Paylocity Holding CorporationPCTY reported better-than-expected results for the second quarter of fiscal 2017. The company incurred adjusted loss (excluding all one-time income and expenses but including stock-based compensation) of 2 cents per share, narrower than the Zacks Consensus Estimate of a loss of 8 cents. Reported loss was however wider than the year-ago quarter loss of 1 cent.
On a GAAP basis, Paylocity posted a loss of 3 cents per share, wider than the year-ago quarter loss of 2 cents.
The company's revenues came in at $68.6 million, up 24.4% year over year, and beat the Zacks Consensus Estimate of $67 million. The year-over-over increase was driven by solid sales and operational implementation.
The top line was also backed by a 26% surge in recurring revenues, which more than offset a 9.2% decrease in implementation and other revenues.
The company's gross margin contracted 60 basis points (bps) year over year to 55.7%, primarily due to higher cost of sales.
Paylocity reported operating loss of $1.6 million, higher than a loss of $1.3 million in the year-ago quarter. Consequently, net loss amounted to $1.8 million compared with a loss of $1.2 million in the year-ago period.
Paylocity exited the quarter with cash and cash equivalents of $82.2 million compared with $78 million in the previous quarter. Receivables were $2.1 million compared with $1.76 million in the previous quarter.
Paylocity has no long-term debt. The company generated $13.5 million of cash flow from operational activities during the quarter.
The company provided outlook for the third quarter and fiscal 2017. For the third quarter of fiscal 2017, Paylocity expects revenues in a range of $87.5 million to $88.5 million. The Zacks Consensus Estimate is pegged at $88 million. Adjusted EBITDA is projected to be in a band of $17-$18 million. Non-GAAP earnings per share are expected to be within 22-24 cents.
For fiscal 2017, Paylocity continues to anticipate revenues in a range of $296 million to $298 million. The Zacks Consensus Estimate stands at $297 million. Adjusted EBITDA is now projected to be in a band of $42 million to $43 million (previously $37.5 million to $39.5 million). Non-GAAP earnings per share are now expected within 41 cents to 43 cents (previously 22-40 cents).
Over the past one year, shares of Paylocity have decreased 7.9%, underperforming the Zacks Categorized Internet-Software industry, which gained 11%.
Paylocity reported better-than-expected second-quarter results. The company also provided a modest third-quarter and fiscal guidance.
We remain positive about Paylocity's regular investments in SaaS technology. Notably, over the past few quarters, clients moving from traditional payroll service providers to the company's SaaS-based services generated a significant portion of Paylocity's revenues. Therefore, we believe that regular investments in technological upgrades, along with product innovations, will continue to boost the company's top line over the long run. Such initiatives are also likely to have a positive impact on its forthcoming results.
Furthermore, higher adoption of Paylocity's ACA dashboard application, which specializes in tracking employee count, employee status and health care plan affordability, will act as a tailwind.
However, competition in the payroll processing sector from new entrants as well as existing players such as Automatic Data Processing, Inc. ADP , Oracle Corporation ORCL and SAP SE SAP remains a major headwind.
Currently, Paylocity has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
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