PAYC · 10-Q · 2026Q2 · Full report

Interest Rate Environment

Paycom Software, Inc. · 2026-08-06 · Importance 49 · Surprise 32 · No source text

Lower interest rates reduced interest earned on funds held for clients to $53.9 million for the six months ended June 30, 2026, down 8.7% from $59.0 million in the prior-year period. The decline was partially offset by higher average daily client-fund balances of $3.0 billion, compared with $2.8 billion in the first six months of 2025. Management expects interest income to remain sensitive to future changes in interest rates as client-fund balances grow.

Key facts

• Three months interest expense: $10.5 million (-2.0% of total revenues) for the three months ended June 30, 2026, increased 1245.1% versus prior year. source
• Six months interest expense: $14.5 million (-1.3% of total revenues) for the six months ended June 30, 2026, increased 833.0% versus prior year. source
• Borrowings under the Credit Agreement bear interest at either ABR plus a margin or Term SOFR plus a margin, with applicable margin for ABR borrowings ranging from 0.25% to 1.00% and for SOFR-based borrowings ranging from 1.25% to 2.00%, determined by consolidated leverage ratio. source
• The applicable commitment fee rate on the unused portion of the Revolving Credit Facility ranges from 0.20% to 0.275% per annum based on consolidated leverage ratio. source
• Decrease in interest earned on funds held for clients for the three months ended June 30, 2026 compared to prior year was due to lower interest rates partially offset by increased average funds held balances. source
• Interest income earned on corporate funds was $1.5 million and $3.5 million for the three and six months ended June 30, 2026, respectively, compared to $5.5 million and $10.3 million for the corresponding prior year periods. source

Impact estimates