Paylocity Announces Second Quarter Fiscal Year 2023 Financial Results
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- Q2 2023 Recurring & Other Revenue of
$256.4 million, up 31% year-over-year - Q2 2023 Total Revenue of
$273.0 million, up 39% year-over-year
"Our differentiated value proposition of providing the most modern software in the industry, coupled with continued strong sales execution, helped drive recurring and other revenue growth of 31% and total revenue growth of 39% in the second quarter. Our continued strong momentum is the result of ongoing investments in product innovation, including leveraging last year’s acquisition of Cloudsnap, a flexible, low-code solution for integrating disparate business applications. We have fully integrated Cloudsnap into the
Second Quarter Fiscal 2023 Financial Highlights
Revenue:
- Total revenue was
$273.0 million , an increase of 39% from the second quarter of fiscal year 2022. - Recurring & other revenue was
$256.4 million , an increase of 31% from the second quarter of fiscal year 2022.
Operating Income:
- GAAP operating income was
$18.2 million and Non-GAAP operating income was$65.1 million in the second quarter of fiscal year 2023.
Net Income:
- GAAP net income was
$15.6 million or$0.28 per share in the second quarter of fiscal year 2023 based on 56.5 million diluted weighted average common shares outstanding.
Adjusted EBITDA:
- Adjusted EBITDA, a non-GAAP measure, was
$77.4 million in the second quarter of fiscal year 2023.
Balance Sheet and Cash Flow:
- Cash and cash equivalents totaled
$120.1 million as of the second quarter of fiscal year 2023. - Cash flow from operations for the second quarter of fiscal year 2023 was
$62.4 million . - As of
December 31, 2022 ,Paylocity had no long-term debt and had not drawn on its credit facility.
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
Third Quarter 2023:
- Total revenue is expected to be in the range of
$330.5 million to$334.5 million , which represents approximately 35% growth over fiscal 2022 third quarter total revenue. - Adjusted EBITDA, a non-GAAP measure, is expected to be in the range of
$121.5 million to$124.5 million .
Fiscal Year 2023:
- Total revenue is expected to be in the range of
$1.156 billion to$1.161 billion , which represents approximately 36% growth over fiscal year 2022 total revenue. - Adjusted EBITDA, a non-GAAP measure, is expected to be in the range of
$358.5 million to$362.5 million .
We are unable to reconcile forward-looking non-GAAP Adjusted EBITDA to its directly comparable GAAP financial measure because the information which is needed to complete a reconciliation is unavailable at this time without unreasonable effort.
Conference Call Details
About
Non-GAAP Financial Measures
The company uses certain non-GAAP financial measures in this release, including Adjusted EBITDA, adjusted gross profit, non-GAAP operating income, non-GAAP net income, non-GAAP net income per share, non-GAAP sales and marketing, non-GAAP total research and development and non-GAAP general and administrative and free cash flow. 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 and other items as described later in this release. Adjusted gross profit is 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 and certain acquired intangibles. Non-GAAP operating income is adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises, the amortization of acquired intangibles and other items as described later in this release. 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 and other items as described later in this release. 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, the amortization of certain acquired intangibles and other items as described later in this release. Non-GAAP net income and non-GAAP net income per share are adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises, the amortization of acquired intangibles and other items as described later in this release, including the income tax effect on these items. Non-GAAP total research and development is adjusted for capitalized internal-use software costs paid and to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises and other items as described later in this release. Free cash flow is defined as net cash provided by operating activities less capitalized internal-use software costs, purchase of property and equipment and lease allowances used for tenant improvements. 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.
