GlobeNewswire Inc | Feb 4, 2021 04:05PM EST

February 04, 2021

-- Q2 2021 Recurring & Other Revenue of $145.4 million, up 14% year-over-year -- Q2 2021 Total Revenue of $146.3 million, up 11% year-over-year

SCHAUMBURG, Ill., Feb. 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 second quarter of fiscal year 2021, which ended December 31, 2020.

Despite the challenges of the COVID-19 pandemic, we had a strong second quarter, with 14% growth in recurring & other revenue and 11% total revenue growth. The momentum our sales team developed during the Fall selling season translated into a strong January, and we continue to be pleased with how our team is performing in a virtual selling environment. We also remain excited about our product momentum in delivering the most modern platform. Our recent acquisition of Samepage, an all-in-one team collaboration solution, is another recent proofpoint, said Steve Beauchamp, Chief Executive Officer of Paylocity.

Second Quarter Fiscal 2021 Financial Highlights

Revenue:

-- Total revenue was $146.3 million, an increase of 11% from the second quarter of fiscal year 2020. -- Recurring & other revenue was $145.4 million, representing 99% of total revenue and an increase of 14% from the second quarter of fiscal year 2020.

Operating Income:

-- GAAP operating income was $6.4 million and Non-GAAP operating income was $25.1 million in the second quarter of fiscal year 2021.

Net Income:

-- GAAP net income was $9.6 million or $0.17 per share for the three months ended December 31, 2020 based on 56.3 million diluted weighted average common shares outstanding.

Adjusted EBITDA:

-- Adjusted EBITDA, a non-GAAP measure, was $35.0 million in the second quarter of fiscal year 2021.

Balance Sheet and Cash Flow:

-- Cash, cash equivalents and invested corporate cash totaled $232.3 million as of the end of the quarter. -- $100 million outstanding at the end of the quarter under our credit facility. -- Cash flow from operations for the second quarter of fiscal year 2021 was $21.2 million compared to $27.8 million for the second quarter of fiscal year 2020.

A reconciliation of GAAP to non-GAAP financial measures has been provided in this press release, including the accompanying tables. An explanation of these measures is also included below under the heading Non-GAAP Financial Measures.

Business Outlook

Based on information available as of February 4, 2021, Paylocity is issuing guidance for the third quarter and full fiscal year 2021 as indicated below.

Third Quarter 2021:

-- Total revenue is expected to be in the range of $182.5 million to $186.5 million, which represents approximately 6% - 9% growth over fiscal 2020 third quarter revenue. -- Adjusted EBITDA, a non-GAAP measure, is expected to be in the range of $59.0 million to $62.0 million.

Fiscal Year 2021:

