Paylocity Holding Corporation (NASDAQ:PCTY) reported better-than-expected results for the fourth quarter of fiscal 2016. The company incurred adjusted loss (excluding all one-time income and expenses but including stock-based compensation) of 10 cents per share, narrower than the Zacks Consensus Estimate of loss of 12 cents. However, reported loss was wider from the year-ago quarter figure of 8 cents.
On GAAP basis, Paylocity posted a loss of 11 cents per share, which was wider than the year-ago quarter tally of 9 cents.
On the other hand, the company’s revenues came in at $58.9 million, up 49.6% year over year, and beat the Zacks Consensus Estimate of $57 million. The year-over-over increase was driven by solid sales and operational implementation.
The top line was also backed by a 51% surge in recurring revenues and a 13% increase in implementation and other revenues.
The company’s gross margin expanded 90 basis points (bps) year over year to 55.6%. A higher revenue base, along with ACA enhanced product, drove margin expansion.
Paylocity reported operating loss of $5 million, which was wider than the loss of $4.3 million in the year-ago quarter mainly due to a 46.4% rise in operating expenses. Consequently, net loss amounted to $5.4 million, compared with $4.4 million in the year-ago period.
Paylocity exited the quarter with cash and cash equivalents of $86.5 million, compared with $81.3 million in the previous quarter. Receivables were $1.7 million, compared with $1.1 million at the end of third-quarter fiscal 2016.
Paylocity has no long-term debt. The company generated $33 million of cash flow from operational activities during fiscal 2016.
Guidance
The company provided outlook for the first quarter and fiscal 2017. For the first quarter of fiscal 2017, Paylocity expects revenues in the range of $63 million to $64 million, with a mid-point of $63.5 million. The Zacks Consensus Estimate is pegged at $60.8 million. Adjusted EBITDA is projected to be in the $4.5–$5.5 million band. Non-GAAP earnings per share are expected to be within 1–3 cents.
For fiscal 2017, Paylocity anticipates revenues in the range of $296 million to $298 million, with a mid-point of $297 million. The Zacks Consensus Estimate stands at $289.24 million. Adjusted EBITDA is projected to be in the $365–$38 million band. Non-GAAP earnings per share are expected within 35–38 cents.
Our Take
Paylocity reported better-than-expected results for the fourth quarter of fiscal 2016, wherein loss was narrower than the Zacks Consensus Estimate and revenues topped the same. Moreover, the company has provided an encouraging outlook for the first quarter and fiscal 2017.
Going ahead, we remain positive about Paylocity’s regular investments in SaaS technology. Notably, over the past few quarters, clients moving from traditional payroll service providers to the company’s SaaS-based services generated a significant portion of Paylocity’s revenues. Therefore, we believe that regular investments in technological upgrades, along with product innovations, will continue to boost the company’s top line over the long run. Such initiatives are also likely to have a positive impact on fiscal third-quarter results.
Furthermore, higher adoption of Paylocity’s ACA dashboard application, which specializes in tracking employee count, employee status and health care plan affordability, will act as a tailwind.
However, competition in the payroll processing sector from new entrants as well as existing players such as Automatic Data Processing, Inc. (NASDAQ:ADP) , Oracle Corporation (NYSE:ORCL) and SAP SE (TO:SAP) remains a major headwind.
Currently, Paylocity has a Zacks Rank #3 (Hold).
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