Paylocity Holding(US:PCTY)2026-02-06 15:02Revenue Growth - Total revenues increased from $377.0 million for the three months ended December 31, 2024 to $416.1 million for the three months ended December 31, 2025, representing a 10% year-over-year increase [88]. - Total revenues for the three months ended December 31, 2025, increased by $39.3 million, or 10.4%, to $416.1 million from $376.9 million for the same period in 2024 [112]. - Recurring and other revenue accounted for 92% and 93% of total revenues for the three months ended December 31, 2024 and 2025, respectively [96]. - Recurring and other revenue for the six months ended December 31, 2025, increased by $85.0 million, or 12%, to $765.8 million from $680.8 million for the same period in 2024 [123]. Profitability Metrics - Adjusted Gross Profit for the three months ended December 31, 2025 was $309.5 million, up from $278.2 million in the same period of 2024, reflecting a year-over-year increase of 11% [92]. - Adjusted EBITDA for the three months ended December 31, 2025 was $142.7 million, compared to $126.2 million for the same period in 2024, indicating a year-over-year increase of 13% [93]. - Operating income for the three months ended December 31, 2025, increased by $23.8 million, or 51%, to $70.4 million from $46.6 million for the same period in 2024 [112]. - Net income for the three months ended December 31, 2025, increased by $12.7 million, or 33.9%, to $50.2 million from $37.5 million for the same period in 2024 [112]. - Gross profit margin improved from 67% for the three months ended December 31, 2024, to 68% for the same period in 2025 [115]. Expenses - Sales and marketing expenses are expected to continue increasing in absolute dollars as the company grows its sales organization and expands marketing activities [102]. - Sales and marketing expenses for the three months ended December 31, 2025, increased by $4.9 million, or 5%, to $98.1 million from $93.1 million for the same period in 2024 [116]. - Research and development expenses for the three months ended December 31, 2025 totaled $76.4 million, up from $73.4 million in the same period of 2024 [105]. - Research and development expenses for the three months ended December 31, 2025, increased by $1.6 million, or 3%, to $57.7 million from $56.2 million for the same period in 2024 [117]. - General and administrative expenses rose by $4.9 million, or 5%, to $109.5 million for the six months ended December 31, 2025, from $104.7 million in 2024 [129]. Cash Flow and Investments - Net cash provided by operating activities was $203.5 million for the six months ended December 31, 2025, up from $145.7 million in 2024 [147]. - Net cash used in investing activities decreased significantly to $27.5 million for the six months ended December 31, 2025, compared to $301.0 million in 2024 [148]. - Net cash provided by financing activities increased to $2,403.7 million for the six months ended December 31, 2025, from $835.5 million in 2024, primarily due to a net change in client fund obligations [150]. - Capital expenditures were $7.2 million for the six months ended December 31, 2025, compared to $5.3 million in 2024, excluding capitalized internal-use software costs [153]. Taxation - The effective tax rate for the three months ended December 31, 2025, was 28.5%, up from 20.0% for the same period in 2024 [121]. - The effective tax rate increased to 32.3% for the six months ended December 31, 2025, compared to 24.8% in 2024, primarily due to stock-based compensation shortfalls and state and local income taxes [131][132]. Market and Economic Conditions - Inflation has not had a material effect on the company's business, but significant inflationary pressures could harm its financial condition and results of operations [162]. - The company does not anticipate significant impacts on operations from hypothetical changes of 100 basis points in interest rates [161]. Financial Position - As of December 31, 2025, the company had $162.5 million in cash and cash equivalents and a $550.0 million revolving credit facility [138]. - The company maintains a revolving credit facility of $550.0 million, which can be increased to $825.0 million, with $81.3 million in borrowings outstanding as of December 31, 2025 [161]. - As of December 31, 2025, the company had cash and cash equivalents of $162.5 million and funds held for clients amounting to $5,510.2 million [157]. Interest Rate Exposure - Interest income on funds held for clients is generated from advance collections for payroll and related services, contributing to overall revenue [98]. - Interest income on funds held for clients for the three months ended December 31, 2025, was flat at $29.2 million compared to $29.3 million for the same period in 2024 [114]. - An immediate 100-basis point increase in interest rates would decrease the market value of available-for-sale securities by $12.6 million, while a decrease of 100 basis points would increase the market value by $13.0 million [159]. - Interest rates applicable to the credit facility are variable, exposing the company to market risk from changes in underlying index rates [161]. - The company has not recorded any credit impairment losses on its portfolio to date [158]. - The investment policy focuses on generating higher yields while preserving liquidity and capital, exposing the company to interest rate changes [157]. - Fluctuations in the value of available-for-sale securities are recorded in other comprehensive income and realized only upon sale [160].