Core Viewpoint - Paylocity Holding Corporation has scheduled a conference call to discuss its first quarter fiscal 2026 results on November 4, 2025, at 4:00 pm Central Time [1] Group 1: Conference Call Details - The conference call will be accessible via a live webcast on the Company's "Investor Relations" page [2] - Dial-in details for the call will be provided through a specific link [2] - A replay of the call will be available and archived via webcast on the Company's website [2] Group 2: Company Overview - Paylocity is a leading provider of cloud-based HR, finance, and IT solutions, headquartered in Schaumburg, IL [3] - The company was founded in 1997 and has been publicly traded since 2014 [3] - Paylocity offers a unified platform that automates HR and payroll processes, helping businesses attract and retain talent [3] - The company is recognized for its unique culture and is consistently rated as one of the best places to work [3]

Core Insights - Paylocity has been named the Official Human Capital Management (HCM) Partner of the Vegas Golden Knights, marking a multi-year partnership aimed at enhancing HR operations and employee experience [1][2]. Company Overview - Paylocity, headquartered in Schaumburg, IL, is a provider of cloud-based HR, finance, and IT solutions, recognized for its innovative technology and workplace culture [5]. - The company has been publicly traded since 2014 and focuses on automating HR and payroll processes to help businesses attract and retain talent [5]. Partnership Details - The collaboration will allow the Golden Knights to utilize Paylocity's HR technology to streamline operations, enabling the HR team to concentrate on building culture and supporting talent [2][4]. - The partnership is built on shared values of performance, innovation, and teamwork, aiming to enhance both on-ice performance and organizational efficiency [3][4]. Brand Impact - The sponsorship will increase Paylocity's visibility across the Golden Knights' brand platforms, reinforcing its commitment to organizations that prioritize efficiency and teamwork [3].

Core Insights - Paylocity has entered a five-year partnership with the New York Islanders and UBS Arena, becoming the team's Official Human Capital Management (HCM) Partner [1] - The partnership aims to streamline back-office operations for the Islanders through Paylocity's HR and payroll solutions, allowing the team to focus on strategic priorities [2] - Paylocity's charitable initiative, Paylocity Gives, will support the Islanders' Recycle the Game program, promoting youth hockey by redistributing used equipment [3] Company Overview - Paylocity, headquartered in Schaumburg, IL, is a provider of cloud-based HR, finance, and IT solutions, known for its unified platform that automates HR and payroll processes [5] - Founded in 1997 and publicly traded since 2014, Paylocity is recognized for its workplace culture and has been awarded as one of the best places to work [5] Partnership Details - The partnership emphasizes a shared commitment to innovation and community impact between Paylocity and the Islanders [4] - Paylocity's solutions will enhance operational efficiency for the Islanders while also broadening the impact of community programs [4] Venue Information - UBS Arena, home to the New York Islanders, is a state-of-the-art venue that has hosted over 3 million guests and 350+ events since its opening in November 2021 [6] - The arena is designed with fan-first amenities and has achieved sustainability certifications, including Zero Waste TRUE Silver and LEED Green Building Certification [7]

Core Insights - Paylocity has launched an advanced AI Assistant that transforms user inquiries into immediate actions, enhancing efficiency by reducing unnecessary clicks and streamlining workflows [1][3]. Company Overview - Paylocity is a cloud-based provider of HR, finance, and IT solutions, headquartered in Schaumburg, IL, and has been publicly traded since 2014 [6]. AI Assistant Features - The AI Assistant acts as a personal guide within Paylocity's unified platform, enabling users to quickly access answers and complete tasks [2]. - It is designed to provide contextual answers based on the user's current task, improving the overall user experience [2][3]. Performance Metrics - In the past year, the AI Assistant has successfully answered over 1.2 million questions, with usage of AI-powered features more than doubling year over year for three consecutive years [4]. User Testimonials - Users have reported significant time savings and improved efficiency, with the AI Assistant allowing for quick access to information such as vacation balances and headcount management [5].

Core Insights - Paylocity Holding Corporation (PCTY) is facing challenges, including a 12% year-to-date decline and competitive pressures from acquisitions in the industry, notably Thoma Bravo's $12.3 billion acquisition of Dayforce [2][4] - Citizens JMP has reaffirmed a 'Market Outperform' rating for PCTY with a price target of $270, highlighting the company's strong market position and growth potential despite current challenges [2] - PCTY has entered a multi-year sponsorship with the Chicago Bulls, becoming the team's Official HCM Software Partner, which will enhance its brand visibility and community engagement [3] Company Overview - Paylocity provides cloud-based HR, finance, and IT solutions aimed at automating processes and enhancing workplace culture, which helps businesses attract, retain, and empower employees [4] - The company is currently listed among stocks recommended for sale, indicating potential concerns regarding its investment attractiveness compared to other sectors, particularly AI stocks [4][5]

Core Insights - Paylocity has entered a multi-year sponsorship partnership with the Chicago Bulls, focusing on performance, innovation, and community commitment [1][4] - As the Official HCM Software Partner, Paylocity will enhance the Bulls' HR and payroll operations, simplifying payroll and automating processes [2][3] Company Overview - Paylocity, headquartered in Schaumburg, IL, is a provider of cloud-based HR, Finance, and IT solutions, publicly traded since 2014 [5] - The company is recognized for its user-friendly product suite that aids businesses in automating HR processes and fostering employee engagement [5] Community Engagement - The partnership includes a community initiative, an all-girls youth basketball clinic for players aged 7 to 17, promoting sports access and mentorship [3] - Both organizations emphasize the importance of investing in people and community programs to create lasting connections and growth opportunities [4]

