Paylocity Announces Fourth Quarter and Full Fiscal Year 2020 Financial Results


  • Q4 2020 Recurring & Other Revenue of $129.3 million, up 13% year-over-year
  • Q4 2020 Total Revenue of $130.6 million, up 8% year-over-year
  • FY 2020 Recurring & Other Revenue of $546.2 million, up 22% year-over-year
  • FY 2020 Total Revenue of $561.3 million, up 20% year-over-year

SCHAUMBURG, Ill., Aug. 06, 2020 (GLOBE NEWSWIRE) -- Paylocity Holding Corporation (Nasdaq: PCTY), a leading provider of cloud-based HR and payroll software solutions, today announced financial results for the fourth quarter and full fiscal year 2020, which ended June 30, 2020.

“We had a solid fiscal 2020, which included 22% recurring and other revenue growth and a very strong year for our sales team, despite the impact COVID-19 had on macro-economic conditions in the fourth quarter,” said Steve Beauchamp, Chief Executive Officer of Paylocity. “I’m proud of the dedication our employees showed in helping our clients navigate through a very uncertain time, coupled with a rapidly changing legislation landscape. We continue to see our commitment to product development pay dividends, with usage of our Learning Management and Community products up significantly during the fourth quarter. We also recently released a number of new product features and resources to help prospects and clients rethink how they recruit, rehire and engage their workforce in this new environment.”

Key Recent Achievements

  • FY 2020 Recurring & Other Revenue of $546.2 million, up 22% year-over-year

  • FY 2020 Total Revenue of $561.3 million, up 20% year-over-year

  • FY 2020 GAAP net income of $64.5 million and $1.15 per diluted share

  • FY 2020 Adjusted EBITDA, a non-GAAP measure, of $159.8 million or 28.5% of revenue

  • Ending FY 2020 cash, cash equivalents and invested corporate cash balance of $288.0 million

  • Acquisition of VidGrid, a leading video platform provider that enables peer-to-peer video learning courses, completed in April 2020

Fourth Quarter Fiscal 2020 Financial Highlights

Revenue:

  • Total revenue was $130.6 million, an increase of 8% from the fourth quarter of fiscal year 2019.

  • Recurring & other revenue was $129.3 million, representing 99% of total revenue and an increase of 13% from the fourth quarter of fiscal year 2019 recurring & other revenue.

Operating Income:

  • GAAP operating income was $6.3 million and Non-GAAP operating income was $21.4 million in the fourth quarter of fiscal year 2020.

Net Income:

  • GAAP net income was $5.0 million or $0.09 per share for the three months ended June 30, 2020 based on 56.0 million diluted weighted average common shares outstanding.

Adjusted EBITDA:

  • Adjusted EBITDA, a non-GAAP measure, was $30.8 million in the fourth quarter of fiscal year 2020.

Fiscal Year 2020 Financial Highlights

Revenue:

  • Total revenue was $561.3 million, an increase of 20% from fiscal year 2019.

  • Recurring & other revenue was $546.2 million, representing 97% of total revenue and an increase of 22% from fiscal year 2019 recurring & other revenue.

Operating Income:

  • GAAP operating income was $66.2 million and non-GAAP operating income was $122.7 million in fiscal year 2020.

Net Income:

  • GAAP net income was $64.5 million or $1.15 per share for fiscal year 2020, based on 55.8 million diluted weighted average common shares outstanding.

 Adjusted EBITDA:

  • Adjusted EBITDA, a non-GAAP measure, was $159.8 million for fiscal year 2020.

Balance Sheet and Cash Flow:

  • Cash, cash equivalents and invested corporate cash totaled $288.0 million at the end of the year. 

  • $100 million outstanding at the end of the year under our credit facility.

  • Cash flow from operations for fiscal year 2020 was $112.7 million compared to $115.0 million for fiscal year 2019.

  • Free cash flow, a non-GAAP measure, was $70.4 million or 12.5% of revenue for 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 August 6, 2020, Paylocity is issuing guidance for the first quarter of fiscal year 2021 as indicated below.

First Quarter 2021:

  • Total revenue is expected to be in the range of $131.5 million to $135.5 million, which represents 4% - 7% growth over fiscal 2020 first quarter revenue.

