Paylocity Announces Fourth Quarter and Fiscal Year 2016 Financial Results


  • Q4 2016 Total Revenue of $59.8 million, up 50% year-over-year
  • FY 2016 Total Revenue of $230.7 million, up 51% year-over-year

ARLINGTON HEIGHTS, Ill., Aug. 09, 2016 (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 fourth quarter and full fiscal year 2016, which ended June 30, 2016.

“Paylocity ended a record-setting fiscal year with a very strong fourth quarter highlighted by total revenue growth of 50% and recurring revenue growth of 51%, driven by strong sales and operational execution,” said Steve Beauchamp, President and Chief Executive Officer of Paylocity. “The 51% total revenue growth in fiscal year 2016 was a record for Paylocity, and was a result of our strong commitment to customer service, outstanding performance by our sales team and a continued focus on investment in product development.”

Fourth Quarter 2016 Financial Highlights

Revenue:

  • Total revenue was $59.8 million, an increase of 50% from the fourth quarter of fiscal year 2015. 

  • Total recurring revenue was $57.8 million, representing 97% of total revenue and an increase of 51% from the fourth quarter of fiscal year 2015. 

Operating Loss:

  • GAAP operating loss was ($5.0) million, compared to an operating loss of ($4.3) million in the fourth quarter of fiscal year 2015.

  • Non-GAAP operating loss was ($0.0) million, compared to a non-GAAP operating loss of ($1.3) million in the fourth quarter of fiscal year 2015.

Net Loss:

  • GAAP net loss was ($5.4) million. This compares to a net loss of ($4.4) million for the fourth quarter of fiscal year 2015. Net loss per share was ($0.11) for the three months ended June 30, 2016 based on 51.1 million basic and diluted weighted average common shares outstanding. Net loss per share was ($0.09) for the three months ended June 30, 2015, based on 50.7 million basic and diluted weighted average common shares outstanding.

  • Non-GAAP net loss was ($0.4) million. This compares to non-GAAP net loss of ($1.5) million for the fourth quarter of fiscal year 2015. Non-GAAP net loss per share was ($0.01) for the three months ended June 30, 2016, based on 51.1 million basic and diluted weighted average common shares outstanding. Non-GAAP net loss per share was ($0.03) for the three months ended June 30, 2015, based on 50.7 million basic and diluted weighted average common shares outstanding. 

Adjusted EBITDA:

  • Adjusted EBITDA, a non-GAAP measure, was $3.3 million compared to Adjusted EBITDA of $0.6 million in the fourth quarter of fiscal year 2015.

Fiscal Year 2016 Financial Highlights

Revenue:

  • Total revenue was $230.7 million, an increase of 51% from fiscal year 2015. 

  • Total recurring revenue was $220.1 million, representing 95% of total revenue and an increase of 53% from fiscal year 2015.

Operating Income (Loss):

  • GAAP operating loss was ($3.6) million, compared to an operating loss of ($13.9) million in fiscal year 2015.

  • Non-GAAP operating income was $16.2 million, compared to non-GAAP operating income of $0.5 million in fiscal year 2015.

Net Income (Loss):

  • GAAP net loss was ($3.9) million for fiscal year 2016. This compares to a net loss of ($14.0) million for fiscal year 2015. Net loss per share was ($0.08) for fiscal year 2016, based on 50.9 million basic and diluted weighted average common shares outstanding. For fiscal year 2015 net loss was ($0.28) per share based on 50.1 million basic and diluted weighted average common shares outstanding.

  • Non-GAAP net income was $15.9 million. This compares to non-GAAP net income of $0.4 million in fiscal year 2015. Non-GAAP net income per share was $0.30 for fiscal year 2016 based on 53.5 million pro forma diluted weighted-average common shares outstanding. Non-GAAP net income per share was $0.01 for fiscal year 2015, based on 52.5 million pro forma diluted weighted-average common shares outstanding.

Adjusted EBITDA:

  • Adjusted EBITDA, a non-GAAP measure, was $28.4 million for fiscal year 2016 compared to Adjusted EBITDA of $8.2 million for fiscal year 2015.

Balance Sheet and Cash Flow:

  • Cash and cash equivalents totaled $86.5 million at the end of the year. 
     