-- Total revenue is expected to be in the range of $623.5 million to $628.5 million, which represents approximately 11% - 12% growth over fiscal year 2020 revenue. -- Adjusted EBITDA, a non-GAAP measure, is expected to be in the range of $152.0 million to $156.0 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 second quarter fiscal year 2021 results at 4:00 p.m. Central Time today (5:00 Eastern Time). A live audio webcast of the conference call, together with detailed financial information, can be accessed through the company's Investor Relations Web site at www.paylocity.com. Participants who choose to call in to the conference call can do so by dialing (855) 226-3021 or (315) 625-6892, passcode 2895946. 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 todays 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 MeasuresThe 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 companys 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 companys future earnings discussions and, therefore, the inclusion of the non-GAAP financial measures should provide consistency in the companys 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 StatementsThis press release contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included herein regarding Paylocitys 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 managements 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 Paylocitys 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 Paylocitys employees and clients and Paylocitys ability to provide services to its clients and respond to their needs; Paylocitys ability to retain existing clients and to attract new clients to enter into subscriptions for its services; Paylocitys ability to sell new products and retain subscriptions for its existing products to its new and existing clients; the challenges associated with a growing companys 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; Paylocitys 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 Paylocitys tax position; risks related to regulatory, legislative and judicial uncertainty in Paylocitys 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; Paylocitys ability to protect and defend its intellectual property; the risk that Paylocitys security measures are compromised or the unauthorized access to customer data; unexpected events in the market for Paylocitys solutions; changes in the competitive environment in Paylocitys industry and the markets in which it operates; adverse changes in general economic or market conditions; changes in the employment rates of Paylocitys clients and the resultant impact on revenue; and other risks and potential factors that could affect Paylocitys business and financial results identified in Paylocitys filings with the Securities and Exchange Commission (the SEC), including its 10-K filed with the SEC on August 7, 2020. Additional information will also be set forth in Paylocitys 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 Paylocitys 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 CORPORATIONUnaudited Consolidated Balance Sheets(in thousands, except per share data) June30, December31, 2020 2020Assets Current assets: Cash and cash equivalents $ 250,851 $ 218,696 Corporate investments 34,556 13,637 Accounts receivable, net 4,923 6,118 Deferred contract costs 32,332 37,447 Prepaid expenses and other 13,188 15,633 Total current assets before funds held for 335,850 291,531 clientsFunds held for clients 1,327,304 2,204,286 Total current assets 1,663,154 2,495,817 Capitalized internal-use software, net 36,501 40,623 Property and equipment, net 66,737 64,066 Operating lease right-of-use assets 48,658 45,429 Intangible assets, net 13,360 15,083 Goodwill 21,655 33,184 Long-term deferred contract costs 125,711 144,027 Long?term prepaid expenses and other 4,917 3,218 Deferred income tax assets 4,955 9,516 Total assets $ 1,985,648 $ 2,850,963 Liabilities and Stockholders? Equity Current liabilities: Accounts payable $ 1,755 $ 2,771 Accrued expenses 79,881 64,204 Total current liabilities before client fund 81,636 66,975 obligationsClient fund obligations 1,327,304 2,204,286 Total current liabilities 1,408,940 2,271,261 Long-term debt 100,000 100,000 Long-term operating lease liabilities 73,299 69,672 Other long-term liabilities 1,747 1,812 Deferred income tax liabilities 8,754 ? Total liabilities $ 1,592,740 $ 2,442,745 Stockholders? equity: Preferred stock, $0.001 par value, 5,000authorized, no shares issued and outstanding at $ ? $ ? June30,2020 and December31,2020Common stock, $0.001 par value, 155,000 sharesauthorized at June30,2020 andDecember31,2020; 53,792 shares issued and 54 54 outstanding at June30,2020 and 54,370 sharesissued and outstanding at December31,2020Additional paid-in capital 227,907 221,525 Retained earnings 164,272 186,374 Accumulated other comprehensive income 675 265 Total stockholders' equity $ 392,908 $ 408,218 Total liabilities and stockholders? equity $ 1,985,648 $ 2,850,963

PAYLOCITY HOLDING CORPORATIONUnaudited Consolidated Statements of Operations and Comprehensive Income(in thousands, except per share data) Three Months Ended Six Months Ended December31, December31, 2019 2020 2019 2020Revenues: Recurring and $ 127,980 $ 145,393 $ 249,853 $ 280,268 other revenueInterest incomeon funds held 4,394 936 9,241 1,855 for clientsTotal revenues 132,374 146,329 259,094 282,123 Cost of revenues 45,424 53,542 88,054 102,922 Gross profit 86,950 92,787 171,040 179,201 Operating expenses:Sales and 37,293 37,775 74,250 75,449 marketingResearch and 15,410 19,338 29,804 37,985 developmentGeneral and 28,133 29,323 54,872 55,967 administrativeTotal operating 80,836 86,436 158,926 169,401 expensesOperating income 6,114 6,351 12,114 9,800 Other income 285 (379 ) 759 (636 )(expense)Income before 6,399 5,972 12,873 9,164 income taxesIncome taxexpense 932 (3,670 ) (6,500 ) (12,938 )(benefit)Net income $ 5,467 $ 9,642 $ 19,373 $ 22,102 Othercomprehensive (36 ) (187 ) (32 ) (410 )loss, net of taxComprehensive $ 5,431 $ 9,455 $ 19,341 $ 21,692 income Net income per share:Basic $ 0.10 $ 0.18 $ 0.36 $ 0.41 Diluted $ 0.10 $ 0.17 $ 0.35 $ 0.39 Weighted-averageshares used incomputing net income pershare:Basic 53,542 54,305 53,415 54,160 Diluted 55,826 56,343 55,692 56,122

