition.We face challenges related to attracting and retaining larger clients, including demand for customized features, longer sales cycles and less predictability in completing sales.In some cases, prospective clients, especially larger companies, expect customized features and functions unique to their business processes, or are seeking to integrate our solutions with other products. If we do not meet the demands of such prospective clients, the market for our solution will be more limited and our business could be adversely affected. Furthermore, pursing larger clients may result in a longer sales cycle and, in some cases, we may devote a significant amount of support and service resources to attract and acquire larger prospective clients with no guarantee that these prospective clients will adopt our solution.We are dependent on the leadership of our key executives and, if we fail to retain such key executives, our business could be adversely affected.We believe the success of our business and execution of our strategy depend, in part, on the leadership of Chad Richison, our founder, Chief Executive Officer and Chairman of the Board of Directors, and that of our other key executive officers and",
      "prior_body": "In order for us to maintain or improve our operating results, it is important that our current clients continue to use our applications and purchase additional applications from us, and that we add new clients. Most of our clients have the right to cancel their agreements with us for any or no reason by providing 30 days’ prior written notice. Moreover, from time to time, clients choose not to continue to use our applications at the same or higher level of service, if at all. Our annual revenue retention rate fluctuates as a result of a number of factors, including but not limited to the level of client satisfaction with our applications, pricing, the prices of competing products or services, mergers and acquisitions affecting our client base, reduced hiring by our clients or reductions in our clients’ spending levels. In addition, because our Beti technology is designed to eliminate payroll errors that lead to billable corrections and unscheduled payroll runs, we have experienced a reduction in these activities that would historically otherwise generate additional revenue for us. If our clients do not continue to use our applications, renew on less favorable terms or fail to purchase additional applications, or if we fail to add new clients, our annual revenue retention rate may decline and our business, operating results or financial condition could be adversely affected."
    },
    {
      "status": "MODIFIED",
      "current_title": "The failure to develop and maintain our brand cost-effectively could have an adverse effect on our business.",
      "prior_title": "The failure to develop and maintain our brand cost-effectively could have an adverse effect on our business.",
      "similarity_score": 0.629,
      "confidence": "medium",
      "key_changes": [
        "Reworded sentence: \"If we fail to successfully promote and maintain our brand, or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new clients or retain our existing 23 23 clients to the extent necessary to realize a sufficient return on our brand-building efforts, which could have an adverse effect on our business.As we continue to enhance our solution to serve clients located outside of the United States, our business is subject to risks associated with international operations.An element of our growth strategy is to expand our operations and client base, including in markets outside of the United States.\""
      ],
      "current_body": "We believe that developing and maintaining widespread awareness of our brand in a cost-effective manner is critical to achieving widespread acceptance of our solution and is an important element in attracting new clients and retaining existing clients. Successful promotion of our brand depends largely on the effectiveness of our marketing efforts and on our ability to provide reliable and useful applications at competitive prices. Brand promotion activities, including increased spending on our national media campaigns, may not yield increased revenues, and even if they do, any increased revenues may not offset the expenses incurred in building our brand. If we fail to successfully promote and maintain our brand, or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new clients or retain our existing 23 23 clients to the extent necessary to realize a sufficient return on our brand-building efforts, which could have an adverse effect on our business.As we continue to enhance our solution to serve clients located outside of the United States, our business is subject to risks associated with international operations.An element of our growth strategy is to expand our operations and client base, including in markets outside of the United States. Launching into international markets and doing business internationally involves a number of risks, including but not limited to:•multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits, and licenses;•failure to obtain and maintain regulatory approvals for the use of our products in various countries;•lack of brand recognition, including greater brand recognition of local or other global competitors who have more established operations in the markets we are seeking to enter;•lack of familiarity with local, regional or national politics, culture, economics, market conditions and commerce;•complexities and difficulties in obtaining protection for and enforcing our intellectual property rights;•difficulties in staffing and managing foreign operations; •financial risks, such as the impact of local and regional financial crises on demand for our products and exposure to foreign currency exchange rate fluctuations;•natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions;•certain expenses including, among others, expenses for travel, translation and insurance; and•regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act, its books and records provisions or its anti-bribery provisions, as well as similar laws in foreign jurisdictions.Our expansion into international markets requires significant resources and management attention and subjects us to regulatory, economic and political risks that differ from those in the United States. Because of our inexperience with international operations, we cannot ensure that our expansion into international markets will be successful, and the impact of such expansion may adversely affect our business, operating results or financial condition.Our business depends in part on the success of our relationships with third parties. We rely on third-party couriers to deliver payroll checks and tax forms and on financial and accounting processing systems and various financial institutions to perform financial services in connection with our applications, such as providing automated clearing house (“ACH”) and wire transfers as part of our payroll and payroll tax payment services and facilitating our Vault Visa® Payroll Card. We also rely on third parties to provide technology and content support, manufacture time clocks and process background checks. We anticipate that we will continue to depend on various third-party relationships in order to provide these and other services. Identifying, negotiating and documenting relationships with these third parties and integrating third-party content and technology requires significant time and resources. Our agreements with third parties typically are non-exclusive and do not prohibit them from working with our competitors. In addition, these third parties may not perform as expected under our agreements, which could hinder our ability to deliver certain services to our clients and negatively affect our brand and reputation. A global economic slowdown could also adversely affect the businesses of our third-party providers, hindering their ability to provide the services on which we rely. If we are unsuccessful in establishing or maintaining our relationships with these third parties, or the services provided by third parties fail to meet our clients’ or client employees’ expectations, our ability to compete in the marketplace or to grow our revenues could be impaired and our business, operating results or financial condition could be adversely affected. Furthermore, due to our dependence on financial institutions for certain services, a systemic shutdown of the banking industry or a disruption of the Federal Reserve Bank’s services, including ACH processing, would impede our ability to provide our payroll and expense reimbursement services by delaying direct deposits and other financial transactions across the United States and could have an adverse impact on our financial results and liquidity.We employ third-party licensed software for use in our applications and the inability to maintain these licenses or errors in the software we license could result in increased costs or reduced service levels, which could adversely affect our business.Our applications incorporate certain third-party software obtained under licenses from other companies. For example, we rely on third-party software to support our background checks application. We anticipate that we will continue to rely on third-party software and development tools from third parties in the future. If the third-party software we currently license becomes unavailable, we may be unable to identify commercially reasonable alternatives without significant cost or difficulty, or clients to the extent necessary to realize a sufficient return on our brand-building efforts, which could have an adverse effect on our business.",
      "prior_body": "We believe that developing and maintaining widespread awareness of our brand in a cost-effective manner is critical to achieving widespread acceptance of our solution and is an important element in attracting new clients and retaining existing clients. Successful promotion of our brand depends largely on the effectiveness of our marketing efforts and on our ability to provide reliable and useful applications at competitive prices. Brand promotion activities, including increased spending on our national media campaigns, may not yield increased revenues, and even if they do, any increased revenues may not offset the expenses incurred in building our brand. If we fail to successfully promote and maintain our brand, or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new clients or retain our existing clients to the extent necessary to realize a sufficient return on our brand-building efforts, which could have an adverse effect on our business."
