Analysis of Debt
Total Debt (Carrying Amount)
Paycom Software Inc., balance sheet: debt
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
Total long-term debt exhibited a consistent downward trajectory from 2018 through 2021, followed by a period of stabilization in 2022. The carrying amount decreased from 34,389 thousand US dollars at the end of 2018 to 29,000 thousand US dollars by December 31, 2022.
- Systematic Debt Reduction
- Between 2018 and 2021, the total long-term debt declined by approximately 1.74 million US dollars annually. This linear decrease indicates a structured amortization schedule or a disciplined approach to principal repayment.
- Debt Composition and Current Obligations
- From 2018 to 2021, the current portion of long-term debt remained static at 1,775 thousand US dollars. However, for the period ending December 31, 2022, the total long-term debt became equal to the net long-term debt at 29,000 thousand US dollars, indicating that no current portion was recorded for that fiscal year.
- Net Debt Trends
- The net long-term debt, excluding the current portion, decreased from 32,614 thousand US dollars in 2018 to 27,380 thousand US dollars in 2021. A slight reversal in this trend occurred in 2022, with the amount increasing to 29,000 thousand US dollars.
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Total Debt (Fair Value)
| Dec 31, 2022 | |
|---|---|
| Selected Financial Data (US$ in thousands) | |
| Total long-term debt (fair value) | 29,000) |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | 1.00 |
Based on: 10-K (reporting date: 2022-12-31).
Weighted-average Interest Rate on Debt
Weighted-average interest rate on debt: 3.70%
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| 3.70% | 29,000) | 1,073) | |
| Total | 29,000) | 1,073) | |
| 3.70% | |||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Weighted-average interest rate = 100 × 1,073 ÷ 29,000 = 3.70%
Interest Costs Incurred
Paycom Software Inc., interest costs incurred
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
Between 2018 and 2022, total interest costs incurred remained relatively stable before experiencing a substantial escalation in the final year. From 2018 to 2021, these costs exhibited a slight downward trajectory, moving from 1,566 thousand US$ to 1,400 thousand US$, followed by a sharp increase to 3,436 thousand US$ in 2022.
- Total Interest Costs Incurred
- A period of relative stability is observed from 2018 through 2021, where costs fluctuated within a narrow range. This stability was interrupted in 2022 by a significant spike, representing an increase of approximately 145% over the 2021 level.
- Interest Expense Volatility
- The portion of interest costs recognized as an expense shows extreme volatility. After reaching 940 thousand US$ in 2019, the expense plummeted to 19 thousand US$ in 2020 and remained minimal through 2021. A dramatic reversal occurred in 2022, with interest expenses rising to 2,536 thousand US$, becoming the primary driver of the total costs incurred.
- Interest Cost Capitalization Trends
- Capitalization patterns shifted inversely to interest expenses. Capitalized interest costs increased from 600 thousand US$ in 2019 to a peak of 1,500 thousand US$ in 2020, accounting for nearly the entirety of interest costs incurred in 2020 and 2021. However, by 2022, capitalized costs declined to 900 thousand US$, indicating a transition from capitalizing interest to expensing it directly.
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Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
2022 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense
= 392,114 ÷ 2,536 = 154.62
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs incurred
= 392,114 ÷ 3,436 = 114.12
The analysis of interest coverage indicates a robust capacity to service debt obligations throughout the observed period, with both metrics remaining significantly above typical risk thresholds, suggesting an exceptionally strong solvency position.
- Interest Coverage Ratio (without capitalized interest)
- A volatile trajectory is observed in the non-adjusted ratio. After a slight increase between 2018 and 2019, the ratio experienced an extraordinary spike in 2020, reaching 9,787.11. By 2022, the metric returned to a more conventional level of 154.62. This extreme fluctuation in 2020 suggests a period where non-capitalized interest expenses were negligible relative to operating earnings.
- Adjusted Interest Coverage Ratio (with capitalized interest)
- The adjusted ratio exhibits greater stability and provides a more consistent view of debt serviceability. The ratio grew from 112.05 in 2018 to 147.42 in 2019, followed by a slight dip to 122.42 in 2020. It reached a peak of 182.83 in 2021 before moderating to 114.12 in 2022. The relative stability of this metric indicates a steadier relationship between earnings and the total interest burden.
- Comparative Analysis of Interest Treatment
- A significant divergence exists between the two ratios, most notably in 2020. The stark contrast between the non-adjusted ratio (9,787.11) and the adjusted ratio (122.42) during that year reveals that capitalized interest constituted the vast majority of the interest expense. The consistently lower values of the adjusted ratio compared to the non-adjusted ratio across the period emphasize that capitalized interest is a material component of the company's financial obligations, making the adjusted ratio a more conservative and comprehensive measure of coverage.
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