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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): November 5, 2020

 

PAYLOCITY HOLDING CORPORATION

(Exact name of registrant as specified in charter)

 

Delaware   001-36348   46-4066644
(State or Other Jurisdiction of
Incorporation)
  (Commission File Number)   (I.R.S. Employer Identification
Number)

 

1400 American Lane

Schaumburg, Illinois, 60173

(Address of principal executive offices, including zip code)

 

(847) 463-3200

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name or former address, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, par value $0.001 per share   PCTY   The NASDAQ Global Select Market LLC

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

¨  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

  

 

 

 

Item 2.02 Results of Operations and Financial Condition.

 

On November 5, 2020, Paylocity Holding Corporation (the “Company”) issued a press release announcing financial results for the three month period ended September 30, 2020. The press release contains forward-looking statements regarding the Company, and includes cautionary statements identifying important factors that could cause actual results to differ materially from those anticipated.

 

The press release issued November 5, 2020 is furnished herewith as Exhibit 99.1. The information in this Item 2.02, including Exhibit 99.1, is being furnished and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that Section, nor shall such information be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as otherwise stated in such filing.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit No.   Description
99.1   Press Release issued by Paylocity Holding Corporation dated November 5, 2020.
104   Cover Page Interactive Data File (formatted as Inline XBRL)

 

 

 

EXHIBIT INDEX

 

Exhibit No.   Description
99.1   Press Release issued by Paylocity Holding Corporation dated November 5, 2020.
104   Cover Page Interactive Data File (formatted as Inline XBRL)

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  PAYLOCITY HOLDING CORPORATION
     
     
Date: November 5, 2020 By: /s/ Toby J. Williams
    Toby J. Williams
   

Chief Financial Officer

 

 

 

Exhibit 99.1 

 

press release

 

Paylocity Announces First Quarter Fiscal Year 2021 Financial Results

 

•         Q1 2021 Recurring & Other Revenue of $134.9 million, up 11% year-over-year

•         Q1 2021 Total Revenue of $135.8 million, up 7% year-over-year

 

SCHAUMBURG, IL. – November 5, 2020 – Paylocity Holding Corporation (Nasdaq: PCTY), a leading provider of cloud-based HR and payroll software solutions, today announced financial results for the first quarter of fiscal year 2021, which ended September 30, 2020.

 

“Despite the challenges of the COVID-19 pandemic, we are off to a strong start in fiscal 2021, with 11% growth in recurring & other revenue and 7% total revenue growth. Our sales team continues to perform well and gain momentum during the busy Fall selling season, and we continue to be pleased with the velocity we’re seeing within our product suite, as we focus on being the most modern HCM platform.  At our virtual Elevate Client Conference in September we announced the addition of Premium Video, which will give clients the ability to record, upload and embed videos across our HCM product suite. The launch of Premium Video will increase our PEPY from $400 to $420 and we remain confident and committed to reaching our target PEPY of $500 by both further expanding our product suite and adding features and functionalities to existing products,” said Steve Beauchamp, Chief Executive Officer of Paylocity.

 

 

 

 

First Quarter Fiscal 2021 Financial Highlights

 

Revenue:

 

· Total revenue was $135.8 million, an increase of 7% from the first quarter of fiscal year 2020.
   
·Recurring & other revenue was $134.9 million, representing 99% of total revenue and an increase of 11% from the first quarter of fiscal year 2020.

 

Operating Income:

 

·GAAP operating income was $3.4 million and Non-GAAP operating income was $21.4 million in the first quarter of fiscal year 2021.

 

Net Income:

 

·GAAP net income was $12.5 million or $0.22 per share for the three months ended September 30, 2020 based on 56.1 million diluted weighted average common shares outstanding.

 

Adjusted EBITDA:

 

·Adjusted EBITDA, a non-GAAP measure, was $30.9 million in the first quarter of fiscal year 2021.