    },
    {
      "status": "MODIFIED",
      "current_title": "Our increasing focus on, and investments in, automation expose us to a number of risks.",
      "prior_title": "Our increasing focus on, and investments in, automation expose us to a number of risks.",
      "similarity_score": 0.612,
      "confidence": "medium",
      "key_changes": [
        "Reworded sentence: \"We currently utilize automation and machine learning in certain of our products and services to deliver a better experience for our clients and their employees or customers, and we expect to automate more functions within our solution in the future.\"",
        "Reworded sentence: \"Data sourcing, technology, integration and process issues, programmed bias in decision-making algorithms, concerns over intellectual property, concerns over incorrect or inaccurate outputs, security concerns, and the protection of privacy could impair the adoption and acceptance of our automated solutions.\"",
        "Reworded sentence: \"In addition, we may incur additional compliance costs to the extent our automation initiatives utilize tools and technologies that are the subject of increasing regulatory and legal scrutiny, such as our AI-powered tools.\"",
        "Added sentence: \"25 25 If we fail to adequately protect our proprietary rights, our competitive advantage could be impaired and we may lose valuable assets, generate reduced revenues or incur costly litigation to protect our rights.Our success is dependent in part upon our intellectual property.\"",
        "Added sentence: \"We rely on a combination of copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish and to protect our intellectual property rights in the United States and in foreign jurisdictions.\""
      ],
      "current_body": "A key part of our strategy is our focus on automation. We currently utilize automation and machine learning in certain of our products and services to deliver a better experience for our clients and their employees or customers, and we expect to automate more functions within our solution in the future. We also leverage AI internally to make certain business processes more efficient. While we believe the use of these emerging technologies can present significant benefits, it also creates risks and challenges. The development and implementation of such advanced technologies is complex. We have invested, and intend to continue to invest, significant time and resources in our automation initiatives, some or all of which may not result in new products or enhancements to our solution or services or, even if deployed, may not materially improve client or client employee experience. Furthermore, existing and prospective clients may be hesitant to adopt products that rely on automation, particularly those that utilize AI. Data sourcing, technology, integration and process issues, programmed bias in decision-making algorithms, concerns over intellectual property, concerns over incorrect or inaccurate outputs, security concerns, and the protection of privacy could impair the adoption and acceptance of our automated solutions. There also may be real or perceived social harm, unfairness, or other outcomes that undermine public confidence in the use and deployment of AI. If our investments in automation initiatives do not result in marketable products or services, or the resulting solutions do not gain market acceptance or we otherwise do not fully realize the intended benefits of these significant investments, our operating results and financial condition may suffer. In addition, we may incur additional compliance costs to the extent our automation initiatives utilize tools and technologies that are the subject of increasing regulatory and legal scrutiny, such as our AI-powered tools. These laws and regulations are developing and vary from one jurisdiction to another. Future legislative and regulatory action, court decisions or other governmental action may adversely impact our ability to pursue our automation strategy and, in turn, may adversely impact our operations and financial results. 25 25 If we fail to adequately protect our proprietary rights, our competitive advantage could be impaired and we may lose valuable assets, generate reduced revenues or incur costly litigation to protect our rights.Our success is dependent in part upon our intellectual property. We rely on a combination of copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish and to protect our intellectual property rights in the United States and in foreign jurisdictions. However, the steps we take to protect our intellectual property may be inadequate. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Despite our precautions, it may be possible for unauthorized third parties to copy our applications and use information that we regard as proprietary to create products or services that compete with ours.We may be required to spend significant resources to monitor and protect our intellectual property. We have been involved in litigation in the past and litigation may be necessary in the future to protect and enforce our intellectual property rights and to protect our trade secrets. Such litigation could be costly, time-consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. We may not be able to secure, protect and enforce our intellectual property rights or control access to, and the distribution of, our solution and proprietary information, which could adversely affect our business.We may be sued by third parties for alleged infringement of their proprietary rights.Considerable intellectual property development activity exists in our industry, and we expect that companies will increasingly be subject to infringement claims as the number of applications and competitors grows and the functionality of applications in different industry segments overlaps. Our competitors, as well as a number of other entities and individuals, may own or claim to own intellectual property in technology areas relating to our solution or applications. In addition, we may increasingly be subject to trademark infringement claims as our presence grows in the marketplace. From time to time, third parties have asserted and may in the future assert that we are infringing on their intellectual property rights, and we may be found to be infringing upon such rights. A claim of infringement may also be made relating to technology that we acquire or license from third parties. However, we may be unaware of the intellectual property rights of others that may cover, or may be alleged to cover, some or all of our solution, applications or brands.The outcome of litigation is inherently unpredictable and, as a result, any future litigation or claim of infringement could (i) cause us to enter into an unfavorable royalty or license agreement, pay ongoing royalties or require that we comply with other unfavorable terms, (ii) require us to discontinue the sale of our solution or applications, (iii) require us to indemnify our clients or third-party service providers or (iv) require us to expend additional development resources to redesign our solution or applications. Any of these outcomes could harm our business. Even if we were to prevail, any litigation regarding our intellectual property could be costly and time consuming and divert the attention of our management and key personnel from our business and operations.We may acquire other businesses, applications or technologies, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results.In the future, we may seek to acquire or invest in businesses, applications or technologies that we believe complement or expand our applications, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are ultimately consummated.We do not have any experience in acquiring other businesses. If we acquire additional businesses, we may not be able to integrate the acquired personnel, operations and technologies successfully or to effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including:•the inability to integrate or benefit from acquired applications or services in a profitable manner;•unanticipated costs or liabilities associated with the acquisition;•the incurrence of acquisition-related costs;•difficulty integrating the accounting systems, operations and personnel of the acquired business;•difficulty and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business;•difficulty converting the clients of the acquired business onto our solution, including disparities in the revenues, licensing, support or services of the acquired company;•diversion of management’s attention from other business concerns;•harm to our existing relationships with clients as a result of the acquisition;",
      "prior_body": "A key part of our strategy is our focus on automation. We currently utilize automation and machine learning in certain of our products and services to deliver a better experience for our clients and their employees, and we expect to automate more functions within our solution in the future. We also leverage AI internally to make certain business processes more efficient. While we believe the use of these emerging technologies can present significant benefits, it also creates risks and challenges. The development and implementation of such advanced technologies is complex. We have invested, and intend to continue to invest, significant time and resources in our automation initiatives, some or all of which may not result in new products or enhancements to our solution or services or, even if deployed, may not materially improve client or client employee experience. Furthermore, existing and prospective clients may be hesitant to adopt products that rely on automation, particularly those that utilize AI. Data sourcing, technology, integration and process issues, programmed bias in decision-making algorithms, concerns over intellectual property, security concerns, and the protection of privacy could impair the adoption and acceptance of our automated solutions. If our investments in automation initiatives do not result in marketable products or services, or the resulting solutions do not gain market acceptance or we otherwise do not fully realize the intended benefits of these significant investments, our operating results and financial condition may suffer. In addition, we may incur additional compliance costs to the extent our automation initiatives utilize tools and technologies that are the subject of increasing regulatory and legal scrutiny, such as AI. These laws and regulations are developing and vary from one 24 24 24 jurisdiction to another. Future legislative and regulatory action, court decisions or other governmental action may adversely impact our ability to pursue our automation strategy and, in turn, may adversely impact our operations and financial results."