  • Adjusted EBITDA, a non-GAAP measure, is expected to be in the range of $18.5 million to $21.5 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 fourth quarter and fiscal year 2020 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 3247749. 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-Q filed with the SEC on May 8, 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
Consolidated Balance Sheets
(in thousands, except per share data)

        
  As of June 30,  
  2019 2020 
Assets       
Current assets:       
Cash and cash equivalents $132,476 $250,851 
Corporate investments  29,314  34,556 
Accounts receivable, net  4,358  4,923 
Deferred contract costs  21,677  32,332 
Prepaid expenses and other  13,895  13,188 
Total current assets before funds held for clients  201,720  335,850 
Funds held for clients  1,394,469  1,327,304 
Total current assets  1,596,189  1,663,154 
Capitalized internal-use software, net  27,486  36,501 
Property and equipment, net  70,056  66,737 
Operating lease right-of-use assets    48,658 
Intangible assets, net  10,751  13,360 
Goodwill  9,590  21,655 
Long-term deferred contract costs  81,422  125,711 
Long-term prepaid expenses and other  1,975  4,917 
Deferred income tax assets  6,472  4,955 
Total assets $1,803,941 $1,985,648 
        
Liabilities and Stockholders’ Equity       
Current liabilities:       
Accounts payable $3,954 $1,755 
Accrued expenses  57,625  79,881 
Total current liabilities before client fund obligations  61,579  81,636 
Client fund obligations  1,394,469  1,327,304 
Total current liabilities  1,456,048  1,408,940 
Long-term debt    100,000 
Deferred rent  31,263   
Long-term operating lease liabilities    73,299 
Other long-term liabilities  1,723  1,747 
Deferred income tax liabilities  6,943  8,754 
Total liabilities $1,495,977 $1,592,740 
Stockholders’ equity:       
Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2019 and June 30, 2020 $ $ 
Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2019 and June 30, 2020; 53,075 shares issued and outstanding at June 30, 2019 and 53,792 shares issued and outstanding at June 30, 2020  53  54 
Additional paid-in capital  207,982  227,907 
Retained earnings  99,817  164,272 
Accumulated other comprehensive income  112  675 
Total stockholders’ equity $307,964 $392,908 
Total liabilities and stockholders’ equity $1,803,941 $1,985,648 
        

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

 For the Three Months Ended
June 30,
 For the Years Ended
June 30,

 
 2019  2020  2019 2020 
Revenues:            
Recurring and other revenue$114,656  $129,264  $447,752 $546,212 
Interest income on funds held for clients 5,717   1,325   19,881  15,117 
Total revenues 120,373   130,589   467,633  561,329 
Cost of revenues 40,094   45,875   153,851  182,010 
Gross profit 80,279   84,714   313,782  379,319 
Operating expenses:            
Sales and marketing 31,912   33,083   112,599  145,134 
Research and development 13,443   17,350   50,329  62,766 
General and administrative 25,715   27,965   94,630  105,248 
Total operating expenses 71,070   78,398   257,558  313,148 
Operating income 9,209   6,316   56,224  66,171 
Other income 667   (247)  1,822  947 
Income before income taxes 9,876   6,069   58,046  67,118 
Income tax expense (benefit) (365)  1,119   4,223  2,663 
             
Net income$10,241  $4,950  $53,823 $64,455 
             
Other comprehensive income, net of tax            
Unrealized gains on securities, net of tax 90   777   251  563 
Total other comprehensive income, net of tax 90   777   251  563 
Comprehensive income$10,331  $5,727  $54,074 $65,018 
             
Net income per share:            
Basic$0.19  $0.09  $1.02 $1.20 
Diluted$0.18  $0.09  $0.97 $1.15 
             
Weighted-average shares used in computing net income per share:            
Basic 53,017   53,731   52,914  53,547 
Diluted 55,692   55,970   55,414  55,807 
               

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
June 30,
  For the Years Ended
June 30,

 
  2019   2020   2019   2020 
Cost of revenues$1,360$1,605   $5,544   $6,217 
Sales and marketing 2,208   3,215   8,059   14,494 
Research and development 1,364   2,299   5,844   7,855 
General and administrative 5,286   6,374   21,567   21,798 
Total$10,218   $13,493   $41,014   $50,364 
                