Unaudited Consolidated Balance Sheets
(in thousands, except per share data)
2022 |
2022 |
||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 139,756 | $ | 120,053 | |||
Accounts receivable, net | 15,754 | 24,540 | |||||
Deferred contract costs | 59,501 | 68,557 | |||||
Prepaid expenses and other | 28,896 | 30,175 | |||||
Total current assets before funds held for clients | 243,907 | 243,325 | |||||
Funds held for clients | 3,987,776 | 3,065,697 | |||||
Total current assets | 4,231,683 | 3,309,022 | |||||
Capitalized internal-use software, net | 61,985 | 71,083 | |||||
Property and equipment, net | 62,839 | 59,506 | |||||
Operating lease right-of-use assets | 49,210 | 46,604 | |||||
Intangible assets, net | 45,475 | 39,934 | |||||
101,949 | 102,054 | ||||||
Long-term deferred contract costs | 229,067 | 262,313 | |||||
Long‑term prepaid expenses and other | 7,746 | 6,727 | |||||
Deferred income tax assets | 19,060 | 40,530 | |||||
Total assets | $ | 4,809,014 | $ | 3,937,773 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 8,374 | $ | 7,611 | |||
Accrued expenses | 124,384 | 115,795 | |||||
Total current liabilities before client fund obligations | 132,758 | 123,406 | |||||
Client fund obligations | 3,987,776 | 3,065,697 | |||||
Total current liabilities | 4,120,534 | 3,189,103 | |||||
Long-term operating lease liabilities | 69,119 | 65,353 | |||||
Other long-term liabilities | 3,681 | 3,333 | |||||
Deferred income tax liabilities | 2,217 | 2,217 | |||||
Total liabilities | $ | 4,195,551 | $ | 3,260,006 | |||
Stockholders’ equity: | |||||||
Preferred stock, |
$ | — | $ | — | |||
Common stock, |
55 | 56 | |||||
Additional paid-in capital | 289,843 | 310,050 | |||||
Retained earnings | 325,868 | 371,820 | |||||
Accumulated other comprehensive loss | (2,303 | ) | (4,159 | ) | |||
Total stockholders' equity | $ | 613,463 | $ | 677,767 | |||
Total liabilities and stockholders’ equity | $ | 4,809,014 | $ | 3,937,773 |
Unaudited Consolidated Statements of Operations and Comprehensive Income
(in thousands, except per share data)
Three Months Ended |
Six Months Ended |
||||||||||||||
2021 | 2022 | 2021 | 2022 | ||||||||||||
Revenues: | |||||||||||||||
Recurring and other revenue | $ | 195,041 | $ | 256,434 | $ | 375,865 | $ | 501,840 | |||||||
Interest income on funds held for clients | 996 | 16,574 | 1,869 | 24,448 | |||||||||||
Total revenues | 196,037 | 273,008 | 377,734 | 526,288 | |||||||||||
Cost of revenues | 70,821 | 90,076 | 134,070 | 174,619 | |||||||||||
Gross profit | 125,216 | 182,932 | 243,664 | 351,669 | |||||||||||
Operating expenses: | |||||||||||||||
Sales and marketing | 52,219 | 75,694 | 102,104 | 146,757 | |||||||||||
Research and development | 25,278 | 41,029 | 48,354 | 81,122 | |||||||||||
General and administrative | 39,581 | 48,001 | 74,816 | 98,493 | |||||||||||
Total operating expenses | 117,078 | 164,724 | 225,274 | 326,372 | |||||||||||
Operating income | 8,138 | 18,208 | 18,390 | 25,297 | |||||||||||
Other expense | (372 | ) | (5 | ) | (489 | ) | (168 | ) | |||||||
Income before income taxes | 7,766 | 18,203 | 17,901 | 25,129 | |||||||||||
Income tax expense (benefit) | (2,087 | ) | 2,603 | (22,884 | ) | (20,823 | ) | ||||||||
Net income | $ | 9,853 | $ | 15,600 | $ | 40,785 | $ | 45,952 | |||||||
Other comprehensive income (loss), net of tax | (335 | ) | 516 | (410 | ) | (1,856 | ) | ||||||||
Comprehensive income | $ | 9,518 | $ | 16,116 | $ | 40,375 | $ | 44,096 | |||||||
Net income per share: | |||||||||||||||
Basic | $ | 0.18 | $ | 0.28 | $ | 0.74 | $ | 0.83 | |||||||
Diluted | $ | 0.17 | $ | 0.28 | $ | 0.72 | $ | 0.81 | |||||||
Weighted-average shares used in computing net income per share: | |||||||||||||||
Basic | 55,067 | 55,721 | 54,938 | 55,587 | |||||||||||
Diluted | 56,468 | 56,474 | 56,486 | 56,559 |
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises for each of the three and six months ended
Three Months Ended |
Six Months Ended |
||||||||||
2021 | 2022 | 2021 | 2022 | ||||||||
Cost of revenues | $ | 3,327 | $ | 5,310 | $ | 6,854 | $ | 10,355 | |||
Sales and marketing | 5,749 | 10,871 | 11,769 | 21,371 | |||||||
Research and development | 5,446 | 11,472 | 10,220 | 21,706 | |||||||
General and administrative | 11,948 | 16,328 | 21,383 | 35,527 | |||||||