  • Cash flow from operations for fiscal year 2016 was $33.0 million compared to $11.1 million for fiscal year 2015.

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 August 9, 2016, Paylocity is issuing guidance for the first quarter and full fiscal year 2017 as indicated below.

First Quarter 2017:

  • Total revenue is expected to be in the range of $63.0 million to $64.0 million.
  • Adjusted EBITDA is expected to be in the range of $4.5 million to $5.5 million.
  • Non-GAAP net income is expected to be in the range of $0.5 million to $1.5 million, or $0.01 to $0.03 per share, based on approximately 54.0 million diluted weighted average common shares outstanding.

Fiscal Year 2017:

  • Total revenue is expected to be in the range of $296.0 million to $298.0 million.
  • Adjusted EBITDA is expected to be in the range of $36.0 million to $38.0 million.
  • Non-GAAP net income is expected to be in the range of $19.0 million to $21.0 million, or $0.35 to $0.38 per share, based on approximately 55.0 million diluted weighted average common shares outstanding.

We are unable to reconcile these forward-looking non-GAAP financial measures to their directly comparable GAAP financial measures because the information which is needed to complete a reconciliation is unavailable at this time without unreasonable effort.

Conference Call Details

Paylocity will host a conference call to discuss its fourth quarter and fiscal year 2016 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 41307524. 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, taxes, 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 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, such as ACA Enhanced, to its existing customers and new customers; Paylocity’s ability to service clients effectively; Paylocity’s ability to expand its sales organization to effectively address new geographies; Paylocity’s ability to continue to expand its referral network of third parties; Paylocity’s ability to accurately forecast revenue and appropriately plan its expenses; Paylocity’s ability to manage its growth effectively; Paylocity’s ability to forecast its 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; future regulatory, judicial and legislative changes in its industry, including changes in ACA that could impact sales of the ACA Enhanced product; changes in the competitive environment in Paylocity’s industry and the market 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 14, 2015.  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 
Consolidated Balance Sheets 
(in thousands, except per share data) 
  
  As of June 30, 
Assets  2015   2016  
Current assets:     
Cash and cash equivalents $81,258  $86,496  
Accounts receivable, net  1,115   1,681  
Prepaid expenses and other  4,416   7,409  
Deferred income tax assets, net  775     
      
Total current assets before funds held for clients  87,564   95,586  
Funds held for clients  591,219   1,239,622  
      
Total current assets  678,783   1,335,208  
Long-term prepaid expenses  403   845  
Capitalized internal-use software, net  7,357   11,427  
Property and equipment, net  16,061   26,787  
Intangible assets, net  11,941   10,419  
Goodwill  6,003   6,003  
      
Total assets $720,548  $1,390,689  
      
Liabilities and Stockholders’ Equity (Deficit)     
      
Current liabilities:     
      
Accounts payable $1,327  $1,621  
Consideration related to acquisitions  511     
Accrued expenses  16,430   24,979  
      
Total current liabilities before client fund obligations  18,268   26,600  
Client fund obligations  591,219   1,239,622  
      
Total current liabilities  609,487   1,266,222  
Deferred rent  2,607   4,646  
Deferred income tax liabilities, net  874   249  
      
Total liabilities $612,968  $1,271,117  
      
Stockholders’ equity     
Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2015 and 2016 $  $  
Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2015 and 2016, 50,703 and 51,132 shares issued and outstanding at June 30, 2015 and 2016, respectively  51   51  
Additional paid-in capital  155,672   171,515  
Accumulated deficit  (48,143)  (51,994) 
Total stockholders’ equity $107,580  $119,572  
Total liabilities and stockholders’ equity $720,548  $1,390,689  


PAYLOCITY HOLDING CORPORATION 
Consolidated Statements of Operations 
(in thousands, except per share data) 
  