Core Insights - Paylocity Holding Corporation (PCTY) reported fourth-quarter fiscal 2025 non-GAAP earnings of $1.56 per share, exceeding the Zacks Consensus Estimate by 13.04% and reflecting a year-over-year increase of 5.4% [1][8] - The company's revenues rose 12% year over year to $400.7 million, surpassing the Zacks Consensus Estimate by 3.10% [1][8] Revenue Breakdown - The top-line growth was driven by a 13.9% increase in Recurring and other revenues, which accounted for 92.3% of total revenues, reaching $369.9 million [2] - Interest income on funds held for clients, representing 7.7% of total revenues, declined 5.2% year over year to $30.9 million [2] Quarterly Financial Performance - Paylocity's adjusted gross profit was $296.7 million, up 14.2% from the previous year, with an adjusted gross margin expansion of 130 basis points to 74.1% [3] - Non-GAAP operating income increased 9.7% year over year to $105.6 million, while the non-GAAP operating margin contracted 60 basis points to 26.4% [3] - Adjusted EBITDA rose 8.8% from the year-ago quarter to $130.7 million, with an adjusted EBITDA margin down 100 basis points to 32.6% [3][8] Balance Sheet and Cash Flow - As of June 30, 2025, Paylocity's cash and cash equivalents were $398.1 million, down from $477.8 million as of March 31, 2025 [4] - Long-term debt totaled $162.5 million due to borrowings for the acquisition of Airbase, with approximately $162.5 million repaid during the second half of fiscal year 2025 [4] - Cash flow from operations for fiscal year 2025 was $418.2 million, compared to $331.7 million for the first nine months of the fiscal year [5] - Non-GAAP free cash flow was $342.8 million as of June 30, 2025, up from $278.5 million as of March 31, 2025 [5] Guidance - For the first quarter of fiscal 2026, Paylocity expects total revenues of $397.5-$402.5 million, indicating a 10% growth from the previous year [6] - For fiscal 2026, total revenues are projected between $1.707 billion and $1.722 billion, implying an 8% growth from the prior year [6]

```markdown PART I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Paylocity is a leading cloud-based provider of human capital management (HCM), payroll, and spend management software solutions, serving approximately **41,650 clients** across the U.S. as of June 30, 2025 - **Paylocity** is a leading cloud-based provider of **HCM**, **payroll**, and **spend management software solutions**, serving approximately **41,650 clients** across the U.S. as of June 30, 2025[19](index=19&type=chunk)[195](index=195&type=chunk)[62](index=62&type=chunk) - The company's **strategy** includes extending technological leadership, growing its **client base** (target **market** of **1.3 million businesses** with **10-5,000 employees**), expanding **product offerings**, and developing its **referral network**[25](index=25&type=chunk)[25](index=25&type=chunk)[25](index=25&type=chunk) **Key Financial Highlights** | Metric | FY2023 | FY2024 | FY2025 | | :-------------------------------- | :------- | :------- | :------- | | **Total Revenues** (Millions) | **$1,174.6** | **$1,402.5** | **$1,595.2** | | **YoY Increase** | - | **19%** | **14%** | | **Annual Revenue Retention Rate** | **>92%** | **>92%** | **>92%** | | **Client Count** (as of June 30) | **36,200** | **39,050** | **41,650** | [Overview](index=4&type=section&id=Overview) **Paylocity** provides cloud-based **HCM**, **payroll**, and **spend management software solutions** to approximately **41,650 clients** across the U.S. as of June 30, 2025, with an average of over **150 employees**[19](index=19&type=chunk)[62](index=62&type=chunk) - The platform offers a comprehensive suite of **products** designed to streamline HR, **payroll**, and **spend management**, attract and retain talent, and build culture and connection[19](index=19&type=chunk)[26](index=26&type=chunk) - Key benefits include a single platform with flexible data, enhanced **employee experience**, AI-powered insights and recommendations, leading **customer service**, and seamless integration with hundreds of third-party partner systems[23](index=23&type=chunk) [Our Strategy](index=6&type=section&id=Our%20Strategy) **Paylocity** aims to strengthen its position as a leading provider of cloud-based **HCM**, **payroll**, and **spend management solutions**[25](index=25&type=chunk) - Extend Technological Leadership: Continue innovation in cloud-based software, unified database architecture, mobile applications, social features, and analytics, leveraging an intuitive user interface[25](index=25&type=chunk) - Grow Our **Client Base**: Expand beyond the current **41,650 clients** to address a **market** of approximately **1.3 million** U.S. **businesses** with **10-5,000 employees**, with a realized target addressable **market** of **$22.0 billion**[25](index=25&type=chunk) - Expand Our **Product Offerings**: Invest in **product development** to offer a broader selection of **solutions** to new and existing **clients**[25](index=25&type=chunk) - Further Develop Our **Referral Network**: Increase integration with third-party providers and expand the **network** of **401(k) advisors**, **benefits administrators**, insurance brokers, and HR consultants to grow the **client base** and lower acquisition **costs**[25](index=25&type=chunk) [Our Products](index=7&type=section&id=Our%20Products) **Paylocity** offers a unified platform with a comprehensive suite of **HCM**, **payroll**, and **spend management solutions**[26](index=26&type=chunk) - **Payroll**: Includes **Payroll** and **Tax Services**, **Global Payroll** (**100+ countries**), **On Demand Payment**, and **Garnishments**[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - Human Resources: Features Human Resources **management**, **Employee Self-Service** (with AI Assistant), **Workflows & Documents**, **HR Compliance Dashboard**, and **HR Edge**[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - Time & Labor: Provides **Time** and **Attendance tracking**, AI-driven **Scheduling**, and various **Time Collection devices**[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - Talent: Offers **Recruiting tools** (auto-posting, QR code applications, bias reduction), **Onboarding**, **Market Pay insights**, **Learning** (custom and library courses), **Performance management**, and **Compensation tools**[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - Benefits: Includes **Benefit Enrollment & Updates** (AI-powered decision support) and **Third-Party Administrative (TPA) Solutions** (HSA, FSA, HRA, TMA, POP, COBRA)[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - **Employee Experiences**: Features **Community** (streamlined communication, chat, file sharing), **Video tools**, **Employee Voice** (AI-generated sentiment summaries), **Recognition & Rewards**, **Modern Workforce Index** (AI-powered HR intelligence), and **Data Insights & Reporting**[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - **Paylocity for Finance**: