Paylocity Holding Corp 10-Q for FY2021 Q2

About this 10-Q

Headline figures

Paylocity Holding Corp (PCTY)

10-Q 2021-02-05 For: 2020-12-31

Added on April 11, 2026

Paylocity Holding Corp filed this 10-Q on February 5, 2021, covering the quarter ended December 31, 2020 (FY2021 Q2).

Expected dividend yield

Expected volatility

Expected term (years)

Risk‑free interest rate

Quarter ended December 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $146.33M; up 10.5% from $132.37M a year earlier
Net income: $9.64M; up 76.4% from net income of $5.47M a year earlier
Diluted EPS: $0.17; up 70.0% from $0.10 a year earlier

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Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	PCTY	The NASDAQ Global Select Market LLC


Large Accelerated Filer	☒	Accelerated Filer	☐

Non-Accelerated Filer	☐	Smaller Reporting Company	☐

		Emerging Growth Company	☐


		Page

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Unaudited Consolidated Balance Sheets		2

Unaudited Consolidated Statements of Operations and Comprehensive Income		3

Unaudited Consolidated Statement of Changes in Stockholders’ Equity		4

Unaudited Consolidated Statements of Cash Flows		5

Notes to the Unaudited Consolidated Financial Statements		6

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		19

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		32

ITEM 4. CONTROLS AND PROCEDURES		33

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS		34

ITEM 1A. RISK FACTORS		34

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		34

ITEM 3. DEFAULTS UPON SENIOR SECURITIES		34

ITEM 4. MINE SAFETY DISCLOSURES		34

ITEM 5. OTHER INFORMATION		34

ITEM 6. EXHIBITS		35

SIGNATURES		37


	June 30,		December 31,
	2020		2020
Assets
Current assets:
Cash and cash equivalents	$	250,851	$	218,696
Corporate investments		34,556		13,637
Accounts receivable, net		4,923		6,118
Deferred contract costs		32,332		37,447
Prepaid expenses and other		13,188		15,633
Total current assets before funds held for clients		335,850		291,531
Funds held for clients		1,327,304		2,204,286
Total current assets		1,663,154		2,495,817
Capitalized internal-use software, net		36,501		40,623
Property and equipment, net		66,737		64,066
Operating lease right-of-use assets		48,658		45,429
Intangible assets, net		13,360		15,083
Goodwill		21,655		33,184
Long-term deferred contract costs		125,711		144,027
Long‑term prepaid expenses and other		4,917		3,218
Deferred income tax assets		4,955		9,516
Total assets	$	1,985,648	$	2,850,963

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,755	$	2,771
Accrued expenses		79,881		64,204
Total current liabilities before client fund obligations		81,636		66,975
Client fund obligations		1,327,304		2,204,286
Total current liabilities		1,408,940		2,271,261
Long-term debt		100,000		100,000
Long-term operating lease liabilities		73,299		69,672
Other long-term liabilities		1,747		1,812
Deferred income tax liabilities		8,754		—
Total liabilities	$	1,592,740	$	2,442,745
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2020 and December 31, 2020	$	—	$	—
Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2020 and December 31, 2020; 53,792 shares issued and outstanding at June 30, 2020 and 54,370 shares issued and outstanding at December 31, 2020		54		54
Additional paid-in capital		227,907		221,525
Retained earnings		164,272		186,374
Accumulated other comprehensive income		675		265
Total stockholders' equity	$	392,908	$	408,218
Total liabilities and stockholders’ equity	$	1,985,648	$	2,850,963


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2019		2020		2019		2020
Revenues:
Recurring and other revenue	$	127,980	$	145,393	$	249,853	$	280,268
Interest income on funds held for clients		4,394		936		9,241		1,855
Total revenues		132,374		146,329		259,094		282,123
Cost of revenues		45,424		53,542		88,054		102,922
Gross profit		86,950		92,787		171,040		179,201
Operating expenses:
Sales and marketing		37,293		37,775		74,250		75,449
Research and development		15,410		19,338		29,804		37,985
General and administrative		28,133		29,323		54,872		55,967
Total operating expenses		80,836		86,436		158,926		169,401
Operating income		6,114		6,351		12,114		9,800
Other income (expense)		285		(379)		759		(636)
Income before income taxes		6,399		5,972		12,873		9,164
Income tax expense (benefit)		932		(3,670)		(6,500)		(12,938)
Net income	$	5,467	$	9,642	$	19,373	$	22,102
Other comprehensive loss, net of tax		(36)		(187)		(32)		(410)
Comprehensive income	$	5,431	$	9,455	$	19,341	$	21,692