    },
    {
      "status": "MODIFIED",
      "current_title": "Certain of our operating results and financial metrics may be difficult to predict as a result of seasonality.",
      "prior_title": "Certain of our operating results and financial metrics may be difficult to predict as a result of seasonality.",
      "similarity_score": 0.536,
      "confidence": "low",
      "key_changes": [
        "Reworded sentence: \"In addition, unscheduled payroll runs at the end of the year (such as bonuses) have a positive impact on our recurring revenues in the fourth quarter.\"",
        "Added sentence: \"31 31 We are subject to certain operating and financial covenants that may restrict our business and financing activities and may adversely affect our cash flow and our ability to operate our business.We maintain a Revolving Credit Facility, which can be accessed as needed to supplement our operating cash flow and cash balances.\"",
        "Added sentence: \"Although we do not currently have any outstanding indebtedness, pursuant to the Credit Agreement (as defined herein) that governs the Revolving Credit Facility, we may not, subject to certain exceptions: •create or permit the existence of additional liens on our assets;•incur additional debt;•change the nature of our business;•make investments in and acquisitions of (or acquisitions of substantially all of the assets of) any person;•permit certain fundamental changes, including a merger;•dispose of assets;•make any distributions during an event of default, or any other distributions in excess of $50 million in any fiscal year without demonstrating pro forma compliance with certain financial covenants;•enter into transactions with affiliates other than in the ordinary course of business on an arm’s-length basis;•enter into certain transactions, including swap agreements and sale and leaseback transactions; or•pay dividends or distributions of our capital stock.In addition, we are required to maintain as of the end of each fiscal quarter a consolidated interest coverage ratio of not less than 3.0 to 1.0 and a consolidated leverage ratio of not greater than 3.0 to 1.0.\"",
        "Added sentence: \"The operating and financial covenants in the Credit Agreement, as well as any future financing agreements that we may enter into, may restrict our ability to finance our operations, engage in business activities or expand or fully pursue our business strategies.\"",
        "Added sentence: \"If we borrow in the future, we may be required to use a substantial portion of our cash flows to pay principal and interest on our debt, which would reduce the amount of money available for operations, working capital, expansion, or other general corporate purposes.Our ability to meet our expenses and debt obligations and comply with the operating and financial covenants may be affected by financial, business, economic, regulatory and other factors beyond our control.\""
      ],
      "current_body": "We have historically experienced seasonality in our revenues. A significant portion of our recurring revenues relate to the annual processing of payroll tax filing forms such as Form W-2 and Form 1099 and the annual processing and filing of ACA-related forms. These forms are typically processed in the first quarter of the year and, as a result, positively impact first quarter recurring revenues. In addition, unscheduled payroll runs at the end of the year (such as bonuses) have a positive impact on our recurring revenues in the fourth quarter. Although we expect the magnitude of seasonal fluctuations in our revenues to decrease in the future to the extent clients utilize more of our non-payroll applications, seasonal fluctuations in certain of our operating results and financial metrics may make such results and metrics difficult to predict. 31 31 We are subject to certain operating and financial covenants that may restrict our business and financing activities and may adversely affect our cash flow and our ability to operate our business.We maintain a Revolving Credit Facility, which can be accessed as needed to supplement our operating cash flow and cash balances. Although we do not currently have any outstanding indebtedness, pursuant to the Credit Agreement (as defined herein) that governs the Revolving Credit Facility, we may not, subject to certain exceptions: •create or permit the existence of additional liens on our assets;•incur additional debt;•change the nature of our business;•make investments in and acquisitions of (or acquisitions of substantially all of the assets of) any person;•permit certain fundamental changes, including a merger;•dispose of assets;•make any distributions during an event of default, or any other distributions in excess of $50 million in any fiscal year without demonstrating pro forma compliance with certain financial covenants;•enter into transactions with affiliates other than in the ordinary course of business on an arm’s-length basis;•enter into certain transactions, including swap agreements and sale and leaseback transactions; or•pay dividends or distributions of our capital stock.In addition, we are required to maintain as of the end of each fiscal quarter a consolidated interest coverage ratio of not less than 3.0 to 1.0 and a consolidated leverage ratio of not greater than 3.0 to 1.0. The operating and financial covenants in the Credit Agreement, as well as any future financing agreements that we may enter into, may restrict our ability to finance our operations, engage in business activities or expand or fully pursue our business strategies. If we borrow in the future, we may be required to use a substantial portion of our cash flows to pay principal and interest on our debt, which would reduce the amount of money available for operations, working capital, expansion, or other general corporate purposes.Our ability to meet our expenses and debt obligations and comply with the operating and financial covenants may be affected by financial, business, economic, regulatory and other factors beyond our control. We may be unable to control many of these factors and comply with these covenants. A breach of any of the covenants under our Credit Agreement could result in an event of default, which could result in the acceleration of any outstanding indebtedness or foreclosure on our assets pledged to secure the indebtedness.If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.As a public company, we are required to maintain internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements. Management must evaluate and furnish a report on the effectiveness of our internal control over financial reporting as of the end of each fiscal year, and our auditors must attest to the effectiveness of our internal control over financial reporting.If we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. If we identify material weaknesses in our internal control over financial reporting or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and/or we could become subject to investigations by the New York Stock Exchange (the “NYSE”), the SEC, or other regulatory authorities, and the market price of our common stock could be negatively affected.Our actual operating results may differ significantly from our guidance.We have released, and may continue to release, guidance in our earnings conference calls, earnings releases, or otherwise, regarding our future performance, which represents our estimates as of the date of release. This guidance, which includes forward-looking statements, has been and will be based on projections prepared by our management. These projections are not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, and neither our registered public accountants nor any other independent expert or outside party compiles or examines the projections. Accordingly, no such person expresses any opinion or any other form of assurance with respect to the projections.Projections are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control. Projections are also based upon specific assumptions with respect to future business decisions, some of which will change. The principal reason that we release guidance is to provide a basis for our management to discuss our",
      "prior_body": "We have historically experienced seasonality in our revenues. A significant portion of our recurring revenues relate to the annual processing of payroll tax filing forms such as Form W-2 and Form 1099 and the annual processing and filing of ACA-related forms. These forms are typically processed in the first quarter of the year and, as a result, positively impact first quarter recurring revenues. In addition, unscheduled payroll runs at the end of the year (such as bonuses) have a positive impact on our recurring 29 29 29 revenues in the fourth quarter. Although we expect the magnitude of seasonal fluctuations in our revenues to decrease in the future to the extent clients utilize more of our non-payroll applications, seasonal fluctuations in certain of our operating results and financial metrics may make such results and metrics difficult to predict."
    },
    {
      "status": "UNCHANGED",
      "current_title": "Our financial results may fluctuate due to many factors, some of which may be beyond our control.",
      "prior_title": "Our financial results may fluctuate due to many factors, some of which may be beyond our control.",
      "current_body": "Our results of operations, including our revenues, costs of revenues, administrative expenses, operating income, cash flow and deferred revenue, may vary significantly in the future, and the results of any one period should not be relied upon as an indication of future performance. Fluctuations in our financial results may negatively impact the value of our common stock. Our financial results may fluctuate as a result of a variety of factors, many of which are outside of our control, and as a result, may not fully reflect the underlying performance of our business. Factors that may cause our financial results to fluctuate from period to period include, without limitation: •our ability to attract new clients or sell additional applications to our existing clients; our ability to attract new clients or sell additional applications to our existing clients; •the number of new clients and their employees, as compared to the number of existing clients and their employees in a particular period; the number of new clients and their employees, as compared to the number of existing clients and their employees in a particular period; •the mix of clients between small, mid-sized and large organizations; the mix of clients between small, mid-sized and large organizations; •the extent to which we retain existing clients and the expansion or contraction of our relationships with them; the extent to which we retain existing clients and the expansion or contraction of our relationships with them; •the mix of applications sold during a period; the mix of applications sold during a period; •changes in our pricing policies or those of our competitors; changes in our pricing policies or those of our competitors; •seasonal factors affecting payroll processing, demand for our applications or potential clients’ purchasing decisions; seasonal factors affecting payroll processing, demand for our applications or potential clients’ purchasing decisions; •the amount and timing of operating expenses, including those related to the maintenance and expansion of our business, operations and infrastructure; the amount and timing of operating expenses, including those related to the maintenance and expansion of our business, operations and infrastructure; •the timing and success of new applications introduced by us and the timing of expenses related to the development of new applications and technologies; the timing and success of new applications introduced by us and the timing of expenses related to the development of new applications and technologies; •the timing and success of current and new competitive products and services offered by our competitors; the timing and success of current and new competitive products and services offered by our competitors; •economic conditions affecting our clients, including their ability to outsource HCM solutions and hire employees; economic conditions affecting our clients, including their ability to outsource HCM solutions and hire employees; •changes in laws, regulations or policies affecting our clients’ legal obligations and, as a result, demand for certain applications; changes in laws, regulations or policies affecting our clients’ legal obligations and, as a result, demand for certain applications; •changes in the competitive dynamics of our industry, including consolidation among competitors or clients; changes in the competitive dynamics of our industry, including consolidation among competitors or clients; •our ability to manage our existing business and future growth, including expenses related to our data centers and the expansion of such data centers and the addition of new offices; our ability to manage our existing business and future growth, including expenses related to our data centers and the expansion of such data centers and the addition of new offices; •the effects and expenses of acquisition of third-party technologies or businesses and any potential future charges for impairment of goodwill resulting from those acquisitions; the effects and expenses of acquisition of third-party technologies or businesses and any potential future charges for impairment of goodwill resulting from those acquisitions; •business disruptions caused by widespread public health crises, natural disasters, such as tornadoes, hurricanes, fires, earthquakes and floods (including as a result of climate change), acts of war, terrorism, or other catastrophic events; business disruptions caused by widespread public health crises, natural disasters, such as tornadoes, hurricanes, fires, earthquakes and floods (including as a result of climate change), acts of war, terrorism, or other catastrophic events; •network outages or security breaches; and network outages or security breaches; and •general economic, industry and market conditions. general economic, industry and market conditions."
