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Paylocity (PCTY) Beats on Q2 Earnings, Raises 2020 Guidance

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Paylocity Holding (PCTY - Free Report) delivered second-quarter fiscal 2020 non-GAAP earnings of 36 cents per share, topping the Zacks Consensus Estimate of 29 cents. The bottom line was also way higher than the year-ago quarter’s 23 cents.

Additionally, Paylocity’s revenues of $132 million improved 23% year over year and also trumped the Zacks Consensus Estimate of $130 million.

The company is benefiting from growing adoption of its solutions among clients with less than 50 employees. Moreover, healthy momentum in the company’s core and upper end of the market is a tailwind.

The better-than-expected earnings, coupled with a bullish guidance by management for the full year, is expected to buoy investor confidence in the stock.

Paylocity Holding Corporation Price, Consensus and EPS Surprise

Paylocity Holding Corporation Price, Consensus and EPS Surprise

Paylocity Holding Corporation price-consensus-eps-surprise-chart | Paylocity Holding Corporation Quote

Quarter in Detail

Paylocity’s top line was driven by a 23% rise in recurring revenues (97% of total revenues), which totaled $132.4 million. However, interest income on funds held for clients declined 1.5% to $4.39 million.

Channel referrals, mainly from brokers and financial advisors, represented more than 25% of new business in the reported quarter.

Partnerships in the technology space with computer software provider Compete and the microsavings tech company EvoShare were noteworthy in the period.

The company’s non-GAAP gross profit came in at $93.1 million, up 24.4% year over year. Non-GAAP gross margin also expanded 50 basis points (bps) year over year to 70.3%, aided by consistent revenue growth and a steady scale in business model.

Adjusted EBITDA increased 16.1% from the year-ago quarter to $30.3 million. Also, adjusted EBITDA margin of 22.9% contracted 140 basis points.

Non-GAAP operating income of $21.1 million increased 19.2% year over year.

Paylocity exited the reported quarter with cash and cash equivalents of $132.5 million compared with $100.5 million in the earlier reported quarter.

Cash flow from operations for the fiscal second quarter was $27.8 million compared with $8.3 million in the year-ago period.


For the fiscal third quarter, Paylocity expects revenues in the range of $168.5-$169.5 million, indicating 21% growth from the year-ago reported figure. Adjusted EBITDA is projected in the band of $63.8-$64.8 million.

For fiscal 2020, the company anticipates revenues in the bracket of $572.5-$573.5 million, up from $567-$569 million predicted earlier. Adjusted EBITDA is maintained within $163.5-$165.5 million.

Zacks Rank and Stocks to Consider

Paylocity currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Perficient (PRFT), Applied Materials (AMAT) and ManTech International Corporation (MANT), each flaunting 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 Perficient, Applied Materials and ManTech is currently pegged at 11.75%, 8.2% and 8%, respectively.

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