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Nov 2, 2017

Paylocity Announces First Quarter Fiscal Year 2018 Financial Results
  • Q1 2018 Total Revenue of $81.5 million, up 25% year-over-year
  • Q1 2018 Recurring Revenue of $78.9 million, up 26% year-over-year

ARLINGTON HEIGHTS, Ill., Nov. 02, 2017 (GLOBE NEWSWIRE) -- Paylocity Holding Corporation (Nasdaq:PCTY), a cloud-based provider of payroll and human capital management software solutions, today announced financial results for the first quarter of fiscal year 2018, which ended September 30, 2017.

"Fiscal 2018 is off to a nice start, as we saw 25% top-line revenue growth while also continuing to drive improved leverage across all of our key financial metrics, as we remain committed to scaling the business," said Steve Beauchamp, Chief Executive Officer of Paylocity. "We continue to be focused on investment in product development, announcing today at our annual Client Conference the release of our Compensation Management and Survey modules as we continue to add value to our product suite."

First Quarter Fiscal 2018 Financial Highlights

Revenue:

  • Total revenue was $81.5 million, an increase of 25% from the first quarter of fiscal year 2017. 

  • Total recurring revenue was $78.9 million, representing 97% of total revenue and an increase of 26% from the first quarter of fiscal year 2017. 

Operating Income (Loss):

  • GAAP operating income was $0.5 million, compared to an operating loss of ($2.5) million in the first quarter of fiscal year 2017.

  • Non-GAAP operating income was $8.2 million, compared to non-GAAP operating income of $4.0 million in the first quarter of fiscal year 2017.

Net Income (Loss):

  • GAAP net income was $0.5 million. This compares to a net loss of ($2.6) million for the first quarter of fiscal year 2017. Net income per share was $0.01 for the first quarter of fiscal year 2018 based on 54.6 million diluted weighted average common shares outstanding. Net loss per share was ($0.05) for the first quarter of fiscal year 2017, based on 51.2 million basic and diluted weighted average common shares outstanding.

  • Non-GAAP net income was $8.2 million. This compares to non-GAAP net income of $4.0 million for the first quarter of fiscal year 2017. Non-GAAP net income per share was $0.15 for the first quarter of fiscal year 2018, based on 54.6 million diluted weighted average common shares outstanding. Non-GAAP net income per share was $0.07 for the first quarter of fiscal year 2017, based on 54.2 million pro forma diluted weighted average common shares outstanding. 

Adjusted EBITDA:

  • Adjusted EBITDA, a non-GAAP measure, was $14.6 million compared to Adjusted EBITDA of $8.0 million in the first quarter of fiscal year 2017.

Balance Sheet and Cash Flow:

  • Cash and cash equivalents totaled $97.4 million at the end of the quarter. 
     
  • Cash flow from operations for the first quarter of fiscal year 2018 was $8.2 million compared to $1.9 million for the first quarter of fiscal year 2017.

A reconciliation of GAAP to non-GAAP financial measures has been provided in this press release, including the accompanying tables.  An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

Business Outlook

Based on information available as of November 2, 2017, Paylocity is issuing guidance for the second quarter and full fiscal year 2018 as indicated below.

Second Quarter 2018:

  • Total revenue is expected to be in the range of $84.3 million to $85.3 million.
  • Adjusted EBITDA is expected to be in the range of $12.5 million to $13.5 million.
  • Non-GAAP net income is expected to be in the range of $6.0 million to $7.0 million, or $0.11 to $0.13 per share, based on approximately 55 million diluted weighted average common shares outstanding.

Fiscal Year 2018:

  • Total revenue is expected to be in the range of $368.5 million to $370.5 million.
  • Adjusted EBITDA is expected to be in the range of $74.0 million to $75.0 million.
  • Non-GAAP net income is expected to be in the range of $46.0 million to $47.0 million, or $0.84 to $0.85 per share, based on approximately 55 million diluted weighted average common shares outstanding.

We are unable to reconcile these forward-looking non-GAAP financial measures to their directly comparable GAAP financial measures because the information which is needed to complete a reconciliation is unavailable at this time without unreasonable effort.

Conference Call Details

Paylocity will host a conference call to discuss its first quarter fiscal year 2018 results at 4:00 p.m. Central Time today (5:00 Eastern Time). A live audio webcast of the conference call, together with detailed financial information, can be accessed through the company's Investor Relations Web site at http://www.paylocity.com. Participants who choose to call in to the conference call can do so by dialing (855) 226-3021 or (315) 625-6892, passcode 97618145. A replay of the call will be available and archived via webcast at www.paylocity.com.

