News Release


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Feb 8, 2018

Paylocity Announces Second Quarter Fiscal Year 2018 Financial Results
  • Q2 2018 Total Revenue of $86.0 million, up 25% year-over-year
  • Q2 2018 Recurring Revenue of $83.1 million, up 26% year-over-year

ARLINGTON HEIGHTS, Ill., Feb. 08, 2018 (GLOBE NEWSWIRE) --  Paylocity Holding Corporation (Nasdaq:PCTY), a cloud-based provider of payroll and human capital management software solutions, announced today financial results for the second quarter of fiscal year 2018, which ended Dec. 31, 2017.

“I was pleased with the 25 percent total revenue growth we saw in the second quarter, while also continuing to drive scale throughout our business model,” said Steve Beauchamp, Chief Executive Officer of Paylocity. “We continue to focus on investments in both our product and our people, highlighted this quarter by the launch of our Compensation and Survey modules and the recognition received by Glassdoor as one of the Best Places to Work in 2018.”

Second Quarter Fiscal 2018 Financial Highlights

Revenue

  • Total revenue was $86.0 million, an increase of 25% from the second quarter of fiscal year 2017. 
  • Total recurring revenue was $83.1 million, representing 97% of total revenue and an increase of 26% from the second quarter of fiscal year 2017. 

Operating Income (Loss)

  • GAAP operating income was $0.1 million, compared to an operating loss of ($1.6) million in the second quarter of fiscal year 2017.
  • Non-GAAP operating income was $8.7 million, compared to non-GAAP operating income of $5.4 million in the second quarter of fiscal year 2017.

Net Income (Loss)

  • GAAP net income was $0.4 million. This compares to a net loss of ($1.7) million for the second quarter of fiscal year 2017. Net income per share was $0.01 for the second quarter of fiscal year 2018 based on 54.8 million diluted weighted average common shares outstanding. Net loss per share was ($0.03) for the second quarter of fiscal year 2017, based on 51.4 million basic and diluted weighted average common shares outstanding.
  • Non-GAAP net income was $9.0 million. This compares to non-GAAP net income of $5.4 million for the second quarter of fiscal year 2017. Non-GAAP net income per share was $0.16 for the second quarter of fiscal year 2018, based on 54.8 million diluted weighted average common shares outstanding. Non-GAAP net income per share was $0.10 for the second quarter of fiscal year 2017, based on 53.9 million pro forma diluted weighted average common shares outstanding. 

Adjusted EBITDA

  • Adjusted EBITDA, a non-GAAP measure, was $15.2 million compared to Adjusted EBITDA of $9.9 million in the second quarter of fiscal year 2017.

Balance Sheet and Cash Flow

  • Cash and cash equivalents totaled $111.0 million at the end of the quarter. 
     
  • Cash flow from operations for the second quarter of fiscal year 2018 was $26.0 million compared to $13.5 million for the second 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 February 8, 2018, Paylocity is issuing guidance for the third quarter and full fiscal year 2018 as indicated below.

Third Quarter 2018

  • Total revenue is expected to be in the range of $110.0 million to $111.0 million.
  • Adjusted EBITDA is expected to be in the range of $32.3 million to $33.3 million.
  • Non-GAAP net income is expected to be in the range of $25.0 million to $26.0 million, or $0.45 to $0.47 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 $369.0 million to $371.0 million.
  • Adjusted EBITDA is expected to be in the range of $76.0 million to $77.0 million.
  • Non-GAAP net income is expected to be in the range of $48.0 million to $49.0 million, or $0.87 to $0.89 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 second quarter fiscal year 2018 results at 4 p.m. CST today (5 p.m. EST). A live audio webcast of the conference call, together with detailed financial information, can be accessed through the company's Investor Relations website. Participants who choose to call in to the conference call can do so by dialing (855) 226-3021 or (315) 625-6892, using passcode 3271209. 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.

