Paylocity
Feb 2, 2017
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Paylocity Announces Second Quarter Fiscal Year 2017 Financial Results

ARLINGTON HEIGHTS, Ill., Feb. 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 second quarter of fiscal year 2017, which ended December 31, 2016.

"I was pleased with our second quarter in terms of both top and bottom line performance given the challenge in comparing to the record-setting revenue growth in the second quarter of last fiscal year." said Steve Beauchamp, President and Chief Executive Officer of Paylocity. "We continue to realize value from our product investments, as our newly released Recruiting product is off to a good start and we just launched our newest module, Expense Management. We continue to focus on investments in both our products and our people and were recently recognized as the #14 Best Places to Work in the Glassdoor Employees' Choice Award."

Second Quarter Fiscal 2017 Financial Highlights

Revenue:

Operating Income (Loss):

Net Income (Loss):

Adjusted EBITDA:

Balance Sheet and Cash Flow:

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 2, 2017, Paylocity is issuing guidance for the third quarter and full fiscal year 2017 as indicated below.

Third Quarter 2017:

Fiscal Year 2017:

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 2017 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 39058974. 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 for medium-sized organizations. 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, 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, 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 Enhanced, 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 12, 2016.  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,
Assets  2016   2016
Current assets:    
Cash and cash equivalents $86,496    $82,257 
Accounts receivable, net  1,681    2,067 
Prepaid expenses and other  7,409    11,291 
     
Total current assets before funds held for clients  95,586    95,615 
Funds held for clients  1,239,622    1,092,471 
     
Total current assets  1,335,208    1,188,086 
Long-term prepaid expenses  845    618 
Capitalized internal-use software, net  11,427    14,944 
Property and equipment, net  26,787    33,633 
Intangible assets, net  10,419    9,657 
Goodwill  6,003    6,003 
     
Total assets $1,390,689  $ 1,252,941 
     
Liabilities and Stockholders' Equity    
     
Current liabilities:    
     
Accounts payable $1,621  $3,134 
Accrued expenses  24,979    22,096 
     
Total current liabilities before client fund obligations  26,600    25,230 
Client fund obligations  1,239,622    1,092,471 
     
Total current liabilities  1,266,222    1,117,701 
Deferred rent  4,646    9,548 
Deferred income tax liabilities, net  249    351 
     
Total liabilities $1,271,117  $ 1,127,600 
Stockholders' equity:    
Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2016 and December 31, 2016 $  $ 
Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2016 and December 31, 2016; 51,132 shares issued and
outstanding at June 30, 2016 and 51,430 shares issued and outstanding at December 31, 2016
  51    51 
Additional paid-in capital  171,515    181,523 
Accumulated deficit  (51,994)   (56,233)
Total stockholders' equity $119,572  $ 125,341 
Total liabilities and stockholders' equity $1,390,689  $ 1,252,941 



PAYLOCITY HOLDING CORPORATION
Unaudited Consolidated Statements of Operations
 (in thousands, except per share data)
 
  Three months ended 
December 31,
 Six months ended 
December 31,
   2015   2016   2015   2016 
Revenues:        
Recurring fees $51,732  $65,347  $94,095  $127,267 
Interest income on funds held for clients  615   731   1,143   1,448 
Total recurring revenues  52,347   66,078   95,238   128,715 
Implementation services and other  2,837   2,576   5,054   4,961 
Total revenues  55,184   68,654   100,292   133,676 
Cost of revenues:        
Recurring revenues  16,125   20,716   29,282   39,819 
Implementation services and other  7,975   9,667   15,013   18,923 
Total cost of revenues  24,100   30,383   44,295   58,742 
Gross profit  31,084   38,271   55,997   74,934 
Operating expenses:        
Sales and marketing  14,340   17,735   26,790   35,746 
Research and development  6,799   7,222   12,228   14,523 
General and administrative  11,239   14,957   21,690   28,815 
Total operating expenses  32,378   39,914   60,708   79,084 
Operating loss  (1,294)  (1,643)  (4,711)  (4,150)
Other income  214   4   297   43 
Loss before income taxes  (1,080)  (1,639)  (4,414)  (4,107)
Income tax expense  85   32   186   132 
Net loss $(1,165) $(1,671) $(4,600) $(4,239)
Net loss per share:        
Basic $  (0.02) $  (0.03) $(0.09) $(0.08)
Diluted$  (0.02)$(0.03) $(0.09) $(0.08)
Weighted-average shares used in computing net loss per share:        
Basic  50,890   51,384   50,817   51,308 
Diluted 50,890  51,384   50,817   51,308 


