Paylocity Announces First Quarter Fiscal Year 2022 Financial Results

Schaumburg, Illinois, UNITED STATES


  • Q1 2022 Recurring & Other Revenue of $180.8 million, up 34% year-over-year
  • Q1 2022 Total Revenue of $181.7 million, up 34% year-over-year

SCHAUMBURG, Ill., Nov. 04, 2021 (GLOBE NEWSWIRE) -- 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 2022, which ended September 30, 2021.

“We are off to a very strong start in fiscal 2022 with recurring and total revenue up 34% versus Q1 of last fiscal. Our value proposition of providing the most modern platform in the industry is resonating with clients and prospects of all sizes. During the quarter we also completed the acquisition of Blue Marble, a leading global payroll provider, to further support companies in managing and paying their employees outside the U.S.  In October we also held our virtual Elevate Client Conference where we hosted a record number of attendees and highlighted numerous enhancements across our product suite,” said Steve Beauchamp, Chief Executive Officer of Paylocity.

First Quarter Fiscal 2022 Financial Highlights

Revenue:

  • Total revenue was $181.7 million, an increase of 34% from the first quarter of fiscal year 2021.
  • Recurring & other revenue was $180.8 million, an increase of 34% from the first quarter of fiscal year 2021.

Operating Income:

  • GAAP operating income was $10.3 million and Non-GAAP operating income was $36.2 million in the first quarter of fiscal year 2022.

Net Income:

  • GAAP net income was $30.9 million or $0.55 per share for the three months ended September 30, 2021 based on 56.5 million diluted weighted average common shares outstanding.

Adjusted EBITDA:

  • Adjusted EBITDA, a non-GAAP measure, was $46.1 million in the first quarter of fiscal year 2022.

Balance Sheet and Cash Flow:

  • Cash, cash equivalents and invested corporate cash totaled $69.6 million as of the end of the quarter.

  • Cash flow from operations for the first quarter of fiscal year 2022 was ($4.1) million compared to ($1.6) million for the first quarter of fiscal year 2021.

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 4, 2021, Paylocity is issuing guidance for the second quarter and full fiscal year 2022 as indicated below.

Second Quarter 2022:

  • Total revenue is expected to be in the range of $185.5 million to $189.5 million, which represents approximately 27% - 30% growth over fiscal 2021 second quarter revenue.
  • Adjusted EBITDA, a non-GAAP measure, is expected to be in the range of $39.0 million to $42.0 million.

Fiscal Year 2022:

  • Total revenue is expected to be in the range of $815.0 million to $820.0 million, which represents approximately 29% growth over fiscal year 2021 revenue.
  • Adjusted EBITDA, a non-GAAP measure, is expected to be in the range of $216.0 million to $220.0 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 2022 results at 4:30 p.m. Central Time today (5:30 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 9393553. 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 possibility that the anticipated synergies of the unified solution through Paylocity’s acquisition of Blue Marble may not be achieved after closing; general economic conditions in regions in which Paylocity and Blue Marble Payroll do business, including the ongoing impact of the novel coronavirus disease (“COVID-19”) on the U.S. and the global 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; 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; the possibility that Paylocity or Blue Marble Payroll may be adversely affected by other economic, business, and/or competitive factors; 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 6, 2021. 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,  
     2021    2021
 
Assets       
Current assets:       
Cash and cash equivalents $202,287 $66,431  
Corporate investments  4,456  3,151  
Accounts receivable, net  6,267  8,094  
Deferred contract costs  44,230  46,928  
Prepaid expenses and other  15,966  21,903  
Total current assets before funds held for clients  273,206  146,507  
Funds held for clients  1,759,677  3,185,520  
Total current assets  2,032,883  3,332,027  
Capitalized internal-use software, net  45,018  48,719  
Property and equipment, net  59,835  62,265  
Operating lease right-of-use assets  43,984  44,249  
Intangible assets, net  13,027  37,175  
Goodwill  33,650  68,022  
Long-term deferred contract costs  170,663  179,079  
Long-term prepaid expenses and other  4,223  7,399  
Deferred income tax assets  11,602  32,602  
Total assets $2,414,885 $3,811,537  
        
