Paylocity Holding(US:PCTY)2025-05-02 14:01Revenue Growth - Total revenues increased from $401.3 million for the three months ended March 31, 2024 to $454.5 million for the three months ended March 31, 2025, representing a 13% year-over-year increase [88]. - Recurring and other revenue accounted for 91% and 93% of total revenues for the three months ended March 31, 2024 and 2025, respectively [96]. - Recurring and other revenue for the three months ended March 31, 2025 increased by $54.3 million, or 15%, to $421.1 million from $366.8 million for the same period in 2024 [113]. - Recurring and other revenue for the nine months ended March 31, 2025 increased by $145.0 million, or 15%, to $1,101.9 million from $956.9 million for the same period in 2024 [122]. Profitability Metrics - Adjusted Gross Profit for the three months ended March 31, 2025 was $350.1 million, up from $304.6 million for the same period in 2024, reflecting a 15% increase [92]. - Adjusted EBITDA for the three months ended March 31, 2025 was $197.1 million, compared to $167.9 million for the same period in 2024, representing a 17% increase [93]. - Operating income for the three months ended March 31, 2025 was $127.0 million, representing an increase of $20.7 million, or 19.5%, compared to $106.3 million for the same period in 2024 [109]. - Net income for the three months ended March 31, 2025 was $91.5 million, an increase of $6.2 million, or 7.3%, from $85.3 million for the same period in 2024 [109]. Expenses and Investments - The company plans to continue investing in research and development to broaden its product offerings, with total research and development expenses increasing from $63.0 million in Q1 2024 to $71.8 million in Q1 2025 [105]. - Sales and marketing expenses are expected to increase as the company grows its sales organization and expands marketing activities [102]. - Total operating expenses for the three months ended March 31, 2025 increased by $18.7 million, or 10.4%, to $197.7 million from $179.0 million for the same period in 2024 [109]. - Cost of revenues for the three months ended March 31, 2025 increased by $13.9 million, or 12%, to $129.9 million from $116.0 million for the same period in 2024 [115]. - Research and development expenses increased by $20.7 million, or 15%, to $154.8 million for the nine months ended March 31, 2025, compared to $134.1 million for the same period in 2024 [127]. - Sales and marketing expenses for the nine months ended March 31, 2025 increased by $26.4 million, or 11%, to $273.3 million from $246.9 million for the same period in 2024 [126]. - General and administrative expenses rose by $17.1 million, or 12%, to $159.2 million for the nine months ended March 31, 2025, from $142.1 million in the prior year [128]. Tax and Interest - The effective tax rate increased to 27.7% for the three months ended March 31, 2025, compared to 22.9% for the same period in 2024 [120]. - The effective tax rate increased to 26.3% for the nine months ended March 31, 2025, compared to 24.3% for the same period in 2024 [130]. - Interest income from funds held for clients contributes to revenue, with the company earning interest on payroll funds prior to remittance [98]. - Interest income on funds held for clients for the three months ended March 31, 2025 decreased by $1.0 million, or 3%, to $33.5 million from $34.4 million for the same period in 2024 [114]. Cash Flow and Capital Management - Net cash provided by operating activities was $331.7 million for the nine months ended March 31, 2025, up from $304.7 million in the prior year [143]. - Net cash used in investing activities increased significantly to $328.5 million for the nine months ended March 31, 2025, compared to $76.4 million in the same period in 2024 [145]. - Capital expenditures were $7.6 million for the nine months ended March 31, 2025, down from $11.7 million in the prior year [149]. - The company had $477.8 million in cash and cash equivalents and $3,429.5 million in funds held for clients as of March 31, 2025 [153]. - The company expects to fund operations and capital expenditures primarily with cash flows from operations and available cash [141]. - The company repurchased 472 thousand shares for approximately $93.6 million at an average cost per share of $198.11 during the nine months ended March 31, 2025 [136]. Market Risks and Economic Factors - A decline in interest rates would decrease interest income earned on cash and cash equivalents and funds held for clients [154]. - An immediate 100-basis point increase in interest rates would decrease the market value of available-for-sale securities by $11.1 million as of March 31, 2025 [155]. - Interest rates applicable to the credit facility are variable, exposing the company to market risk from changes in underlying index rates [156]. - The company has not recorded any credit impairment losses on its portfolio to date [154]. - The company does not believe inflation has had a material effect on its business or financial condition [157]. - A hypothetical change of 100 basis points in interest rates would not have a significant impact on the company's results of operations [156]. - The market value changes of available-for-sale securities are only realized if the underlying securities are sold [155]. - The company may not be able to fully offset higher costs through price increases if significant inflationary pressures arise [157]. - Fluctuations in the value of available-for-sale securities due to interest rate changes are recorded in other comprehensive income [155].