Paycom Software Inc. (NYSE:PAYC)

Current Portion of Long-Term Debt

The current portion of long-term debt remained constant at $1,775 thousand from December 31, 2018, through December 31, 2021. There is no data reported for December 31, 2022, which prevents analysis of the most recent year. The stability over the four reported years indicates a consistent short-term repayment schedule within this timeframe.

Net Long-Term Debt, Less Current Portion

This financial item demonstrates a gradual decline from $32,614 thousand at the end of 2018 to $27,380 thousand by the end of 2021, indicating a steady reduction in the long-term debt excluding current obligations. However, in 2022, there is an increase to $29,000 thousand, suggesting a reversal in the prior decreasing trend. This uptick could imply new borrowing or adjustments in debt classification during the latest period.

Total Long-Term Debt (Carrying Amount)

Total long-term debt shows a declining trend from $34,389 thousand in 2018 to $29,155 thousand in 2021, reflecting the overall repayment or reduction of long-term liabilities. The decrease mirrors the pattern seen in net long-term debt. In 2022, total long-term debt slightly decreases further to $29,000 thousand, indicating relative stability or minor reduction compared to the previous year.

Overall Observations

The data reveals a consistent effort to reduce long-term debt over the period from 2018 through 2021, with both net and total long-term debt steadily decreasing. The unchanged current portion of long-term debt suggests stable short-term obligations until 2021. The data for 2022 shows a slight increase in net long-term debt but a small decrease in total long-term debt, which may be due to changes in debt structure or repayments. The absence of current portion data in 2022 limits comprehensive analysis for that year. These trends indicate prudent debt management with potential adjustments in the latest reporting period.

The analysis of the annual interest costs incurred reveals notable fluctuations over the reported periods. The interest expense exhibited variability, with an initial increase from 766 thousand USD in 2018 to 940 thousand USD in 2019, followed by a significant decline to 19 thousand USD in 2020. Data for 2021 is missing, but there is a substantial increase to 2,536 thousand USD in 2022, indicating renewed or increased borrowing costs or interest-bearing liabilities in that year.

Interest costs capitalized demonstrate a declining trend after peaking at 1,500 thousand USD in 2020. The capitalized interest decreased to 1,400 thousand USD in 2021 and further declined to 900 thousand USD in 2022. This suggests a reduction in the amount of interest being added to the cost of assets, potentially reflecting changes in capital expenditure or project financing activities.

The total interest costs incurred, which represent the sum of interest expense and interest capitalized, remained relatively steady around the 1,500 thousand USD mark from 2018 to 2021, with values of 1,566 thousand USD in 2018, 1,540 thousand USD in 2019, 1,519 thousand USD in 2020, and 1,400 thousand USD in 2021. However, there is a marked increase to 3,436 thousand USD in 2022, more than doubling the previous levels. This sharp rise is largely attributable to higher interest expense in 2022, despite a decline in capitalized interest costs.

Overall, the data indicates a period of relatively stable total interest costs until 2021, followed by a significant increase in 2022. The decline in capitalized interest alongside increased interest expense in the latest period could reflect a shift in financing strategy, asset capitalization policy, or increasing interest rates impacting the company’s cost of debt.

Interest Coverage Ratio (without capitalized interest)

The interest coverage ratio demonstrates significant fluctuations over the analyzed periods. Starting at a high value of 229.08 in 2018, the ratio increased moderately to 241.52 in 2019, followed by a sharp surge to an exceptionally high level of 9787.11 in 2020. However, the data for 2021 is missing, and by 2022, the ratio declined markedly to 154.62. This indicates a potential reduction in earnings relative to interest expense or changes in interest expenses over time, with an extraordinary peak in 2020 that may require further investigation.

Adjusted Interest Coverage Ratio (with capitalized interest)

The adjusted interest coverage ratio also exhibits variability but within a narrower range compared to the unadjusted measure. Beginning at 112.05 in 2018, the ratio increased steadily to 147.42 in 2019, then decreased to 122.42 in 2020. Subsequently, it rose to 182.83 in 2021 before declining again to 114.12 in 2022. This pattern suggests fluctuations in underlying earnings and interest expense when accounting for capitalized interest, reflecting potential impacts of accounting treatments or operational performances on interest-related coverage capability.

General Insights

Overall, both interest coverage ratios highlight variability in the company's ability to cover interest obligations across the five-year period. The extreme spike in 2020's unadjusted ratio contrasts with more moderate changes elsewhere, while the adjusted ratio indicates a somewhat more consistent though fluctuating capacity. The missing data point in 2021 for the unadjusted ratio limits full trend analysis but comparing both ratios suggests that capitalized interest plays a significant role in the financial structure and reporting, influencing coverage metrics in a material way. Monitoring these parameters remains critical for assessing financial health related to debt servicing capability.