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Paylocity Announces Second Quarter Fiscal Year 2023 Financial Results
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Paylocity Announces Second Quarter Fiscal Year 2023 Financial Results






  • 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

SCHAUMBURG, Ill., Feb. 02, 2023 (GLOBE NEWSWIRE) — Paylocity Holding Corporation (Nasdaq: PCTY), a leading provider of cloud-based HCM and payroll software solutions, today announced financial results for the second quarter of fiscal year 2023, which ended December 31, 2022.

"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 Paylocity suite and are leveraging this technology to provide the most modern software in the industry to accelerate the rollout of new integrations and use-cases to better serve our clients and their employees. Additionally, we continue to see strong attach rates in our modern workforce solutions, as clients realize the value in creating a unique employee experience and engaging culture for remote, hybrid and in-office teams,” said Steve Beauchamp, Co-Chief Executive Officer of Paylocity.

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 February 2, 2023, Paylocity is issuing guidance for the third quarter and full fiscal year 2023 as indicated below.

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
Paylocity will host a conference call to discuss its second quarter fiscal year 2023 results at 4:30 p.m. Central Time today (5:30 p.m. Eastern Time). A live audio webcast of the conference call along with detailed financial information can be accessed through https://investors.paylocity.com/events-and-presentations where dial in details are provided. A replay of the call will be available and archived via webcast at https://investors.paylocity.com/.

About Paylocity

Paylocity is a leading provider of cloud-based HCM 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 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. 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 general economic conditions in regions in which Paylocity does business, including the ongoing impact of the novel coronavirus disease (“COVID-19”) on the U.S. and the global economy, changes 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; Paylocity’s ability to retain existing clients and to attract new clients to enter into subscriptions for its services; 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; challenges related to cybersecurity threats and evolving cybersecurity regulations; Paylocity’s reliance on and ability to expand its referral network of third parties; Paylocity’s reliance on third party payroll partners in foreign jurisdictions in its Blue Marble business; difficulties associated with accurately forecasting revenue and appropriately planning expenses; challenges with managing growth effectively; risks related to regulatory, legislative and judicial uncertainty in Paylocity’s markets; Paylocity’s ability to protect and defend its intellectual property; the risk that Paylocity’s security measures are compromised or a threat actor gains 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 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 5, 2022. Additional information will also be set forth in Paylocity’s future quarterly reports on Form 10-Q, annual reports on Form 10-K and other filings that Paylocity makes with the SEC. These forward-looking statements represent Paylocity’s expectations as of the date of this press release. Subsequent events may cause these expectations to change, and Paylocity disclaims any obligations to update or alter these forward-looking statements in the future, whether as a result of new information, future events or otherwise.


PAYLOCITY HOLDING CORPORATION

Unaudited Consolidated Balance Sheets
(in thousands, except per share data)

  June 30,
2022
  December 31,
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  
Goodwill   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, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2022 and December 31, 2022 $     $  
Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2022 and December 31, 2022; 55,190 shares issued and outstanding at June 30, 2022 and 55,768 shares issued and outstanding at December 31, 2022   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  

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

  Three Months Ended
December 31,
  Six Months Ended
December 31,
    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 December 31, are included in the above line items:

  Three Months Ended
December 31,
  Six Months Ended
December 31,
    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

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

  Six Months Ended
December 31,
    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  

Paylocity Holding Corporation
Reconciliation of GAAP to non-GAAP Financial Measures
(In thousands except per share data) 

  Three Months Ended
December 31,
  Six Months Ended
December 31,
    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
December 31,
  Six Months Ended
December 31,
    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
December 31,
  Six Months Ended
December 31,
    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
December 31,
  Six Months Ended
December 31,
    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
December 31,
  Six Months Ended
December 31,
    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
December 31,
  Six Months Ended
December 31,
    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
December 31,
  Six Months Ended
December 31,
    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
December 31,
  Six Months Ended
December 31,
    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.

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