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Core Insights - Paylocity (PCTY) reported quarterly earnings of $1.75 per share, exceeding the Zacks Consensus Estimate of $1.5 per share, and up from $1.66 per share a year ago [1] - The earnings surprise was +16.67%, following a previous surprise of +13.04% in the last quarter [2] - The company achieved revenues of $408.17 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 1.95% and increasing from $362.96 million year-over-year [3] Earnings Performance - Paylocity has consistently surpassed consensus EPS estimates for the last four quarters [2] - The current consensus EPS estimate for the upcoming quarter is $1.53, with expected revenues of $407.48 million, and for the current fiscal year, the estimate is $7.14 on $1.72 billion in revenues [8] Stock Performance and Outlook - Paylocity shares have declined approximately 29.4% year-to-date, contrasting with the S&P 500's gain of 16.5% [4] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [7] Industry Context - The Internet - Software industry, to which Paylocity belongs, is currently ranked in the top 32% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [9] - Another company in the same industry, Bentley Systems, is expected to report earnings soon, with a consensus EPS estimate of $0.27, reflecting a year-over-year increase of +12.5% [10]

Financial Data and Key Metrics Changes - Total revenue for Q1 was $408.2 million, representing a 12% increase year-over-year [6][16] - Recurring and other revenue grew by 14% compared to the same period last year [6][16] - Adjusted gross margin improved to 75.1%, up from 74% in Q1 of the previous year [16] - Adjusted EBITDA for Q1 was $146.4 million, with a margin of 35.9%, exceeding guidance by $11.4 million [18] Business Line Data and Key Metrics Changes - The launch of Paylocity for Finance contributed to strong revenue growth, expanding the platform's capabilities [6][7] - The AI assistant's usage has more than doubled, with over 1.2 million questions answered in the past year [8][11] Market Data and Key Metrics Changes - The company reported stable workforce levels at client companies, consistent with previous quarters [28] - The referral channel contributed over 25% of new business in Q1, indicating strong market demand [10] Company Strategy and Development Direction - The company is focused on expanding its AI capabilities across its platform to enhance user experience and drive product adoption [7][11] - Paylocity aims to leverage its broker-neutral position to strengthen its market presence and client partnerships [10][87] - Long-term financial targets have been increased, with revenue expectations rising from $2 billion to $3 billion [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of the demand environment and the ability to continue driving growth [28][58] - The company anticipates a positive impact from recent tax legislation changes, benefiting free cash flow by approximately $65 million in Fiscal 2026 [20][72] Other Important Information - The company repurchased nearly 1.2 million shares for $200 million in Q1, reflecting confidence in its financial position [19] - Paylocity was recognized as a leader in multiple HCM product categories, enhancing its market reputation [9] Q&A Session Summary Question: Update on the macro environment and headcount assumptions - Management noted continued stability in workforce levels and maintained flat workforce assumptions for the fiscal year [28] Question: Long-term guidance and AI benefits - Management indicated that both natural business scale and AI benefits contribute to confidence in long-term growth, though it's still early for AI impacts [29] Question: Insights on the Office of the CFO and Airbase acquisition - Management reported strong early traction for the Finance product and positive feedback from clients [34][36] Question: Impact of Paylocity for Finance on long-term financial targets - Management expressed confidence that the Finance solution will achieve margins similar to the rest of the portfolio [82] Question: Competitive landscape and win rates - Management highlighted a differentiated product portfolio and stable demand environment, with a focus on execution [87]

