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Paylocity (PCTY) Q3 Earnings Beat Estimates, 2019 View Up

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Paylocity Holding (PCTY - Free Report) delivered third-quarter fiscal 2019 non-GAAP earnings of 60 cents per share, topping the Zacks Consensus Estimate by a penny. The bottom line was also way higher than the year-ago quarter’s 15 cents.

Paylocity’s revenues of $140 million improved 25% year over year and also trumped the Zacks Consensus Estimate of $136 million.

The better-than-expected earnings coupled with a bullish guidance by the management for the fourth quarter of fiscal 2019 and the full year are expected to buoy investor confidence in the stock.

Notably, shares of Paylocity have soared 76.4% in the past year, substantially outperforming the industry’s rally of 26.6%.

Quarter in Detail

Paylocity’s top line was driven by a 25% rise in recurring revenues (98% of total revenues), which totaled $136.2 million. Recurring revenues increased on the back of 22.8% growth in recurring fees and a 127.9% jump in interest income on client funds.

However, Implementation services and other revenues of $3.4 million plunged 30% year over year.

The company’s non-GAAP gross profit came in at $105.3 million, up 32.3% year over year. Non-GAAP gross margin expanded 530 basis points (bps) year over year to 75.5%, aided by consistent revenue growth and a steady scale in business model.

Adjusted EBITDA soared 53.3% from the year-ago quarter to $54.8 million.

Non-GAAP operating income was $46.4 million compared with $28.7 million a year ago.

Paylocity Holding Corporation Price, Consensus and EPS Surprise

Paylocity Holding Corporation Price, Consensus and EPS Surprise | Paylocity Holding Corporation Quote

Balance Sheet and Cash Flow

Paylocity exited the quarter with cash and cash equivalents of $90.9 million compared with $137.2 million in the earlier reported quarter.

During the quarter under review, the company generated operating cash flow of $44.9 million compared with $26 million in the prior quarter.

Guidance

The company provided guidance for the fourth quarter and fiscal 2019. For the fiscal fourth quarter, Paylocity expects revenues in the range of $116.7-$117.7 million, indicating 22% growth from the year-ago reported figure. The current Zacks Consensus Estimate is pegged at $116.3 million. Adjusted EBITDA is projected in the band of $27.3-$28.3 million.

For fiscal 2019, the company now anticipates revenues in the bracket of $464-$465 million, up from $459-$460 million predicted in the past. The current Zacks Consensus Estimate for the metric stands at $459.8 million.

Adjusted EBITDA is forecast within $131.5-$132.5 million, up from the previous outlook of $129-$130 million.

Zacks Rank and Stocks to Consider

Paylocity currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader Computer and Technology sector are Cadence Design Systems (CDNS - Free Report) , ACI Worldwide, Inc. (ACIW - Free Report) and Avid Technology, Inc. (AVID - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Cadence, ACI Worldwide and Avid is projected at 12%, 12% and 10%, respectively.

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