Total stock-based compensation expense and employer payroll taxes related to stock releases and option exercises | $ | 26,470 | $ | 43,981 | $ | 50,226 | $ | 88,959 |
Unaudited Consolidated Statements of Cash Flows
(in thousands)
Six Months Ended |
|||||||
2021 | 2022 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 40,785 | $ | 45,952 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Stock-based compensation expense | 45,802 | 83,364 | |||||
Depreciation and amortization expense | 23,383 | 29,094 | |||||
Deferred income tax benefit | (22,952 | ) | (20,856 | ) | |||
Provision for credit losses | 103 | 602 | |||||
Net accretion of discounts and amortization of premiums on available-for-sale securities | 221 | (2,039 | ) | ||||
Amortization of debt issuance costs | 90 | 157 | |||||
Other | 247 | 1,253 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (916 | ) | (9,377 | ) | |||
Deferred contract costs | (26,786 | ) | (40,638 | ) | |||
Prepaid expenses and other | (10,008 | ) | 616 | ||||
Accounts payable | 1,403 | (392 | ) | ||||
Accrued expenses and other | (24,514 | ) | (8,979 | ) | |||
Net cash provided by operating activities | 26,858 | 78,757 | |||||
Cash flows from investing activities: | |||||||
Purchases of available-for-sale securities | (190,000 | ) | (296,060 | ) | |||
Proceeds from sales and maturities of available-for-sale securities | 60,391 | 190,253 | |||||
Capitalized internal-use software costs | (17,966 | ) | (19,740 | ) | |||
Purchases of property and equipment | (10,528 | ) | (6,663 | ) | |||
Acquisitions of businesses, net of cash acquired | (60,234 | ) | — | ||||
Other investing activities | — | 29 | |||||
Net cash used in investing activities | (218,337 | ) | (132,181 | ) | |||
Cash flows from financing activities: | |||||||
Net change in client fund obligations | 160,325 | (922,079 | ) | ||||
Proceeds from employee stock purchase plan | 7,216 | 8,450 | |||||
Taxes paid related to net share settlement of equity awards | (67,109 | ) | (79,369 | ) | |||
Payment of debt issuance costs | (41 | ) | (864 | ) | |||
Net cash provided by (used in) financing activities | 100,391 | (993,862 | ) | ||||
Net change in cash, cash equivalents and funds held for clients' cash and cash equivalents | (91,088 | ) | (1,047,286 | ) | |||
Cash, cash equivalents and funds held for clients' cash and cash equivalents—beginning of period | 1,945,881 | 3,793,453 | |||||
Cash, cash equivalents and funds held for clients' cash and cash equivalents—end of period | $ | 1,854,793 | $ | 2,746,167 | |||
Supplemental Disclosure of Non-Cash Investing and Financing Activities | |||||||
Purchases of property and equipment, accrued but not paid | $ | 125 | $ | — | |||
Liabilities assumed for acquisitions | $ | 1,874 | $ | 117 | |||
Supplemental Disclosure of Cash Flow Information | |||||||
Cash paid for interest | $ | 126 | $ | 157 | |||
Refunds received for income taxes | $ | (115 | ) | $ | (158 | ) | |
Reconciliation of cash, cash equivalents and funds held for clients' cash and cash equivalents to the Consolidated Balance Sheets | |||||||
Cash and cash equivalents | $ | 84,104 | $ | 120,053 | |||
Funds held for clients' cash and cash equivalents | 1,770,689 | 2,626,114 | |||||
Total cash, cash equivalents and funds held for clients' cash and cash equivalents | $ | 1,854,793 | $ | 2,746,167 |
Reconciliation of GAAP to non-GAAP Financial Measures
(In thousands except per share data)
Three Months Ended |
Six Months Ended |
||||||||||
2021 | 2022 | 2021 | 2022 | ||||||||
Reconciliation from Gross profit to Adjusted gross profit: | |||||||||||
Gross profit | $ | 125,216 | $ | 182,932 | $ | 243,664 | $ | 351,669 | |||
Amortization of capitalized internal-use software costs | 6,087 | 7,478 | 12,215 | 14,520 | |||||||
Amortization of certain acquired intangibles | — | 1,853 | — | 3,707 | |||||||
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises | 3,327 | 5,310 | 6,854 | 10,355 | |||||||
Other items (1) | 36 | — | 48 | 19 | |||||||
Adjusted gross profit | $ | 134,666 | $ | 197,573 | $ | 262,781 | $ | 380,270 |
Three Months Ended |
Six Months Ended |
||||||||||
2021 | 2022 | 2021 | 2022 | ||||||||
Reconciliation from Operating income to Non-GAAP Operating income: | |||||||||||