About Paylocity

Paylocity is a provider of cloud-based payroll and human capital management, or HCM, software solutions. Paylocity's comprehensive and easy-to-use solutions enable its clients to manage their workforces more effectively.  Paylocity's solutions help drive strategic human capital decision-making and improve employee engagement by enhancing the human resource, payroll and finance capabilities of its clients. For more information, visit www.paylocity.com.

Source: Paylocity

Non-GAAP Financial Measures
The company uses certain non-GAAP financial measures in this release, including Adjusted EBITDA, adjusted gross profit, adjusted recurring gross profit, non-GAAP operating income (loss), non-GAAP net income (loss), non-GAAP net income (loss) per share, non-GAAP sales and marketing, non-GAAP total research and development and non-GAAP general and administrative. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. We define Adjusted EBITDA as net income (loss) before interest expense, income tax expense, and depreciation and amortization expense, adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises. Adjusted gross profit and adjusted recurring gross profit are adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises and amortization of capitalized internal-use software costs. Non-GAAP operating income (loss) is adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises and the amortization of acquired intangibles. Non-GAAP sales and marketing expense is adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises. Non-GAAP general and administrative expense is adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises and the amortization of acquired intangibles. Non-GAAP net income (loss) and non-GAAP net income (loss) per share are adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises and the amortization of acquired intangibles. Pro forma diluted weighted average number of common shares are adjusted for the weighted average effect of potentially diluted shares. Non-GAAP total research and development is adjusted for capitalized internal-use software costs and to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises. Please note that other companies may define their non-GAAP financial measures differently than we do. Management presents certain non-GAAP financial measures in this release because it considers them to be important supplemental measures of performance. Management uses these non-GAAP financial measures for planning purposes, including analysis of the company's performance against prior periods, the preparation of operating budgets and to determine appropriate levels of operating and capital investments. Management believes that these non-GAAP financial measures provide additional insight for analysts and investors in evaluating the company's financial and operational performance. Management also intends to provide these non-GAAP financial measures as part of the company's future earnings discussions and, therefore, the inclusion of the non-GAAP financial measures should provide consistency in the company's financial reporting. Non-GAAP financial measures have limitations as an analytical tool. Investors are encouraged to review the reconciliation of the non-GAAP measures to their most directly comparable GAAP measures provided in this release.

Safe Harbor/forward looking statements
This press release contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included herein regarding Paylocity's future operations, ability to scale its business, future financial position and performance, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "will," "would," "seek" and similar expressions (or the negative of these terms) are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about management's estimates regarding future revenues and financial performance and other statements about management's beliefs, intentions or goals.  Paylocity may not actually achieve the expectations disclosed in the forward-looking statements, and you should not place undue reliance on Paylocity's forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results or events to differ materially from the expectations disclosed in the forward-looking statements, including, but not limited to, risks related to regulatory, legislative and judicial uncertainty in Paylocity's markets, including the potential repeal or replacement of the Affordable Care Act; Paylocity's ability to retain existing clients and to attract new clients to enter into subscriptions for its services; Paylocity's ability to sell new products and retain subscriptions for its existing products, such as ACA Compliance, to its new and existing clients; the challenges associated with a growing company's ability to effectively service clients in a dynamic and competitive market; challenges associated with expanding and evolving a sales organization to effectively address new geographies and products and services; Paylocity's reliance on and ability to expand its referral network of third parties; difficulties associated with accurately forecasting revenue and appropriately planning expenses; challenges with managing growth effectively; difficulties in forecasting Paylocity's tax position, including but not limited to the assessment of the need for a valuation allowance against its deferred tax position; continued acceptance of SaaS as an effective method for delivery of payroll and HCM solutions; Paylocity's ability to protect and defend its intellectual property; the risk that Paylocity's security measures are compromised or the unauthorized access to customer data; unexpected events in the market for Paylocity's solutions; changes in the competitive environment in Paylocity's industry and the markets in which it operates; adverse changes in general economic or market conditions; changes in the employment rates of Paylocity's clients and the resultant impact on revenue; and other risks and potential factors that could affect Paylocity's business and financial results identified in Paylocity's filings with the Securities and Exchange Commission (the "SEC"), including its 10-K filed with the SEC on August 11, 2017.  Additional information will also be set forth in Paylocity's future quarterly reports on Form 10-Q, annual reports on Form 10-K and other filings that Paylocity makes with the SEC.  These forward-looking statements represent Paylocity's expectations as of the date of this press release. Subsequent events may cause these expectations to change, and Paylocity disclaims any obligations to update or alter these forward-looking statements in the future, whether as a result of new information, future events or otherwise.