 

Balance Sheet and Cash Flow:

 

·Cash, cash equivalents and invested corporate cash totaled $242.7 million as of the end of the quarter.

 

·$100 million outstanding at the end of the quarter under our credit facility.

 

·Cash flow from operations for the first quarter of fiscal year 2021 was ($1.6) million compared to $8.3 million for the first quarter of fiscal year 2020.

 

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 5, 2020, Paylocity is issuing guidance for the second quarter of fiscal year 2021 as indicated below.

 

Second Quarter 2021:

 

·Total revenue is expected to be in the range of $141.0 million to $145.0 million, which represents approximately 7% - 10% growth over fiscal 2020 second quarter revenue.
   
·Adjusted EBITDA, a non-GAAP measure, is expected to be in the range of $26.5 million to $29.5 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

 

Paylocity will host a conference call to discuss its first quarter fiscal year 2021 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 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 2149349. A replay of the call will be available and archived via webcast at www.paylocity.com.

 

About Paylocity

 

Paylocity is a leading provider of cloud-based HR and payroll software solutions headquartered in Schaumburg, IL. Founded in 1997 and publicly traded since 2014, Paylocity offers an intuitive, easy-to-use product suite that helps businesses tackle today’s challenges while moving them toward the promise of tomorrow. Known for its unique culture and consistently recognized as one of the best places to work, Paylocity accompanies its clients on the journey to create great workplaces and help people achieve their best through automation, data-driven insights, and engagement. 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, 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. 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. 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 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, the valuation allowance release, excess tax benefit related to employee stock-based compensation payments and the impact of tax reform. 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 and acquisition-related costs. 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. 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 the ongoing impact of the novel coronavirus disease (“COVID-19”) on the U.S. economy, including reductions in interest rates, business disruptions, reductions in employment and an increase in business failures that have occurred or may occur in the future; the continuing impact of COVID-19 on Paylocity’s employees and clients and Paylocity’s ability to provide services to its clients and respond to their needs; 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; risks related to regulatory, legislative and judicial uncertainty in Paylocity’s markets, including the potential repeal or replacement of the Affordable Care 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 7, 2020. 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, including events relating to the COVID-19 pandemic and its severity, duration and ultimate impact, 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, 
   2020   2020 
Assets          
Current assets:          
Cash and cash equivalents  $250,851   $221,514 
Corporate investments   34,556    18,554 
Accounts receivable, net   4,923    4,672 
Deferred contract costs   32,332    34,124 
Prepaid expenses and other   13,188    15,202 
Total current assets before funds held for clients   335,850    294,066 
Funds held for clients   1,327,304    1,378,975 
Total current assets   1,663,154    1,673,041 
Capitalized internal-use software, net   36,501    39,231 
Property and equipment, net   66,737    66,068 
Operating lease right-of-use assets   48,658    47,080 
Intangible assets, net   13,360    12,516 
Goodwill   21,655    21,655 
Long-term deferred contract costs   125,711    134,328 
Long-term prepaid expenses and other   4,917    5,016 
Deferred income tax assets   4,955    5,916 
Total assets  $1,985,648   $2,004,851 
           
Liabilities and Stockholders’ Equity          
Current liabilities:          
Accounts payable  $1,755   $3,209 
Accrued expenses   79,881    62,343 
Total current liabilities before client fund obligations   81,636    65,552 
Client fund obligations   1,327,304    1,378,975 
Total current liabilities   1,408,940    1,444,527 
Long-term debt   100,000    100,000 
Long-term operating lease liabilities   73,299    71,460 
Other long-term liabilities   1,747    1,676 
Deferred income tax liabilities   8,754    368 
Total liabilities  $1,592,740   $1,618,031 
Stockholders’ equity:          
Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2020 and September 30, 2020  $   $ 
Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2020 and September 30, 2020; 53,792 shares issued and outstanding at June 30, 2020 and 54,223 shares issued and outstanding at September 30, 2020   54    54 
Additional paid-in capital   227,907    209,582 
Retained earnings   164,272    176,732 
Accumulated other comprehensive income   675    452 
Total stockholders’ equity  $392,908   $386,820 
Total liabilities and stockholders’ equity  $1,985,648   $2,004,851 

