Analysis of Property, Plant and Equipment
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- Income Statement
- Balance Sheet: Assets
- Common-Size Balance Sheet: Assets
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Price to FCFE (P/FCFE)
- Selected Financial Data since 2014
- Operating Profit Margin since 2014
- Debt to Equity since 2014
- Price to Sales (P/S) since 2014
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Property, Plant and Equipment Disclosure
Paycom Software Inc., balance sheet: property, plant and equipment
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).
- Software and capitalized software costs
- The value of software and capitalized software costs increased steadily from 66,634 thousand US dollars in 2018 to 270,645 thousand US dollars in 2022. This represents a significant rise, particularly notable between 2020 and 2022, indicating substantial investment in software assets over the period.
- Buildings
- Buildings showed a moderate increase from 101,421 thousand US dollars in 2018 to 177,765 thousand US dollars in 2022. The most pronounced growth occurred between 2020 and 2021. The relatively stable growth compared to other asset categories suggests controlled expansion or maintenance in building assets.
- Computer equipment
- Computer equipment values rose markedly from 39,492 thousand US dollars in 2018 to 133,715 thousand US dollars in 2022. This reflects considerable growth, especially from 2020 onwards, indicating increased spending on technological hardware.
- Rental clocks
- Rental clocks increased steadily from 16,950 thousand US dollars in 2018 to 35,846 thousand US dollars in 2022. The consistent growth pattern suggests ongoing investment in leased or rental assets related to clocks.
- Furniture, fixtures and equipment
- The value of furniture, fixtures, and equipment rose from 16,474 thousand US dollars in 2018 to 28,414 thousand US dollars in 2022, reflecting moderate growth over the five-year span.
- Other
- The category labeled “Other” showed a substantial increase from 1,348 thousand US dollars in 2018 to 17,321 thousand US dollars in 2022, with notable spikes particularly between 2019 and 2021. This may reflect diversification or acquisition of various minor asset classes.
- Construction in progress
- Construction in progress exhibited volatility, starting at 8,589 thousand US dollars in 2018, peaking notably at 53,833 thousand US dollars in 2020, then dropping to 11,342 thousand US dollars in 2021 before rising again to 36,286 thousand US dollars in 2022. This pattern indicates fluctuating capital expenditure on projects under development, possibly aligned with project start and completion cycles.
- Land
- Land assets grew sharply from 9,023 thousand US dollars in 2018 to 29,034 thousand US dollars in 2019, remaining stable at 33,796 thousand US dollars in 2021 and 2022. This suggests an initial acquisition followed by stable holding of land assets.
- Property and equipment, gross
- The gross property and equipment balance increased steadily from 259,931 thousand US dollars in 2018 to 733,788 thousand US dollars in 2022. This represents a near threefold increase over five years, driven primarily by growth in various asset categories, especially software, computer equipment, and buildings.
- Accumulated depreciation and amortization
- Accumulated depreciation and amortization rose in absolute terms from -82,969 thousand US dollars in 2018 to -331,340 thousand US dollars in 2022, reflecting the aging and use of fixed assets. The increasing depreciation aligns with the rising asset base, indicating ongoing consumption of asset values over time.
- Property and equipment, net
- The net property and equipment value showed a significant increase from 176,962 thousand US dollars in 2018 to 402,448 thousand US dollars in 2022. The upward trend in net assets indicates robust investment in property and equipment assets outweighing the accumulated depreciation, signaling growth and expansion of the asset base.
Asset Age Ratios (Summary)
Paycom Software Inc., asset age ratios
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).
- Average Age Ratio
- The average age ratio has demonstrated a consistent upward trend over the five-year period. Starting at 33.07% in 2018, it increased each year, reaching 47.33% by 2022. This indicates that the property, plant, and equipment (PP&E) assets are aging progressively, with a larger proportion of the assets being older each subsequent year.
- Estimated Total Useful Life
- The estimated total useful life of the assets fluctuated between 8 and 9 years. Initially, it was 9 years in 2018, decreased to 8 years from 2019 through 2020, briefly returned to 9 years in 2021, and settled back to 8 years in 2022. This variation suggests periodic reassessment of asset longevity, but overall the useful life remains around 8 to 9 years.
- Estimated Age (Time Elapsed Since Purchase)
- The estimated age of the assets remained relatively stable, beginning at 3 years from 2018 through 2020, then increasing to 4 years for the last two years, 2021 and 2022. This reflects steady aging of the asset base, consistent with the passage of time and limited acquisition or retirement of assets during this timeframe.
- Estimated Remaining Life
- The estimated remaining life of the assets has shown a declining trend over the period. It decreased from 6 years in 2018 to 4 years by 2022, with a notable drop occurring between 2021 and 2022 from 5 years to 4 years. This suggests that the assets are approaching the end of their useful life and highlights an increasing need for asset replacement or refurbishment in the near future.
Average Age
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 Average age = 100 × Accumulated depreciation and amortization ÷ (Property and equipment, gross – Land)
= 100 × ÷ ( – ) =
- Property and Equipment, Gross
- The gross value of property and equipment exhibited a consistent upward trend over the five-year period. Starting at $259,931 thousand in 2018, it increased substantially each year, reaching $733,788 thousand by the end of 2022. This indicates a strong expansion or significant investments in fixed assets over time.