  
PAYLOCITY HOLDING CORPORATION 
Unaudited Consolidated Balance Sheets 
(in thousands, except per share data) 
  
  June 30,  September 30,  
  2017  2017  
Assets       
Current assets:       
Cash and cash equivalents $103,468  $97,399  
Accounts receivable, net  2,040   2,565  
Prepaid expenses and other  14,879   13,494  
        
Total current assets before funds held for clients  120,387   113,458  
Funds held for clients  942,459   941,989  
        
Total current assets  1,062,846   1,055,447  
Long-term prepaid expenses  1,535   1,323  
Capitalized internal-use software, net  17,394   17,979  
Property and equipment, net  40,756   44,968  
Intangible assets, net  8,907   8,548  
Goodwill  6,003   6,003  
        
Total assets $1,137,441  $1,134,268  
        
Liabilities and Stockholders' Equity       
Current liabilities:       
Accounts payable $2,046  $1,864  
Accrued expenses  30,301   26,728  
        
Total current liabilities before client fund obligations  32,347   28,592  
Client fund obligations  942,459   941,989  
        
Total current liabilities  974,806   970,581  
Deferred rent  14,621   14,529  
Deferred income tax liabilities, net  401   438  
        
Total liabilities $989,828  $985,548  
Stockholders' equity:       
Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2017 and September 30, 2017 $  $  
Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2017 and September 30, 2017; 51,738 shares issued and outstanding at June 30, 2017 and 52,075 shares issued and outstanding at September 30, 2017  52   52  
Additional paid-in capital  192,837   193,406  
Accumulated deficit  (45,276)  (44,733) 
Accumulated other comprehensive loss     (5) 
Total stockholders' equity $147,613  $148,720  
Total liabilities and stockholders' equity $1,137,441  $1,134,268  
          


PAYLOCITY HOLDING CORPORATION 
Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss) 
(in thousands, except per share data) 
  
  Three Months Ended  
  September 30,  
  2016  2017  
Revenues:       
Recurring fees $61,920  $77,294  
Interest income on funds held for clients  717   1,617  
Total recurring revenues  62,637   78,911  
Implementation services and other  2,385   2,589  
Total revenues  65,022   81,500  
Cost of revenues:       
Recurring revenues  19,103   24,091  
Implementation services and other  9,256   10,868  
        
Total cost of revenues  28,359   34,959  
Gross profit  36,663   46,541  
Operating expenses:       
Sales and marketing  18,011   21,180  
Research and development  7,301   8,895  
General and administrative  13,858   15,951  
        
Total operating expenses  39,170   46,026  
Operating income (loss)  (2,507)  515  
Other income  39   109  
        
Income (loss) before income taxes  (2,468)  624  
Income tax expense  100   81  
Net income (loss) $(2,568) $543  
        
Other comprehensive loss, net of tax       
Unrealized losses on securities, net of tax     (5) 
Total other comprehensive loss, net of tax     (5) 
Comprehensive income (loss) $(2,568) $538  
        
Net income (loss) per share:       
Basic $(0.05) $0.01  
Diluted $(0.05) $0.01  
        
Weighted-average shares used in computing net income (loss) per share:       
Basic  51,231   51,893  
Diluted  51,231   54,610  
          

Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises for each of the three months ended September 30 are included in the above line items:

  Three months ended 
September 30,
 
 2016 2017 
Cost of revenue — recurring$605 $737 
Cost of revenue — implementation services and other348 444 
Sales and marketing1,597 2,051 
Research and development900 1,097 
General and administrative2,721 2,966 
Total stock-based compensation expense and employer payroll taxes related to stock releases and option exercises$6,171 $7,295 


PAYLOCITY HOLDING CORPORATION 
Unaudited Consolidated Statements of Cash Flows 
(in thousands)  
  Three Months Ended  
  September 30,  
  2016  2017  
        
Cash flows from operating activities:       
        
Net income (loss) $ (2,568) $ 543  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:       
Stock-based compensation expense   5,813    6,606  
Depreciation and amortization expense   4,268    6,673  
Deferred income tax expense   78    37  
Provision for doubtful accounts   (3)   4  
Net accretion of discounts and amortization of premiums on available-for-sale securities   —    (108) 
Loss on disposal of equipment   28    31  
Changes in operating assets and liabilities:       
Accounts receivable   (73)   (529) 
Prepaid expenses and other   1,289    (305) 
Accounts payable   85    (101) 
Accrued expenses   (7,034)   (6,304) 
Tenant improvement allowance   —    1,656  
Net cash provided by operating activities   1,883    8,203  
        
