Paycom Software, Inc. Stock Compensation Disclosure

In May 2023, the stockholders of the Company approved the Paycom Software, Inc. 2023 Long-Term Incentive Plan (the “2023 LTIP”), which provides for the granting of equity-based awards to the Company’s employees, contractors and outside directors. Subject to certain adjustments, the maximum number of shares of common stock that may be delivered pursuant to awards under the 2023 LTIP is 3.6 million.

For the year ended December 31, 2025, the Company recognized non-cash stock-based compensation expense of $118.7 million. For the year ended December 31, 2024, the Company recognized non-cash stock-based compensation expense, inclusive of forfeitures, that totaled a net benefit of $22.9 million. For the year ended December 31, 2023, our total non-cash stock-based compensation expense was $129.8 million.

We capitalized stock-based compensation costs related to software developed for internal use of $25.2 million, $17.5 million and $14.7 million for the years ended December 31, 2025, 2024 and 2023, respectively.

In May 2023, our Board of Directors adopted a dividend policy under which we intend to pay quarterly cash dividends on our common stock. All unvested equity incentive awards currently outstanding are entitled to receive dividends or dividend equivalents, provided that such dividends or dividend equivalents are withheld by the Company and distributed to the applicable holder upon the release of restrictions on such equity incentive awards (i.e., upon vesting).

Restricted Stock Awards

We have historically issued shares of restricted stock that are subject to either market-based vesting conditions (“Market-Based Restricted Stock Awards”) or time-based or no vesting conditions (“Time-Based Restricted Stock Awards”). The market-based vesting conditions are based on the Company’s total enterprise value or volume weighted average stock price over a specific period exceeding certain specified thresholds.

During the year ended December 31, 2025, we issued an aggregate of 880,267 restricted shares of common stock under the 2023 LTIP, consisting of 188,370 shares underlying Market-Based Restricted Stock Awards and 691,897 shares underlying Time-Based Restricted Stock Awards. Generally, Market-Based Restricted Stock Awards will vest 50% on the first date, if any, that the arithmetic average of the Company’s volume weighted average price on each of the 20 consecutive trading days immediately preceding such date (the “VWAP Value”) equals or exceeds $250 per share and 50% on the first date, if any, that the Company’s VWAP Value equals or exceeds $282 per share, in each case provided that (i) such date occurs on or before the eighth anniversary of the grant date and (ii) the recipient is employed by, or providing services to, the Company on the applicable vesting date, and subject to the terms and conditions of the 2023 LTIP and the applicable restricted stock award agreement. Generally, the Time-Based Restricted Stock Awards will vest over periods ranging from approximately one to four years, provided that the recipient is employed by, or providing services to, the Company on the applicable vesting date, and subject to the terms and conditions of the 2023 LTIP and the applicable restricted stock award agreement.

The Time-Based Restricted Stock Awards mentioned above include an aggregate of 7,693 shares of restricted stock issued to the non-employee members of our Board of Directors in 2025 under the 2023 LTIP. Such shares of restricted stock will cliff-vest on the seventh day following the first anniversary date of the grant, provided that such director is providing services to the Company through the applicable vesting date, and subject to the terms and conditions of the 2023 LTIP and the applicable restricted stock award agreement.

Restricted Stock Units

During the year ended December 31, 2025, we issued the following RSU awards to certain of our executive officers and employees, in each case subject to the terms and conditions of the 2023 LTIP and the applicable RSU award agreement: (i) an aggregate of 80,741 time-based RSUs and (ii) an aggregate of 80,238 performance-based RSUs (“PSUs”). Generally, the number of shares deliverable upon the vesting of such PSUs was determined based on the achievement of a pre-established revenue performance goal for the one-year performance period from January 1, 2025 to December 31, 2025. The PSUs were eligible to vest following the performance period, but no later than March 1, 2026, provided that the recipient was employed by, or providing services to, the Company on the applicable vesting date, and subject to the terms and conditions of the 2023 LTIP and the applicable RSU award agreement. Generally, the RSUs vest in three equal annual tranches over a period of approximately three years, provided that the recipient is employed by, or providing services to, the Company on the applicable vesting date.

During the year ended December 31, 2025, 23,715 PSUs (consisting of PSUs granted to certain executive officers in 2024) were eligible to vest based on the Company’s performance during a performance period ended December 31, 2024. On February 10, 2025, we issued 23,715 shares of common stock upon the vesting of PSUs. The number of shares delivered upon the vesting of such PSUs was determined based on the Company’s achievement of a revenue performance goal.