- Accumulated Depreciation and Amortization
- The accumulated depreciation and amortization also showed a continuous increase, rising from $82,969 thousand in 2018 to $331,340 thousand in 2022. This growth in accumulated depreciation aligns with the increase in gross property and equipment, reflecting ongoing asset usage and aging.
- Land
- The value attributed to land increased notably from $9,023 thousand in 2018 to $29,034 thousand in 2019, after which it remained stable through 2020. Subsequently, it grew moderately to $33,796 thousand by 2021 and stayed flat through 2022. This pattern suggests an initial period of land acquisition, followed by minimal additional purchases in later years.
- Average Age Ratio
- The average age ratio, representing the proportion of accumulated depreciation to gross property and equipment, rose steadily from 33.07% in 2018 to 47.33% in 2022. This upward trend indicates that the asset base is aging, with a greater portion of the equipment having been in use for longer periods, potentially signaling the need for future asset renewal or replacement strategies.
Estimated Total Useful Life
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 Estimated total useful life = (Property and equipment, gross – Land) ÷ Depreciation and amortization expense for property and equipment, net
= ( – ) ÷ =
- Property and equipment, gross
- The gross value of property and equipment has shown a consistent upward trend over the examined period. From 2018 to 2022, it increased significantly from 259,931 thousand US dollars to 733,788 thousand US dollars. This reflects a substantial and continuing investment or acquisition of property and equipment assets each year.
- Land
- The recorded value of land experienced a notable increase between 2018 and 2019, rising from 9,023 thousand US dollars to 29,034 thousand US dollars. After 2019, the land value remained stable at 29,034 thousand US dollars in 2020, followed by a moderate increase to 33,796 thousand US dollars in 2021, and stability at that value through 2022.
- Depreciation and amortization expense for property and equipment, net
- Depreciation and amortization expenses demonstrated a clear upward trajectory from 29,400 thousand US dollars in 2018 to 88,700 thousand US dollars in 2022. The yearly expense rose steadily without any decline or plateau, indicating either an increase in the asset base subject to depreciation or changes in depreciation policies or asset composition.
- Estimated total useful life
- The estimated useful life of the property and equipment fluctuated slightly, alternating between 8 and 9 years over the years. It was 9 years in 2018, dropped to 8 years in 2019 and 2020, returned to 9 years in 2021, and reverted to 8 years in 2022. These minor variations may suggest adjustments in asset life expectations, potentially correlating with changes in asset types or depreciation methods.
Estimated Age, Time Elapsed since Purchase
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 Time elapsed since purchase = Accumulated depreciation and amortization ÷ Depreciation and amortization expense for property and equipment, net
= ÷ =
- Accumulated depreciation and amortization
- The accumulated depreciation and amortization consistently increased year over year from 82,969 thousand US dollars in 2018 to 331,340 thousand US dollars in 2022. This reflects a continuous allocation of the cost of property, plant, and equipment over their useful lives, indicative of ongoing investment in assets and their subsequent consumption or aging.
- Depreciation and amortization expense for property and equipment, net
- The annual depreciation and amortization expense also showed a steady upward trend, rising from 29,400 thousand US dollars in 2018 to 88,700 thousand US dollars in 2022. This increase suggests either an expansion in the asset base or changes in the depreciation policies or estimates, such as asset lives or residual values. The growth in expense is consistent with the larger accumulated depreciation figures.
- Time elapsed since purchase
- The time elapsed since purchase remained steady at 3 years from 2018 through 2020, then increased to 4 years in 2021 and 2022. This indicates that the gross age of the assets averaged 3 to 4 years over the period, which aligns with the rising accumulated depreciation and suggests a relatively young asset base experiencing annual depreciation.
Estimated Remaining Life
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 Estimated remaining life = (Property and equipment, net – Land) ÷ Depreciation and amortization expense for property and equipment, net
= ( – ) ÷ =
- Property and Equipment, Net
- The net value of property and equipment has shown consistent and substantial growth over the five-year period from 2018 to 2022. The asset base increased from $176,962 thousand in 2018 to $402,448 thousand in 2022, more than doubling in size. This indicates ongoing investment and expansion in the company’s physical assets.
- Land
- The carrying value of land increased significantly from $9,023 thousand in 2018 to $29,034 thousand in 2019, after which it remained stable through 2022 with a minor increase to $33,796 thousand. The sharp increase in 2019 and subsequent stability suggest the acquisition of land assets at that time, followed by no significant additional purchases or disposals through the later years.
- Depreciation and Amortization Expense for Property and Equipment, Net
- The depreciation and amortization expense has steadily risen each year, from $29,400 thousand in 2018 to $88,700 thousand in 2022. This increase likely reflects both the growing asset base and a reduction in the estimated remaining life of property and equipment. The sharper rise in depreciation expense in the last year aligns with a decrease in asset life expectancy, suggesting accelerated amortization schedules or updated estimates of asset useful life.
- Estimated Remaining Life
- The estimated remaining life of property and equipment decreased over the period, from 6 years in 2018 to 4 years in 2022. This trend may indicate that assets are aging or that management has revised its useful life assumptions downward, contributing to an increase in depreciation expense as seen in the data.
- Overall Insights
- The overall upward trend in net property and equipment alongside rising depreciation expenses points to significant capital investment by the company, accompanied by an increasingly accelerated recognition of depreciation. The stable land values since 2019 and relatively shorter asset lives suggest strategic acquisitions followed by an increasing aging of the asset base. These trends could imply a focus on growth through physical asset expansion while managing asset utilization and depreciation in financial reporting.