Operating income | $ | 8,138 | $ | 18,208 | $ | 18,390 | $ | 25,297 | |||
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises | 26,470 | 43,981 | 50,226 | 88,959 | |||||||
Amortization of acquired intangibles | 2,000 | 2,770 | 3,352 | 5,541 | |||||||
Other items (2) | — | 151 | 803 | 416 | |||||||
Non-GAAP Operating income | $ | 36,608 | $ | 65,110 | $ | 72,771 | $ | 120,213 |
Three Months Ended |
Six Months Ended |
|||||||||||||
2021 | 2022 | 2021 | 2022 | |||||||||||
Reconciliation from Net income to Non-GAAP Net income: | ||||||||||||||
Net income | $ | 9,853 | $ | 15,600 | $ | 40,785 | $ | 45,952 | ||||||
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises | 26,470 | 43,981 | 50,226 | 88,959 | ||||||||||
Amortization of acquired intangibles | 2,000 | 2,770 | 3,352 | 5,541 | ||||||||||
Other items (2) | 208 | 151 | 1,011 | 416 | ||||||||||
Income tax effect on adjustments (3) | (2,241 | ) | 496 | (25,929 | ) | (22,439 | ) | |||||||
Non-GAAP Net income | $ | 36,290 | $ | 62,998 | $ | 69,445 | $ | 118,429 |
Three Months Ended |
Six Months Ended |
||||||||||
2021 | 2022 | 2021 | 2022 | ||||||||
Calculation of Non-GAAP Net income per share: | |||||||||||
Non-GAAP Net income | $ | 36,290 | $ | 62,998 | $ | 69,445 | $ | 118,429 | |||
Diluted weighted-average number of common shares | 56,468 | 56,474 | 56,486 | 56,559 | |||||||
Non-GAAP Net income per share | $ | 0.64 | $ | 1.12 | $ | 1.23 | $ | 2.09 |
Three Months Ended |
Six Months Ended |
|||||||||||||
2021 | 2022 | 2021 | 2022 | |||||||||||
Reconciliation from Net income to Adjusted EBITDA: | ||||||||||||||
Net income | $ | 9,853 | $ | 15,600 | $ | 40,785 | $ | 45,952 | ||||||
Interest expense | 110 | 190 | 218 | 377 | ||||||||||
Income tax expense (benefit) | (2,087 | ) | 2,603 | (22,884 | ) | (20,823 | ) | |||||||
Depreciation and amortization expense | 12,061 | 14,827 | 23,383 | 29,094 | ||||||||||
EBITDA | 19,937 | 33,220 | 41,502 | 54,600 | ||||||||||
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises | 26,470 | 43,981 | 50,226 | 88,959 | ||||||||||
Other items (2) | 208 | 151 | 1,011 | 416 | ||||||||||
Adjusted EBITDA | $ | 46,615 | $ | 77,352 | $ | 92,739 | $ | 143,975 |
Three Months Ended |
Six Months Ended |
||||||||||
2021 | 2022 | 2021 | 2022 | ||||||||
Reconciliation of Non-GAAP sales and marketing: | |||||||||||
Sales and marketing | $ | 52,219 | $ | 75,694 | $ | 102,104 | $ | 146,757 | |||
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises | 5,749 | 10,871 | 11,769 | 21,371 | |||||||
Other items (1) | 76 | — | 102 | 22 | |||||||
Non-GAAP sales and marketing | $ | 46,394 | $ | 64,823 | $ | 90,233 | $ | 125,364 |
Three Months Ended |
Six Months Ended |
||||||||||
2021 | 2022 | 2021 | 2022 | ||||||||
Reconciliation of Non-GAAP total research and development: | |||||||||||
Research and development | $ | 25,278 | $ | 41,029 | $ | 48,354 | $ | 81,122 | |||
Capitalized internal-use software costs | 8,807 | 9,787 | 17,966 | 19,740 | |||||||
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises | 5,446 | 11,472 | 10,220 | 21,706 | |||||||
Other items (1) | 325 | 151 | 468 | 369 | |||||||
Non-GAAP total research and development | $ | 28,314 | $ | 39,193 | $ | 55,632 | $ | 78,787 |
Three Months Ended |
Six Months Ended |
|||||||||||
2021 | 2022 | 2021 | 2022 | |||||||||
Reconciliation of Non-GAAP general and administrative: | ||||||||||||
General and administrative | $ | 39,581 | $ | 48,001 | $ | 74,816 | $ | 98,493 | ||||
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises | 11,948 | 16,328 | 21,383 | 35,527 | ||||||||
Amortization of certain acquired intangibles | 2,000 | 917 | 3,352 | 1,834 | ||||||||
Other items (2) | (437 | ) | — | 185 | 6 | |||||||
Non-GAAP general and administrative | $ | 26,070 | $ | 30,756 | $ | 49,896 | $ | 61,126 |
(1) Represents certain nonrecurring acquisition-related costs.
(2) Represents nonrecurring costs including acquisition-related costs and lease exit activity.
(3) Includes the income tax effect on non-GAAP net income adjustments related to stock-based compensation expense and employer payroll taxes related to stock releases and option exercises, amortization of acquired intangibles and other items, which include acquisition-related costs and lease exit activity.
Contact:
investors@paylocity.com
Source: Paylocity