It has been about a month since the last earnings report for Paylocity (PCTY - Free Report) . Shares have added about 1.4% in that time frame, outperforming 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 Q4 Earnings Lag, Revenues Top Estimates
Paylocity reported mixed fiscal first-quarter 2019 results, wherein the top line beat estimates but the bottom line missed the same.
The company reported non-GAAP earnings of 20 cents per share, which missed the Zacks Consensus Estimate by a penny. The figure, however, increased 33.3% from the year-ago quarter.
Paylocity’s revenues of $100.5 million increased 26% year over year and topped the Zacks Consensus Estimate of $98 million.
The top line was driven by a 25.8% rise in recurring revenues (99% of total revenues), which totaled $99.3 million. New client wins and a rise in average revenue per client, given the momentum of the company’s newest product offerings, drove results.
For the quarter, broker referrals represented more than 25% of new business. The company’s investment in the channel is aiding the number of brokers and helping to create stronger relationships with current partners.
However, a 52% decline in Implementation services and other revenues was a dampener.
The company’s non-GAAP gross profit came in at $70.4 million, up 37.7% year over year. Non-GAAP gross margin expanded 730 basis points year over year to 70%.
Adjusted EBITDA increased 59.4% from the year-ago quarter to $23.3 million.
Non-GAAP operating income was $15.3 million compared with $8.2 million a year ago.
Balance Sheet and Cash Flow
Paylocity exited the quarter with cash and cash equivalents of $63.7 million compared with $137.2 million in the previous quarter.
During the quarter, the company generated operating cash flow of $7.3 million compared with $8.2 million in the prior-year quarter.
The company announced the addition of TPA solutions, which will be available in the first quarter of 2019. The addition of Health Savings Account and Flexible Spending Account is expected to provide “users with a single unified access point for payroll, HR and benefits administration” adds management.
Moreover, the company introduced new functionalities in HCM solutions. The company also launched a free additional self-service information resource called Paylocity Education and Knowledge or PEAK. It contains supplemental training materials and trending topics for payroll and HCM professionals, management stated.
The company provided guidance for the second quarter and fiscal 2019. For the fiscal second quarter, Paylocity expects revenues in the range of $104-$105 million. Adjusted EBITDA is projected in the band of $23.5-$24.5 million.
For fiscal 2019, it now anticipates revenues in the range of $453-$455 million, up from $451-$453 million projected earlier.
Adjusted EBITDA guidance was maintained in the range of $126.5 million to $128.5 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -43.59% due to these changes.
Currently, Paylocity has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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 this revision indicates a downward shift. Notably, Paylocity has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.