Includes **Headcount Planning**, AI-powered **Expense Management**, AI-powered **Accounts Payable Automation**, **Corporate Cards**, and **Guided Procurement**[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) [Client Support Teams](index=11&type=section&id=Client%20Support%20Teams) **Paylocity** supplements its **software platform** with an integrated implementation and **client service organization**, emphasizing a positive **client experience** and high **support levels**[57](index=57&type=chunk)[60](index=60&type=chunk) - Implementation and Training Services: Rapid implementation (**1-8 weeks**) guided by consultants, supported by standardized methodology, cloud-based architecture, and configurable **products**. Offers on-demand/in-class training and an annual **client conference**[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) - **Client Service**: Achieves high **revenue retention** (over **92%** in FY2023-2025) through assigned **account management teams**, deep technical expertise, proactive **client feedback surveys**, and an online knowledge repository[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) - **Tax and Regulatory Services**: Utilizes a rules engine for accurate federal, state, and local **tax calculations**, continually updated by **tax compliance professionals**. Provides **payroll tax deposits**, **return filing**, and **notice resolution**[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) [Clients](index=12&type=section&id=Clients) As of June 30, 2025, **Paylocity** served approximately **41,650 clients** across various industries in the U.S., excluding acquired **clients**[62](index=62&type=chunk) - **Client acquisition** is variable and seasonal, with many **clients** switching **solutions** in the first calendar quarter. No single **client** accounted for more than **1%** of **revenues** in fiscal **years 2023**, **2024**, or **2025**[62](index=62&type=chunk) [Sales and Marketing](index=12&type=section&id=Sales%20and%20Marketing) **Paylocity markets** and sells **products** through a direct **sales force** with defined geographic territories in the U.S[63](index=63&type=chunk) - **Sales leads** are generated through **sales representatives**, a third-party **referral network**, **client referrals**, telemarketing, the external website, and **marketing initiatives** (seminars, webinars, email, social media, broker events)[64](index=64&type=chunk) [Referral Network](index=12&type=section&id=Referral%20Network) A strong **referral network**, including **401(k) advisors**, **benefits administrators**, and HR consultants, is a significant component of the **sales process**[65](index=65&type=chunk) - In fiscal **2025**, over **25%** of new **client revenue** originated from **referrals**. Partners are attracted by **product strength**, **value** from the broker portal, non-competitive **services**, and **platform integration capabilities**[65](index=65&type=chunk)[66](index=66&type=chunk) [Marketplace](index=12&type=section&id=Marketplace) **Paylocity** has a partner ecosystem with automated **data integration** for third-party systems (e.g., **401(k)**, **benefits**, **insurance providers**)[67](index=67&type=chunk) - This **integration** reduces complexity, errors, and saves **time** for **clients** and **employees**, while enhancing partners' **service offerings** and **competitive positioning**[68](index=68&type=chunk) [Technology](index=13&type=section&id=Technology) **Paylocity's solutions** are offered on a cloud-based platform with a unified architecture and common code base, accessible via mobile devices or web browsers[69](index=69&type=chunk) - The company uses multiple cloud hosting and third-party **data center providers**, including locations in Franklin Park, Illinois, and Kenosha, Wisconsin (for backup and **disaster recovery**)[70](index=70&type=chunk) [Competition](index=13&type=section&id=Competition) The **HCM** and **payroll solutions market** is fragmented, highly competitive, and rapidly changing, with competitors including Automatic Data Processing, Inc., Dayforce, Inc., Paychex, Inc., Paycom Software, Inc., and Ultimate Kronos Group[71](index=71&type=chunk)[102](index=102&type=chunk) - Key competitive factors include multi-tenant architecture, mobile-focused design, robust **security programs**, comprehensive **product suite** on a single platform, configurability, ease of use, modern **user experience**, **innovation capability**, **domain expertise**, **quality of service**, ease of implementation, real-time **payroll processing**, and access to third-party providers[72](index=72&type=chunk)[73](index=73&type=chunk) [Research and Development](index=14&type=section&id=Research%20and%20Development) **Paylocity** invests heavily in **R&D** to continuously introduce new modules, technologies, features, and functionality, utilizing agile **development methodology**[75](index=75&type=chunk) **R&D Costs (Millions)** | Fiscal Year | **R&D Costs** (Millions) | | :---------- | :------------------- | | **2023** | **$219.6** | | **2024** | **$253.9** | | **2025** | **$281.7** | [Intellectual Property](index=14&type=section&id=Intellectual%20Property) **Success** depends on protecting proprietary **technology** and **intellectual property rights** through **trade secrets**, **copyrights**, **trademarks**, and **contractual protections**[77](index=77&type=chunk) - Key means of maintaining **technology leadership** include the technological and creative **skills** of **personnel**, creation of new modules, features, and frequent enhancements[77](index=77&type=chunk) [Governmental Regulation](index=14&type=section&id=Governmental%20Regulation) **Paylocity's platform** handles sensitive **data** and is subject to evolving **data privacy laws** (e.g., HIPAA, CCPA, BIPA, GDPR) and **regulatory requirements** related to **tax**, **benefits**, and other **laws**[78](index=78&type=chunk)[79](index=79&type=chunk) - **Compliance** requires continuous modification of **products** and **services**, potentially incurring additional **costs** or hindering new **product development**[79](index=79&type=chunk) - The company has implemented established frameworks, policies, and procedures to protect **data accuracy**, **privacy**, and **security**, and undergoes periodic **audits** and **certifications**[80](index=80&type=chunk)[81](index=81&type=chunk) [Human Capital](index=15&type=section&id=Human%20Capital) As of June 30, 2025, **Paylocity** had approximately **6,700 full-time employees**, primarily in the United States[84](index=84&type=chunk) - **Culture & Engagement**: Driven by core **values** (earning it every day, **growth fuels opportunity**, thinking next generation, living the **reputation**, unbeatable together), fostering an engaging **culture**. Recognized by