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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Paycom Software Inc., economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net operating profit after taxes (NOPAT)¹	297,371)	244,272)	176,158)	214,806)	172,096)
Cost of capital²	18.25%	18.26%	18.27%	18.26%	18.21%
Invested capital³	1,478,485)	1,189,369)	860,024)	724,133)	522,609)

Economic profit⁴	27,555)	27,089)	19,031)	82,604)	76,944)

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).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 297,371 – 18.25% × 1,478,485 = 27,555

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Paycom Software Inc., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net income	281,389)	195,960)	143,453)	180,576)	137,065)
Deferred income tax expense (benefit)¹	(3,210)	32,906)	21,381)	21,011)	21,077)
Increase (decrease) in deferred revenue²	15,990)	14,600)	10,582)	11,593)	13,027)
Increase (decrease) in equity equivalents³	12,780)	47,506)	31,963)	32,604)	34,104)
Interest expense	2,536)	—)	19)	940)	766)
Interest expense, operating lease liability⁴	1,517)	1,020)	921)	1,119)	408)
Adjusted interest expense	4,053)	1,020)	940)	2,059)	1,174)
Tax benefit of interest expense⁵	(851)	(214)	(197)	(432)	(247)
Adjusted interest expense, after taxes⁶	3,202)	806)	742)	1,626)	927)
Net operating profit after taxes (NOPAT)	297,371)	244,272)	176,158)	214,806)	172,096)

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).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in deferred revenue.

³ Addition of increase (decrease) in equity equivalents to net income.

⁴ 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 41,012 × 3.70% = 1,517

⁵ 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 4,053 × 21.00% = 851

⁶ Addition of after taxes interest expense to net income.

The financial data reveals notable fluctuations and overall growth in key profitability metrics over the five-year period ending December 31, 2022.

Net Income: Net income exhibited an upward trend, increasing significantly from $137,065 thousand in 2018 to $281,389 thousand in 2022. Despite a dip in 2020, when net income fell to $143,453 thousand from $180,576 thousand in 2019, the subsequent years showed robust recovery and growth, particularly with a substantial rise in 2022 to a new high.
Net Operating Profit After Taxes (NOPAT): NOPAT followed a similar trajectory to net income but on a generally higher scale. It rose from $172,096 thousand in 2018 to $297,371 thousand in 2022. Although there was a decline in 2020, dropping to $176,158 thousand from $214,806 thousand in 2019, the profit metric rebounded strongly in the following years, reaching the peak in 2022. The increases in NOPAT were more pronounced in magnitude compared to net income, indicating increasing operational efficiency or improved core business profitability.

Overall, the data suggests a company experiencing notable profit growth, with a momentary setback in 2020 likely due to specific operational or market challenges during that year. The recovery and growth in NOPAT and net income in 2021 and 2022 demonstrate improved performance and potentially effective strategic or operational adjustments.

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Paycom Software Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Provision for income taxes	108,189)	60,002)	42,483)	45,511)	37,646)
Less: Deferred income tax expense (benefit)	(3,210)	32,906)	21,381)	21,011)	21,077)
Add: Tax savings from interest expense	851)	214)	197)	432)	247)
Cash operating taxes	112,250)	27,310)	21,299)	24,932)	16,816)

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).

Provision for income taxes: The provision for income taxes showed a general increasing trend from 2018 to 2022. Starting at 37,646 thousand USD in 2018, it increased moderately to 45,511 thousand USD in 2019, then slightly declined to 42,483 thousand USD in 2020. Following this, there was a significant increase to 60,002 thousand USD in 2021, which was further amplified by a substantial rise to 108,189 thousand USD in 2022. This pattern indicates growing income tax obligations over the five-year period, with the most notable escalation occurring in the last two years.
Cash operating taxes: Cash operating taxes also exhibited an overall upward trajectory throughout the years analyzed. Initially, it stood at 16,816 thousand USD in 2018 and increased sharply to 24,932 thousand USD in 2019. There was a slight dip in 2020 to 21,299 thousand USD, followed by a recovery to 27,310 thousand USD in 2021. The year 2022 saw a dramatic increase to 112,250 thousand USD, which mirrors the substantial rise observed in the provision for income taxes. This suggests that cash outflows related to operating taxes have grown significantly, particularly in the most recent year.

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Paycom Software Inc., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Current portion of long-term debt	—)	1,775)	1,775)	1,775)	1,775)
Net long-term debt, less current portion	29,000)	27,380)	29,119)	30,858)	32,614)
Operating lease liability¹	41,012)	30,912)	27,896)	28,685)	27,199)
Total reported debt & leases	70,012)	60,067)	58,790)	61,318)	61,588)
Stockholders’ equity	1,182,607)	893,714)	655,643)	526,628)	334,753)
Net deferred tax (assets) liabilities²	141,033)	145,504)	112,598)	91,217)	70,206)
Deferred revenue³	117,416)	101,426)	86,826)	76,244)	64,651)
Equity equivalents⁴	258,449)	246,930)	199,424)	167,461)	134,857)
Accumulated other comprehensive (income) loss, net of tax⁵	3,703)	—)	—)	—)	—)
Adjusted stockholders’ equity	1,444,759)	1,140,644)	855,067)	694,089)	469,610)
Construction in progress⁶	(36,286)	(11,342)	(53,833)	(31,274)	(8,589)
Invested capital	1,478,485)	1,189,369)	860,024)	724,133)	522,609)

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).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of deferred revenue.