Cash flows from investing activities:       
Purchases of available-for-sale securities from funds held for clients   —    (58,844) 
Proceeds from sales of available-for-sale securities from funds held for clients   —    421  
Net change in funds held for clients' cash and cash equivalents   468,674    59,001  
Capitalized internal-use software costs   (2,887)   (3,751) 
Purchases of property and equipment   (2,952)   (2,693) 
Lease allowances used for tenant improvements   —    (1,466) 
Net cash provided by (used in) investing activities   462,835    (7,332) 
        
Cash flows from financing activities:       
Net change in client fund obligations   (468,674)   (470) 
Taxes paid related to net share settlement of equity awards   (4,542)   (6,470) 
Net cash used in financing activities   (473,216)   (6,940) 
Net Change in Cash and Cash Equivalents   (8,498)   (6,069) 
Cash and Cash Equivalents—Beginning of Period   86,496    103,468  
Cash and Cash Equivalents—End of Period $ 77,998  $ 97,399  
Supplemental Disclosure of Non-Cash Investing and Financing Activities       
Purchase of property and equipment and internal-use software, accrued but not paid $ 1,781  $ 4,317  
Supplemental Disclosure of Cash Flow Information       
Cash paid for income taxes, net of refunds $ 16  $ 53  
          


Paylocity Holding Corporation
Reconciliation of GAAP to non-GAAP Financial Measures
(In thousands except per share data)
   
 Three months
Ended
September 30,
  2016  2017
Reconciliation from gross profit to adjusted gross profit:  
Gross profit$36,663 $46,541
Amortization of capitalized internal-use software costs 1,684  3,389
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 953  1,181
Adjusted gross profit$39,300 $51,111
   
 Three months
Ended
September 30,
  2016  2017
Reconciliation from total recurring revenues to adjusted recurring gross profit:  
Total recurring revenues$62,637 $78,911
Cost of recurring revenues 19,103  24,091
Recurring gross profit 43,534  54,820
Amortization of capitalized internal-use software costs 1,684  3,389
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 605  737
Adjusted recurring gross profit$45,823 $58,946
   
 Three months
Ended
September 30,
  2016  2017
Reconciliation from operating income (loss) to non-GAAP operating income:  
Operating income (loss)$(2,507)$515
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 6,171  7,295
Amortization of acquired intangibles 381  359
Non-GAAP operating income$4,045 $8,169
   
 Three months
Ended
September 30,
  2016  2017
Reconciliation from net income (loss) to non-GAAP net income:  
Net income (loss)$(2,568)$543
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 6,171  7,295
Amortization of acquired intangibles 381  359
Non-GAAP net income$3,984 $8,197
   
 Three months
Ended
September 30,
  2016  2017
Reconciliation from diluted weighted-average number of common shares as reported to pro forma diluted weighted average number of common shares  
Diluted weighted-average number of common shares, as reported 51,231  54,610
Weighted-average effect of potentially dilutive shares 2,946  -
Pro forma diluted weighted-average number of common shares 54,177  54,610
   
 Three months
Ended
September 30,
  2016  2017
Calculation of non-GAAP net income per share:  
Non-GAAP net income$3,984 $8,197
Pro forma diluted weighted-average number of common shares 54,177  54,610
Non-GAAP net income per share$0.07 $0.15
   
 Three months
Ended
September 30,
  2016  2017
Reconciliation from net income (loss) to Adjusted EBITDA:  
Net income (loss)$(2,568)$543
Interest expense -  -
Income tax expense 100  81
Depreciation and amortization expense 4,268  6,673
EBITDA 1,800  7,297
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 6,171  7,295
Adjusted EBITDA$7,971 $14,592
   
 Three months
Ended
September 30,
  2016  2017
Reconciliation of non-GAAP Sales and Marketing:  
Sales and Marketing$18,011 $21,180
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 1,597  2,051
Non-GAAP Sales and Marketing$16,414 $19,129
   
 Three months
Ended
September 30,
  2016  2017
Reconciliation of non-GAAP Total Research and Development:  
Research and Development$7,301 $8,895
Capitalized internal-use software costs 2,887  3,751
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 900  1,097
Non-GAAP Total Research and Development$9,288 $11,549
   
 Three months
Ended
September 30,
  2016  2017
Reconciliation of non-GAAP General and Administrative:  
General and Administrative$13,858 $15,951
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 2,721  2,966
Amortization of acquired intangibles 381  359
Non-GAAP General and Administrative$10,756 $12,626
   

 

Investor Contact:
Annemarie Pozo
investors@paylocity.com
224-318-3900