Paylocity Holding Corporation (PCTY) Earnings & Analysis

Latest quarter

Paylocity reported Q4 FY2026 revenue of $444.7 million, up 11.0% from $400.7 million a year earlier and above the $431.0 million consensus. Adjusted earnings per share were $1.84, above the $1.54 consensus. The company also exceeded its own quarterly revenue guidance of $428.4 million to $433.4 million.

CFO Ryan Glenn said recurring revenue rose 12.4% to $415.6 million, and that recurring and other revenue accounted for most of the amount by which total revenue exceeded guidance. Paylocity reported diluted earnings per share of $1.12, compared with $0.86 a year earlier.

The company’s gross margin was 67.5%, compared with 67.8% a year ago, while its operating margin rose to 19.0% from 16.5%. Paylocity reported free cash flow of $71.1 million, up from $64.3 million in the prior-year quarter. Glenn said quarterly adjusted EBITDA was $145.5 million.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Toby Williams said sales and go-to-market execution contributed to the quarter and that Paylocity was continuing to invest in those functions. Benefit brokers generated more than 25% of new business in fiscal 2026, he said, attributing their referrals partly to the platform’s integrations and to Paylocity’s decision not to compete with brokers by selling insurance.

Asked about the operating environment, CFO Ryan Glenn said client workforce levels increased in Q4 and remained up year over year. He described the environment as “very stable” but said the company assumed flat workforce levels in fiscal 2027. Williams said annual revenue retention remained above 92% in fiscal 2026.

On products, Williams said Paylocity Retirement brings plan administration and employee savings tools onto its platform. He said the company had launched Ignite AI and acquired Adora to automate leave-of-absence management. Paylocity also is integrating Grayscale’s recruiting automation as a premium offering, he said.

Glenn said combined expensed and capitalized non-GAAP research and development investment was 14.5% of revenue in fiscal 2026. In response to a margin question, he said the Grayscale and Adora acquisitions were subscale and would create a slight margin headwind in fiscal 2027. He also said automation, AI and pricing power with some third-party vendors supported the company’s multi-year gross-margin target above 80%.

Discussing cash flow, Glenn said tax legislation provided a one-time benefit in fiscal 2026. He expected fiscal 2027 free cash flow to increase in dollar terms, though its margin might face a headwind from the comparison. He said Paylocity could continue repurchasing shares while remaining open to acquisitions.

Guidance

CFO Ryan Glenn presented Paylocity’s initial fiscal 2027 outlook, including total revenue of $1.880 billion to $1.895 billion and adjusted EBITDA of $690 million to $700 million. For Q1 FY2027, he expected revenue of $439.5 million to $444.5 million and adjusted EBITDA of $152 million to $156 million.

Glenn said the outlook assumes two 25 basis point interest-rate cuts in the back half of fiscal 2027 and flat client workforce levels. He said a change in deferred contract cost amortization is included in guidance and would increase fiscal 2027 adjusted EBITDA margins by approximately 120 to 140 basis points.