Financial Data and Key Metrics Changes - Total revenue for Q1 2026 was $408.2 million, representing a 12% increase year-over-year [6][16] - Recurring and other revenue grew by 14% compared to the same period last year [6][16] - Adjusted gross margin improved to 75.1%, up from 74% in Q1 of the previous year [16] - Adjusted EBITDA for Q1 was $146.4 million, with a margin of 35.9%, exceeding guidance by $11.4 million [18] Business Line Data and Key Metrics Changes - The launch of Paylocity for Finance contributed to strong revenue growth, expanding the platform's capabilities into the office of the CFO [6][7] - The AI assistant's usage has more than doubled, with over 1.2 million questions answered, indicating increased product adoption [8][11] Market Data and Key Metrics Changes - The company reported stable demand across its target market, with workforce levels at clients slightly up year-over-year [28][58] - The referral channel contributed over 25% of new business in Q1, demonstrating strong performance in the broker channel [10] Company Strategy and Development Direction - The company is focused on expanding its AI capabilities across its platform to enhance user experience and drive business impact [7][11] - Paylocity aims to leverage its differentiated value proposition to capture a larger share of the HCM market while expanding into finance and IT [41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of the operating environment and the ability to maintain flat workforce levels throughout the fiscal year [28] - The company raised its fiscal 2026 guidance due to strong Q1 performance and confidence in ongoing growth [24][25] Other Important Information - The company repurchased nearly 1.2 million shares for $200 million in Q1, reflecting confidence in its cash flow and business outlook [19] - The average daily balance of client funds was approximately $2.9 billion in Q1, with expectations to increase to $3 billion in Q2 [21] Q&A Session Summary Question: Update on macro trends and headcount assumptions - Management noted continued stability in workforce levels at clients, with flat assumptions for the fiscal year [28] Question: Long-term guidance and AI benefits - Management indicated that while AI is still in early stages, it provides incremental confidence for multi-year growth [29] Question: Office of the CFO and Airbase acquisition - Management reported strong early traction for the Finance product, with positive feedback from both new and existing clients [34] Question: Impact of Paylocity for Finance on long-term targets - Management expressed confidence that the Finance solution will achieve margins similar to the rest of the portfolio [82] Question: Demand environment across employee segments - Management observed stable demand across all segments, with strong execution from go-to-market teams [58] Question: Sales cycle changes with new product offerings - Management confirmed no elongation in sales cycles, maintaining a focus on efficient go-to-market strategies [78]

Financial Data and Key Metrics Changes - Total revenue for Q1 was $408.2 million, representing a 12% increase year-over-year, with recurring and other revenue growth of 14% [4][13] - Adjusted gross margin improved to 75.1% from 74% in the same quarter last year, reflecting 110 basis points of leverage [13] - Adjusted EBITDA for Q1 was $146.4 million, with a margin of 35.9%, exceeding guidance by $11.4 million [16][23] Business Line Data and Key Metrics Changes - The launch of Paylocity for Finance has expanded the company's offerings, contributing to strong demand across HR, finance, and IT functions [5][10] - The AI assistant's usage has more than doubled in the past year, with over 1.2 million questions answered, indicating increased product adoption [6][9] Market Data and Key Metrics Changes - The company reported strong client retention and a stable demand environment across its target market, with workforce levels at clients slightly up year-over-year [8][49] - The referral channel contributed over 25% of new business in Q1, demonstrating the effectiveness of the broker channel [8] Company Strategy and Development Direction - The company is focused on driving innovation through AI and automation, enhancing user experience and operational efficiency [5][11] - Long-term financial targets have been increased, with revenue targets raised from $2 billion to $3 billion and adjusted gross margin targets increased to over 80% [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of the workforce levels and the ability to maintain growth, with a focus on prudent guidance [25] - The company anticipates continued strong performance in Q2 and throughout Fiscal 2026, driven by the success of its AI strategy and product offerings [22][23] Other Important Information - The company repurchased nearly 1.2 million shares for $200 million in Q1, reflecting confidence in its cash flows and business outlook [17] - The average daily balance of client funds was approximately $2.9 billion in Q1, with expectations of $3 billion in Q2 [19] Q&A Session Summary Question: Update on the macro environment and headcount assumptions - Management noted continued stability in workforce levels and maintained flat workforce assumptions for the fiscal year [25] Question: Long-term guidance and drivers of upside - Management indicated that both natural business scale and AI benefits contribute to confidence in long-term growth, though it's still early days for AI [26] Question: Insights on the Office of the CFO and Airbase acquisition - Management reported strong early traction for the Finance product, with positive feedback from clients and prospects [30] Question: Drivers for adjusted EBITDA guidance - Management emphasized a level of prudence in guidance despite strong Q1 performance, with flexibility to make investments as needed [33] Question: Opportunities in IT department offerings - Management highlighted the potential for leveraging employee data for asset and identity management, indicating early positive feedback from clients [36] Question: Demand environment across employee segments - Management observed stable demand across all segments, with strong execution from go-to-market teams [49] Question: Impact of AI on product adoption - Management noted that AI investments are driving broader product adoption and simplifying user experiences, leading to increased value for clients [56] Question: Changes in sales cycle due to new product offerings - Management confirmed that there have been no elongations in sales cycles, maintaining a focus on efficient go-to-market strategies [66]