    },
    {
      "status": "UNCHANGED",
      "current_title": "Our business and operations have experienced significant growth and organizational change. If we fail to manage such growth and change effectively, we may be unable to execute our business plan, maintain high levels of service or adequately address competitive challenges.",
      "prior_title": "Our business and operations have experienced significant growth and organizational change. If we fail to manage such growth and change effectively, we may be unable to execute our business plan, maintain high levels of service or adequately address competitive challenges.",
      "current_body": "We have experienced, and may continue to experience, significant growth in our operations, which has placed, and may continue to place, significant demands on our management, operational and financial resources. We have also experienced significant growth in the number of clients and transactions and the amount of client and employee data that our infrastructure supports. As a result, our organizational structure and recording systems and procedures are becoming more complex as we improve our operational, financial and management controls. Our success depends, in part, on our ability to manage this growth and organizational change effectively. Moreover, our international expansion efforts are exacerbating many of these challenges. To manage the effects of our growth, we must continue to improve our operational, financial and management controls and our reporting systems and procedures. The failure to effectively manage growth could result in (i) declines in the quality of, or client satisfaction with, our applications or service delivery, (ii) increases in costs, (iii) difficulties or delays in introducing new applications or (iv) other operational difficulties, any of which could adversely affect our business by impairing our ability to retain and attract clients or sell additional applications to our existing clients. In addition, our ability to expand our sales force may be constrained by the willingness and availability of qualified personnel to staff and manage new offices and our success in recruiting and training sales personnel. If our expansion efforts are unsuccessful, our business, operating results or financial condition could be adversely affected."
    },
    {
      "status": "UNCHANGED",
      "current_title": "The adoption of new, or adverse interpretations of existing U.S. state, U.S. federal, or foreign money transmitter, money services business, or payment services statutes or regulations could subject us to additional regulation and related expenses and require changes to our business.",
      "prior_title": "The adoption of new, or adverse interpretations of existing U.S. state, U.S. federal, or foreign money transmitter, money services business, or payment services statutes or regulations could subject us to additional regulation and related expenses and require changes to our business.",
      "current_body": "The adoption of new money transmitter, money services business, or payment services statutes or regulations in jurisdictions, changes in regulators’ interpretation of existing U.S. state, U.S. federal, or foreign money transmitter, money services business, or payments services statutes or regulations, or disagreements by regulatory authorities with our interpretation of such statutes or regulations, have subjected us to registration or licensing and could limit business activities until we are appropriately licensed. These occurrences could also require changes to the manner in which we conduct certain aspects of our business or invest client funds, which could adversely impact the amount of interest income we receive from investing client funds before such funds are remitted to the appropriate taxing authorities and accounts designated by our clients. As the Paycom National Trust Bank now manages U.S. client money movement activity, these transmissions are federally exempt from state money transmitter regulation, and we have surrendered all historically maintained state money transmitter licenses. Outside of the United States, we maintain certain “money services business” registrations and intend to apply for, where necessary, money services business, money transmitter, payment services provider, or similarly named applicable licenses. Should other U.S. state, U.S. federal, or foreign regulators make a determination that we have operated as an unlicensed money services business, money transmitter, or payment services provider, we could be subject to civil and criminal fines, penalties, costs of registration, legal fees, reputational damage or other negative consequences, any of which may have an adverse effect on our business operating results or financial condition. While we maintain we are not a money services business or money transmitter in the United States and other jurisdictions, our operations in certain jurisdictions in and outside of the U.S. are subject to AML laws and regulations, including, for example, the BSA. Among other things, the BSA requires certain financial institutions, including banks and money services businesses, to develop and implement risk-based AML programs, report large cash transactions and suspicious activity, and maintain transaction records. We have adopted an AML compliance program to mitigate the risk of our application being used for illegal or illicit activity and to help detect and prevent fraud. Our AML compliance program is designed to foster trust in our application and services. However, there can be no assurance that our employees, consultants, or agents will not take actions in violation of our policies for which we may be ultimately responsible, or that our policies and procedures will be adequate or will be determined to be adequate by regulators. Any violation of applicable AML laws or regulations could limit certain of our business activities until they are satisfactorily remediated and could result in civil and criminal penalties, including fines, which could damage our reputation and have a materially adverse effect on our results of operations and financial condition. Further, bank regulators continue to impose additional and stricter requirements on banks to ensure they are meeting their BSA obligations, and banks are increasingly viewing money services businesses and third-party senders to be higher risk customers for money laundering. Thus, our banking partners that assist in processing our money movement transactions may limit the scope of services they provide to us or may impose additional material requirements on us. These regulatory restrictions on banks and changes to banks’ internal risk-based policies and procedures may result in a decrease in the number of banks willing to do business with us, may require us to materially change the manner in which we conduct some aspects of our business, may decrease our revenues and earnings and could have a material adverse effect on our results of operations or financial condition."
    },
    {
      "status": "UNCHANGED",
      "current_title": "The issuance of additional stock in connection with acquisitions, our stock incentive plans, warrants or otherwise will dilute all other stockholders.",
      "prior_title": "The issuance of additional stock in connection with acquisitions, our stock incentive plans, warrants or otherwise will dilute all other stockholders.",
      "current_body": "Our certificate of incorporation authorizes us to issue up to 100 million shares of common stock and up to 10 million shares of preferred stock with such rights and preferences as may be determined by our board of directors. Subject to compliance with applicable rules and regulations, we may issue all of these shares that are not already outstanding without any action or approval by our stockholders. We intend to continue to evaluate strategic acquisitions in the future. We may pay for such acquisitions, in part or in full, through the issuance of additional equity securities. Any issuance of shares in connection with an acquisition, the exercise of stock options or warrants, the award of shares of restricted stock or otherwise would dilute the percentage ownership held by our existing stockholders."
    },
    {
      "status": "UNCHANGED",
      "current_title": "Anti-takeover provisions in our charter documents and Delaware law may delay or prevent an acquisition of our company.",
      "prior_title": "Anti-takeover provisions in our charter documents and Delaware law may delay or prevent an acquisition of our company.",
      "current_body": "Our certificate of incorporation, bylaws and Delaware law contain provisions that may have the effect of delaying or preventing a change in control of us or changes in our management. These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management. Any provision of our certificate of incorporation, bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could affect the price that some investors are willing to pay for our common stock."