  For the Three   
  Months Ended  For the Years Ended 
  June 30, June 30, 
   2015   2016   2015    2016  
Revenues:            
Recurring fees $37,636  $57,042  $142,168  $217,416  
Interest income on funds held for clients  547   742   1,901   2,688  
Total recurring revenues  38,183   57,784   144,069   220,104  
Implementation services and other  1,821   2,055   8,629   10,597  
Total revenues  40,004   59,839   152,698   230,701  
Cost of revenues:         
Recurring revenues  11,750   18,273   46,366   66,131  
Implementation services and other  6,366   8,308   24,530   31,954  
Total cost of revenues  18,116   26,581   70,896   98,085  
Gross profit  21,888   33,258   81,802   132,616  
Operating expenses:         
Sales and marketing  11,883   17,361   43,035   61,832  
Research and development  5,513   7,749   19,864   26,736  
General and administrative  8,756   13,188   32,824   47,598  
Total operating expenses  26,152   38,298   95,723   136,166  
Operating loss  (4,264)  (5,040)  (13,921)  (3,550) 
Other income (expense)  (126)  (338)  54   (124) 
Loss before income taxes  (4,390)  (5,378)  (13,867)  (3,674) 
Income tax expense  39   34   105   177  
Net loss $(4,429) $(5,412) $(13,972) $(3,851) 
Net loss per share attributable to common stockholders:         
Basic $(0.09) $(0.11) $(0.28) $(0.08) 
Diluted $(0.09) $(0.11) $(0.28) $(0.08) 
Weighted-average shares used in computing net loss per share attributable to common stockholders:         
Basic  50,650   51,058   50,127   50,913  
Diluted  50,650   51,058   50,127   50,913  
                  

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

 For the Three       
 Months Ended For the Years Ended
 
 
June 30, June 30,
 
 2015 2016 2015 2016 
Cost of revenue - recurring$311 $448 $1,567 $1,765 
Cost of revenue -  implementation services and other 212  297  1,251  1,202 
Sales and marketing 631  1,207  3,347  4,567 
Research and development 468  714  2,609  2,942 
General and administrative 991  1,973  4,722  7,723 
Total$2,613 $4,639 $13,496 $18,199 
             


PAYLOCITY HOLDING CORPORATION 
Consolidated Statements of Cash Flows 
(in thousands) 
  
   
For the Years Ended June 30,
   
    2015   2016    
Cash flows from operating activities:        
        
Net loss  $(13,972) $(3,851)  
Adjustments to reconcile net loss to net cash provided by
operating activities:
       
Stock-based compensation   13,169   17,563   
Depreciation and amortization   8,609   13,873   
Deferred income tax expense   91   150   
Provision for doubtful accounts   90   159   
Loss on disposal of equipment   256   712   
Changes in operating assets and liabilities:       
Accounts receivable   (449)  (725)  
Prepaid expenses   (1,754)  (3,270)  
Trade accounts payable   (186)  72   
Accrued expenses   5,251   8,310   
Net cash provided by operating activities   11,105   32,993   
        
Cash flows from investing activities:       
Capitalized internal-use software costs   (4,215)  (8,391)  
Purchases of property and equipment   (9,020)  (16,083)  
Payments for acquisitions   (11,979)  (483)  
Net change in funds held for clients   (173,958)  (648,403)  
Net cash used in investing activities   (199,172)  (673,360)  
        
Cash flows from financing activities:       
Net change in client funds obligation   173,958   648,403   
Proceeds from follow-on offering, net of issuance costs   18,367      
Payments on initial public offering costs   (75)     
Proceeds from exercise of stock options   247   137   
Proceeds from employee stock purchase plan   1,773   2,991   
Taxes paid related to net share settlement of equity awards   (3,793)  (5,926)  
Net cash provided by financing activities   190,477   645,605   
Net Change in Cash and Cash Equivalents   2,410   5,238   
Cash and Cash Equivalents—Beginning of Year   78,848   81,258   
Cash and Cash Equivalents—End of Year  $81,258  $86,496   
Supplemental Disclosure of Non-Cash Investing and Financing Activities       
Build-out allowances received from landlords     $1,888   
Purchase of property and equipment and internal-use software, accrued but not paid  $210  $607   
Unpaid initial offering costs         
Supplemental disclosure of cash flow information       
Cash paid for income taxes, net of refunds  $162  $3   
Cash paid for interest         


Paylocity Holding Corporation 
Reconciliation of GAAP to non-GAAP Financial Measures 
(In thousands except per share data) 
         
 Three months
Ended
June 30,
 For the year
Ended
June 30,
 
  2015   2016   2015   2016  
Reconciliation from gross profit to adjusted gross profit:        
Gross profit$21,888  $33,258  $81,802  $132,616  
Amortization of capitalized internal-use software costs 685   1,577   2,606   5,446  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 523   745   2,818   2,967  
Adjusted gross profit$23,096  $35,580  $87,226  $141,029  
         