Financial Performance & Growth - Total revenue has shown consistent growth, from $1.175 billion in FY23 to $1.723 billion in FY26 (guidance)[9] - The company targets $3 billion in total revenue in the long term[60] - Adjusted EBITDA margin has increased from 27.2% in FY23 to 31.6% in FY26 (guidance)[63] - The company has driven approximately 400bps of Adjusted EBITDA margin leverage since FY23[64] - Free Cash Flow (FCF) margin has also increased, reaching 14.9% in FY25[66] Market & Product Strategy - The company estimates a Realized HCM Total Addressable Market (TAM) of approximately $22.0 billion[12] - The company has penetrated approximately 3% of its addressable market[13] - Over 25% of new client revenue comes from referrals from channels[52] - The company focuses on a target market of roughly 1.3 million businesses[18] Client Retention - The company maintains a strong net revenue retention rate of over 92%[45, 53, 54]

Financial Performance - Recurring and other revenue for Q1 2026 was $378.9 million, representing a 14% increase year-over-year[6] - Total revenue for Q1 2026 reached $408.2 million, up 12% from Q1 2025[7] - GAAP operating income for Q1 2026 was $74.2 million, compared to $64.1 million in Q1 2025[3] - GAAP net income for Q1 2026 was $48.0 million, or $0.86 per share, down from $49.6 million, or $0.88 per share in Q1 2025[4] - Adjusted EBITDA for Q1 2026 was $146.4 million, an increase from $129.0 million in Q1 2025[8] - Total revenues increased from $362,956 thousand in September 2024 to $408,172 thousand in September 2025, representing a growth of 12.5%[26] - Net income decreased slightly from $49,573 thousand in September 2024 to $47,991 thousand in September 2025, a decline of 3.2%[26] - Operating income rose from $64,144 thousand in September 2024 to $74,211 thousand in September 2025, an increase of 15.5%[26] - Non-GAAP Net income increased from $93,616 thousand in September 2024 to $97,660 thousand in September 2025, a growth of 4.1%[32] - Non-GAAP Net income per share rose from $1.66 in September 2024 to $1.75 in September 2025, an increase of 5.4%[34] Revenue Projections - For Q2 2026, recurring and other revenue is expected to be between $378.5 million and $383.5 million, indicating approximately 10% growth year-over-year[14] - Total revenue for Q2 2026 is projected to be between $405.5 million and $410.5 million, reflecting about 8% growth year-over-year[14] - Updated long-term financial targets include total revenue of $3 billion and Adjusted EBITDA margin of 40-45%[10] Asset and Liability Management - Total current assets increased from $3,311,969 thousand as of June 30, 2025, to $3,162,958 thousand as of September 30, 2025, a decrease of 4.5%[24] - Cash and cash equivalents decreased from $398,070 thousand as of June 30, 2025, to $165,192 thousand as of September 30, 2025, a decline of 58.6%[24] - Total liabilities increased from $3,155,681 thousand as of June 30, 2025, to $3,132,653 thousand as of September 30, 2025, an increase of 0.7%[24] - Total stockholders' equity increased from $1,233,747 thousand as of June 30, 2025, to $1,103,479 thousand as of September 30, 2025, a decrease of 10.5%[24] Research and Development - Research and development expenses increased from $47,260 thousand in September 2024 to $55,607 thousand in September 2025, a rise of 17.8%[26] - Non-GAAP total research and development expenses rose from $52,038 in Q3 2024 to $60,594 in Q3 2025, indicating a focus on innovation[37] Cash Flow and Expenses - Free cash flow for Q3 2024 was $73,917, compared to $67,199 in Q3 2025, showing an increase in cash generation[38] - Non-GAAP sales and marketing expenses for Q3 2024 were $78,570, increasing to $87,056 in Q3 2025, highlighting a rise in marketing investments[35] - General and administrative expenses on a non-GAAP basis were $34,628 for Q3 2024, compared to $36,065 in Q3 2025, suggesting a controlled increase[37] - Adjusted free cash flow excluding interest income on funds held for clients was $45,531 in Q3 2024, down from $39,266 in Q3 2025, reflecting changes in cash management strategies[38] - Interest income on funds held for clients was $(29,851) for Q3 2024, slightly decreasing to $(29,314) in Q3 2025, indicating stable interest income levels[38] - The company incurred $2,528 in other items for Q3 2024, which decreased to $1,764 in Q3 2025, suggesting improved cost management[35] - Capitalized internal-use software costs were $15,210 in Q3 2024, compared to $15,460 in Q3 2025, reflecting consistent investment in technology[38] Strategic Focus - The company is focused on enhancing its AI strategy, delivering predictive insights and generative AI functionalities to improve productivity[2]