    },
    {
      "status": "UNCHANGED",
      "current_title": "Our business depends in part on the success of our relationships with third parties.",
      "prior_title": "Our business depends in part on the success of our relationships with third parties.",
      "current_body": "We rely on third-party couriers to deliver payroll checks and tax forms and on financial and accounting processing systems and various financial institutions to perform financial services in connection with our applications, such as providing automated clearing house (“ACH”) and wire transfers as part of our payroll and payroll tax payment services and facilitating our Vault Visa® Payroll Card. We also rely on third parties to provide technology and content support, manufacture time clocks and process background checks. We anticipate that we will continue to depend on various third-party relationships in order to provide these and other services. Identifying, negotiating and documenting relationships with these third parties and integrating third-party content and technology requires significant time and resources. Our agreements with third parties typically are non-exclusive and do not prohibit them from working with our competitors. In addition, these third parties may not perform as expected under our agreements, which could hinder our ability to deliver certain services to our clients and negatively affect our brand and reputation. A global economic slowdown could also adversely affect the businesses of our third-party providers, hindering their ability to provide the services on which we rely. If we are unsuccessful in establishing or maintaining our relationships with these third parties, or the services provided by third parties fail to meet our clients’ or client employees’ expectations, our ability to compete in the marketplace or to grow our revenues could be impaired and our business, operating results or financial condition could be adversely affected. Furthermore, due to our dependence on financial institutions for certain services, a systemic shutdown of the banking industry or a disruption of the Federal Reserve Bank’s services, including ACH processing, would impede our ability to provide our payroll and expense reimbursement services by delaying direct deposits and other financial transactions across the United States and could have an adverse impact on our financial results and liquidity."
    },
    {
      "status": "UNCHANGED",
      "current_title": "We face challenges related to attracting and retaining larger clients, including demand for customized features, longer sales cycles and less predictability in completing sales.",
      "prior_title": "We face challenges related to attracting and retaining larger clients, including demand for customized features, longer sales cycles and less predictability in completing sales.",
      "current_body": "In some cases, prospective clients, especially larger companies, expect customized features and functions unique to their business processes, or are seeking to integrate our solutions with other products. If we do not meet the demands of such prospective clients, the market for our solution will be more limited and our business could be adversely affected. Furthermore, pursing larger clients may result in a longer sales cycle and, in some cases, we may devote a significant amount of support and service resources to attract and acquire larger prospective clients with no guarantee that these prospective clients will adopt our solution."
    },
    {
      "status": "UNCHANGED",
      "current_title": "We may be sued by third parties for alleged infringement of their proprietary rights.",
      "prior_title": "We may be sued by third parties for alleged infringement of their proprietary rights.",
      "current_body": "Considerable intellectual property development activity exists in our industry, and we expect that companies will increasingly be subject to infringement claims as the number of applications and competitors grows and the functionality of applications in different industry segments overlaps. Our competitors, as well as a number of other entities and individuals, may own or claim to own intellectual property in technology areas relating to our solution or applications. In addition, we may increasingly be subject to trademark infringement claims as our presence grows in the marketplace. From time to time, third parties have asserted and may in the future assert that we are infringing on their intellectual property rights, and we may be found to be infringing upon such rights. A claim of infringement may also be made relating to technology that we acquire or license from third parties. However, we may be unaware of the intellectual property rights of others that may cover, or may be alleged to cover, some or all of our solution, applications or brands. The outcome of litigation is inherently unpredictable and, as a result, any future litigation or claim of infringement could (i) cause us to enter into an unfavorable royalty or license agreement, pay ongoing royalties or require that we comply with other unfavorable terms, (ii) require us to discontinue the sale of our solution or applications, (iii) require us to indemnify our clients or third-party service providers or (iv) require us to expend additional development resources to redesign our solution or applications. Any of these outcomes could harm our business. Even if we were to prevail, any litigation regarding our intellectual property could be costly and time consuming and divert the attention of our management and key personnel from our business and operations."
    },
    {
      "status": "UNCHANGED",
      "current_title": "Our business, operating results or financial condition could be adversely affected if our solution fails to perform properly or our clients are not satisfied with our services.",
      "prior_title": "Our business, operating results or financial condition could be adversely affected if our solution fails to perform properly or our clients are not satisfied with our services.",
      "current_body": "Our solution is inherently complex and may in the future contain, or develop, undetected defects or errors. Any defects in our applications could adversely affect our reputation, impair our ability to sell our applications in the future and result in significant costs to us. The costs incurred to correct any application defects may be substantial and could adversely affect our business, operating results or financial condition. Any defects in functionality or defects that cause interruptions in the availability of our applications could result in: •loss or delayed market acceptance and sales of our applications; loss or delayed market acceptance and sales of our applications; •termination of service agreements or loss of clients; termination of service agreements or loss of clients; •credits, refunds or other liability to clients, including reimbursements for any fees or penalties assessed by regulatory agencies; credits, refunds or other liability to clients, including reimbursements for any fees or penalties assessed by regulatory agencies; •breach of contract, breach of warranty or indemnification claims against us, which may result in litigation; breach of contract, breach of warranty or indemnification claims against us, which may result in litigation; •diversion of development and service resources; diversion of development and service resources; •increased scrutiny of our solution from regulatory agencies; and increased scrutiny of our solution from regulatory agencies; and •injury to our reputation. injury to our reputation. Because of the large amount of data that we collect and manage, it is possible that hardware failures or errors in our applications could result in data loss or corruption or cause the information that we collect to be incomplete or contain inaccuracies that our clients regard as significant. From time to time, our clients assert claims against us alleging that they suffered damages due to a defect, error, or other failure of our solution. We also face potential liability from our clients, and possibly third parties, in the event we fail to report information, particularly wage and earnings information, criminal records or other potentially negative information, or wrongly report such information. From time to time, we have been subject to claims and lawsuits by current and potential employees of our clients, alleging that we provided to our clients inaccurate or improper information that negatively affected the clients. Although the resolutions of these lawsuits have not had a material adverse effect on us to date, the costs of such claims, including settlement amounts or punitive damages, could be material in the future, could cause adverse publicity and reputational damage, could divert the attention of our management, could subject us to equitable remedies relating to the operation of our business and provision of services and result in significant legal expenses, all of which could have a material adverse effect on our business, financial condition and results of operations and adverse publicity, and could result in the loss of existing clients and make it difficult to attract new clients. Our errors and omissions insurance may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our policy may not cover all claims made against us, and defending a suit, regardless of its merit, could be costly and divert management’s attention. Any failures in the performance of our solution could harm our reputation and our ability to retain existing clients and attract new clients, which would have an adverse impact on our business, operating results or financial condition. Furthermore, our business depends on our ability to satisfy our clients, both with respect to our applications and the technical support provided to help our clients use the applications that address the needs of their businesses. We use our in-house deployment personnel to implement and configure our solution and provide support to our clients. If a client is not satisfied with the quality of our solution, the applications delivered or the support provided, we could incur additional costs to address the situation, our profitability might be negatively affected, and the client’s dissatisfaction with our deployment or support service could harm our ability to sell additional applications to that client. In addition, our sales process is highly dependent on the reputation of our solution and applications and on positive recommendations from our existing clients. Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality technical support, could adversely affect client retention, our reputation, our ability to sell our applications to existing and prospective clients, and, as a result, our business, operating results or financial condition."
