Paylocity Holding(US:PCTY)2024-08-02 14:00Revenue Growth - Total revenues increased from $852.7 million in fiscal 2022 to $1,174.6 million in fiscal 2023, representing a 38% year-over-year increase, and further increased to $1,402.5 million in fiscal 2024, a 19% year-over-year increase [189]. - Total revenues for the year ended June 30, 2024 increased by $227.9 million, or 19%, to $1,402.5 million from $1,174.6 million for the year ended June 30, 2023 [214]. - Recurring and other revenue increased by $183.6 million, or 17%, to $1,281.7 million for the year ended June 30, 2024, driven by strong sales performance and a client retention rate exceeding 92% [217]. - The company generated approximately 99%, 93%, and 91% of total revenues from recurring and other revenue in the years ended June 30, 2022, 2023, and 2024, respectively [202]. Client Growth and Retention - The number of clients using HCM and payroll software solutions grew from approximately 33,300 as of June 30, 2022, to approximately 39,050 as of June 30, 2024, reflecting a compound annual growth rate of approximately 8% [190]. - The annual revenue retention rate has remained above 92% for the past three fiscal years, indicating strong client satisfaction and retention [193]. - The number of clients using HCM and payroll software solutions increased by 8% to approximately 39,050 as of June 30, 2024 [217]. Profitability and Expenses - Adjusted Gross Profit for fiscal 2024 was $1,034.8 million, up from $864.9 million in fiscal 2023, and $605.5 million in fiscal 2022 [198]. - Adjusted EBITDA increased to $505.6 million in fiscal 2024, compared to $375.2 million in fiscal 2023 and $237.8 million in fiscal 2022 [199]. - Gross profit margin remained stable at 69% for both years ended June 30, 2023 and 2024 [219]. - Sales and marketing expenses increased by $38.2 million, or 13%, to $335.0 million for the year ended June 30, 2024, mainly due to higher employee-related costs and marketing expenses [221]. - Research and development expenses rose by $14.3 million, or 9%, to $178.3 million for the year ended June 30, 2024, driven by additional personnel costs [222]. - General and administrative expenses for the year ended June 30, 2024 decreased by $4.4 million, or 2%, to $187.4 million from $191.8 million for the year ended June 30, 2023 [223]. Cash Flow and Capital Management - Net cash provided by operating activities increased from $282.7 million in 2023 to $384.7 million in 2024 [241]. - Net cash used in investing activities decreased from $220.2 million in 2023 to $101.9 million in 2024 [242]. - The company expects to fund operations, capital expenditures, and acquisitions primarily with cash flows from operations and available cash [237]. - The company believes its current cash and cash equivalents, future cash flow from operations, and access to its credit facility will be sufficient for at least the next 12 months [239]. - Cash and cash equivalents as of June 30, 2024 totaled $401.8 million, with an additional $550.0 million revolving credit facility available [234]. Interest Income and Market Risks - Interest income on funds held for clients has increased due to rising interest rates and higher average daily balances, contributing to revenue growth [189]. - Interest income on funds held for clients rose by $44.3 million, or 58%, to $120.8 million for the year ended June 30, 2024, attributed to higher interest rates and increased client balances [218]. - An immediate 100-basis point increase in interest rates would decrease the market value of available-for-sale securities by $10.4 million as of June 30, 2024, while a decrease of the same magnitude would increase the market value by the same amount [250]. - The company has a revolving credit facility of $550.0 million, which may be increased to $825.0 million, with no amounts drawn as of June 30, 2024, exposing the company to market risk from changes in underlying index rates [251]. Future Outlook and Investments - The company plans to continue investing in research and development to expand its product offerings and enhance client experiences [183]. - The company plans to grow its research and development efforts to broaden product offerings and extend technological leadership [209]. - The cost of revenues is expected to rise in absolute dollars as the client base expands, but the company anticipates achieving cost efficiencies over the long term [204]. - General and administrative expenses are expected to continue increasing in absolute dollars as the company grows, but cost efficiencies are anticipated as the business scales [210]. Tax and Other Financial Information - The effective tax rate for the year ended June 30, 2024 was 25.4%, up from 11.2% for the year ended June 30, 2023, primarily due to an increase in state taxes [225]. - Other income for the year ended June 30, 2024 increased by $13.3 million compared to the year ended June 30, 2023, primarily due to higher interest income from cash and cash equivalents [224]. - The company has $64.1 million in operating lease obligations, with $9.8 million due in the next twelve months, and $72.7 million in purchase obligations, of which $43.5 million is due in the next twelve months [245]. - Inflation has not materially affected the company's business, but significant inflationary pressures could harm its financial condition and results of operations if costs cannot be offset through price increases [252].