Paylocity (PCTY) Acquires BeneFLEX, Strengthens Portfolio

Paylocity Holding (NASDAQ:PCTY) recently announced the acquisition of BeneFLEX HR Resources – a privately held employee benefit agency, in an all-cash deal.

BeneFLEX manages employee benefit related plans including the likes of health savings accounts (HSAs), health reimbursement accounts (HRAs), flexible spending accounts (FSAs), and COBRA for the Midwest and California based mid-market clients. The company was founded in 1994 and is headquartered in St. Louis.

Per Paylocity’s CEO, Steve Beauchamp, this inorganic addition has enriched the company’s product suite with a host of benefit administration related solutions. Apart from this, the acquisition brings in BeneFLEX’s 36 trained employees along with a number of “clients and referring brokers” to the Paylocity.

The company stated that while reporting the results for third-quarter of fiscal 2018, it will be discussing how the acquisition will impact its financials.

Paylocity’s Solutions Gaining Traction

Notably, Paylocity is performing well backed by the robust performance of its HCM product suite which has resulted in new client additions and existing client growth.

Driven by the strong demand for the company’s solutions, revenues of second-quarter fiscal 2018 came in at $86 million, reflecting an increase of 25% on a year over year basis. Notably, an accelerated market penetration of low implementation cost-based HCM products assisted the non-GAAP gross margin to expand 230 basis points (bps) year over year to 62.3%.

Paylocity Holding Corporation Revenue (TTM)

Paylocity Holding Corporation Revenue (TTM) | Paylocity Holding Corporation Quote

During last earnings conference call, management stated that the company’s platforms were used by over million users in a single month during the second quarter, marking a new record for the company. Further, with adjusted EBITDA increasing 54.5% from the year-ago quarter, the company is encouraged to invest further in sales and marketing initiatives in the second half of fiscal 2018 as well as in 2019.

Further, these sales initiatives will be a boost for the better penetration of the products. We believe the enhanced offerings via the integration of the solutions suite of acquired entities will be lucrative for the customers, consequently proving to be a top-line driver going ahead.

Zacks Rank and Key Picks

Paylocity carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Paycom Software, Inc. (NYSE:PAYC) , Veeva Systems Inc. (NYSE:VEEV) and NVIDIA Corporation (NASDAQ:NVDA) all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term EPS growth rate for Paycom, Veeva and NVIDIA are projected to be 25.8%, 17% and 10.3%, respectively.

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