    },
    {
      "status": "UNCHANGED",
      "current_title": "As we continue to enhance our solution to serve clients located outside of the United States, our business is subject to risks associated with international operations.",
      "prior_title": "As we continue to enhance our solution to serve clients located outside of the United States, our business is subject to risks associated with international operations.",
      "current_body": "An element of our growth strategy is to expand our operations and client base, including in markets outside of the United States. Launching into international markets and doing business internationally involves a number of risks, including but not limited to: •multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits, and licenses; multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits, and licenses; •failure to obtain and maintain regulatory approvals for the use of our products in various countries; failure to obtain and maintain regulatory approvals for the use of our products in various countries; •lack of brand recognition, including greater brand recognition of local or other global competitors who have more established operations in the markets we are seeking to enter; lack of brand recognition, including greater brand recognition of local or other global competitors who have more established operations in the markets we are seeking to enter; •lack of familiarity with local, regional or national politics, culture, economics, market conditions and commerce; lack of familiarity with local, regional or national politics, culture, economics, market conditions and commerce; •complexities and difficulties in obtaining protection for and enforcing our intellectual property rights; complexities and difficulties in obtaining protection for and enforcing our intellectual property rights; •difficulties in staffing and managing foreign operations; difficulties in staffing and managing foreign operations; •financial risks, such as the impact of local and regional financial crises on demand for our products and exposure to foreign currency exchange rate fluctuations; financial risks, such as the impact of local and regional financial crises on demand for our products and exposure to foreign currency exchange rate fluctuations; •natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; •certain expenses including, among others, expenses for travel, translation and insurance; and certain expenses including, among others, expenses for travel, translation and insurance; and •regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act, its books and records provisions or its anti-bribery provisions, as well as similar laws in foreign jurisdictions. regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act, its books and records provisions or its anti-bribery provisions, as well as similar laws in foreign jurisdictions. Our expansion into international markets requires significant resources and management attention and subjects us to regulatory, economic and political risks that differ from those in the United States. Because of our inexperience with international operations, we cannot ensure that our expansion into international markets will be successful, and the impact of such expansion may adversely affect our business, operating results or financial condition."
    },
    {
      "status": "UNCHANGED",
      "current_title": "Our certificate of incorporation contains an exclusive forum provision that may discourage lawsuits against us and our directors and officers.",
      "prior_title": "Our certificate of incorporation contains an exclusive forum provision that may discourage lawsuits against us and our directors and officers.",
      "current_body": "Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or if no Court of Chancery located within the State of Delaware has jurisdiction, the Federal District Court for the District of Delaware) will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of Delaware law or our certificate of incorporation or our bylaws (as either may be amended from time to time) or any action asserting a claim against us or any of our directors, officers or other employees governed by the internal affairs doctrine. This exclusive forum provision applies to state and federal law claims, although our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. In addition, this exclusive forum selection provision will not apply to claims under the Exchange Act. Moreover, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce our forum selection provision as written in connection with claims arising under the Securities Act. This forum selection provision may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us. It is also possible that, notwithstanding the forum selection clause included in our certificate of incorporation, a court could rule that such a provision is inapplicable or unenforceable."
    },
    {
      "status": "UNCHANGED",
      "current_title": "If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.",
      "prior_title": "If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.",
      "current_body": "As a public company, we are required to maintain internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements. Management must evaluate and furnish a report on the effectiveness of our internal control over financial reporting as of the end of each fiscal year, and our auditors must attest to the effectiveness of our internal control over financial reporting. If we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. If we identify material weaknesses in our internal control over financial reporting or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and/or we could become subject to investigations by the New York Stock Exchange (the “NYSE”), the SEC, or other regulatory authorities, and the market price of our common stock could be negatively affected."
    },
    {
      "status": "UNCHANGED",
      "current_title": "If we fail to adequately protect our proprietary rights, our competitive advantage could be impaired and we may lose valuable assets, generate reduced revenues or incur costly litigation to protect our rights.",
      "prior_title": "If we fail to adequately protect our proprietary rights, our competitive advantage could be impaired and we may lose valuable assets, generate reduced revenues or incur costly litigation to protect our rights.",
      "current_body": "Our success is dependent in part upon our intellectual property. We rely on a combination of copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish and to protect our intellectual property rights in the United States and in foreign jurisdictions. However, the steps we take to protect our intellectual property may be inadequate. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Despite our precautions, it may be possible for unauthorized third parties to copy our applications and use information that we regard as proprietary to create products or services that compete with ours. We may be required to spend significant resources to monitor and protect our intellectual property. We have been involved in litigation in the past and litigation may be necessary in the future to protect and enforce our intellectual property rights and to protect our trade secrets. Such litigation could be costly, time-consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. We may not be able to secure, protect and enforce our intellectual property rights or control access to, and the distribution of, our solution and proprietary information, which could adversely affect our business."
    },
    {
      "status": "UNCHANGED",
      "current_title": "Compliance with employment-related laws and regulations could increase our cost of doing business and violations of such laws and regulations could subject us to fines and lawsuits.",
      "prior_title": "Compliance with employment-related laws and regulations could increase our cost of doing business and violations of such laws and regulations could subject us to fines and lawsuits.",
      "current_body": "Our operations are subject to a variety of federal, state, local and international employment-related laws and regulations, including, but not limited to, the U.S. Fair Labor Standards Act, which governs such matters as minimum wages, the Family Medical Leave Act, overtime pay, compensable time, recordkeeping and other working conditions, Title VII of the Civil Rights Act, the Employee Retirement Income Security Act, the Americans with Disabilities Act, the National Labor Relations Act, regulations of the Equal Employment Opportunity Commission, regulations of the Office of Civil Rights, regulations of the Department of Labor, regulations of state attorneys general, federal and state wage and hour laws, and a variety of similar laws enacted by the federal and state governments that govern these and other employment-related matters. As our employees are located in a number of states and countries, compliance with evolving laws and regulations could substantially increase our cost of doing business. In recent years, we have been subject to threatened and filed lawsuits, including class action lawsuits, alleging violations of federal and state law regarding workplace and employment matters, overtime wage policies, discrimination and similar matters. We may incur damages and expenses resulting from lawsuits of this type, which could have a material adverse effect on our business, financial condition or results of operations. We are currently subject to employee-related legal proceedings in the ordinary course of business. While we believe that we have adequate reserves for those losses that we believe are probable and can be reasonably estimated, the ultimate results of legal proceedings and claims cannot be predicted with certainty. While none of our employees are currently represented by a union, our employees have the right under the National Labor Relations Act to form or affiliate with a union. If a significant portion of our employees were to become unionized, our labor costs could increase and our business could be negatively affected by other requirements and expectations that could increase our costs, change our employee culture, impact corporate flexibility and disrupt our business. Additionally, our responses to any union organizing efforts could negatively impact perception of our brand and have adverse effects on our business, including on our financial results. These responses could also expose us to legal risk, causing us to incur costs related to defending legal and regulatory actions, potential penalties and restrictions or reputational harm."
    },
    {
      "status": "UNCHANGED",
      "current_title": "Changes in laws, government regulations and policies could have a material adverse effect on our business and results of operations.",
      "prior_title": "Changes in laws, government regulations and policies could have a material adverse effect on our business and results of operations.",
      "current_body": "Many of our applications are designed to assist our clients in complying with government regulations that continually change. The introduction of new regulatory requirements, or new interpretations of existing laws or regulations, could increase our cost of doing business, decrease our revenues and net income or require us to make changes to our applications. Moreover, changing regulatory requirements may make the introduction of new applications and enhancements more costly or more time-consuming than we currently anticipate or could prevent the introduction of new applications and enhancements by us altogether. For example, a change in tax laws and regulations resulting in a decrease in the amount of taxes required to be withheld or accelerating the deadline to remit taxes to appropriate tax agencies would adversely impact our average balance of funds held for clients and, as a result, adversely impact the interest income we earn on such funds during the period between receipt and disbursement. Changes in laws, regulations or policies could also affect the extent and type of benefits employers are required, or may choose, to provide employees or the amount and type of taxes employers and employees are required to pay. Such changes could reduce or eliminate the need for certain of our existing applications or services, which would result in decreased revenues. Further, we may spend time and money developing new applications and enhancements that, due to regulatory changes, become unnecessary prior to being released. In addition, any failure to educate and assist our clients with respect to new or revised legislation that impacts them could have an adverse effect on our reputation, and any failure to modify our applications or develop new applications in a timely fashion in response to regulatory changes could have an adverse effect on our business and results of operations. Additionally, new regulations or changes to existing regulations could be unclear, difficult to interpret or conflict with other applicable regulations. Our or our clients’ failure to comply with new or modified laws or regulations could result in financial penalties, legal proceedings or reputational harm. Finally, a negative audit or other investigations by the U.S. Government could adversely affect our ability to receive U.S. Government contracts and could result in financial or reputational harm. In addition, federal, state and foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the internet as a commercial medium. Changes in these laws or regulations could require us to modify our applications. Further, government agencies or private organizations may impose taxes, fees or other charges for accessing the internet or commerce conducted via the internet. These laws or charges could limit the growth of internet-related commerce or communications generally or could result in reductions in the demand for internet-based applications such as ours."
