Paylocity to acquire spend management firm Airbase for $325 million

SCHAUMBURG, Ill. - Paylocity (NASDAQ: NASDAQ:PCTY), a prominent provider of cloud-based HR and payroll software, announced today its agreement to acquire Airbase Inc., a modern spend management software company. The acquisition, valued at approximately $325 million, is aimed at expanding Paylocity's market reach into the Office of the CFO and enhancing its platform to manage business-related expenses comprehensively.

Airbase's suite, which includes bill pay automation, expense management, corporate cards, and procurement capabilities, will be integrated with Paylocity's existing human capital management (HCM) solutions. This move is expected to offer HR and finance leaders a unified experience across both HCM and finance solutions, a significant differentiator according to Paylocity's President and CEO, Toby Williams.

Founded in 2017 with a workforce of around 300 employees, Airbase caters to the mid-market segment, serving over 500 clients. The acquisition is funded through borrowings under Paylocity's revolving credit facility and is not anticipated to affect its ongoing $350 million share repurchase program.

Subject to customary closing conditions and regulatory approvals, the transaction is expected to close in the first or second quarter of fiscal 2025. The deal is projected to contribute approximately 1% to Paylocity's total revenue in fiscal 2025 and is expected to dilute adjusted EBITDA margin by 100 basis points.

Paylocity, headquartered in Schaumburg, IL, has been recognized for its workplace culture and offers a product suite that streamlines HR and payroll processes. The acquisition of Airbase is part of Paylocity's strategy to provide integrated software solutions for operational spend management, aiming to enhance client experiences and offer a comprehensive solution on a single platform.

The financial implications of the acquisition will be reflected in Paylocity's updated financial guidance during its first quarter fiscal 2025 earnings release. This strategic move is based on a press release statement from Paylocity.

In other recent news, Paylocity Holding Corporation reported significant growth in its fiscal 2024 results. The company's recurring revenue saw a 15% increase in the fourth quarter and a 17% rise for the fiscal year. Total revenue climbed by 16% in Q4 and 19% for the fiscal year, reaching $1.4 billion. The addition of 2,850 new clients brought the total to 39,050, and the average recurring revenue per client grew by 8% to nearly $33,000. Paylocity also reported a gross profit of $240.4 million in Q4 and $960.8 million for the full year, with net income standing at $48.8 million in Q4 and $206.8 million for the year.

In other developments, Piper Sandler reiterated its Overweight rating on shares of Paylocity, maintaining a consistent price target of $172.00. The firm's confidence in Paylocity's growth strategy and product development was reinforced following meetings with the company's CFO, Ryan Glenn. Piper Sandler believes Paylocity's initial financial targets for fiscal year 2025 are set conservatively and encourages investors with a medium to long-term perspective to consider the company.

These recent developments shed light on Paylocity's robust fiscal performance and the confidence analysts have in the company's future growth.

InvestingPro Insights

In light of Paylocity's (NASDAQ: PCTY) recent announcement to acquire Airbase Inc., it's pertinent to examine the company's financial health and market performance to understand the potential impact of this strategic move. Paylocity's impressive gross profit margins, which stood at 68.64% in the last twelve months as of Q4 2024, indicate a strong ability to manage costs and potentially integrate Airbase's offerings effectively.

The company's market capitalization is currently at $8.9 billion, with a noteworthy revenue growth of 19.4% in the same period, reflecting its expanding market presence and operational success. This growth trajectory is likely to be bolstered by the acquisition, as it aims to offer a unified HR and finance solution.

InvestingPro Tips reveal that Paylocity is trading at a high earnings multiple, with a P/E ratio of 43.83, suggesting that investors have high expectations for the company's future earnings. However, the company's stock has also experienced a strong return over the last three months, up by 16.24%, which may reflect market confidence in its growth prospects and strategic acquisitions like that of Airbase.

For readers looking to delve deeper into Paylocity's financial metrics and gain more insights, there are additional tips available on InvestingPro. These include the company's ability to cover interest payments with cash flows and its trading at high valuation multiples, such as EBITDA and revenue. Interested investors can explore a total of 14 InvestingPro Tips for Paylocity at https://www.investing.com/pro/PCTY, which could provide a more comprehensive understanding of the company's financial position and the potential implications of the Airbase acquisition.

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