Paylocity Holding(US:PCTY)2025-11-05 15:02Revenue Growth - Total revenues increased from $363.0 million for the three months ended September 30, 2024 to $408.2 million for the same period in 2025, representing a 12% year-over-year increase[91]. - Recurring and other revenue accounted for 92% and 93% of total revenues for the three months ended September 30, 2024 and 2025, respectively[99]. - Recurring and other revenue increased by $45.8 million, or 14%, to $378.9 million for the three months ended September 30, 2025, compared to $333.1 million for the same period in 2024[117]. Profitability and Efficiency - Adjusted Gross Profit rose from $268.7 million in Q3 2024 to $306.7 million in Q3 2025, reflecting a significant increase in operational efficiency[95]. - Adjusted EBITDA increased from $129.0 million for the three months ended September 30, 2024 to $146.4 million for the same period in 2025[96]. - Operating income improved from $64.1 million in Q3 2024 to $74.2 million in Q3 2025, demonstrating enhanced profitability[113]. - Gross margin improved from 68% in 2024 to 69% in 2025[119]. Expenses - Sales and marketing expenses grew from $88.4 million in Q3 2024 to $96.4 million in Q3 2025, indicating a continued investment in client acquisition[113]. - Research and development expenses increased from $47.3 million in Q3 2024 to $55.6 million in Q3 2025, highlighting a focus on technological advancement[113]. - General and administrative expenses grew by $5.4 million, or 11%, to $53.6 million for the three months ended September 30, 2025[122]. - Sales and marketing expenses rose by $7.9 million, or 9%, to $96.4 million for the three months ended September 30, 2025[120]. - Research and development expenses increased by $8.3 million, or 18%, to $55.6 million for the three months ended September 30, 2025[121]. Cash Flow and Financial Position - The company had $165.2 million in cash and cash equivalents as of September 30, 2025, and a $550.0 million revolving credit facility[130]. - Net cash provided by operating activities was $91.5 million for the three months ended September 30, 2024, compared to $86.5 million for the same period in 2025, reflecting changes in operating assets and liabilities[139]. - Net cash used in investing activities increased from $13.3 million in 2024 to $17.7 million in 2025, primarily due to a $10.3 million increase in purchases of available-for-sale securities[140][141]. - Net cash used in financing activities decreased from $318.3 million in 2024 to $229.7 million in 2025, with a significant increase in client fund obligations by $692.0 million[142]. - Capital expenditures were $2.3 million in 2024 and $3.8 million in 2025, excluding capitalized internal-use software costs of $15.2 million and $15.5 million, respectively[144]. - As of September 30, 2025, the company had cash and cash equivalents of $165.2 million and funds held for clients totaling $2,775.6 million[148]. Future Outlook and Strategic Initiatives - The company plans to expand spend management capabilities through the acquisition of Airbase Inc. in October 2024, enhancing its platform offerings[84]. - The number of clients is expected to grow as the company continues to invest in its sales and marketing organization across new and existing territories[86]. - The company anticipates improved gross and operating margins over the long term as it scales its operations and gains economies of scale[88]. - The company expects to continue investing in capital spending to enhance operating facilities and technical infrastructure, depending on sales growth[144]. Market and Economic Factors - Interest income on funds held for clients decreased by $0.5 million, or 2%, to $29.3 million for the three months ended September 30, 2025, from $29.9 million in 2024[118]. - Cost of revenues increased by $13.4 million, or 12%, to $128.4 million for the three months ended September 30, 2025, compared to $115.0 million in 2024[119]. - An immediate 100-basis point increase in interest rates would decrease the market value of available-for-sale securities by $12.0 million, while a decrease would increase it by $11.6 million[150]. - The company maintains a revolving credit facility of $550.0 million, which can be increased to $825.0 million, with $81.3 million borrowed as of September 30, 2025[151]. - The company has $81.3 million in borrowings on its revolving credit facility, which is not due in the next twelve months, along with $63.2 million in operating lease obligations[143]. - Inflation has not materially affected the company's financial condition, but significant inflationary pressures could impact costs and pricing strategies[152]. Income Metrics - Net income decreased to 12% in 2025 from 14% in 2024, with income before income taxes at 18% for both years[116].