Forbes, Newsweek, Fortune, Time, and Built In. Supports **Employee Resource Groups (ERGs)**[83](index=83&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) - **Learning & Development**: Committed to industry-leading **talent development** and **leadership programs**, offering **professional development courses**, internal **learning tools**, and specialized **training programs** (e.g., operations, sales, leadership)[83](index=83&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) - **Talent Acquisition & Compensation**: Focuses on attracting top talent regardless of location, emphasizing **values**, **curiosity**, and diverse perspectives. Offers competitive **total rewards**, including **pay**, **restricted stock**, **ESPP**, **retirement benefits**, **paid time off**, and **health/well-being resources**[83](index=83&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) - **PCTY Gives**: Mobilizes **technology**, **people**, and **resources** for **community giving** through in-kind donations, the **Elevate Your Passions (EYP) Grant Program**, **paid volunteer time**, and partnerships with national organizations like **Girls Who Code** and **American Red Cross**. Also supports the **Peter J. McGrail Scholarship program**[83](index=83&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) [Available Information](index=16&type=section&id=Available%20Information) **Paylocity's investor relations website** (http://investors.paylocity.com) provides free access to **SEC filings** (**10-K**, **10-Q**, **8-K**) as soon as practicable after electronic filing[93](index=93&type=chunk) [Item 1A. Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) This section outlines various risks that could materially adversely affect **Paylocity's business**, **growth prospects**, **financial condition**, or **operating results**, spanning operational, technological, competitive, legal, regulatory, financial, and stock ownership aspects - Quarterly **operating results** may fluctuate due to factors like **client employee counts**, **renewal rates**, **market acceptance**, **client budgets**, **business disruptions**, macroeconomic factors (**interest rates**, **inflation**), and unforeseen **legal expenses**[95](index=95&type=chunk)[96](index=96&type=chunk)[100](index=100&type=chunk) - Failure to innovate and deliver technologically advanced **products**, especially with rapid advancements in AI and **machine learning**, could lead to **loss of competitiveness**, **revenue**, and **operating results**[97](index=97&type=chunk)[98](index=98&type=chunk) - **Cybersecurity attacks** and incidents pose significant **risks**, potentially leading to unauthorized **data access**, **service disruptions**, **client loss**, **reputational harm**, **litigation**, and **regulatory fines**, despite ongoing **security measures**[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk) - **Compliance** with evolving **data privacy laws** (HIPAA, GDPR, CCPA) and other **regulatory requirements** (**tax**, **benefits**, **employment**) could impose increased **costs**, delay new **product introductions**, or impair existing **services**[139](index=139&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk) [Risks Related to our Business and Industry](index=16&type=section&id=Risks%20Related%20to%20our%20Business%20and%20Industry) Quarterly **operating results** are subject to fluctuations due to factors such as **client employee counts**, **renewal rates**, **market acceptance**, **client budgets**, **business disruptions**, macroeconomic conditions (**interest rates**, **inflation**), and **legal expenses**[95](index=95&type=chunk)[100](index=100&type=chunk) - The company faces intense **competition** from larger, more resourced **payroll** and HR **service/software providers**, requiring continuous **innovation** to maintain **competitiveness**[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) - Failure to effectively manage **growth**, including attracting and retaining skilled **personnel** and maintaining **technology infrastructure**, could increase **expenses** and hinder **revenue growth**[99](index=99&type=chunk)[101](index=101&type=chunk) - Operational **risks** include potential **service outages** from **infrastructure failures**, reliance on third-party **service providers** (e.g., couriers, banks for ACH transfers), and the **risk** of **client payment defaults**[105](index=105&type=chunk)[106](index=106&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk) [Risks Related to Cybersecurity and Intellectual Property Rights](index=21&type=section&id=Risks%20Related%20to%20Cybersecurity%20and%20Intellectual%20Property%20Rights) **Breaches** or unauthorized access to **information systems**, **client data**, or **funds** could lead to **client loss**, **reputational harm**, **litigation**, **government enforcement**, and significant **liabilities**[123](index=123&type=chunk)[127](index=127&type=chunk)[129](index=129&type=chunk) - The company's reliance on **trade secrets**, **copyrights**, and **trademarks** for **intellectual property protection** may be inadequate against unauthorized use or copying, potentially requiring costly **litigation**[131](index=131&type=chunk)[133](index=133&type=chunk) - The use of **open-source software** in **products** may expose the company to additional **risks**, including potential **disclosure requirements** for proprietary code or **intellectual property infringement claims**[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk) [Risks Related to Legal and Regulatory Matters](index=24&type=section&id=Risks%20Related%20to%20Legal%20and%20Regulatory%20Matters) Changes in **regulatory laws** (**tax**, **benefits**, **employment**, **privacy**) could increase **costs**, delay new **product introductions**, or negatively affect existing **services**, potentially requiring **registration** or **licensing** as a **money transmitter**[139](index=139&type=chunk) - Failure to comply with **data privacy laws** (HIPAA, GDPR, CCPA) could result in significant **penalties**, **legal liability**, **reputational damage**, and increased **governmental oversight**[143](index=143&type=chunk)[144](index=144&type=chunk)[146](index=146&type=chunk) - The use of new technologies like AI and **machine learning** introduces **legal risks** related to **intellectual property**, **privacy**, and **civil rights**, and may lead to increased **regulatory scrutiny**[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) [Risks Related to Financial Matters](index=26&type=section&id=Risks%20Related%20to%20Financial%20Matters) The **revolving credit agreement** contains restrictive **covenants**, and non-compliance could limit **borrowing ability** or make **outstanding amounts** immediately due, negatively impacting **financial condition**[150](index=150&type=chunk) - **Corporate