    },
    {
      "status": "UNCHANGED",
      "current_title": "We are subject to certain operating and financial covenants that may restrict our business and financing activities and may adversely affect our cash flow and our ability to operate our business.",
      "prior_title": "We are subject to certain operating and financial covenants that may restrict our business and financing activities and may adversely affect our cash flow and our ability to operate our business.",
      "current_body": "We maintain a Revolving Credit Facility, which can be accessed as needed to supplement our operating cash flow and cash balances. Although we do not currently have any outstanding indebtedness, pursuant to the Credit Agreement (as defined herein) that governs the Revolving Credit Facility, we may not, subject to certain exceptions: •create or permit the existence of additional liens on our assets; create or permit the existence of additional liens on our assets; •incur additional debt; incur additional debt; •change the nature of our business; change the nature of our business; •make investments in and acquisitions of (or acquisitions of substantially all of the assets of) any person; make investments in and acquisitions of (or acquisitions of substantially all of the assets of) any person; •permit certain fundamental changes, including a merger; permit certain fundamental changes, including a merger; •dispose of assets; dispose of assets; •make any distributions during an event of default, or any other distributions in excess of $50 million in any fiscal year without demonstrating pro forma compliance with certain financial covenants; make any distributions during an event of default, or any other distributions in excess of $50 million in any fiscal year without demonstrating pro forma compliance with certain financial covenants; •enter into transactions with affiliates other than in the ordinary course of business on an arm’s-length basis; enter into transactions with affiliates other than in the ordinary course of business on an arm’s-length basis; •enter into certain transactions, including swap agreements and sale and leaseback transactions; or enter into certain transactions, including swap agreements and sale and leaseback transactions; or •pay dividends or distributions of our capital stock. pay dividends or distributions of our capital stock. In addition, we are required to maintain as of the end of each fiscal quarter a consolidated interest coverage ratio of not less than 3.0 to 1.0 and a consolidated leverage ratio of not greater than 3.0 to 1.0. The operating and financial covenants in the Credit Agreement, as well as any future financing agreements that we may enter into, may restrict our ability to finance our operations, engage in business activities or expand or fully pursue our business strategies. If we borrow in the future, we may be required to use a substantial portion of our cash flows to pay principal and interest on our debt, which would reduce the amount of money available for operations, working capital, expansion, or other general corporate purposes. Our ability to meet our expenses and debt obligations and comply with the operating and financial covenants may be affected by financial, business, economic, regulatory and other factors beyond our control. We may be unable to control many of these factors and comply with these covenants. A breach of any of the covenants under our Credit Agreement could result in an event of default, which could result in the acceleration of any outstanding indebtedness or foreclosure on our assets pledged to secure the indebtedness."
    },
    {
      "status": "UNCHANGED",
      "current_title": "If we are unable to attract and retain qualified personnel, including software developers, product managers and skilled IT, sales, marketing and operational personnel, our ability to develop and market new and existing products and, in turn, increase our revenue and profitability could be adversely affected.",
      "prior_title": "If we are unable to attract and retain qualified personnel, including software developers, product managers and skilled IT, sales, marketing and operational personnel, our ability to develop and market new and existing products and, in turn, increase our revenue and profitability could be adversely affected.",
      "current_body": "Our future success is dependent on our ability to continue to enhance and introduce new applications. As a result, we are heavily dependent on our ability to attract and retain qualified software developers, product managers and IT personnel with the requisite education, background and industry experience. In addition, to continue to execute our growth strategy, we must also attract and retain qualified sales, marketing and operational personnel capable of supporting a larger and more diverse client base. The technology industry is characterized by a high level of employee mobility and aggressive recruiting among competitors, and competition is particularly intense for qualified software developers, product managers and IT personnel. In addition, the nature of the office environment is changing as employers continue to offer various remote or hybrid work arrangements, which can be an important factor in a candidate’s decision on employment. We maintain an office-centric operational model. Certain companies with which we compete for talent offer work arrangements more flexible than ours, which may impact our ability to attract and retain qualified personnel if potential or current employees prefer such policies. The competition for qualified personnel has been amplified by new immigration laws and policies that limit software companies’ ability to recruit internationally. Although such changes in immigration laws and policies have not had a significant direct impact on our workforce to date, the ensuing increase in demand for software developers and IT personnel could impair our ability to attract or retain skilled employees and/or significantly increase our costs to do so. Furthermore, identifying and recruiting qualified personnel and training them in the use of our applications requires significant time, expense and attention, and it can take a substantial amount of time before our employees are fully trained and productive. The unplanned loss of the services of a significant number of skilled employees could be disruptive to our development efforts, which may adversely affect our business by causing us to lose clients, increase operating expenses or divert management’s attention to recruit replacements for the departed employees."