 

 

 

 

PAYLOCITY HOLDING CORPORATION

Unaudited Consolidated Statements of Operations and Comprehensive Income

(in thousands, except per share data)

 

   Three Months Ended 
   September 30, 
   2019   2020 
Revenues:        
Recurring and other revenue  $121,873   $134,875 
Interest income on funds held for clients   4,847    919 
Total revenues   126,720    135,794 
Cost of revenues   42,630    49,380 
Gross profit   84,090    86,414 
Operating expenses:          
Sales and marketing   36,957    37,674 
Research and development   14,394    18,647 
General and administrative   26,739    26,644 
Total operating expenses   78,090    82,965 
Operating income   6,000    3,449 
Other income (expense)   474    (257)
Income before income taxes   6,474    3,192 
Income tax benefit   (7,432)   (9,268)
Net income  $13,906   $12,460 
Other comprehensive income (loss), net of tax          
Unrealized gains (losses) on securities, net of tax   4    (223)
Total other comprehensive income (loss), net of tax   4    (223)
Comprehensive income  $13,910   $12,237 
           
Net income per share:          
Basic  $0.26   $0.23 
Diluted  $0.25   $0.22 
           
Weighted-average shares used in computing net income per share:          
Basic   53,287    54,015 
Diluted   55,713    56,050 

 

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,
 
   2019   2020 
Cost of revenues  $1,732   $2,403 
Sales and marketing   4,344    4,348 
Research and development   1,800    2,851 
General and administrative   6,153    7,135 
Total stock-based compensation expense and employer payroll taxes related to stock releases and option exercises  $14,029   $16,737 

 

 

 

 

 

PAYLOCITY HOLDING CORPORATION

Unaudited Consolidated Statements of Cash Flows

(in thousands)

 

   Three Months Ended 
   September 30, 
   2019   2020 
Cash flows from operating activities:          
Net income  $13,906   $12,460 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:          
Stock-based compensation expense   12,062    14,277 
Depreciation and amortization expense   8,933    10,235 
Deferred income tax benefit   (7,431)   (9,268)
Provision for credit losses       56 
Net accretion of discounts and amortization of premiums on available-for-sale securities   (485)   133 
Amortization of debt issuance costs   33    37 
Loss on disposal of equipment   85    31 
Changes in operating assets and liabilities:          
Accounts receivable   452    195 
Deferred contract costs   (9,987)   (10,409)
Prepaid expenses and other   (89)   (2,144)
Accounts payable   39    1,611 
Accrued expenses and other   (9,253)   (18,781)
Net cash provided by (used in) operating activities   8,265    (1,567)
Cash flows from investing activities:          
Purchases of available-for-sale securities and other   (63,621)    
Proceeds from sales and maturities of available-for-sale securities   45,154    37,493 
Capitalized internal-use software costs   (6,714)   (7,884)
Purchases of property and equipment   (8,033)   (2,045)
Net cash provided by (used in) investing activities   (33,214)   27,564 
Cash flows from financing activities:          
Net change in client fund obligations   (239,942)   51,671 
Taxes paid related to net share settlement of equity awards   (24,749)   (33,402)
Payment of debt issuance costs   (669)   (9)
Net cash provided by (used in) financing activities   (265,360)   18,260 
Net change in cash, cash equivalents and funds held for clients' cash and cash equivalents   (290,309)   44,257 
Cash, cash equivalents and funds held for clients' cash and cash equivalents—beginning of period   1,426,143    1,492,133 
Cash, cash equivalents and funds held for clients' cash and cash equivalents—end of period  $1,135,834   $1,536,390 
Supplemental Disclosure of Non-Cash Investing and Financing Activities          
Purchase of property and equipment, accrued but not paid  $1,249   $1,479 
Supplemental Disclosure of Cash Flow Information          
Cash paid for interest  $   $311 
Cash paid (refunds received) for income taxes  $11   $(119)
Reconciliation of cash, cash equivalents and funds held for clients' cash and cash equivalents to the Consolidated Balance Sheets          
Cash and cash equivalents  $100,529   $221,514 
Funds held for clients' cash and cash equivalents   1,035,305    1,314,876 
Total cash, cash equivalents and funds held for clients' cash and cash equivalents  $1,135,834   $1,536,390 