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 (benefit), 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 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; potential adverse tax consequences to Paylocity as a result of the recently enacted Federal Tax Cut and Jobs Act; 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,    December 31,   
    2017     2017    
Assets              
Current assets:              
Cash and cash equivalents   $  103,468     $  111,027    
Accounts receivable, net      2,040        2,739    
Prepaid expenses and other      14,879        7,456    
               
Total current assets before funds held for clients      120,387        121,222    
Funds held for clients      942,459        1,345,702    
               
Total current assets      1,062,846        1,466,924    
Long-term prepaid expenses      1,535        1,072    
Capitalized internal-use software, net      17,394        18,786    
Property and equipment, net      40,756        48,354    
Intangible assets, net      8,907        8,189    
Goodwill      6,003        6,003    
               
Total assets   $  1,137,441     $  1,549,328    
               
Liabilities and Stockholders’ Equity              
Current liabilities:              
Accounts payable   $  2,046     $  1,794    
Accrued expenses      30,301        29,128    
               
Total current liabilities before client fund obligations      32,347        30,922    
Client fund obligations      942,459        1,345,702    
               
Total current liabilities      974,806        1,376,624    
Deferred rent      14,621        14,243    
Deferred income tax liabilities, net      401        308    
               
Total liabilities   $  989,828     $  1,391,175    
Stockholders’ equity:              
Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2017 and December 31, 2017   $  —     $  —    
Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2017 and December 31, 2017; 51,738 shares issued and outstanding at June 30, 2017 and 52,590 shares issued and outstanding at December 31, 2017      52        53    
Additional paid-in capital      192,837        202,512    
Accumulated deficit      (45,276 )      (44,302 )  
Accumulated other comprehensive loss      —        (110 )  
Total stockholders’ equity   $  147,613     $  158,153    
Total liabilities and stockholders’ equity   $  1,137,441     $  1,549,328    
                   


PAYLOCITY HOLDING CORPORATION
Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except per share data)  
 
   
    Three Months Ended   Six Months Ended  
    December 31,    December 31,   
    2016
  2017
  2016
  2017
 
Revenues:                          
Recurring fees   $  65,347     $  81,292     $  127,267     $  158,586    
Interest income on funds held for clients      731        1,783        1,448        3,400    
                           
Total recurring revenues      66,078        83,075        128,715        161,986    
Implementation services and other      2,576        2,929        4,961        5,518    
                           
Total revenues      68,654        86,004        133,676        167,504    
Cost of revenues:                          
Recurring revenues      20,716        25,638        39,819        49,729    
Implementation services and other      9,667        11,202        18,923        22,070    
                           
Total cost of revenues      30,383        36,840        58,742        71,799    
Gross profit      38,271        49,164        74,934        95,705    
Operating expenses:                          
Sales and marketing      17,735        21,598        35,746        42,778    
Research and development      7,222        9,274        14,523        18,169    
General and administrative      14,957        18,159        28,815        34,110    
                           
Total operating expenses      39,914        49,031        79,084        95,057    
Operating income (loss)      (1,643 )      133        (4,150 )      648    
Other income      4        141        43        250    
                           
Income (loss) before income taxes      (1,639 )      274        (4,107 )      898    
Income tax expense (benefit)      32        (157 )      132        (76 )  
                           
Net income (loss)   $  (1,671 )   $  431     $  (4,239 )   $  974    
                           
Other comprehensive loss, net of tax                          
Unrealized losses on securities, net of tax      —        (105 )      —        (110 )  
Total other comprehensive loss, net of tax      —        (105 )      —        (110 )  
Comprehensive income (loss)   $  (1,671 )   $  326     $  (4,239 )   $  864    
                           
                           
Net income (loss) per share:                          
Basic   $  (0.03 )   $  0.01     $  (0.08 )   $  0.02    
Diluted   $  (0.03 )   $ 0.01     $  (0.08 )   $  0.02    
                           
                           
Weighted-average shares used in computing net income (loss) per share:                          
Basic      51,384        52,502        51,308        52,197    
Diluted      51,384        54,818        51,308        54,639    
                                   

Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises are included in the above line items:

    Three months ended
December 31,

  Six months ended
December 31,

 
    2016    2017    2016    2017  
Cost of revenue - recurring   $600   $753   $1,205   $1,490  
Cost of revenue -  implementation services and other   373   390   721   834  
Sales and marketing   1,697   2,212   3,294   4,263  
Research and development   877   956   1,777   2,053  
General and administrative   3,127   3,895   5,848   6,861  
Total   $6,674   $8,206   $12,845   $15,501  


PAYLOCITY HOLDING CORPORATION
Unaudited Consolidated Statements of Cash Flows
(in thousands)
 
   
    Six Months Ended  
    December 31,   
    2016
  2017
 
               
Cash flows from operating activities:              
               
Net income (loss)   $  (4,239 )   $  974    
Adjustments to reconcile net income (loss) to net cash provided by operating activities:              
Stock-based compensation expense      12,448        14,424    
Depreciation and amortization expense      9,103        13,438    
Deferred income tax expense (benefit)      102        (93 )  
Provision for doubtful accounts      60        76    
Net accretion of discounts and amortization of premiums on available-for-sale securities      —        (141 )  
Net realized losses on sales of available-for-sale securities      —        2    
Loss on disposal of equipment      97        106    
Changes in operating assets and liabilities:              
Accounts receivable      (446 )      (775 )  
Prepaid expenses and other      845        1,583    
Accounts payable      46        (88 )  
Accrued expenses      (2,626 )      (1,290 )  
Tenant improvement allowance      —        5,952    
Net cash provided by operating activities      15,390        34,168    
               
Cash flows from investing activities:              
Purchases of available-for-sale securities from funds held for clients      —        (95,207 )  
Proceeds from sales and maturities of available-for-sale securities from funds held for clients      —        23,181    
Net change in funds held for clients' cash and cash equivalents      147,151        (331,078 )  
Capitalized internal-use software costs      (6,279 )      (7,146 )  
Purchases of property and equipment      (10,038 )      (7,998 )  
Lease allowances used for tenant improvements      —        (5,952 )  
Net cash provided by (used in) investing activities      130,834        (424,200 )  
               
Cash flows from financing activities:              
Net change in client fund obligations      (147,151 )      403,243    
Proceeds from employee stock purchase plan      1,823        2,045    
Taxes paid related to net share settlement of equity awards      (5,135 )      (7,697 )  
Net cash provided by (used in) financing activities      (150,463 )      397,591    
Net Change in Cash and Cash Equivalents      (4,239 )      7,559    
Cash and Cash Equivalents—Beginning of Period      86,496        103,468    
Cash and Cash Equivalents—End of Period   $  82,257     $  111,027    
Supplemental Disclosure of Non-Cash Investing and Financing Activities              
Purchase of property and equipment and internal-use software, accrued but not paid   $  2,172     $  482    
Supplemental Disclosure of Cash Flow Information              
Cash paid for income taxes, net of refunds   $  26     $  60    
                   


Paylocity Holding Corporation
Reconciliation of GAAP to non-GAAP Financial Measures
(In thousands except per share data)
           
  Three months
Ended
December 31,
  Six months
Ended
December 31,
    2016     2017       2016     2017  
Reconciliation from gross profit to adjusted gross profit:          
Gross profit $ 38,271   $ 49,164     $ 74,934   $ 95,705  
Amortization of capitalized internal-use software costs   1,950      3,314       3,634     6,703  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   973     1,143       1,926     2,324  
Adjusted gross profit $ 41,194   $ 53,621     $ 80,494   $ 104,732  
           
  Three months
Ended
December 31,
  Six months
Ended
December 31,
    2016     2017       2016     2017  
Reconciliation from total recurring revenues to adjusted recurring gross profit:          
Total recurring revenues $ 66,078   $ 83,075     $ 128,715   $ 161,986  
Cost of recurring revenues   20,716     25,638       39,819     49,729  
Recurring gross profit   45,362     57,437       88,896     112,257  
Amortization of capitalized internal-use software costs   1,950     3,314       3,634     6,703  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   600     753       1,205     1,490  
Adjusted recurring gross profit $ 47,912   $ 61,504     $ 93,735   $ 120,450  
           