investments** and **client funds** are subject to **market**, **interest rate**, **credit**, and **liquidity risks**, with potential for adverse impacts on **business** and **operating results** if **funds** are lost or inaccessible[151](index=151&type=chunk) - Changes in U.S. GAAP or interpretations by FASB and SEC could significantly affect reported **financial results**, including increased **volatility**[153](index=153&type=chunk) [Risks Related to Ownership of Our Common Stock](index=27&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) The **market price** of **common stock** may experience wide fluctuations due to **operating performance**, **acquisitions**, **management changes**, **research reports**, **public announcements**, **share repurchases**, and general **economic conditions**[154](index=154&type=chunk)[156](index=156&type=chunk) - The **share repurchase program** may increase **stock price volatility**, reduce **market liquidity**, and may not achieve anticipated long-term **stockholder value**[155](index=155&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) - Future issuances of **common stock** could dilute existing **stockholders' ownership** and depress the **market price**. Anti-takeover provisions in charter documents and Delaware law could discourage changes in **control**[160](index=160&type=chunk)[161](index=161&type=chunk) [General Risk Factors](index=29&type=section&id=General%20Risk%20Factors) Adverse **economic** and **market conditions** (e.g., lower **employment**, rising **interest rates**, **inflation**) could reduce **demand** for **software solutions**, impacting **revenues**, **sales**, and increasing **price competition**[164](index=164&type=chunk) - Failure to maintain **effective internal controls** over **financial reporting** could lead to **investor loss of confidence**, negative impact on **stock price**, and potential **investigations** by **regulatory authorities**[165](index=165&type=chunk) [Item 1B. Unresolved Staff Comments](index=29&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments from the SEC regarding the registrant's filings - No unresolved staff comments were reported[166](index=166&type=chunk) [Item 1C. Cybersecurity](index=29&type=section&id=Item%201C.%20Cybersecurity) **Paylocity** maintains a comprehensive **cybersecurity risk management program**, integrated into its overall **risk management function**, to assess, identify, and manage material **cybersecurity threats** - **Paylocity's cybersecurity risk management program** includes **information security policies** aligned with NIST, COSO, and ISO 27001, and maintains ISO 27001:2022 **certification** and SOC 1/SOC 2 **audits**[167](index=167&type=chunk)[168](index=168&type=chunk) - **Security Measures**: Multi-layered **vulnerability management**, **intrusion prevention systems**, **web application firewalls**, **network firewalls**, SIEM, **user/entity behavior analytics**, **endpoint detection and response**, **data loss prevention**, regular **penetration testing**, and **encryption** of sensitive **client information**[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk) - **Incident Response**: Maintains an **incident response plan** for identification, notification, **response activities**, and escalation based on severity[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk) - **Business Resilience**: Applies **controls** from BCI, DRII, and ISO 22301 for threat-agnostic **plans** to ensure **continuity of client services** and critical **business operations**[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk) - The **audit committee** oversees **cybersecurity risks**, receiving quarterly updates from the CISO, who leads the dedicated **information security team** and the **Information Security Steering Committee**[177](index=177&type=chunk)[178](index=178&type=chunk) [Risk Management and Strategy](index=29&type=section&id=Risk%20Management%20and%20Strategy) The **cybersecurity risk management program** includes formal **information security policies**, ISO 27001:2022 **certification**, and annual SOC 1 and SOC 2 **audits**[167](index=167&type=chunk)[168](index=168&type=chunk) - **Employee security awareness** and **training** are mandatory, covering sensitive **information handling**, **data breach responses**, and **security responsibilities**[169](index=169&type=chunk) - **Data and Web Security Safeguards**: Multi-layered **vulnerability management**, **intrusion prevention systems**, **web application firewalls**, **network firewalls**, SIEM, **user and entity behavior analytics**, **endpoint detection and response**, **data loss prevention**, regular **penetration testing**, and **encryption** of sensitive **client information**[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk) - **Incident Response Plan**: Framework for identifying, notifying, organizing, and escalating **cyber incidents**[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk) - **Business Resilience**: Threat-agnostic **plans** and **strategies** to continue **client services** and critical **business operations** during disruptions, validated through regular exercises[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk) - **Third-Party Risk Management**: Ongoing **monitoring** and **cybersecurity risk assessments** for **vendors**, **suppliers**, and **service providers** with access to sensitive **information**[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk) [Governance](index=31&type=section&id=Governance) The **board of directors** delegates **cybersecurity risk oversight** to the **audit committee**, which meets quarterly with the CISO[177](index=177&type=chunk) - The CISO, with over **20 years** of **experience** and multiple **certifications**, leads the **cybersecurity risk management efforts** and the **Information Security Steering Committee (ISSC)**, which tracks **risks**, reviews **audits**, and identifies **mitigation controls**[178](index=178&type=chunk) [Item 2. Properties](index=31&type=section&id=Item%202.%20Properties) As of June 30, 2025, **Paylocity's corporate headquarters** is located in Schaumburg, Illinois, occupying approximately **272,000 square feet** under **leases** expiring in October 2032 - **Corporate headquarters** in Schaumburg, Illinois (**272,000 sq ft**, **lease** until Oct 2032)[179](index=179&type=chunk) - Major **operations centers** in Lake Mary, Florida (**70,000 sq ft**), Meridian, Idaho (**64,000 sq ft**), and Pittsford, New York (**20,000 sq ft**)[179](index=179&type=chunk) - Additional smaller leased facilities serve as **data centers**, **sales offices**, and **distribution centers** across the U.S[179](index=179&type=chunk) [Item 3. Legal Proceedings](index=31&type=section&id=Item%203.