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

           
  For the Years Ended June 30,  
  2018  2019  2020  
Cash flows from operating activities:          
Net income $38,598  $53,823  $64,455  
Adjustments to reconcile net income to net cash provided by operating activities:          
Stock-based compensation expense  30,354   38,765   47,493  
Depreciation and amortization expense  30,202   34,564   37,913  
Deferred income tax expense (benefit)  (21,870)  4,134   2,754  
Provision for doubtful accounts  296   283   309  
Net accretion of discounts and amortization of premiums on available-for-sale securities  (443)  (2,230)  (1,836) 
Net realized losses on sales of available-for-sale securities  2        
Amortization of debt issuance costs        154  
Loss on disposal of equipment  227   454   395  
Changes in operating assets and liabilities:          
Accounts receivable  (1,494)  (1,188)  (732) 
Deferred contract costs     (34,992)  (54,944) 
Prepaid expenses and other  (2,141)  389   (196) 
Accounts payable  740   (75)  (806) 
Accrued expenses and other  11,641   13,625   17,696  
Tenant improvement allowance  11,754   7,480     
Net cash provided by operating activities  97,866   115,032   112,655  
Cash flows from investing activities:          
Purchases of available-for-sale securities and other  (196,597)  (250,685)  (400,343) 
Proceeds from sales and maturities of available-for-sale securities  73,044   246,243   410,593  
Capitalized internal-use software costs  (15,638)  (20,142)  (25,715) 
Purchases of property and equipment  (21,676)  (11,280)  (16,578) 
Lease allowances used for tenant improvements  (11,754)  (7,480)    
Acquisition of business, net of cash acquired  (6,658)     (16,714) 
Net cash used in investing activities  (179,279)  (43,344)  (48,757) 
Cash flows from financing activities:          
Net change in client fund obligations  281,467   168,855   (67,165) 
Borrowings under credit facility        100,000  
Payment of contingent consideration     (1,000)    
Repurchases of common shares     (34,991)    
Proceeds from exercise of stock options     85     
Proceeds from employee stock purchase plan  4,304   5,982   8,901  
Taxes paid related to net share settlement of equity awards  (10,554)  (24,207)  (38,943) 
Payment of debt issuance costs        (701) 
Net cash provided by financing activities  275,217   114,724   2,092  
Net change in cash, cash equivalents and funds held for clients' cash and cash equivalents  193,804   186,412   65,990  
Cash, cash equivalents and funds held for clients' cash and cash equivalents—beginning of year  1,045,927   1,239,731   1,426,143  
Cash, cash equivalents and funds held for clients' cash and cash equivalents—end of year $1,239,731  $1,426,143  $1,492,133  
Supplemental Disclosure of Non-Cash Investing and Financing Activities          
Build-out allowances received from landlords $1,956  $1,264  $  
Purchase of property and equipment and internal-use software, accrued but not paid $659  $4,260  $164  
Liabilities assumed for acquisition $  $  $674  
Supplemental Disclosure of Cash Flow Information          
Cash paid for interest $  $  $438  
Cash paid (refunds received) for income taxes $(53) $412  $84  
Reconciliation of cash, cash equivalents and funds held for clients' cash and cash equivalents to the Consolidated Balance Sheets          
Cash and cash equivalents $137,193  $132,476  $250,851  
Funds held for clients' cash and cash equivalents  1,102,538   1,293,667   1,241,282  
Total cash, cash equivalents and funds held for clients' cash and cash equivalents $1,239,731  $1,426,143  $1,492,133  
              

 

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,
  2019   2020   2019   2020 
Reconciliation from gross profit to adjusted gross profit:       
Gross profit$80,279  $84,714  $313,782  $379,319 
Amortization of capitalized internal-use software costs 4,067   5,188   16,921   19,261 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 1,360   1,605   5,544   6,217 
Adjusted gross profit$85,706  $91,507  $336,247  $404,797 
        