 Three months
Ended
June 30,
 For the year
Ended
June 30,
 
  2015   2016   2015   2016  
Reconciliation from total recurring revenues to adjusted recurring gross profit:        
Total recurring revenues$38,183  $57,784  $144,069  $220,104  
Cost of recurring revenues 11,750   18,273   46,366   66,131  
Recurring gross profit 26,433   39,511   97,703   153,973  
Amortization of capitalized internal-use software costs 685   1,577   2,606   5,446  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 311   448   1,567   1,765  
Adjusted recurring gross profit$27,429  $41,536  $101,876  $161,184  
         
 Three months
Ended
June 30,
 For the year
Ended
June 30,
 
  2015   2016   2015   2016  
Reconciliation from operating loss to non-GAAP operating income (loss):        
Operating loss$(4,264) $(5,040) $(13,921) $(3,550) 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 2,613   4,639   13,496   18,199  
Amortization of acquired intangibles 349   380   919   1,522  
Non-GAAP operating income (loss)$(1,302) $(21) $494  $16,171  
         
 Three months
Ended
June 30,
 For the year
Ended
June 30,
 
  2015   2016   2015   2016  
Reconciliation from net loss to non-GAAP net income (loss):        
Net loss$(4,429) $(5,412) $(13,972) $(3,851) 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 2,613   4,639   13,496   18,199  
Amortization of acquired intangibles 349   380   919   1,522  
Non-GAAP net income (loss)$(1,467) $(393) $443  $15,870  
         
 Three months
Ended
June 30,
 For the year
Ended
June 30,
 
  2015   2016   2015   2016  
Calculation of non-GAAP net income (loss) per share:        
Non-GAAP net income (loss)$(1,467) $(393) $443  $15,870  
Diluted weighted-average number of common shares (pro forma for years ended June 30, 2015 and 2016) 50,650   51,058   52,493   53,522  
Non-GAAP net income (loss) per share$(0.03) $(0.01) $0.01  $0.30  
         
 Three months
Ended
June 30,
 For the year
Ended
June 30,
 
  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 50,650   51,058   50,127   50,913  
Weighted-average effect of potentially dilutive shares -   -   2,366   2,609  
Pro forma diluted weighted-average number of common shares 50,650   51,058   52,493   53,522  
         
 Three months
Ended
June 30,
 For the year
Ended
June 30,
 
  2015   2016   2015   2016  
Reconciliation from net loss to Adjusted EBITDA:        
Net loss$(4,429) $(5,412) $(13,972) $(3,851) 
Interest expense -   -   -   -  
Income tax expense 39   34   105   177  
Depreciation and amortization 2,364   3,998   8,609   13,873  
EBITDA (2,026)  (1,380)  (5,258)  10,199  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 2,613   4,639   13,496   18,199  
Adjusted EBITDA$587  $3,259  $8,238  $28,398  
         
 Three months
Ended
June 30,
 For the year
Ended
June 30,
 
  2015   2016   2015   2016  
Reconciliation of non-GAAP Sales and Marketing:        
Sales and Marketing$11,883  $17,361  $43,035  $61,832  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 631   1,207   3,347   4,567  
Non-GAAP Sales and Marketing$11,252  $16,154  $39,688  $57,265  
         
 Three months
Ended
June 30,
 For the year
Ended
June 30,
 
  2015   2016   2015   2016  
Reconciliation of non-GAAP Total Research and Development:        
Research and Development$5,513  $7,749  $19,864  $26,736  
Capitalized internal-use software costs 1,671   2,584   4,215   8,391  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 468   714   2,609   2,942  
Non-GAAP Total Research and Development$6,716  $9,619  $21,470  $32,185  
         
 Three months
Ended
June 30,
 For the year
Ended
June 30,
 
  2015   2016   2015   2016  
Reconciliation of non-GAAP General and Administrative:        
General and Administrative$8,756  $13,188  $32,824  $47,598  
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 991   1,973   4,722   7,723  
Amortization of acquired intangibles 349   380   919   1,522  
Non-GAAP General and Administrative$7,416  $10,835  $27,183  $38,353  
         



            

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