Net income per share:
Basic	$	0.10	$	0.18	$	0.36	$	0.41
Diluted	$	0.10	$	0.17	$	0.35	$	0.39

Weighted-average shares used in computing net income per share:
Basic		53,542		54,305		53,415		54,160
Diluted		55,826		56,343		55,692		56,122


	Three Months Ended December 31, 2019
								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Retained		Comprehensive		Stockholders’
	Shares	Amount		Capital		Earnings		Income		Equity
Balances at September 30, 2019	53,511	$	54	$	195,566	$	113,723	$	116	$	309,459
Stock-based compensation	—		—		13,422		—		—		13,422
Stock options exercised	15		—		269		—		—		269
Issuance of common stock upon vesting of restricted stock units	11		—		—		—		—		—
Issuance of common stock under employee stock purchase plan	45		—		3,961		—		—		3,961
Net settlement for taxes and/or exercise price related to equity awards	(9)		—		(978)		—		—		(978)
Unrealized losses on securities, net of tax	—		—		—		—		(36)		(36)
Net income	—		—		—		5,467		—		5,467
Balances at December 31, 2019	53,573	$	54	$	212,240	$	119,190	$	80	$	331,564


	Three Months Ended December 31, 2020
								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Retained		Comprehensive		Stockholders’
	Shares	Amount		Capital		Earnings		Income		Equity
Balances at September 30, 2020	54,223	$	54	$	209,582	$	176,732	$	452	$	386,820
Stock-based compensation	—		—		17,187		—		—		17,187
Stock options exercised	146		—		1,403		—		—		1,403
Issuance of common stock upon vesting of restricted stock units	9		—		—		—		—		—
Issuance of common stock under employee stock purchase plan	60		—		6,100		—		—		6,100
Net settlement for taxes and/or exercise price related to equity awards	(68)		—		(12,747)		—		—		(12,747)
Unrealized losses on securities, net of tax	—		—		—		—		(188)		(188)
Currency translation adjustments	—		—		—		—		1		1
Net income	—		—		—		9,642		—		9,642
Balances at December 31, 2020	54,370	$	54	$	221,525	$	186,374	$	265	$	408,218


	Six Months Ended December 31, 2019
								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Retained		Comprehensive		Stockholders’
	Shares	Amount		Capital		Earnings		Income		Equity
Balances at June 30, 2019	53,075	$	53	$	207,982	$	99,817	$	112	$	307,964
Stock-based compensation	—		—		26,140		—		—		26,140
Stock options exercised	23		—		389		—		—		389
Issuance of common stock upon vesting of restricted stock units	688		1		(1)		—		—		—
Issuance of common stock under employee stock purchase plan	45		—		3,961		—		—		3,961
Net settlement for taxes and/or exercise price related to equity awards	(258)		—		(26,231)		—		—		(26,231)
Unrealized losses on securities, net of tax	—		—		—		—		(32)		(32)
Net income	—		—		—		19,373		—		19,373
Balances at December 31, 2019	53,573	$	54	$	212,240	$	119,190	$	80	$	331,564


	Six Months Ended December 31, 2020
								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Retained		Comprehensive		Stockholders’
	Shares	Amount		Capital		Earnings		Income		Equity
Balances at June 30, 2020	53,792	$	54	$	227,907	$	164,272	$	675	$	392,908
Stock-based compensation	—		—		32,233		—		—		32,233
Stock options exercised	234		—		1,932		—		—		1,932
Issuance of common stock upon vesting of restricted stock units	608		—		—		—		—		—
Issuance of common stock under employee stock purchase plan	60		—		6,100		—		—		6,100
Net settlement for taxes and/or exercise price related to equity awards	(324)		—		(46,647)		—		—		(46,647)
Unrealized losses on securities, net of tax	—		—		—		—		(411)		(411)
Currency translation adjustments	—		—		—		—		1		1
Net income	—		—		—		22,102		—		22,102
Balances at December 31, 2020	54,370	$	54	$	221,525	$	186,374	$	265	$	408,218