⁴ Addition of equity equivalents to stockholders’ equity.

⁵ Removal of accumulated other comprehensive income.

⁶ Subtraction of construction in progress.

Total Reported Debt & Leases: The total reported debt and leases exhibited a relatively stable trend from 2018 through 2021, decreasing slightly from 61,588 thousand USD in 2018 to 58,790 thousand USD in 2020, followed by a marginal increase to 60,067 thousand USD in 2021. In 2022, however, there was a noticeable increase to 70,012 thousand USD, marking a significant rise compared to previous years.
Stockholders’ Equity: Stockholders’ equity demonstrated a strong upward progression over the five-year period. Beginning at 334,753 thousand USD in 2018, equity more than doubled to 526,628 thousand USD in 2019 and continued to climb to 655,643 thousand USD in 2020. The growth accelerated thereafter, reaching 893,714 thousand USD in 2021 and further increasing to 1,182,607 thousand USD in 2022. This consistent increase indicates substantial equity growth and strengthening of the company’s financial position.
Invested Capital: Invested capital showed a continuous and significant rise throughout the entire period. Starting at 522,609 thousand USD in 2018, the invested capital increased by approximately 38.6% to 724,133 thousand USD in 2019 and then continued to expand sharply to 860,024 thousand USD in 2020. The momentum persisted with a considerable jump to 1,189,369 thousand USD in 2021, followed by another substantial increase to 1,478,485 thousand USD in 2022. This trend reflects ongoing investment and expansion activities within the company.

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Paycom Software Inc., cost of capital calculations

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	17,792,735)	17,792,735)	÷	17,862,747)	=	1.00	1.00	×	18.31%	=	18.24%
Long-term debt³	29,000)	29,000)	÷	17,862,747)	=	0.00	0.00	×	3.70% × (1 – 21.00%)	=	0.00%
Operating lease liability⁴	41,012)	41,012)	÷	17,862,747)	=	0.00	0.00	×	3.70% × (1 – 21.00%)	=	0.01%
Total:	17,862,747)					1.00					18.25%

Based on: 10-K (reporting date: 2022-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	19,012,528)	19,012,528)	÷	19,072,595)	=	1.00	1.00	×	18.31%	=	18.25%
Long-term debt³	29,155)	29,155)	÷	19,072,595)	=	0.00	0.00	×	3.30% × (1 – 21.00%)	=	0.00%
Operating lease liability⁴	30,912)	30,912)	÷	19,072,595)	=	0.00	0.00	×	3.30% × (1 – 21.00%)	=	0.00%
Total:	19,072,595)					1.00					18.26%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	23,185,491)	23,185,491)	÷	23,244,281)	=	1.00	1.00	×	18.31%	=	18.26%
Long-term debt³	30,894)	30,894)	÷	23,244,281)	=	0.00	0.00	×	3.30% × (1 – 21.00%)	=	0.00%
Operating lease liability⁴	27,896)	27,896)	÷	23,244,281)	=	0.00	0.00	×	3.30% × (1 – 21.00%)	=	0.00%
Total:	23,244,281)					1.00					18.27%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	17,488,062)	17,488,062)	÷	17,549,380)	=	1.00	1.00	×	18.31%	=	18.25%
Long-term debt³	32,633)	32,633)	÷	17,549,380)	=	0.00	0.00	×	3.90% × (1 – 21.00%)	=	0.01%
Operating lease liability⁴	28,685)	28,685)	÷	17,549,380)	=	0.00	0.00	×	3.90% × (1 – 21.00%)	=	0.01%
Total:	17,549,380)					1.00					18.26%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	10,217,070)	10,217,070)	÷	10,278,658)	=	0.99	0.99	×	18.31%	=	18.20%
Long-term debt³	34,389)	34,389)	÷	10,278,658)	=	0.00	0.00	×	1.50% × (1 – 21.00%)	=	0.00%
Operating lease liability⁴	27,199)	27,199)	÷	10,278,658)	=	0.00	0.00	×	1.50% × (1 – 21.00%)	=	0.00%
Total:	10,278,658)					1.00					18.21%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

Paycom Software Inc., economic spread ratio calculation

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	27,555)	27,089)	19,031)	82,604)	76,944)
Invested capital²	1,478,485)	1,189,369)	860,024)	724,133)	522,609)
Performance Ratio
Economic spread ratio³	1.86%	2.28%	2.21%	11.41%	14.72%

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).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 27,555 ÷ 1,478,485 = 1.86%

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Paycom Software Inc., economic profit margin calculation

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	27,555)	27,089)	19,031)	82,604)	76,944)

Revenues	1,375,218)	1,055,524)	841,434)	737,671)	566,336)
Add: Increase (decrease) in deferred revenue	15,990)	14,600)	10,582)	11,593)	13,027)
Adjusted revenues	1,391,208)	1,070,124)	852,016)	749,264)	579,363)
Performance Ratio
Economic profit margin²	1.98%	2.53%	2.23%	11.02%	13.28%

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).

¹ Economic profit. See details »

² 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × 27,555 ÷ 1,391,208 = 1.98%

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Paycom Software Inc. (NYSE:PAYC)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin