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Paylocity (PCTY) Up 5.9% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Paylocity (PCTY). Shares have added about 5.9% 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 Reports Solid Q4 Results

Paylocity delivered fourth-quarter fiscal 2019 non-GAAP earnings of 34 cents per share, topping the Zacks Consensus Estimate of 25 cents. The bottom line was also way higher than the year-ago quarter’s 11 cents.

Additionally, Paylocity’s revenues of $120 million improved 25% year over year and also trumped the Zacks Consensus Estimate of $117 million.

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

Further, the release of Learning Management System, which garnered a positive feedback from clients, is encouraging. Also, the addition of on-demand pay to its portfolio is likely to boost client wins going forward.

Quarter in Detail

Paylocity’s top line was driven by a 26% rise in recurring revenues (97% of total revenues), which totaled $116.7 million. Recurring revenues increased on the back of 23.3% growth in recurring fees and a 92.2% jump in interest income on client funds.

However, Implementation services and other revenues of $3.7 million inched up 1.6% year over year.

The company’s non-GAAP gross profit came in at $85.7 million, up 36.3% year over year. Non-GAAP gross margin also expanded 570 basis points (bps) year over year to 71.2%, aided by consistent revenue growth and a steady scale in business model.

Adjusted EBITDA soared 90.3% from the year-ago quarter to $29.9 million. Also, adjusted EBITDA margin of 24.8% expanded 850 basis points.

Non-GAAP operating income was $21.4 million compared with $8.1 million a year ago.

Paylocity exited the quarter with cash and cash equivalents of $132.5 million compared with $90.9 million in the earlier reported quarter.

Guidance

For the fiscal first quarter, Paylocity expects revenues in the range of $123.5-$124.5 million, indicating 23-24% growth from the year-ago reported figure. Adjusted EBITDA is projected in the band of $28.1-$29.1 million.

For fiscal 2020, the company anticipates revenues in the bracket of $563.5-$565.5 million.

Adjusted EBITDA is forecast within $161.5-$163.5 million.

How Have Estimates Been Moving Since Then?

Estimates review followed a downward path over the past two months. The consensus estimate has shifted 14.34% due to these changes.

VGM Scores

Currently, Paylocity has a nice Growth Score of B, a grade with the same score on the momentum front. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Paylocity has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.



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