Liabilities and Stockholders’ Equity       
Current liabilities:       
Accounts payable $4,230 $6,910  
Accrued expenses  103,109  81,017  
Total current liabilities before client fund obligations  107,339  87,927  
Client fund obligations  1,759,677  3,185,520  
Total current liabilities  1,867,016  3,273,447  
Long-term operating lease liabilities  67,201  66,684  
Other long-term liabilities  1,958  1,905  
Deferred income tax liabilities  1,780  1,928  
Total liabilities $1,937,955 $3,343,964  
Stockholders’ equity:       
Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2021 and September 30, 2021 $ $  
Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2021 and September 30, 2021; 54,594 shares issued and outstanding at June 30, 2021 and 55,019 shares issued and outstanding at September 30, 2021  55  55  
Additional paid-in capital  241,718  201,504  
Retained earnings  235,091  266,023  
Accumulated other comprehensive income (loss)  66  (9) 
Total stockholders' equity $476,930 $467,573  
Total liabilities and stockholders’ equity $2,414,885 $3,811,537  


PAYLOCITY HOLDING CORPORATION
Unaudited Consolidated Statements of Operations and Comprehensive Income
(in thousands, except per share data)

        
  Three Months Ended September 30,  
     2020     2021  
Revenues:       
Recurring and other revenue $134,875  $180,824  
Interest income on funds held for clients  919   873  
Total revenues  135,794   181,697  
Cost of revenues  49,380   63,249  
Gross profit  86,414   118,448  
Operating expenses:       
Sales and marketing  37,674   49,885  
Research and development  18,647   23,076  
General and administrative  26,644   35,235  
Total operating expenses  82,965   108,196  
Operating income  3,449   10,252  
Other expense  (257)  (117) 
Income before income taxes  3,192   10,135  
Income tax benefit  (9,268)  (20,797) 
Net income $12,460  $30,932  
Other comprehensive loss, net of tax  (223)  (75) 
Comprehensive income $12,237  $30,857  
        
Net income per share:       
Basic $0.23  $0.56  
Diluted $0.22  $0.55  
        
Weighted-average shares used in computing net income per share:       
Basic  54,015   54,810  
Diluted  56,050   56,506  

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,
 
  2020  2021 
Cost of revenues $2,403 $3,527 
Sales and marketing  4,348  6,020 
Research and development  2,851  4,774 
General and administrative  7,135  9,435 
Total stock-based compensation expense and employer payroll taxes related to stock releases and option exercises $16,737 $23,756 


PAYLOCITY HOLDING CORPORATION
Unaudited Consolidated Statements of Cash Flows
(in thousands)

  Three Months Ended  
  September 30,  
  2020  2021  
Cash flows from operating activities:       
Net income $12,460  $30,932  
Adjustments to reconcile net income to net cash used in operating activities:       
Stock-based compensation expense  14,277   19,559  
Depreciation and amortization expense  10,235   11,322  
Deferred income tax benefit  (9,268)  (20,827) 
Provision for credit losses  56   38  
Net accretion of discounts and amortization of premiums on available-for-sale securities  133   90  
Amortization of debt issuance costs  37   44  
Other  31   27  
Changes in operating assets and liabilities:       
Accounts receivable  195   (173) 
Deferred contract costs  (10,409)  (11,114) 
Prepaid expenses and other  (2,144)  (9,807) 
Accounts payable  1,611   1,567  
Accrued expenses and other  (18,781)  (25,790) 
Net cash used in operating activities  (1,567)  (4,132) 
Cash flows from investing activities:       
Purchases of available-for-sale securities     (135,849) 
Proceeds from sales and maturities of available-for-sale securities  37,493   9,648  
Capitalized internal-use software costs  (7,884)  (9,159) 
Purchases of property and equipment  (2,045)  (3,220) 
Acquisition of business, net of cash acquired     (59,581) 
Net cash provided by (used in) investing activities  27,564   (198,161) 
Cash flows from financing activities:       
Net change in client fund obligations  51,671   1,425,782  
Taxes paid related to net share settlement of equity awards  (33,402)  (60,809) 
Payment of debt issuance costs  (9)  (9) 
Net cash provided by financing activities  18,260   1,364,964  
Net change in cash, cash equivalents and funds held for clients' cash and cash equivalents  44,257   1,162,671  
Cash, cash equivalents and funds held for clients' cash and cash equivalents—beginning of period  1,492,133   1,945,881  
Cash, cash equivalents and funds held for clients' cash and cash equivalents—end of period $1,536,390  $3,108,552  
Supplemental Disclosure of Non-Cash Investing and Financing Activities       
Purchases of property and equipment and internal-use software, accrued but not paid $1,479  $3,079  
Liabilities assumed for acquisition $  $2,165  
Supplemental Disclosure of Cash Flow Information       
Cash paid for interest $311  $63  
Cash paid (refunds received) for income taxes $(119) $13  
Reconciliation of cash, cash equivalents and funds held for clients' cash and cash equivalents to the Consolidated Balance Sheets       
Cash and cash equivalents $221,514  $66,431  
Funds held for clients' cash and cash equivalents  1,314,876   3,042,121  
Total cash, cash equivalents and funds held for clients' cash and cash equivalents $1,536,390  $3,108,552  


