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Paylocity (NASDAQ:PCTY) Q1 Sales Beat Estimates, Provides Encouraging Quarterly Guidance


Adam Hejl /
2021/11/04 4:34 pm EDT
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Payroll and human resources software provider, Paylocity (NASDAQ:PCTY) beat analyst expectations in Q1 FY2022 quarter, with revenue up 33.8% year on year to $181.6 million. Guidance for next quarter's revenue was $187.5 million at the midpoint, which is 1.45% above the analyst consensus. Paylocity made a GAAP profit of $30.9 million, improving on its profit of $12.4 million, in the same quarter last year.

Is now the time to buy Paylocity? Access our full analysis of the earnings results here, it's free.

Paylocity (PCTY) Q1 FY2022 Highlights:

  • Revenue: $181.6 million vs analyst estimates of $173.9 million (4.43% beat)
  • EPS (non-GAAP): $0.59 vs analyst estimates of $0.38 (53.8% beat)
  • Revenue guidance for Q2 2022 is $187.5 million at the midpoint, above analyst estimates of $184.8 million
  • The company lifted revenue guidance for the full year, from $792.5 million to $817.5 million at the midpoint, a 3.15% increase
  • Free cash flow was negative $16.5 million, down from positive free cash flow of $30.8 million in previous quarter
  • Gross Margin (GAAP): 65.1%, up from 63.6% same quarter last year

“We are off to a very strong start in fiscal 2022 with recurring and total revenue up 34% versus Q1 of last fiscal. Our value proposition of providing the most modern platform in the industry is resonating with clients and prospects of all sizes. During the quarter we also completed the acquisition of Blue Marble, a leading global payroll provider, to further support companies in managing and paying their employees outside the U.S. In October we also held our virtual Elevate Client Conference where we hosted a record number of attendees and highlighted numerous enhancements across our product suite,” said Steve Beauchamp, Chief Executive Officer of Paylocity.

Founded by payroll software veteran Steve Sarowitz in 1997, Paylocity (NASDAQ:PCTY) is a provider of payroll and human resources software for small and medium-sized enterprises.

With employees distributed across multiple geographies, payroll compliance is getting more complicated, and as the digitization of HR functions trickles down from the enterprise market to small and medium businesses, the demand for modern HR software platforms is expected to grow.

Sales Growth

As you can see below, Paylocity's revenue growth has been strong over the last year, growing from quarterly revenue of $135.7 million, to $181.6 million.

Paylocity Total Revenue

This was a standout quarter for Paylocity, with the quarterly revenue up an absolutely stunning 33.8% year on year, which is above average for the company. On top of that, revenue increased $14.2 million quarter on quarter, a strong improvement on the $18.6 million decrease in Q4 2021, and a sign of acceleration of growth, which is very nice to see indeed.

Analysts covering the company are expecting the revenues to grow 22.9% over the next twelve months, although estimates are likely to change post earnings.

There are others doing even better than Paylocity. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Paylocity's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 65.1% in Q1.

Paylocity Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.65 left to spend on developing new products, marketing & sales and the general administrative overhead. This would be considered a low gross margin for a SaaS company and we would like to see it start improving.

Key Takeaways from Paylocity's Q1 Results

Sporting a market capitalization of $16.4 billion, more than $69.5 million in cash and with positive free cash flow over the last twelve months, we're confident that Paylocity has the resources it needs to pursue a high growth business strategy.

It was positive to see Paylocity's solid revenue guidance for the full year. And we were also excited to see the really strong revenue growth. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is up 4.55% on the results and currently trades at $304 per share.

Should you invest in Paylocity right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.