	Three Months Ended December 31, 2019
	Beginning		Capitalized				Ending
	Balance		Costs		Amortization		Balance
Costs to obtain a new contract	$	86,688	$	11,401	$	(5,241)	$	92,848
Costs to fulfill a contract		26,398		7,499		(1,212)		32,685
Total	$	113,086	$	18,900	$	(6,453)	$	125,533


Balance at June 30, 2020		617
Charged to expense		98
Write-offs		(54)
Balance at December 31, 2020	$	661


Balance at June 30, 2020	$	21,655
Additions attributable to current year acquisition		11,529
Balance at December 31, 2020	$	33,184



	June 30,		December 31,		Useful
	2020		2020		Life
Client relationships	$	19,200	$	19,200	5 - 9 years
Proprietary technology		2,962		6,129	5 years
Non-solicitation agreements		1,350		1,600	2 - 4 years
Trade name		350		440	5 years
Total		23,862		27,369
Accumulated amortization		(10,502)		(12,286)
Intangible assets, net	$	13,360	$	15,083


Remainder of fiscal 2021	$	2,056
Fiscal 2022		4,093
Fiscal 2023		3,919
Fiscal 2024		2,914
Fiscal 2025		1,860
Thereafter		241
Total	$	15,083


	June 30, 2020
			Gross		Gross
	Amortized		unrealized		unrealized
Type of Issue	cost		gains		losses		Fair value
Cash and cash equivalents	$	250,851	$	—	$	—	$	250,851
Funds held for clients' cash and cash equivalents		1,241,282		—		—		1,241,282
Available-for-sale securities:
Commercial paper		6,643		6		—		6,649
Corporate bonds		44,343		414		—		44,757
Asset-backed securities		49,978		424		—		50,402
U.S. treasury securities		21,302		67		—		21,369
Total available-for-sale securities (1)		122,266		911		—		123,177
Total investments	$	1,614,399	$	911	$	—	$	1,615,310


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2019		2020		2019		2020
Balance at beginning of the period	$	6,580	$	7,670	$	6,289	$	8,434
Deferral of revenue		3,172		2,860		6,243		5,990
Revenue recognized		(2,899)		(3,465)		(5,679)		(7,359)
Balance at end of the period	$	6,853	$	7,065	$	6,853	$	7,065


	June 30,		December 31,
	2020		2020
Office equipment	$	4,619	$	4,859
Computer equipment		42,936		45,942
Furniture and fixtures		12,723		13,138
Software		6,609		6,627
Leasehold improvements		46,192		46,508
Time clocks rented by clients		4,967		4,722
Total		118,046		121,796
Accumulated depreciation		(51,309)		(57,730)
Property and equipment, net	$	66,737	$	64,066


		Number of Shares
Available for grant at July 1, 2020		9,519
RSUs granted		(481)
MSUs granted		(58)
Shares withheld in settlement of taxes and/or exercise price		324
Forfeitures		60
Shares removed		(84)
Available for grant at December 31, 2020		9,280


	Outstanding Options
				Weighted
		Weighted		average
		average		remaining	Aggregate
	Number of	exercise		contractual	intrinsic
	shares	price		term (years)	value
Balance at July 1, 2020	1,255	$	12.43	2.96	$	167,406
Options exercised	(234)	$	8.27
Balance at December 31, 2020	1,021	$	13.38	2.54	$	196,538
Options vested and exercisable at December 31, 2020	1,021	$	13.38	2.54	$	196,538