%20Legal%20Proceedings) **Paylocity** is involved in **legal proceedings** arising in the ordinary course of **business** - A **class action complaint** filed in November 2020 alleging Illinois Biometric Information Privacy Act violations was dismissed with prejudice in April 2025, and the plaintiff has appealed[452](index=452&type=chunk) - A second, overlapping **class action complaint** filed in September 2023 was settled in June 2025 without a **material financial impact**[453](index=453&type=chunk) - **Management** believes current **litigation** will not materially adversely affect the company's **financial position**, **results of operations**, or **liquidity**[454](index=454&type=chunk) [Item 4. Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to **Paylocity Holding Corporation** - Not applicable[182](index=182&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=32&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) **Paylocity's common stock** is listed on the NASDAQ Global Select Market under the symbol "PCTY" - **Paylocity's common stock** (PCTY) is listed on the NASDAQ Global Select Market[184](index=184&type=chunk) - As of July 30, 2025, there were **55,161,627 shares** of **common stock issued** and **outstanding**[5](index=5&type=chunk) - The company has not paid **dividends** and does not intend to in the foreseeable future, prioritizing **investment** in **growth**[159](index=159&type=chunk)[186](index=186&type=chunk) **Share Repurchase Program Activity (Fiscal 2025):** | Period | **Total Shares Purchased** | **Average Price Paid per Share** | | :----------------------------- | :--------------------- | :--------------------------- | | April 1, 2025 - April 30, 2025 | **314,564** | **$178.21** | | May 1, 2025 - May 31, 2025 | — | — | | June 1, 2025 - June 30, 2025 | — | — | | **Total (Q4 FY2025)** | **314,564** | **$178.21** | | **Total (FY2025)** | **0.8 million** | **$190.16** | - The board authorized an additional **$500 million** for the **share repurchase program** in July 2025[253](index=253&type=chunk)[459](index=459&type=chunk) [Market Information](index=32&type=section&id=Market%20Information) **Paylocity's common stock** is listed on the NASDAQ Global Select Market under the symbol "PCTY"[184](index=184&type=chunk) - As of July 30, 2025, the closing **price** was **$186.41 per share**, with **6 holders** of record and **55,161,627 shares issued** and **outstanding**[5](index=5&type=chunk)[185](index=185&type=chunk) [Dividend Policy](index=32&type=section&id=Dividend%20Policy) **Paylocity** has not declared or paid **dividends** on its **common stock** in the past three fiscal **years** and does not intend to do so for the foreseeable future[159](index=159&type=chunk)[186](index=186&type=chunk) - Future **earnings** will be invested to fund **growth** and other **corporate initiatives**[159](index=159&type=chunk)[186](index=186&type=chunk) [Performance Graph](index=32&type=section&id=Performance%20Graph) The report includes a graph comparing the **total cumulative stockholder return** of **Paylocity's common stock** against the S&P 500 Index and the S&P Software & Services Select Industry Index for the period June 30, 2020, to June 30, 2025[188](index=188&type=chunk) [Issuer Purchases of Equity Securities](index=33&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) **Share Repurchase Program Activity (Q4 FY2025):** | Period | **Total Number of Shares Purchased** | **Average Price Paid per Share** | | :----------------------------- | :----------------------------- | :--------------------------- | | April 1, 2025 - April 30, 2025 | **314,564** | **$178.21** | | May 1, 2025 - May 31, 2025 | — | — | | June 1, 2025 - June 30, 2025 | — | — | | **Total** | **314,564** | | - The board approved a **share repurchase program** in April 2024, authorizing up to **$500 million** of **common stock**. An additional **$500 million** was authorized in July 2025[192](index=192&type=chunk)[253](index=253&type=chunk)[439](index=439&type=chunk)[459](index=459&type=chunk) - In fiscal **2025**, **Paylocity repurchased 0.8 million shares** for approximately **$149.6 million** at an average **cost** of **$190.16 per share**[253](index=253&type=chunk)[439](index=439&type=chunk) [Item 6. [Reserved]](index=33&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information - This item is reserved[193](index=193&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of **Paylocity's financial condition** and **results of operations** for fiscal **years 2024** and **2025**, highlighting its cloud-based **HCM**, **payroll**, and **spend management solutions** - **Paylocity** is a leading cloud-based provider of **HCM**, **payroll**, and **spend management software solutions**, expanding **spend management** through the **acquisition** of Airbase Inc. in October 2024[195](index=195&type=chunk) **Key Financial Highlights (FY2024 vs. FY2025):** | Metric | FY2024 (Millions) | FY2025 (Millions) | **YoY Change** (%) | | :-------------------------------- | :---------------- | :---------------- | :------------- | | **Total Revenues** | **$1,402.5** | **$1,595.2** | **14%** | | **Recurring and Other Revenue** | **$1,281.7** | **$1,471.8** | **15%** | | **Interest Income on Funds Held** | **$120.8** | **$123.4** | **2%** | | **Gross Profit** | **$960.8** | **$1,097.0** | **14%** | | **Operating Income** | **$260.1** | **$304.0** | **17%** | | **Net Income** | **$206.8** | **$227.1** | **10%** | | **Adjusted Gross Profit** | **$1,034.8** | **$1,193.8** | **15%** | | **Adjusted EBITDA** | **$505.6** | **$583.0** | **15%** | - **Client count** increased by **7%** to approximately **41,650** as of June 30, 2025, and the **annual revenue retention rate** remained above **92%**[203](index=203&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk) - The company's **liquidity** is supported by **$398.1 million** in **cash and cash equivalents** as of June 30, 2025, and a **$550.0 million revolving credit facility**, with **$162.5 million outstanding** after repaying a portion of the Airbase **acquisition funding**[252](index=252&type=chunk) [Overview](index=34&type=section&id=Overview) **Paylocity** is a leading cloud-based provider of **HCM**, **payroll**, and **spend management software solutions**, which expanded its **spend management capabilities** through the **acquisition** of Airbase Inc. in October 2024[195](index=195&type=chunk) - The company plans to continue investing in **research and development**, **sales and marketing**, and **client service** to grow its **client base** and increase **revenue** by expanding **product offerings**[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) [Key Metrics](index=35&type=section&id=Key%20Metrics) **Total Revenues Growth:** | Fiscal Year | **Total Revenues** (Millions) | **YoY Increase** | | :---------- | :------------------------ | :----------- | | **2023** | **$1,174.6** | - | | **2024** | **$1,402.5** | **19%** | | **2025** | **$1,595.2** | **14%** | **Client Count Growth (Excluding Acquisitions):** | As of June 30, | **Client Count** | | :------------- | :----------- | | **2023** | **36,200** | | **2024** | **39,050** | | **2025** | **41,650** | *Compound Annual **Growth Rate (CAGR)** of approximately **7%** from **2023** to **2025*** - **Annual revenue retention rate** exceeded **92%** for fiscal **years 2023**, **2024**, and **2025**, indicating strong **client satisfaction**[205](index=205&type=chunk) **Adjusted Gross Profit Reconciliation (Thousands):** | Metric | FY2023 | FY2024 | FY2025 | | :---------------------------------------------------------------- | :------- | :------- | :------- | | **Gross profit** | **$807,559** | **$960,786** | **$1,096,998** | | **Amortization of capitalized internal-use software costs** | **31,440** | **45,246** | **59,948** | | **Amortization of certain acquired intangibles** | **7,414** | **7,907** | **16,168** | | **Stock-based compensation expense and employer payroll taxes** | **18,446** | **20,350** | **19,314** | | **Other items** | **19** | **469** | **1,365** | | **Adjusted Gross Profit** | **$864,878** | **$1,034,758** | **$1,193,793** | **Adjusted EBITDA Reconciliation (Thousands):** | Metric | FY2023 | FY2024 | FY2025 | | :---------------------------------------------------------------- | :------- | :------- | :------- | | **Net income** | **$140,822** | **$206,766** | **$227,127** | | **Interest expense** | **752** | **758** | **13,053** | | **Income tax expense** | **17,792** | **70,249** | **81,936** | | **Depreciation and amortization expense** | **60,866** | **76,426** | **99,636** | | **EBITDA** | **$220,232** | **$354,199** | **$421,752** | | **Stock-based compensation expense and employer payroll taxes** | **154,505** | **152,446** | **150,063** | | **Other items** | **446** | (**1,091**) | **11,182** | | **Adjusted EBITDA** | **$375,183** | **$505,554** | **$582,997** | [Basis of Presentation](index=37&type=section&id=Basis%20of%20Presentation) - **Revenues**: Primarily from recurring **subscriptions** to cloud-based **software solutions** (**91-93%** of **total revenues**), including **base fees**, **per-employee fees**, and **product-based fees**. **Implementation fees** are deferred and amortized over up to **24 months**. **Interest income** is earned on **funds held for clients**[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk][224](index=224&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk) - **Cost of Revenues**: Consists of **employee-related expenses** for **client support** and implementation, **payroll tax filing**, **distribution costs**, **computing costs**, **amortization of acquired intangibles**, and **bank fees**. **Capitalized internal-use software costs** are amortized over **7 years**[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk][224](index=224&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk) - **Operating Expenses**: Includes **Sales and Marketing** (**employee-related**, **commissions**, **marketing**), **Research and Development** (**employee-related**, new technologies, existing **solution refinement**), and **General and Administrative** (**finance**, **legal**, HR, **consulting**, **occupancy**)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk][224](index=224&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk) - **Other Income (Expense)**: Primarily **interest income** on **cash and cash equivalents**, net of **interest expense** from the **revolving credit facility**[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk][224](index=224&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk) [Results of Operations](index=39&type=section&id=Results%20of%20Operations) **Consolidated Statements of Operations Data (Thousands):** | Metric | FY2023 | FY2024 | FY2025 | | :------------------------------------ | :------- | :------- | :------- | | **Recurring and other revenue** | **$1,098,036** | **$1,281,680** | **$1,471,801** | | **Interest income on funds held for clients** | **$76,562** | **$120,835** | **$123,420** | | **Total revenues** | **$1,174,598** | **$1,402,515** | **$1,595,221** | | **Cost of revenues** | **367,039** | **441,729** | **498,223** | | **Gross profit** | **$807,559** | **$960,786** | **$1,096,998** | | **Sales and marketing** | **296,716** | **334,954** | **374,216** | | **Research and development** | **163,994** | **178,333** | **205,851** | | **General and administrative** | **191,823** | **187,406** | **212,907** | | **Total operating expenses** | **$652,533** | **$700,693** | **$792,974** | | **Operating income** | **$155,026** | **$260,093** | **$304,024** | | **Other income** | **3,588** | **16,922** | **5,039** | | **Income before income taxes** | **158,614** | **277,015** | **309,063** | | **Income tax expense** | **17,792** | **70,249** | **81,936** | | **Net income** | **$140,822** | **$206,766** | **$227,127** | **Consolidated Statements of Operations Data (% of Total Revenue):** | Metric | FY2023 | FY2024 | FY2025 | | :------------------------------------ | :----- | :----- | :----- | | **Recurring and other revenue** | **93%** | **91%** | **92%** | | **Interest income on funds held for clients** | **7%** | **9%** | **8%** | | **Total revenues** | **100%** | **100%** | **100%** | | **Cost of revenues** | **31%** | **31%** | **31%** | | **Gross profit** | **69%** | **69%** | **69%** | | **Sales and marketing** | **25%** | **24%** | **24%** | | **Research and development** | **14%** | **13%** | **13%** | | **General and administrative** | **16%** | **13%** | **13%** | | **Total operating expenses** | **55%** | **50%** | **50%** | | **Operating income** | **14%** | **19%** | **19%** | | **Other income** | **0%** | **1%** | **0%** | | **Income before income taxes** | **14%** | **20%** | **19%** | | **Income tax expense** | **2%** | **5%** | **5%** | | **Net income** | **12%** | **15%** | **14%** | [Comparison of Fiscal Years Ended June 30, 2024 and 2025](index=40&type=section&id=Comparison%20of%20Fiscal%20Years%20Ended%20June%2030%2C%202024%20and%202025) **Revenue Comparison (Thousands):** | Revenue Type | FY2024 | FY2025 | **Change** ($) | **Change** (%) | | :-------------------------- | :------- | :------- | :--------- | :--------- | | **Recurring and other revenue** | **$1,281,680** | **$1,471,801** | **$190,121** | **15%** | | **Interest income on funds held** | **$120,835** | **$123,420** | **$2,585** | **2%** | - **Recurring and other revenue** increased by **15%** due to strong **sales performance** and continued high **annual revenue retention**. **Client count** increased by **7%** to **41,650**[234](index=234&type=chunk) - **Interest income on funds held for clients** increased slightly by **2%** due