Paycor HCM(US:PYCR)2022-02-04 21:02Part I - FINANCIAL INFORMATION Financial Statements Presents Paycor HCM's unaudited condensed consolidated financial statements as of December 31, 2021, including Balance Sheets, Statements of Operations, and Cash Flows, with comparative prior periods Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2021 | June 30, 2021 | | :--- | :--- | :--- | | Total Assets | $2,372,352 | $2,010,953 | | Cash and cash equivalents | $111,087 | $2,634 | | Funds held for clients | $940,157 | $670,315 | | Goodwill | $750,397 | $750,802 | | Total Liabilities | $1,080,282 | $883,891 | | Client fund obligations | $940,387 | $669,960 | | Long-term debt, net | $0 | $49,100 | | Total Stockholders' Equity | $1,292,070 | $878,639 | Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $103,067 | $85,864 | $195,799 | $164,925 | | Gross Profit | $61,985 | $49,031 | $109,106 | $93,608 | | Loss from Operations | $(33,764) | $(20,892) | $(86,033) | $(42,359) | | Net Loss | $(25,464) | $(16,817) | $(67,500) | $(34,149) | | Net Loss per Share | $(0.15) | $(0.15) | $(0.46) | $(0.30) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(18,724) | $6,848 | | Net cash used in investing activities | $(16,035) | $(27,996) | | Net cash provided by financing activities | $413,341 | $214,327 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses financial performance, noting a 20% revenue increase driven by customer growth and higher per-employee revenue, with widened operating losses due to post-IPO stock-based compensation and strategic investments - The company's business model is a recurring revenue SaaS model, primarily based on a per-employee-per-month (PEPM) fee structure, which provides significant visibility into future operating results, with recurring and other revenues representing over 99% of total revenue for the periods ended December 31, 2021125 - As of December 31, 2021, customer employee counts had fully recovered to pre-pandemic levels for the cohort of customers active in March 2020, and the company's customer base grew 3.9% year-over-year to approximately 29,000129133 - Key growth strategies include expanding the sales footprint to add new customers, increasing product penetration with existing customers through bundled offerings, and ongoing product innovation132135139 Key Financial Metrics (in thousands) | Metric | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $103,067 | $85,864 | $195,799 | $164,925 | | Loss from Operations | $(33,764) | $(20,892) | $(86,033) | $(42,359) | | Adjusted Operating Income* | $10,259 | $13,495 | $13,651 | $26,171 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate fluctuations affecting client funds and investment portfolio value, with minor exposure to foreign currency and inflation, and no use of derivatives - The company's primary market risk is interest rate risk, which impacts interest income from $940.2 million in funds held for clients and the value of its available-for-sale securities portfolio, with a 100-basis point change in interest rates having an immaterial effect on the portfolio's market value as of December 31, 2021239240 - Foreign currency exchange risk is not considered significant as most sales are denominated in U.S. dollars238 - The company had no outstanding debt under its 2021 Credit Facility as of December 31, 2021, mitigating exposure to variable interest rate risk on borrowings242 - While inflation has not had a significant historical impact, the company notes that if the Federal Reserve raises interest rates to combat inflation, it could benefit from increased interest income on funds held for clients243244 Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of December 31, 2021, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of December 31, 2021, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective246 - No changes were made to the internal control over financial reporting during the three months ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, these controls247 Part II - OTHER INFORMATION Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business, financial condition, or liquidity - Paycor is not presently a party to any legal proceedings that it believes would have a material adverse effect on its business249 Risk Factors This section highlights risks from evolving data privacy laws like CCPA and IBIPA, including three lawsuits related to IBIPA, with potential for significant costs and reputational harm from non-compliance - The company faces risks from a complex and evolving regulatory framework for data security and privacy, including laws like the California Consumer Privacy Act (CCPA) and the Illinois Biometric Information Privacy Act (IBIPA)250251 - Paycor is currently a defendant in three lawsuits (two in Illinois state court, one in federal court) alleging violations of the IBIPA related to the use of handprint/fingerprint scanning for employee timekeeping252 - Potential consequences of non-compliance with privacy laws include regulatory scrutiny, litigation, fines, and the need to modify business practices, which could adversely affect financial results and reputation254255 Unregistered Sales of Equity Securities and Use of Proceeds Details the use of approximately $458.7 million in net IPO proceeds from July 2021, with $260.0 million used to redeem Series A Redeemable Preferred Stock - The company's IPO in July 2021 generated approximately $458.7 million in net proceeds after underwriting discounts260 - Approximately $260.0 million of the IPO proceeds were used to fund the redemption of the Series A Redeemable Preferred Stock on July 23, 2021260 Defaults Upon Senior Securities The company reported no defaults on senior securities Mine Safety Disclosures This item is not applicable to the company Other Information The company reported no other information for this period Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents and Sarbanes-Oxley Act officer certifications