 Three months Ended
June 30,
 For the year Ended
June 30,
  2019   2020   2019   2020 
Reconciliation from operating income to non-GAAP operating income:       
Operating income$9,209  $6,316  $56,224  $66,171 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 10,218   13,493   41,014   50,364 
Other items (1)  1,417   738   1,417   3,685 
Amortization of acquired intangibles 563   835   2,251   2,523 
Non-GAAP operating income$21,407  $21,382  $100,906  $122,743 
        
 Three months Ended
June 30,
 For the year Ended
June 30,
  2019   2020   2019   2020 
Reconciliation from net income to non-GAAP net income:       
Net income$10,241  $4,950  $53,823  $64,455 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 10,218   13,493   41,014   50,364 
Amortization of acquired intangibles 563   835   2,251   2,523 
Other items (1)  1,417   738   1,417   3,685 
Income tax effect on adjustments (2) (3,385)  (2,223)  (22,158)  (16,389)
Non-GAAP net income$19,054  $17,793  $76,347  $104,638 
        
 Three months Ended
June 30,
 For the year Ended
June 30,
  2019   2020   2019   2020 
Calculation of non-GAAP net income per share:       
Non-GAAP net income$19,054  $17,793  $76,347  $104,638 
Diluted weighted-average number of common shares 55,692   55,970   55,414   55,807 
Non-GAAP net income per share$0.34  $0.32  $1.38  $1.87 
        
 Three months Ended
June 30,
 For the year Ended
June 30,
  2019   2020   2019   2020 
Reconciliation from net income to Adjusted EBITDA:       
Net income$10,241  $4,950  $53,823  $64,455 
Interest expense -   405   -   695 
Income tax expense (benefit) (365)  1,119   4,223   2,663 
Depreciation and amortization expense 9,351   10,081   34,564   37,913 
EBITDA 19,227   16,555   92,610   105,726 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 10,218   13,493   41,014   50,364 
Other items (3) 423   738   423   3,685 
Adjusted EBITDA$29,868  $30,786  $134,047  $159,775 
        
 Three months Ended
June 30,
 For the year Ended
June 30,
  2019   2020   2019   2020 
Reconciliation of non-GAAP Sales and Marketing:       
Sales and Marketing$31,912  $33,083  $112,599  $145,134 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 2,208   3,215   8,059   14,494 
Non-GAAP Sales and Marketing$29,704  $29,868  $104,540  $130,640 
        
 Three months Ended
June 30,
 For the year Ended
June 30,
  2019   2020   2019   2020 
Reconciliation of non-GAAP Total Research and Development:       
Research and Development$13,443  $17,350  $50,329  $62,766 
Capitalized internal-use software costs 5,436   6,502   20,142   25,715 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 1,364   2,299   5,844   7,855 
Acquisition-related costs (4) -   228   -   228 
Non-GAAP Total Research and Development$17,515  $21,325  $64,627  $80,398 
        
 Three months Ended
June 30,
 For the year Ended
June 30,
  2019   2020   2019   2020 
Reconciliation of non-GAAP General and Administrative:       
General and Administrative$25,715  $27,965  $94,630  $105,248 
Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises 5,286   6,374   21,567   21,798 
Amortization of acquired intangibles 563   835   2,251   2,523 
Other items (1) 1,417   510   1,417   3,457 
Non-GAAP General and Administrative$18,449  $20,246  $69,395  $77,470 
        
     For the year Ended
June 30,
      2019   2020 
Reconciliation of Free Cash Flow:       
Net cash provided by operating activities    $115,032  $112,655 
Capitalized internal-use software costs     (20,142)  (25,715)
Purchases of property and equipment     (11,280)  (16,578)
Lease allowances used for tenant improvements     (7,480)  - 
Free Cash Flow    $76,130  $70,362 
        
        
(1)  Represents nonrecurring costs including lease exit and acquisition-related costs and the settlement of a certain legal matter and related litigation costs during the year ended June 30, 2020 and lease exit costs and accelerated depreciation expense during the year ended June 30, 2019.
(2)  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 releases and option exercises, excess deductible federal and state tax windfall on stock-based compensation, and amortization of acquired intangibles and other items.
(3)  Represents nonrecurring costs including lease exit and acquisition-related costs and settlement of a certain legal matter and related litigation costs during the year ended June 30, 2020 and lease exit costs incurred during June 30, 2019..
(4)  Acquisition-related costs recorded in Research and Development.