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,
 2015
  2016  2015  2016 
Cost of revenue - recurring
$461 $600 $858 $1,205 
Cost of revenue -  implementation services and other 
 311  373  602  721 
Sales and marketing 
 1,228  1,697  2,155  3,294 
Research and development 
 823  877  1,450  1,777 
General and administrative 
 2,057  3,127  3,721  5,848 
Total

$4,880 $6,674 $8,786 $12,845 



PAYLOCITY HOLDING CORPORATION
Unaudited Consolidated Statements of Cash Flows
 (in thousands)
 
  Six Months Ended
December 31,
   2015   2016 
Cash flows from operating activities:    
     
Net loss $(4,600) $(4,239)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Stock-based compensation expense  8,492   12,448 
Depreciation and amortization expense  6,155   9,103 
Deferred income tax expense  151   102 
Provision for doubtful accounts  75   60 
Loss on disposal of equipment  168   97 
Changes in operating assets and liabilities:    
Accounts receivable  (428)  (446)
Prepaid expenses  (891)  845 
Trade accounts payable  653   46 
Accrued expenses  1,039   (2,626)
Net cash provided by operating activities  10,814   15,390 
     
Cash flows from investing activities:    
Capitalized internal-use software costs  (3,775)  (6,279)
Purchases of property and equipment  (6,865)  (10,038)
Payments for acquisitions  (183)   
Net change in funds held for clients  (291,918)  147,151 
Net cash provided by (used in) investing activities  (302,741)  130,834 
     
Cash flows from financing activities:    
Net change in client funds obligation  291,918   (147,151)
Proceeds from exercise of stock options  137    
Proceeds from employee stock purchase plan  1,403   1,823 
Taxes paid related to net share settlement of equity awards  (3,765)  (5,135)
Net cash provided by (used in) financing activities  289,693   (150,463)
Net Change in Cash and Cash Equivalents  (2,234)  (4,239)
Cash and Cash Equivalents—Beginning of Period  81,258   86,496 
Cash and Cash Equivalents—End of Period $79,024  $82,257 
Supplemental Disclosure of Non-Cash Investing and Financing Activities    
Build-out allowance received from landlord $55  $  — 
Unpaid follow-on offering costs included in accrued expenses $152  $  — 
Purchase of property and equipment, accrued but not paid $1,531  $  2,172 
Supplemental Disclosure of Cash Flow Information    
Cash paid for income taxes, net of refunds $22  $  26 


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,
  2015  2016   2015  2016 
Reconciliation from gross profit to adjusted gross profit:     
Gross profit$  31,084 $  38,271  $  55,997 $  74,934 
Amortization of capitalized internal-use software costs   1,423    1,950     2,365    3,634 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   772    973     1,460    1,926 
Adjusted gross profit$  33,279 $  41,194  $  59,822 $  80,494 
      
 Three months
Ended
December 31,
 Six months
Ended
December 31,
  2015  2016   2015  2016 
Reconciliation from total recurring revenues to adjusted recurring gross profit:     
Total recurring revenues$  52,347 $  66,078  $  95,238 $  128,715 
Cost of recurring revenues   16,125    20,716     29,282    39,819 
Recurring gross profit   36,222    45,362     65,956    88,896 
Amortization of capitalized internal-use software costs   1,423    1,950     2,365    3,634 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   461    600     858    1,205 
Adjusted recurring gross profit$  38,106 $  47,912  $  69,179 $  93,735 
      
