Paycom Software Inc. (NYSE:PAYC)

Goodwill

The value of goodwill remained constant at $51,889 thousand throughout the five-year period, indicating no impairment or revaluation adjustments occurred.

Naming Rights

Naming rights were not recorded until 2021, when an amount of $60,199 thousand appeared and remained steady into 2022, suggesting a significant acquisition or capitalization of naming rights occurred during that year.

Trade Name

The trade name asset maintained a consistent balance of $3,194 thousand each year, indicating no additions or impairments over the period.

Intangibles, Gross

The gross intangible assets held steady at $3,194 thousand from 2018 through 2020 but then increased sharply to $63,393 thousand in 2021 and remained at that level in 2022. This rise coincides with the introduction of naming rights, implying their inclusion contributed to the growth in gross intangible assets.

Accumulated Amortization

Accumulated amortization rose progressively from -$2,449 thousand in 2018 to -$9,376 thousand in 2022, reflecting ongoing amortization charges against intangible assets. The increase accelerated notably in the latter years, consistent with the sizeable addition to intangible assets.

Intangibles, Net

Net intangible assets declined from $745 thousand in 2018 to $319 thousand in 2020, reflecting amortization exceeding additions during this time. However, from 2021 onward, there was a dramatic increase to $58,028 thousand in 2021 and slightly reduced to $54,017 thousand in 2022. This change aligns with the recognition of naming rights and a corresponding rise in gross intangibles offset by accumulated amortization.

Goodwill and Intangible Assets, Net

The combined net value of goodwill and intangible assets trended slightly downward from $52,634 thousand in 2018 to $52,208 thousand in 2020. In 2021, this figure more than doubled to $109,917 thousand before experiencing a modest decrease to $105,906 thousand in 2022. This pattern reflects the stability of goodwill combined with the significant increase in intangible assets, particularly naming rights, during the later years.

Total Assets

Reported total assets demonstrated a consistent upward trend from 1,521,926 thousand US dollars in 2018 to 3,902,513 thousand US dollars in 2022, indicating significant growth over the period. Adjusted total assets, which exclude goodwill, also increased steadily from 1,470,037 thousand US dollars to 3,850,624 thousand US dollars, closely mirroring the reported figures but consistently slightly lower due to the adjustment.

Stockholders’ Equity

Reported stockholders’ equity rose sharply from 334,753 thousand US dollars in 2018 to 1,182,607 thousand US dollars in 2022. The adjusted stockholders’ equity, which excludes goodwill impacts, followed a similar upward trajectory, increasing from 282,864 thousand US dollars to 1,130,718 thousand US dollars over the same period. The increase in both reported and adjusted equity suggests sustained profitability and retained earnings growth.

Goodwill Impact Analysis

The differences between reported and adjusted figures for both total assets and stockholders’ equity indicate the presence and growth of goodwill on the balance sheet. The gap between reported and adjusted total assets and equity steadily widened from 2018 to 2022, implying either acquisitions or other goodwill-generating transactions have increasingly contributed to the company's asset base and net worth.

Overall Financial Position Trends

The company’s balance sheet strengthened significantly over the five-year span, as evidenced by the doubling of total assets and more than tripling of stockholders’ equity. The stable relationship between reported and adjusted data indicates that while goodwill additions have contributed to asset growth, the core asset base and equity attributable to operations also expanded robustly during this period.

Total Asset Turnover

The reported total asset turnover shows a generally stable trend with a slight decline from 0.37 in 2018 to 0.3 in 2019, followed by a gradual increase to 0.35 by 2022. The adjusted total asset turnover mirrors this pattern but starts slightly higher at 0.39 in 2018 and recovers to 0.36 in 2022. Overall, the turnover indicates modest improvements in how efficiently assets are being used to generate revenue over time.

Financial Leverage

Both reported and adjusted financial leverage ratios display a declining trend from 2018 through 2022. Reported financial leverage decreased from 4.55 in 2018 to 3.3 in 2022, while adjusted financial leverage declined from 5.2 to 3.41 during the same period. This suggests a reduction in the extent to which the company is using debt to finance its assets, potentially indicating a more conservative capital structure or deleveraging over these years.

Return on Equity (ROE)

Reported ROE shows a downward trend from 40.95% in 2018 to 21.88% in 2020, stabilizing slightly to reach 23.79% by 2022. Adjusted ROE follows a similar pattern, starting higher at 48.46% in 2018 and declining to 23.76% in 2020, with a gradual increase to 24.89% by 2022. The decreasing ROE suggests diminishing profitability relative to shareholders’ equity over the analyzed period, although the stabilization and slight improvement in later years may indicate a partial recovery.

Return on Assets (ROA)

ROA metrics also declined initially and then showed signs of recovery. Reported ROA decreased from 9.01% in 2018 to 5.5% in 2020 before rising to 7.21% in 2022. Adjusted ROA, similarly, declined from 9.32% in 2018 to 5.61% in 2020 and increased thereafter to 7.31% in 2022. The reduction and subsequent recovery in ROA reflects changes in the company's ability to generate profits from its asset base, with performance improving in the latter years.

The financial data indicates consistent growth in both reported and adjusted total assets from 2018 through 2022. Reported total assets increased steadily from approximately 1,521,926 thousand US dollars in 2018 to about 3,902,513 thousand US dollars in 2022, reflecting significant asset accumulation over the five-year period. Similarly, adjusted total assets—which exclude the impact of goodwill—also rose consistently, moving from 1,470,037 thousand US dollars in 2018 to 3,850,624 thousand US dollars in 2022.