 

 

 

 

 

Paylocity Holding Corporation

Reconciliation of GAAP to non-GAAP Financial Measures

(In thousands except per share data)

 

   Three months
Ended September 30,
 
   2019   2020 
Reconciliation from gross profit to adjusted gross profit:          
Gross profit  $84,090   $86,414 
Amortization of capitalized internal-use software costs   4,457    5,386 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   1,732    2,403 
Adjusted gross profit  $90,279   $94,203 

 

   Three months
Ended September 30,
 
   2019   2020 
Reconciliation from operating income to non-GAAP operating income:          
Operating income  $6,000   $3,449 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   14,029    16,737 
Amortization of acquired intangibles   563    844 
Other items (1)   956    360 
Non-GAAP operating income  $21,548   $21,390 

 

   Three months
Ended September 30,
 
   2019   2020 
Reconciliation from net income to non-GAAP net income:          
Net income  $13,906   $12,460 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   14,029    16,737 
Amortization of acquired intangibles   563    844 
Other items (1)   956    360 
Income tax effect on adjustments (3)   (9,128)   (9,200)
Non-GAAP net income  $20,326   $21,201 

 

   Three months
Ended September 30,
 
   2019   2020 
Calculation of non-GAAP net income per share:        
Non-GAAP net income  $20,326   $21,201 
Diluted weighted-average number of common shares   55,713    56,050 
Non-GAAP net income per share  $0.36   $0.38 

 

   Three months
Ended September 30,
 
   2019   2020 
Reconciliation from net income to Adjusted EBITDA:          
Net income  $13,906   $12,460 
Interest expense   85    340 
Income tax benefit   (7,432)   (9,268)
Depreciation and amortization expense   8,933    10,235 
EBITDA   15,492    13,767 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   14,029    16,737 
Other items (1)   956    360 
Adjusted EBITDA  $30,477   $30,864 

 

   Three months
Ended September 30,
 
   2019   2020 
Reconciliation of non-GAAP Sales and Marketing:        
Sales and Marketing  $36,957   $37,674 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   4,344    4,348 
Non-GAAP Sales and Marketing  $32,613   $33,326 

 

   Three months
Ended September 30,
 
   2019   2020 
Reconciliation of non-GAAP Total Research and Development:        
Research and Development  $14,394   $18,647 
Capitalized internal-use software costs   6,714    7,884 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   1,800    2,851 
Other items (2)   -    155 
Non-GAAP Total Research and Development  $19,308   $23,525 

 

   Three months
Ended September 30,
 
   2019   2020 
Reconciliation of non-GAAP General and Administrative:        
General and Administrative  $26,739   $26,644 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises   6,153    7,135 
Amortization of acquired intangibles   563    844 
Other items (1)   956    205 
Non-GAAP General and Administrative  $19,067   $18,460 

 

(1)  Represents nonrecurring costs including acquisition-related and lease exit costs.

 

(2)  Represents certain nonrecurring acquisition-related costs.

 

(3)  Income tax effect on adjustments: Includes the income tax effect on non-GAAP net income adjustments related to stock-based compensation expense and employer payroll taxes related to stock release and option exercises, amortization of acquired intangibles, acquisition-related costs and lease exit costs.