Paylocity Holding Corp 10-Q for FY2021 Q3

About this 10-Q

Headline figures

Paylocity Holding Corp (PCTY)

10-Q 2021-05-07 For: 2021-03-31

Added on April 11, 2026

Paylocity Holding Corp filed this 10-Q on May 7, 2021, covering the quarter ended March 31, 2021 (FY2021 Q3).

Expected dividend yield

Expected volatility

Expected term (years)

Risk‑free interest rate

Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $186.05M; up 8.4% from $171.65M a year earlier
Net income: $36.83M; down 8.2% from net income of $40.13M a year earlier
Diluted EPS: $0.65; down 9.7% from $0.72 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,		March 31,
	2020		2021
Assets
Current assets:
Cash and cash equivalents	$	250,851	$	175,453
Corporate investments		34,556		6,823
Accounts receivable, net		4,923		9,211
Deferred contract costs		32,332		40,721
Prepaid expenses and other		13,188		14,198
Total current assets before funds held for clients		335,850		246,406
Funds held for clients		1,327,304		2,051,914
Total current assets		1,663,154		2,298,320
Capitalized internal-use software, net		36,501		42,704
Property and equipment, net		66,737		62,187
Operating lease right-of-use assets		48,658		45,112
Intangible assets, net		13,360		14,055
Goodwill		21,655		33,184
Long-term deferred contract costs		125,711		156,943
Long‑term prepaid expenses and other		4,917		3,773
Deferred income tax assets		4,955		7,274
Total assets	$	1,985,648	$	2,663,552

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,755	$	3,319
Accrued expenses		79,881		83,139
Total current liabilities before client fund obligations		81,636		86,458
Client fund obligations		1,327,304		2,051,914
Total current liabilities		1,408,940		2,138,372
Long-term debt		100,000		—
Long-term operating lease liabilities		73,299		68,661
Other long-term liabilities		1,747		1,910
Deferred income tax liabilities		8,754		—
Total liabilities	$	1,592,740	$	2,208,943
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2020 and March 31, 2021	$	—	$	—
Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2020 and March 31, 2021; 53,792 shares issued and outstanding at June 30, 2020 and 54,451 shares issued and outstanding at March 31, 2021		54		54
Additional paid-in capital		227,907		231,208
Retained earnings		164,272		223,208
Accumulated other comprehensive income		675		139
Total stockholders' equity	$	392,908	$	454,609
Total liabilities and stockholders’ equity	$	1,985,648	$	2,663,552


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2020		2021		2020		2021
Revenues:
Recurring and other revenue	$	167,095	$	184,927	$	416,948	$	465,195
Interest income on funds held for clients		4,551		1,126		13,792		2,981
Total revenues		171,646		186,053		430,740		468,176
Cost of revenues		48,081		57,326		136,135		160,248
Gross profit		123,565		128,727		294,605		307,928
Operating expenses:
Sales and marketing		37,801		40,055		112,051		115,504
Research and development		15,612		18,458		45,416		56,443
General and administrative		22,411		31,071		77,283		87,038
Total operating expenses		75,824		89,584		234,750		258,985
Operating income		47,741		39,143		59,855		48,943
Other income (expense)		435		(207)		1,194		(843)
Income before income taxes		48,176		38,936		61,049		48,100
Income tax expense (benefit)		8,044		2,102		1,544		(10,836)
Net income	$	40,132	$	36,834	$	59,505	$	58,936
Other comprehensive loss, net of tax		(182)		(126)		(214)		(536)
Comprehensive income	$	39,950	$	36,708	$	59,291	$	58,400

Net income per share:
Basic	$	0.75	$	0.68	$	1.11	$	1.09
Diluted	$	0.72	$	0.65	$	1.07	$	1.05

Weighted-average shares used in computing net income per share:
Basic		53,629		54,415		53,486		54,244
Diluted		55,953		56,414		55,760		56,338


	Three Months Ended March 31, 2020
								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Retained		Comprehensive		Stockholders’
	Shares	Amount		Capital		Earnings		Income (Loss)		Equity
Balances at December 31, 2019	53,573	$	54	$	212,240	$	119,190	$	80	$	331,564
Stock-based compensation	—		—		10,051		—		—		10,051
Stock options exercised	130		—		1,318		—		—		1,318
Issuance of common stock upon vesting of restricted stock units	20		—		—		—		—		—
Net settlement for taxes and/or exercise price related to equity awards	(63)		—		(8,508)		—		—		(8,508)
Unrealized losses on securities, net of tax	—		—		—		—		(182)		(182)
Net income	—		—		—		40,132		—		40,132
Balances at March 31, 2020	53,660	$	54	$	215,101	$	159,322	$	(102)	$	374,375


	Three Months Ended March 31, 2021
								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Retained		Comprehensive		Stockholders’
	Shares	Amount		Capital		Earnings		Income		Equity
Balances at December 31, 2020	54,370	$	54	$	221,525	$	186,374	$	265	$	408,218
Stock-based compensation	—		—		16,663		—		—		16,663
Stock options exercised	104		—		545		—		—		545
Issuance of common stock upon vesting of restricted stock units	14		—		—		—		—		—
Net settlement for taxes and/or exercise price related to equity awards	(37)		—		(7,525)		—		—		(7,525)
Unrealized losses on securities, net of tax	—		—		—		—		(126)		(126)
Net income	—		—		—		36,834		—		36,834
Balances at March 31, 2021	54,451	$	54	$	231,208	$	223,208	$	139	$	454,609