Regarding total asset turnover, the reported ratio showed a decline from 0.37 in 2018 to 0.30 in 2019, followed by a gradual recovery reaching 0.35 in 2022. The adjusted total asset turnover ratio demonstrated a comparable pattern, starting higher at 0.39 in 2018, dropping to 0.30 in 2019, and then improving steadily to 0.36 in 2022. These trends suggest an initial decrease in asset efficiency in 2019, followed by progressive gains in asset utilization effectiveness through the subsequent years.

Total Assets

Both reported and adjusted total assets exhibited strong growth throughout the period, nearly doubling over five years.

The proximity of reported and adjusted asset values indicates that goodwill comprises a relatively small portion of total assets, with adjustments having marginal impact on overall asset size.

Total Asset Turnover

The initial decline in asset turnover ratios in 2019 may indicate less efficient use of assets that year.

From 2020 onward, a gradual rebound in efficiency is observed, with ratios reaching or surpassing earlier levels by 2022.

Adjusted total asset turnover ratios tend to be slightly higher than the reported ratios, implying goodwill may be associated with less productive assets.

The data reveals a consistent upward trend in both reported and adjusted total assets from 2018 to 2022. Reported total assets increased from approximately 1.52 billion US dollars in 2018 to around 3.9 billion US dollars in 2022, while adjusted total assets followed a similar pattern, rising from about 1.47 billion to 3.85 billion US dollars during the same period. This reflects significant growth in the company's asset base over the five years.

Stockholders' equity also demonstrated substantial growth throughout the period. Reported equity grew from approximately 335 million US dollars in 2018 to over 1.18 billion in 2022. Adjusted equity, which accounts for goodwill adjustments, increased from around 283 million US dollars to roughly 1.13 billion US dollars within the same timeframe. The increase in adjusted equity closely mirrors that of the reported figures, indicating that goodwill adjustments did not drastically alter the equity valuation trend.

Financial leverage ratios, expressed as a multiple, show a downward trajectory over the years, indicating a reduction in reliance on debt financing relative to equity. The reported financial leverage decreased from 4.55 in 2018 to 3.3 in 2022. Adjusted financial leverage followed a similar declining pattern, starting at 5.2 in 2018 and falling to 3.41 by 2022. The consistently higher adjusted leverage ratios compared to reported figures reflect the impact of goodwill adjustments, which reduce adjusted equity, thereby increasing leverage ratios.

Overall, the company has experienced strong asset and equity growth alongside a steady decrease in financial leverage. This suggests an improving capital structure with a shift toward greater equity base supporting asset growth, implying potentially enhanced financial stability and reduced risk from leverage over time.

Stockholders’ Equity Trends

Both reported and adjusted stockholders’ equity exhibit a consistent upward trajectory over the five-year period. Reported stockholders’ equity increased from approximately 335 million US dollars in 2018 to over 1.18 billion US dollars by the end of 2022, marking a significant growth reflective of the company’s expanding net asset base. Similarly, adjusted stockholders’ equity, which accounts for goodwill adjustments, follows a parallel growth pattern, rising from roughly 283 million US dollars to just over 1.13 billion US dollars during the same timeframe. The adjustment difference between the reported and adjusted figures remains relatively stable, indicating a consistent goodwill component within the equity.

Return on Equity (ROE) Analysis

Reported ROE demonstrates a declining trend from 40.95% in 2018 to around 21.93% in 2021, before experiencing a modest recovery to 23.79% in 2022. This decline suggests that despite the increase in equity, profitability relative to equity has diminished over the years, albeit showing signs of stabilization or slight improvement recently. Adjusted ROE, which excludes the goodwill impact, follows a somewhat analogous pattern. It starts higher than the reported ROE at 48.46% in 2018, declines to 23.28% in 2021, and then slightly increases to 24.89% in 2022. The consistently higher adjusted ROE compared to reported ROE indicates that the adjustment for goodwill positively impacts the perceived return performance.

Comparative Insights

The steady growth in stockholders’ equity alongside a declining ROE indicates that equity expansion is outpacing net income growth or profitability margins are compressing. The difference between reported and adjusted metrics suggests that goodwill has a significant, consistent effect on equity and profitability measurements. The narrowing gap in ROE percentages over the years implies that the influence of goodwill on return metrics is diminishing, or that operational profitability is converging across the adjusted and reported bases. Overall, the financial data reflect solid equity growth but a need for scrutiny concerning profitability efficiency relative to the shareholders’ equity base.

The analysis of the financial data over the five-year period reveals several noteworthy trends in the company's asset base and return on assets (ROA), both reported and adjusted for goodwill.

Total Assets

There is a consistent and substantial increase in both reported and adjusted total assets from 2018 to 2022. Reported total assets grew from approximately 1.52 billion USD in 2018 to about 3.90 billion USD in 2022. Similarly, adjusted total assets increased from around 1.47 billion USD to approximately 3.85 billion USD over the same period. This upward trajectory indicates significant asset expansion, suggesting ongoing investment or growth in the company's asset base.

Return on Assets (ROA)

The reported ROA exhibits a declining trend from 2018 to 2020, decreasing from 9.01% to 5.5%, followed by a gradual recovery through 2021 and 2022, reaching 7.21%. The adjusted ROA, which excludes goodwill effects, follows a similar pattern, starting slightly higher than reported ROA at 9.32% in 2018, dropping to 5.61% in 2020, and then increasing to 7.31% by 2022. The consistent gap between reported and adjusted ROA suggests that goodwill adjustments have a modest but consistent impact on profitability metrics.

Overall Insights

The increase in total assets combined with the initial decline and subsequent recovery in ROA may indicate periods of heavy investment or acquisition activity, affecting asset utilization efficiency in the short term. The recovery phase in ROA suggests improved asset management or profitability gains following earlier expansion efforts. The close alignment between reported and adjusted figures implies that goodwill adjustments do not drastically alter the overall financial performance perspective but provide a slightly more favorable view of asset returns.