Paylocity Holding Corporation 
Reconciliation of GAAP to non-GAAP Financial Measures 
(In thousands except per share data) 
        
     
   Three Months Ended 
   September 30, 
   2020   2021  
Reconciliation from Gross profit to Adjusted gross profit:       
Gross profit $86,414  $118,448  
Amortization of capitalized internal-use software costs  5,386   6,128  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises  2,403   3,527  
Other items (1)  -   12  
Adjusted gross profit $94,203  $128,115  
        
   Three Months Ended 
   September 30, 
   2020   2021  
Reconciliation from Operating income to Non-GAAP operating income:       
Operating income $3,449  $10,252  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises  16,737   23,756  
Amortization of acquired intangibles  844   1,352  
Other items (2)  360   803  
Non-GAAP operating income $21,390  $36,163  
        
   Three Months Ended 
   September 30, 
   2020   2021  
Reconciliation from Net income to Non-GAAP net income:       
Net income $12,460  $30,932  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises  16,737   23,756  
Amortization of acquired intangibles  844   1,352  
Other items (2)  360   803  
Income tax effect on adjustments (3)  (9,200)  (23,688) 
Non-GAAP net income $21,201  $33,155  
        
   Three Months Ended 
   September 30, 
   2020   2021  
Calculation of Non-GAAP net income per share:       
Non-GAAP net income $21,201  $33,155  
Diluted weighted-average number of common shares  56,050   56,506  
Non-GAAP net income per share $0.38  $0.59  
        
   Three Months Ended 
   September 30, 
   2020   2021  
Reconciliation from Net income to Adjusted EBITDA:       
Net income $12,460  $30,932  
Interest expense  340   108  
Income tax benefit  (9,268)  (20,797) 
Depreciation and amortization expense  10,235   11,322  
EBITDA  13,767   21,565  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises  16,737   23,756  
Other items (2)  360   803  
Adjusted EBITDA $30,864  $46,124  
        
   Three Months Ended 
   September 30, 
   2020   2021  
Reconciliation of Non-GAAP Sales and Marketing:       
Sales and marketing $37,674  $49,885  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises  4,348   6,020  
Other items (1)  -   26  
Non-GAAP sales and marketing $33,326  $43,839  
        
   Three Months Ended 
   September 30, 
   2020   2021  
Reconciliation of Non-GAAP total Research and Development:       
Research and development $18,647  $23,076  
Capitalized internal-use software costs  7,884   9,159  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises  2,851   4,774  
Other items (1)  155   143  
Non-GAAP total research and development $23,525  $27,318  
        
   Three Months Ended 
   September 30, 
   2020   2021  
Reconciliation of Non-GAAP General and Administrative:       
General and administrative $26,644  $35,235  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises  7,135   9,435  
Amortization of acquired intangibles  844   1,352  
Other items (2)  205   622  
Non-GAAP general and administrative $18,460  $23,826  
        
        
        
(1)  Represents certain nonrecurring acquisition-related costs.   
        
(2)  Represents nonrecurring costs including acquisition-related and lease exit costs.   
        
(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 and lease exit costs.   
        

Contact:
Ryan Glenn
investors@paylocity.com