  Three months
Ended
December 31,
  Six months
Ended
December 31,
    2016     2017       2016     2017  
Reconciliation from operating income (loss) to non-GAAP operating income:          
Operating income (loss) $ (1,643 ) $ 133     $ (4,150 ) $ 648  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   6,674     8,206       12,845     15,501  
Amortization of acquired intangibles   381       359       762     718  
Non-GAAP operating income $ 5,412   $ 8,698     $ 9,457   $ 16,867  
           
  Three months
Ended
December 31,
  Six months
Ended
December 31,
    2016     2017       2016     2017  
Reconciliation from net income (loss) to non-GAAP net income:          
Net income (loss) $ (1,671 ) $ 431     $ (4,239 ) $ 974  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   6,674     8,206       12,845     15,501  
Amortization of acquired intangibles   381     359       762     718  
Non-GAAP net income $ 5,384   $ 8,996     $ 9,368   $ 17,193  
           
  Three months
Ended
December 31,
  Six months
Ended
December 31,
    2016     2017       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   51,384     54,818       51,308     54,639  
Weighted-average effect of potentially dilutive shares   2,534         -       2,689           -  
Pro forma diluted weighted-average number of common shares   53,918     54,818       53,997     54,639  
           
  Three months
Ended
December 31,
  Six months
Ended
December 31,
    2016     2017       2016     2017  
Calculation of non-GAAP net income per share:          
Non-GAAP net income $   5,384   $   8,996     $   9,368   $   17,193  
Pro forma diluted weighted-average number of common shares   53,918     54,818       53,997     54,639  
Non-GAAP net income per share $   0.10   $   0.16     $   0.17   $   0.31  
           
  Three months
Ended
December 31,
  Six months
Ended
December 31,
    2016     2017       2016     2017  
Reconciliation from net income (loss) to Adjusted EBITDA:          
Net income (loss) $   (1,671 ) $   431     $   (4,239 ) $   974  
Interest expense   -      -               -     -  
Income tax expense (benefit)      32     (157 )     132     (76 )
Depreciation and amortization expense   4,835     6,765       9,103     13,438  
EBITDA   3,196     7,039       4,996     14,336  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   6,674     8,206       12,845     15,501  
Adjusted EBITDA $   9,870   $   15,245     $   17,841   $   29,837  
           
  Three months
Ended
December 31,
  Six months
Ended
December 31,
    2016     2017       2016     2017  
Reconciliation of non-GAAP Sales and Marketing:          
Sales and Marketing $ 17,735   $ 21,598     $ 35,746   $ 42,778  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   1,697     2,212       3,294     4,263  
Non-GAAP Sales and Marketing $   16,038   $   19,386     $   32,452   $   38,515  
           
  Three months
Ended
December 31,
  Six months
Ended
December 31,
    2016     2017       2016     2017  
Reconciliation of non-GAAP Total Research and Development:          
Research and Development $     7,222   $   9,274     $ 14,523   $  18,169  
Capitalized internal-use software costs    3,392     3,395       6,279     7,146  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   877     956       1,777     2,053  
Non-GAAP Total Research and Development $   9,737   $   11,713     $   19,025   $   23,262  
           
  Three months
Ended
December 31,
  Six months
Ended
December 31,
    2016     2017       2016     2017  
Reconciliation of non-GAAP General and Administrative:          
General and Administrative $ 14,957   $   18,159     $   28,815   $   34,110  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   3,127     3,895       5,848     6,861  
Amortization of acquired intangibles   381     359       762     718  
Non-GAAP General and Administrative $   11,449   $   13,905     $   22,205   $   26,531  
           

 

Contact:
Ryan Glenninvestors@paylocity.comwww.paylocity.com

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Source: Paylocity