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 Six Months Ended December31, December31, 2019 2020 2019 2020Cost of $ 1,465 $ 2,002 $ 3,197 $ 4,405 revenuesSales and 3,393 4,019 7,737 8,367 marketingResearch and 1,783 2,765 3,583 5,616 developmentGeneral and 6,188 8,300 12,341 15,435 administrativeTotalstock-based $ 12,829 $ 17,086 $ 26,858 $ 33,823 compensationexpense

PAYLOCITY HOLDING CORPORATIONUnaudited Consolidated Statements of Cash Flows(in thousands) Six Months Ended December31, 2019 2020Cash flows from operating activities: Net income $ 19,373 $ 22,102 Adjustments to reconcile net income to net cash provided by operating activities:Stock-based compensation expense 24,832 30,936 Depreciation and amortization expense 18,261 21,071 Deferred income tax benefit (6,500 ) (12,940 )Provision for credit losses 63 98 Net accretion of discounts and amortization of (1,052 ) 255 premiums on available-for-sale securitiesAmortization of debt issuance costs 73 83 Other 250 515 Changes in operating assets and liabilities: Accounts receivable (53 ) (1,287 )Deferred contract costs (22,434 ) (23,431 )Prepaid expenses and other 773 (3,388 )Accounts payable 261 1,070 Accrued expenses and other 2,231 (15,412 )Net cash provided by operating activities 36,078 19,672 Cash flows from investing activities: Purchases of available-for-sale securities and (253,950 ) ? otherProceeds from sales and maturities of 124,780 58,996 available-for-sale securitiesCapitalized internal-use software costs (12,139 ) (14,832 )Purchases of property and equipment (12,398 ) (6,045 )Acquisition of business, net of cash acquired ? (14,992 )Net cash provided by (used in) investing (153,707 ) 23,127 activitiesCash flows from financing activities: Net change in client fund obligations 450,825 876,982 Proceeds from employee stock purchase plan 3,961 6,100 Taxes paid related to net share settlement of (25,954 ) (44,749 )equity awardsPayment of debt issuance costs (675 ) (17 )Net cash provided by financing activities 428,157 838,316 Net change in cash, cash equivalents and funds 310,528 881,115 held for clients' cash and cash equivalentsCash, cash equivalents and funds held forclients' cash and cash equivalents?beginning of 1,426,143 1,492,133 periodCash, cash equivalents and funds held forclients' cash and cash equivalents?end of $ 1,736,671 $ 2,373,248 periodSupplemental Disclosure of Non-Cash Investing and Financing ActivitiesLiabilities assumed for acquisition $ ? $ 281 Supplemental Disclosure of Cash Flow InformationCash paid for interest $ 53 $ 584 Cash paid (refunds received) for income taxes $ 19 $ (110 )Reconciliation of cash, cash equivalents andfunds held for clients' cash and cash equivalents to the Unaudited ConsolidatedBalance SheetsCash and cash equivalents $ 75,900 $ 218,696 Funds held for clients' cash and cash 1,660,771 2,154,552 equivalentsTotal cash, cash equivalents and funds held for $ 1,736,671 $ 2,373,248 clients' cash and cash equivalents