	Nine Months Ended March 31, 2020
								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Retained		Comprehensive		Stockholders’
	Shares	Amount		Capital		Earnings		Income (Loss)		Equity
Balances at June 30, 2019	53,075	$	53	$	207,982	$	99,817	$	112	$	307,964
Stock-based compensation	—		—		36,191		—		—		36,191
Stock options exercised	153		—		1,707		—		—		1,707
Issuance of common stock upon vesting of restricted stock units	708		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	(321)		—		(34,739)		—		—		(34,739)
Unrealized losses on securities, net of tax	—		—		—		—		(214)		(214)
Net income	—		—		—		59,505		—		59,505
Balances at March 31, 2020	53,660	$	54	$	215,101	$	159,322	$	(102)	$	374,375


	Nine Months Ended March 31, 2021
								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	—		—		48,896		—		—		48,896
Stock options exercised	338		—		2,477		—		—		2,477
Issuance of common stock upon vesting of restricted stock units	622		—		—		—		—		—
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	(361)		—		(54,172)		—		—		(54,172)
Unrealized losses on securities, net of tax	—		—		—		—		(536)		(536)
Net income	—		—		—		58,936		—		58,936
Balances at March 31, 2021	54,451	$	54	$	231,208	$	223,208	$	139	$	454,609


	Three Months Ended March 31, 2020
	Beginning		Capitalized				Ending
	Balance		Costs		Amortization		Balance
Costs to obtain a new contract	$	92,848	$	15,141	$	(5,738)	$	102,251
Costs to fulfill a contract		32,685		7,483		(1,491)		38,677
Total	$	125,533	$	22,624	$	(7,229)	$	140,928


Balance at June 30, 2020		617
Charged to expense		213
Write-offs		(66)
Balance at March 31, 2021	$	764


Balance at June 30, 2020	$	21,655
Additions attributable to current year acquisition		11,529
Balance at March 31, 2021	$	33,184



	June 30,		March 31,		Useful
	2020		2021		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)		(13,314)
Intangible assets, net	$	13,360	$	14,055


Remainder of fiscal 2021	$	1,028
Fiscal 2022		4,093
Fiscal 2023		3,919
Fiscal 2024		2,914
Fiscal 2025		1,860
Thereafter		241
Total	$	14,055


	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				Nine Months Ended
	March 31,				March 31,
	2020		2021		2020		2021
Balance at beginning of the period	$	6,853	$	7,065	$	6,289	$	8,434
Deferral of revenue		6,099		5,821		12,342		11,811
Revenue recognized		(3,992)		(4,097)		(9,671)		(11,456)
Balance at end of the period	$	8,960	$	8,789	$	8,960	$	8,789


	June 30,		March 31,
	2020		2021
Office equipment	$	4,619	$	5,208
Computer equipment		42,936		47,078
Furniture and fixtures		12,723		13,104
Software		6,609		6,627
Leasehold improvements		46,192		46,518
Time clocks rented by clients		4,967		5,124
Total		118,046		123,659
Accumulated depreciation		(51,309)		(61,472)
Property and equipment, net	$	66,737	$	62,187


		Number of Shares
Available for grant at July 1, 2020		9,519
January 1, 2021 Evergreen provision increase		1,000
RSUs granted		(483)
MSUs granted		(58)
Shares withheld in settlement of taxes and/or exercise price		361
Forfeitures		71
Shares removed		(116)
Available for grant at March 31, 2021		10,294


	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	(338)	$	7.35
Balance at March 31, 2021	917	$	14.30	2.38	$	151,959
Options vested and exercisable at March 31, 2021	917	$	14.30	2.38	$	151,959


	March 31, 2021
			Gross		Gross
	Amortized		unrealized		unrealized
Type of Issue	cost		gains		losses		Fair value
Cash and cash equivalents	$	175,453	$	—	$	—	$	175,453
Funds held for clients' cash and cash equivalents		2,019,089		—		—		2,019,089
Available-for-sale securities:
Corporate bonds		19,341		116		—		19,457
Asset-backed securities		20,122		69		—		20,191
Total available-for-sale securities (2)		39,463		185		—		39,648
Total investments	$	2,234,005	$	185	$	—	$	2,234,190


	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 March 31,				Nine Months Ended March 31,
	2020		2021		2020		2021
Cost of revenues	$	1,362	$	1,972	$	4,057	$	5,773
Sales and marketing		3,466		3,938		10,813		11,783
Research and development		1,899		2,602		4,945		7,570
General and administrative		2,789		7,499		14,533		21,821
Total stock-based compensation expense	$	9,516	$	16,011	$	34,348	$	46,947


	Units	Weighted average grant date fair value
RSU balance at July 1, 2020	1,626	$	73.96
RSUs granted	483	$	134.17
RSUs vested	(622)	$	64.97
RSUs forfeited	(71)	$	86.65
RSU balance at March 31, 2021	1,416	$	99.54
RSUs expected to vest at March 31, 2021	1,325	$	98.77


	Three Months Ended
	March 31,						Change
	2020			2021			$		%
Recurring and other revenue	$	167,095		$	184,927		$	17,832	11	%
Percentage of total revenues		97	%		99	%
Interest income on funds held for clients	$	4,551		$	1,126		$	(3,425)	(75)	%
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
Operating lease obligations		92,446		10,532		19,285		18,719		43,910
Unconditional purchase obligations		24,332		15,375		7,440		1,517		—
	$	116,778	$	25,907	$	26,725	$	20,236	$	43,910


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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101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document.

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101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document.

104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


		PAYLOCITY HOLDING CORPORATION

Date:	May 7, 2021	By:	/s/ Steven R. Beauchamp
		Name:	Steven R. Beauchamp
		Title:	Chief Executive Officer (Principal Executive Officer) and Director


Date:	May 7, 2021	By:	/s/ Toby J. Williams
		Name:	Toby J. Williams
		Title:	Chief Financial Officer (Principal Financial Officer)