	December 31, 2020
			Gross		Gross
	Amortized		unrealized		unrealized
Type of Issue	cost		gains		losses		Fair value
Cash and cash equivalents	$	218,696	$	—	$	—	$	218,696
Funds held for clients' cash and cash equivalents		2,154,552		—		—		2,154,552
Available-for-sale securities:
Corporate bonds		33,157		188		—		33,345
Asset-backed securities		29,858		168		—		30,026
Total available-for-sale securities (2)		63,015		356		—		63,371
Total investments	$	2,436,263	$	356	$	—	$	2,436,619


	June 30, 2020
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	250,851	$	250,851	$	—	$	—
Funds held for clients' cash and cash equivalents		1,241,282		1,241,282		—		—
Available-for-sale securities:
Commercial paper		6,649		—		6,649		—
Corporate bonds		44,757		—		44,757		—
Asset-backed securities		50,402		—		50,402		—
U.S. treasury securities		21,369		—		21,369		—
Total available-for-sale securities		123,177		—		123,177		—
Total investments	$	1,615,310	$	1,492,133	$	123,177	$	—


	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2020		2019		2020
Cost of revenues	$	1,446	$	1,969	$	2,695	$	3,801
Sales and marketing		3,379		3,965		7,347		7,845
Research and development		1,768		2,738		3,046		4,968
General and administrative		6,177		7,987		11,744		14,322
Total stock-based compensation expense	$	12,770	$	16,659	$	24,832	$	30,936


	Units	Weighted average grant date fair value
RSU balance at July 1, 2020	1,626	$	73.96
RSUs granted	481	$	133.78
RSUs vested	(608)	$	64.74
RSUs forfeited	(60)	$	83.53
RSU balance at December 31, 2020	1,439	$	99.82
RSUs expected to vest at December 31, 2020	1,367	$	100.27


	Three Months Ended
	December 31,						Change
	2019			2020			$		%
Recurring and other revenue	$	127,980		$	145,393		$	17,413	14	%
Percentage of total revenues		97	%		99	%
Interest income on funds held for clients	$	4,394		$	936		$	(3,458)	(79)	%
Percentage of total revenues		3	%		1	%


	Payment Due By Fiscal Period
			Less than 1						More than
	Total		Year		1-3 Years		3-5 Years		5 Years
Long-term debt obligations*	$	103,949	$	1,039	$	2,079	$	100,831	$	—
Operating lease obligations		94,102		10,532		18,711		18,571		46,288
Unconditional purchase obligations		16,110		9,462		4,912		1,736		—
	$	214,161	$	21,033	$	25,702	$	121,138	$	46,288


Exhibit Nos.		Description

3.1		First Amended and Restated Certificate of Incorporation (filed as Exhibit 3.2 of Paylocity Holding Corporation’s Form S-1 Registration Statement (Registration No. 333-193661)).

3.2		Amended and Restated Bylaws of Paylocity Holding Corporation (filed as Exhibit 3.2 of Paylocity Holding Corporation’s Annual Report on Form 10-K for the year ended June 30, 2017 (File No. 001-36348)).

10.1		Form of Market Stock Units Notice of Grant and Award Agreement under the 2014 Equity Incentive Plan (filed as Exhibit 10.1 of Paylocity Holding Corporation’s Current Report on Form 8-K on August 18, 2020 (File No. 001-36348)).

31.1*		Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-4 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-4 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certification pursuant to 18 U.S.C. 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Chief Executive Officer.

32.2**		Certification pursuant to 18 U.S.C. 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Chief Financial Officer.

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		PAYLOCITY HOLDING CORPORATION

Date:	February 5, 2021	By:	/s/ Steven R. Beauchamp
		Name:	Steven R. Beauchamp
		Title:	Chief Executive Officer (Principal Executive Officer) and Director


Date:	February 5, 2021	By:	/s/ Toby J. Williams
		Name:	Toby J. Williams
		Title:	Chief Financial Officer (Principal Financial Officer)


Date: February 5, 2021		/s/ Steven R. Beauchamp
	Name:	Steven R. Beauchamp
	Title:	Chief Executive Officer (Principal Executive Officer) and Director

Dated: February 5, 2021	/s/ Steven R. Beauchamp
	Steven R. Beauchamp
	Chief Executive Officer (Principal Executive Officer) and Director