 Three months
Ended
December 31,
 Six months
Ended
December 31,
  2015  2016   2015  2016 
Reconciliation from operating loss to non-GAAP operating income:     
Operating loss$  (1,294)$  (1,643) $  (4,711)$  (4,150)
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   4,880    6,674     8,786    12,845 
Amortization of acquired intangibles   381    381     761    762 
Non-GAAP operating income$  3,967 $  5,412  $  4,836 $  9,457 
      
 Three months
Ended
December 31,
 Six months
Ended
December 31,
  2015  2016   2015  2016 
Reconciliation from net loss to non-GAAP net income:     
Net loss$  (1,165)$  (1,671) $  (4,600)$  (4,239)
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   4,880    6,674     8,786    12,845 
Amortization of acquired intangibles   381    381     761    762 
Non-GAAP net income $  4,096 $  5,384  $  4,947 $  9,368 
      
 Three months
Ended
December 31,
 Six months
Ended
December 31,
  2015  2016   2015  2016 
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   50,890    51,384     50,817    51,308 
Weighted-average effect of potentially dilutive shares   2,830    2,534     2,763    2,689 
Pro forma diluted weighted-average number of common shares   53,720    53,918     53,580    53,997 
      
 Three months
Ended
December 31,
 Six months
Ended
December 31,
  2015  2016   2015  2016 
Calculation of non-GAAP net income per share:     
Non-GAAP net income $  4,096 $  5,384  $  4,947 $  9,368 
Pro forma diluted weighted-average number of common shares   53,720    53,918     53,580    53,997 
Non-GAAP net income per share$  0.08 $  0.10  $  0.09 $  0.17 
      
 Three months
Ended
December 31,
 Six months
Ended
December 31,
  2015  2016   2015  2016 
Reconciliation from net loss to Adjusted EBITDA:     
Net loss$  (1,165)$  (1,671) $  (4,600)$  (4,239)
Interest expense   -     -      -     -  
Income tax expense    85    32     186    132 
Depreciation and amortization   3,436    4,835     6,155    9,103 
EBITDA   2,356    3,196     1,741    4,996 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   4,880    6,674     8,786    12,845 
Adjusted EBITDA$  7,236 $  9,870  $  10,527 $  17,841 
      
 Three months
Ended
December 31,
 Six months
Ended
December 31,
  2015  2016   2015  2016 
Reconciliation of non-GAAP Sales and Marketing:     
Sales and Marketing $  14,340 $  17,735  $  26,790 $  35,746 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   1,228    1,697     2,155    3,294 
Non-GAAP Sales and Marketing$  13,112 $  16,038  $  24,635 $  32,452 
      
 Three months
Ended
December 31,
 Six months
Ended
December 31,
  2015  2016   2015  2016 
Reconciliation of non-GAAP Total Research and Development:     
Research and Development $  6,799 $  7,222  $  12,228 $  14,523 
Capitalized internal-use software costs   1,732    3,392     3,775    6,279 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   823    877     1,450    1,777 
Non-GAAP Total Research and Development$  7,708 $  9,737  $  14,553 $  19,025 
      
 Three months
Ended
December 31,
 Six months
Ended
December 31,
  2015  2016   2015  2016 
Reconciliation of non-GAAP General and Administrative:     
General and Administrative$  11,239 $  14,957  $  21,690 $  28,815 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   2,057    3,127     3,721    5,848 
Amortization of acquired intangibles   381    381     761    762 
Non-GAAP General and Administrative$  8,801 $  11,449  $  17,208 $  22,205 
      

 

CONTACT: 
Annemarie Pozo
investors@paylocity.com
224.318.3900
www.paylocity.com