A month has gone by since the last earnings report for Paylocity (PCTY - Free Report) . Shares have added about 2.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Paylocity due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Paylocity Holding recorded fourth-quarter fiscal 2020 non-GAAP earnings of 32 cents per share, outpacing the Zacks Consensus Estimate of 13 cents. However, the bottom-line figure came in lower than the year-ago quarter’s 34 cents.
Paylocity’s revenues of $130.6 million improved 8.5% year over year and also trumped the Zacks Consensus Estimate of $126.6 million. The top line was driven by a 13% rise in recurring revenues (99% of total revenues), which totaled $129.3 million. However, interest income on funds held for clients plunged 76.8% to $1.3 million.
The company is benefiting from the growing adoption of its solutions among clients with less than 50 employees. Moreover, healthy momentum in the firm’s core and upper end of the market is a tailwind.
Quarter in Detail
The company’s non-GAAP gross profit came in at $91.5 million, up 6.8% year over year. However, non-GAAP gross margin contracted 120 basis points (bps) year over year to 70%.
Adjusted EBITDA increased 3.1% from the year-ago quarter to $30.8 million. Also, adjusted EBITDA margin of 23.6% shrunk 120 bps.
Non-GAAP operating income of $17.8 million remained flat year over year. However, non-GAAP operating margin declined 140 bps to 16.4%.
Paylocity exited the reported quarter with cash, cash equivalents and corporate investments of $285.4 million compared with the $180.6 million witnessed in the prior quarter. Additionally, as of Jun 30, 2020, the company had long-term debt of $100 million.
Cash flow from operations for the fiscal fourth quarter was $112.7 million compared with the $50.7 million recorded in the prior quarter and $115 million in the year-ago period.
For first-quarter fiscal 2021, Paylocity expects revenues of $131.5-$135.5 million, indicating 4-7% growth from the year-ago reported figure. Adjusted EBITDA is projected in the band of $18.5-$21.5 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -177.59% due to these changes.
Currently, Paylocity has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Paylocity has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.