Paylocity Holding CorporationReconciliation of GAAP to non-GAAP Financial Measures(In thousands except per share data) Three Months Six Months Ended Ended December 31, December 31, 2019 2020 2019 2020Reconciliation fromGross profit to Adjusted gross profit:Gross profit $ 86,950 $ 92,787 $ 171,040 $ 179,201 Amortization ofcapitalized internal-use 4,690 5,882 9,147 11,268 software costsStock-based compensationexpense and employerpayroll taxes related to 1,465 2,002 3,197 4,405 stock releases andoption exercisesAdjusted gross profit $ 93,105 $ 100,671 $ 183,384 $ 194,874 Three Months Six Months Ended Ended December 31, December 31, 2019 2020 2019 2020Reconciliation fromOperating income to Non-GAAP operatingincome:Operating income $ 6,114 $ 6,351 $ 12,114 $ 9,800 Stock-based compensationexpense and employerpayroll taxes related to 12,829 17,086 26,858 33,823 stock releases andoption exercisesAmortization of acquired 562 940 1,125 1,784 intangiblesOther items (1) 1,606 725 2,562 1,085 Non-GAAP operating $ 21,111 $ 25,102 $ 42,659 $ 46,492 income Three Months Six Months Ended Ended December 31, December 31, 2019 2020 2019 2020Reconciliation from Netincome to Non-GAAP net income:Net income $ 5,467 $ 9,642 $ 19,373 $ 22,102 Stock-based compensationexpense and employerpayroll taxes related to 12,829 17,086 26,858 33,823 stock releases andoption exercisesAmortization of acquired 562 940 1,125 1,784 intangiblesOther items (1) 1,606 725 2,562 1,085 Income tax effect on (423 ) (6,187 ) (9,551 ) (15,387 )adjustments (2)Non-GAAP net income $ 20,041 $ 22,206 $ 40,367 $ 43,407 Three Months Six Months Ended Ended December 31, December 31, 2019 2020 2019 2020Calculation of Non-GAAP net income per share:Non-GAAP net income $ 20,041 $ 22,206 $ 40,367 $ 43,407 Diluted weighted-average 55,826 56,343 55,692 56,122 number of common sharesNon-GAAP net income per $ 0.36 $ 0.39 $ 0.72 $ 0.77 share Three Months Six Months Ended Ended December 31, December 31, 2019 2020 2019 2020Reconciliation from Netincome to Adjusted EBITDA:Net income $ 5,467 $ 9,642 $ 19,373 $ 22,102 Interest expense 103 351 188 691 Income tax expense 932 (3,670 ) (6,500 ) (12,938 )(benefit)Depreciation and 9,328 10,836 18,261 21,071 amortization expenseEBITDA 15,830 17,159 31,322 30,926 Stock-based compensationexpense and employerpayroll taxes related to 12,829 17,086 26,858 33,823 stock releases andoption exercisesOther items (1) 1,606 725 2,562 1,085 Adjusted EBITDA $ 30,265 $ 34,970 $ 60,742 $ 65,834 Three Months Six Months Ended Ended December 31, December 31, 2019 2020 2019 2020Reconciliation ofNon-GAAP Sales and Marketing:Sales and marketing $ 37,293 $ 37,775 $ 74,250 $ 75,449 Stock-based compensationexpense and employerpayroll taxes related to 3,393 4,019 7,737 8,367 stock releases andoption exercisesNon-GAAP Sales and $ 33,900 $ 33,756 $ 66,513 $ 67,082 Marketing Three Months Six Months Ended Ended December 31, December 31, 2019 2020 2019 2020Reconciliation ofNon-GAAP Total Research and Development:Research and Development $ 15,410 $ 19,338 $ 29,804 $ 37,985 Capitalized internal-use 5,425 6,948 12,139 14,832 software costsStock-based compensationexpense and employerpayroll taxes related to 1,783 2,765 3,583 5,616 stock releases andoption exercisesOther items (3) ? 230 ? 385 Non-GAAP Total Research $ 19,052 $ 23,291 $ 38,360 $ 46,816 and Development Three Months Six Months Ended Ended December 31, December 31, 2019 2020 2019 2020Reconciliation ofNon-GAAP General and Administrative:General and $ 28,133 $ 29,323 $ 54,872 $ 55,967 AdministrativeStock-based compensationexpense and employerpayroll taxes related to 6,188 8,300 12,341 15,435 stock releases andoption exercisesAmortization of acquired 562 940 1,125 1,784 intangiblesOther items (1) 1,606 495 2,562 700 Non-GAAP General and $ 19,777 $ 19,588 $ 38,844 $ 38,048 Administrative (1)Represents nonrecurring costs including acquisition-related and lease exitcosts. Also includes the settlement of a certain legal matter and relatedlitigation costs of $1.6 million and $2.0 million for the three and six monthsended December 31, 2019, respectively. (2) Income tax effect on adjustments: Includes the income tax effect onnon-GAAP net income adjustments related to stock-based compensation expense andemployer payroll taxes related to stock releases and option exercises,amortization of acquired intangibles and other items. (3)Represents certain nonrecurring acquisition-related costs.

CONTACT: Ryan Glenn investors@paylocity.comwww.paylocity.com