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Paylocity's (PCTY) Q3 Earnings and Revenues Beat Estimates

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Paylocity Holding (PCTY - Free Report) recorded third-quarter fiscal 2021 non-GAAP earnings of 88 cents per share, outpacing the Zacks Consensus Estimate of 66 cents. Moreover, the bottom-line figure comes in 5 cents higher than the year-ago quarter’s earnings of 83 cents per share.

Paylocity’s revenues of $186.1 million improved 8% year over year and also trumped the Zacks Consensus Estimate of $185.5 million. The top line was driven by an 11% increase in recurring revenues (99% of total revenues), which totaled $184.9 million. However, interest income on funds held for clients slumped 75% to $1.1 million.

The company is benefiting from the growing adoption of its solutions among clients with less than 50 employees. Further, healthy momentum in the firm’s core and upper end of the market is a tailwind. However, lower interest rates have been negatively impacting the company’s interest income on funds held for clients.

Quarter in Detail

The company’s non-GAAP gross profit came in at $136.7 million, up 5.3% year on year. Nonetheless, non-GAAP gross margin contracted 220 basis points (bps) year over year to 73.5%.

Adjusted EBITDA edged down 1.9% from the year-ago quarter to $66.9 million. Moreover, adjusted EBITDA margin of 36% contracted 380 bps.

Non-GAAP operating income declined to $57 million from the $58.7 million reported in the year-ago quarter. Also, non-GAAP operating margin expanded 360 bps to 30.6%.

Paylocity exited the reported quarter with cash, cash equivalents and corporate investments of $182 million compared with the $285 million witnessed in the prior quarter. Additionally, as of Mar 31, 2021, the company had a long-term debt of $100 million.

During the first nine months of fiscal 2021, the company generated $85.8 million of operating cash flow.

Guidance

Buoyed by the better-than-expected fiscal third-quarter performance, Paylocity raised its fiscal 2021 outlook. Management now expects revenues between $627.7 million and $631.7 million, up from the $623.5-$628.5 million predicted earlier. Adjusted EBITDA is now projected in the band of $164.3-$167.3 million, up from the previous expectations of $152-$156 million.

For fourth-quarter fiscal 2021, Paylocity expects revenues of $159.5-$163.5 million, indicating 22-25% growth from the year-ago period. Adjusted EBITDA is projected in the band of $31.5-$34.5 million.

Zacks Rank and Key Picks

Paylocity currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Lam Research Corporation (LRCX - Free Report) , ASML Holding N.V. (ASML - Free Report) and NVIDIA (NVDA - Free Report) . While Lam Research and ASML Holding sport a Zacks Rank #1 (Strong Buy), NVIDIA carries a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Lam Research, ASML Holding, and NVIDIA is currently pegged at 32.8%, 29.8% and 15.1%, respectively.

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