Core Insights - Paylocity Holding Corporation reported strong financial results for the first quarter of fiscal year 2026, with a 14% growth in recurring and other revenue and a significant increase in profitability, driven by its modern software offerings and AI strategy [2][3][7]. Financial Performance - Recurring and other revenue reached $378.9 million, up 14% year-over-year [7][8]. - Total revenue for the quarter was $408.2 million, reflecting a 12% increase compared to the same period last year [7][8]. - GAAP operating income was $74.2 million, compared to $64.1 million in the first quarter of fiscal year 2025 [3]. - Non-GAAP operating income increased to $121.2 million from $104.9 million year-over-year [3]. - GAAP net income was $48.0 million, or $0.86 per share, down from $49.6 million, or $0.88 per share, in the prior year [4]. Adjusted Metrics - Adjusted EBITDA for the quarter was $146.4 million, up from $129.0 million in the same quarter last year [9]. - Adjusted EBITDA excluding interest income on funds held for clients was $117.1 million, compared to $99.2 million in the prior year [9]. Balance Sheet and Cash Flow - Cash and cash equivalents totaled $165.2 million as of September 30, 2025 [9]. - Long-term debt stood at $81.3 million, with $81.3 million repaid during the quarter [9]. - Net cash provided by operations was $86.5 million, down from $91.5 million in the same quarter last year [10]. Share Repurchase and Financial Targets - The company repurchased $200 million worth of shares in the first quarter, totaling $500 million since May 2024 [7]. - Updated long-term financial targets include total revenue of $3 billion and an adjusted EBITDA margin of 40-45% [7]. Business Outlook - For the second quarter of fiscal year 2026, recurring and other revenue is expected to be between $378.5 million and $383.5 million, indicating approximately 10% growth [15]. - Total revenue guidance for the full fiscal year 2026 is projected to be between $1.715 billion and $1.730 billion, representing about 8% growth [15].

​Paylocity Holding Corporation (NASDAQ:PCTY) is one of the Best 52-Week Low Mid Cap Stocks to Buy Now. On October 21, Raimo Lenschow from Barclays lowered the firm’s price target on Paylocity Holding Corporation (NASDAQ:PCTY) from $196 to $175, while keeping an Equal Weight rating on the stock. ​The analyst noted that the reduced price targets reflect the company’s preview of the Q3 earnings for the software group. Barclays’ model suggests the group would deliver solid earnings in the third quarter; howev ...

Core Insights - Paylocity Holding is an American SaaS company specializing in payroll, HR, and human capital management, founded in 1997 and went public in 2014 [1] Company Overview - The company has shown stock performance since its IPO in 2014, indicating its growth trajectory in the SaaS sector [1] Investment Focus - The analysis emphasizes a qualitative approach to investing, particularly in small-cap companies that exhibit both long-term growth potential and special situations [1]