    },
    {
      "status": "UNCHANGED",
      "current_title": "The market in which we participate is highly competitive, and if we do not compete effectively, our business, operating results or financial condition could be adversely affected.",
      "prior_title": "The market in which we participate is highly competitive, and if we do not compete effectively, our business, operating results or financial condition could be adversely affected.",
      "current_body": "The market for HCM software is highly competitive, rapidly evolving and fragmented. If we are unable to compete effectively, our business, operating results or financial condition could be adversely affected. We expect competition to 20 20 continue to remain intense as new technologies and new market entrants emerge and aggressive pricing and client retention strategies persist. Competition in the HCM solutions market is primarily based on service responsiveness, application quality and reputation, breadth of service and product offering, and price. Certain competitors have access to larger clients and major distribution agreements with consultants, software vendors and distributors and a more established global presence than we do. Certain of our competitors have in the past or may in the future:•adapt more rapidly to new or emerging technologies and changes in client requirements;•develop superior products or services, gain greater market acceptance and expand their product and service offerings more efficiently or rapidly;•offer products and services that we may not offer individually or at all, or bundle products and services in a manner that provides them with a price advantage;•offer products that can be integrated with other software or systems, whereas our single software may not allow for such integration;•develop and implement control processes that drive internal efficiencies, resulting in a better client experience;•establish and maintain partnerships with third parties that enhance and expand their product offering to business clients and employees;•take advantage of acquisition and other opportunities for expansion more readily;•maintain a lower cost basis;•secure contractual terms and implement other client retention strategies that increase our costs to acquire new clients;•adopt more aggressive or desirable pricing policies;•devote greater resources to the promotion, marketing and sale of their products and services; and•devote greater resources to the research and development of their products and services.Our competitors offer HCM solutions that may overlap with one, several or all categories of the applications we offer. We compete with companies such as Automatic Data Processing, Inc., Dayforce, Inc., Intuit, Inc., Oracle Corporation, Paychex, Inc., Paylocity Holding Corporation, SAP SE, ServiceNow, Inc., Ultimate Kronos Group, Workday, Inc., and other international, national, regional, and local providers. Our competitors provide HCM solutions by various means. Although certain providers continue to deliver legacy enterprise software, most now offer cloud-based solutions, resulting in increased competition for clients seeking the greater flexibility and access to information provided by cloud-based offerings. Furthermore, the HCM industry has experienced an emergence of white label and embedded payroll offerings. The proliferation of white label offerings and products and technologies utilizing embedded payroll systems may adversely affect our competitive position.In addition, some of our principal competitors offer their products or services at a lower price, which has resulted in pricing pressures. If we are unable to maintain our pricing levels, our operating results would be negatively impacted. In addition, pricing pressures and increased competition generally could hinder our ability to attract and retain clients and could result in reduced sales, reduced margins, losses or the failure of our solution to maintain widespread market acceptance, any of which could adversely affect our business, operating results or financial condition.Our business depends on our clients’ continued use of our applications, their purchases of additional applications from us and our ability to add new clients. Any decline in our clients’ continued use of our applications or purchases of additional applications could adversely affect our business, operating results or financial condition.In order for us to maintain or improve our operating results, it is important that our current clients continue to use our applications and purchase additional applications from us, and that we add new clients. Our annual revenue retention rate fluctuates as a result of a number of factors, including but not limited to the level of client satisfaction with our applications, pricing, the prices of competing products or services, mergers and acquisitions affecting our client base, reduced hiring by our clients or reductions in our clients’ spending levels. Many of our clients have the right to cancel their agreements with us for any or no reason by providing 30 days’ prior written notice. Moreover, from time to time, clients choose not to continue to use our applications at the same or higher level of service, if at all. Because we charge our clients on a per employee basis for certain services we provide, the performance of certain of our offerings is sensitive to changes in the labor market. Any increase or decrease in the number of employees of our clients will have a positive or negative impact, respectively, on our results of operations. As technology continues to evolve, more tasks historically performed by people have been and may continue to be replaced by automation, robotics, AI and other technological advances outside of our control, which may reduce our clients’ need for existing or future employees who are or would be potential users of our solution. If our clients reduce headcount, do not continue to use our applications, renew on less favorable terms or fail to purchase additional applications, or if we fail to add new clients, our annual revenue retention rate may decline and our business, operating results or financial condition could be adversely affected. continue to remain intense as new technologies and new market entrants emerge and aggressive pricing and client retention strategies persist. Competition in the HCM solutions market is primarily based on service responsiveness, application quality and reputation, breadth of service and product offering, and price. Certain competitors have access to larger clients and major distribution agreements with consultants, software vendors and distributors and a more established global presence than we do. Certain of our competitors have in the past or may in the future: •adapt more rapidly to new or emerging technologies and changes in client requirements; adapt more rapidly to new or emerging technologies and changes in client requirements; •develop superior products or services, gain greater market acceptance and expand their product and service offerings more efficiently or rapidly; develop superior products or services, gain greater market acceptance and expand their product and service offerings more efficiently or rapidly; •offer products and services that we may not offer individually or at all, or bundle products and services in a manner that provides them with a price advantage; offer products and services that we may not offer individually or at all, or bundle products and services in a manner that provides them with a price advantage; •offer products that can be integrated with other software or systems, whereas our single software may not allow for such integration; offer products that can be integrated with other software or systems, whereas our single software may not allow for such integration; •develop and implement control processes that drive internal efficiencies, resulting in a better client experience; develop and implement control processes that drive internal efficiencies, resulting in a better client experience; •establish and maintain partnerships with third parties that enhance and expand their product offering to business clients and employees; establish and maintain partnerships with third parties that enhance and expand their product offering to business clients and employees; •take advantage of acquisition and other opportunities for expansion more readily; take advantage of acquisition and other opportunities for expansion more readily; •maintain a lower cost basis; maintain a lower cost basis; •secure contractual terms and implement other client retention strategies that increase our costs to acquire new clients; secure contractual terms and implement other client retention strategies that increase our costs to acquire new clients; •adopt more aggressive or desirable pricing policies; adopt more aggressive or desirable pricing policies; •devote greater resources to the promotion, marketing and sale of their products and services; and devote greater resources to the promotion, marketing and sale of their products and services; and •devote greater resources to the research and development of their products and services. devote greater resources to the research and development of their products and services. Our competitors offer HCM solutions that may overlap with one, several or all categories of the applications we offer. We compete with companies such as Automatic Data Processing, Inc., Dayforce, Inc., Intuit, Inc., Oracle Corporation, Paychex, Inc., Paylocity Holding Corporation, SAP SE, ServiceNow, Inc., Ultimate Kronos Group, Workday, Inc., and other international, national, regional, and local providers. Our competitors provide HCM solutions by various means. Although certain providers continue to deliver legacy enterprise software, most now offer cloud-based solutions, resulting in increased competition for clients seeking the greater flexibility and access to information provided by cloud-based offerings. Furthermore, the HCM industry has experienced an emergence of white label and embedded payroll offerings. The proliferation of white label offerings and products and technologies utilizing embedded payroll systems may adversely affect our competitive position. In addition, some of our principal competitors offer their products or services at a lower price, which has resulted in pricing pressures. If we are unable to maintain our pricing levels, our operating results would be negatively impacted. In addition, pricing pressures and increased competition generally could hinder our ability to attract and retain clients and could result in reduced sales, reduced margins, losses or the failure of our solution to maintain widespread market acceptance, any of which could adversely affect our business, operating results or financial condition."
    },
    {
      "status": "UNCHANGED",
      "current_title": "If we are not able to develop enhancements and new applications, keep pace with technological developments or respond to future disruptive technologies, we might not remain competitive and our business could be adversely affected.",
      "prior_title": "If we are not able to develop enhancements and new applications, keep pace with technological developments or respond to future disruptive technologies, we might not remain competitive and our business could be adversely affected.",
      "current_body": "Our continued success will depend on our ability to adapt and innovate. In order to attract new clients and increase revenues from existing clients, we need to enhance, add new features to and improve our existing applications and introduce new applications. The success of any enhancements or new features and applications depends on several factors, including timely completion and introduction and market acceptance. We may expend significant time and resources developing and pursuing sales of a particular enhancement or application that may not result in revenues in the anticipated time frame or at all, or may not result in revenue growth sufficient to offset increased expenses. Further, changing legal and regulatory requirements may delay the development or introduction of enhancements or new applications or render certain of our applications obsolete. If we are unable to successfully develop enhancements, new features or new applications to meet client needs, our business and operating results could be adversely affected. In addition, because our applications are designed to operate on a variety of network, hardware and software platforms using internet tools and protocols, we must continuously modify and enhance our applications to keep pace with changes in internet-related hardware, software, communication, browser and database technologies. If we are unable to respond in a timely and cost-effective manner to these rapid technological developments, our current and future applications may become less marketable and less competitive or even obsolete. Our success is also subject to the risk of future disruptive technologies, such as AI and machine learning. The failure to develop enhancements to our applications for, or that incorporate, technologies such as natural language processing, AI, and machine learning may impact our ability to increase the efficiency of and reduce costs associated with our clients’ operations. If new technologies emerge that are able to deliver HCM solutions at lower prices, more efficiently or more conveniently, such technologies could adversely impact our ability to compete. We have made significant investments in developing, testing, deploying and supporting AI-powered tools in our solution. Continuing to develop, test, deploy and support resource-intensive AI-powered tools will require additional investment and may increase our costs. To the extent that we do not effectively address server capacity constraints or otherwise upgrade our systems and data centers to accommodate actual and anticipated changes in technology and our client base, we may experience service interruptions and performance issues, which could result in negative publicity, harm to our reputation and decreased demand for our solution, require us to pay significant penalties or fines or subject us to litigation, claims or other disputes, any of which could have an adverse effect on our business, results of operations and financial condition."
    }
  ]
}