to higher average daily balances, mostly offset by lower **interest rates**[235](index=235&type=chunk) **Cost of Revenues Comparison (Thousands):** | Metric | FY2024 | FY2025 | **Change** ($) | **Change** (%) | | :--------------- | :------- | :------- | :--------- | :--------- | | **Cost of revenues** | **$441,729** | **$498,223** | **$56,494** | **13%** | | **Gross profit margin** | **69%** | **69%** | **0%** | **0%** | - **Cost of revenues** increased by **13%** primarily due to additional **employee-related costs** (**$22.1M**), increased **internal-use software amortization** (**$14.7M**), **processing/delivery costs** (**$12.6M**), and **acquired intangible asset amortization** (**$8.3M**)[236](index=236&type=chunk) **Operating Expenses Comparison (Thousands):** | Expense Type | FY2024 | FY2025 | **Change** ($) | **Change** (%) | | :------------------------ | :------- | :------- | :--------- | :--------- | | **Sales and marketing** | **$334,954** | **$374,216** | **$39,262** | **12%** | | **Research and development** | **$178,333** | **$205,851** | **$27,518** | **15%** | | **General and administrative** | **$187,406** | **$212,907** | **$25,501** | **14%** | - **Sales and marketing** increased by **12%** due to **$36.8 million** in additional **employee-related costs** for **sales team expansion**. **R&D** increased by **15%** due to **$25.7 million** in additional **development personnel**. **G&A** increased by **14%** due to **$14.3 million** in additional **employee-related costs** and a **$4.3 million gain** related to **lease exit activity** in FY2024[237](index=237&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk) - **Other income** decreased by **$11.9 million**, primarily due to **$12.3 million** in additional **interest expense** from **revolving credit facility borrowings**[241](index=241&type=chunk) - **Effective tax rates** were **25.4%** (FY2024) and **26.5%** (FY2025), higher than the federal statutory **rate** of **21%** primarily due to state **income taxes**[242](index=242&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=42&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) - **Revenue Recognition**: Applies ASC 606, recognizing **revenue** when **control** of **goods/services** is transferred. **Recurring fees** are satisfied over **time**, typically monthly. **Implementation fees** are deferred and amortized over up to **24 months**[245](index=245&type=chunk)[246](index=246&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk)[250](index=250&type=chunk)[251](index=251&type=chunk) - **Capitalized Internal-Use Software Costs**: Capitalizes **development costs** when **projects** are probable of completion and intended use, amortizing them straight-line over **2-3 years** (or **10 years** for main **processing activities**)[245](index=245&type=chunk)[246](index=246&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk)[250](index=250&type=chunk)[251](index=251&type=chunk) - **Business Combinations**: Accounts for **acquisitions** using the **acquisition method**, allocating **purchase price** to **fair values** of acquired **assets** and assumed **liabilities**, with excess to **goodwill**. Requires significant **judgment** in **fair value estimates**[245](index=245&type=chunk)[246](index=246&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk)[250](index=250&type=chunk)[251](index=251&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) Primary **liquidity sources** as of June 30, 2025, were **$398.1 million** in **cash and cash equivalents** and a **$550.0 million revolving credit facility**[252](index=252&type=chunk) - The company borrowed **$325.0 million** under the **credit facility** in September 2024 to fund the Airbase Inc. **acquisition** and repaid **$162.5 million** in H2 FY2025, leaving **$162.5 million outstanding**[252](index=252&type=chunk) - A **share repurchase program** authorized up to **$500 million**, with an additional **$500 million** approved in July 2025. In fiscal **2025**, **$149.6 million** was used to repurchase **0.8 million shares**[253](index=253&type=chunk) - **Operations**, **capital expenditures**, **acquisitions**, and **share repurchases** are expected to be funded by **cash flows from operations**, supplemented by **cash on hand** or the **credit facility**[256](index=256&type=chunk) [Cash Flows](index=45&type=section&id=Cash%20Flows) **Cash Flow Summary (Thousands):** | Activity Type | FY2023 | FY2024 | FY2025 | | :---------------------------------------------------------------- | :------- | :------- | :------- | | **Net cash provided by operating activities** | **$282,723** | **$384,670** | **$418,226** | | **Net cash used in investing activities** | **$(220,162)** | **$(101,891)** | **$(455,548)** | | **Net cash provided by (used in) financing activities** | **$(1,434,702)** | **$141,578** | **$(325,821)** | | **Net change in cash, cash equivalents and funds held for clients' cash and cash equivalents** | **$(1,372,141)** | **$424,357** | **$(363,143)** | - **Operating cash flow** increased from **$384.7 million** in FY2024 to **$418.2 million** in FY2025, driven by improved **operating results** and **non-cash adjustments**[261](index=261&type=chunk)[262](index=262&type=chunk) - **Investing cash flow** shifted from **$101.9 million** used in FY2024 to **$455.5 million** used in FY2025, primarily due to **$265.8 million** for the Airbase **acquisition** and less **proceeds** from **available-for-sale securities**[263](index=263&type=chunk)[264](index=264&type=chunk) - **Financing cash flow** changed from **$141.6 million** provided in FY2024 to **$325.8 million** used in FY2025, mainly due to a **$623.0 million change** in **client fund obligations** and **net borrowings** of **$162.5 million** on the **credit facility** for the Airbase **acquisition**[265](index=265&type=chunk) [Capital Expenditures](index=46&type=section&id=Capital%20Expenditures) **Capital Expenditures (Thousands):** | Metric | FY2023 | FY2024 | FY2025 | | :-------------------------------- | :------- | :------- | :------- | | **Capital expenditures** (excluding **capitalized internal-use software**) | **$21,900** | **$18,000** | **$13,100** | | **Capitalized internal-use software costs** | **$45,000** | **$60,700** | **$62,400** | - The company expects to continue investing in **capital spending** for **business growth**, **operating facilities**, **data centers**, and **technical infrastructure**[266](index=266&type=chunk) [Contractual Obligations](index=46&type=section&id=Contractual%20Obligations) As of June 30, 2025, principal commitments include **$162.5 million** in **revolving credit facility borrowings** (not due in next **12 months**), **$64.6 million** in **operating lease obligations** (**$11.0 million** due in next **12 months**), and **$95.5 million** in **purchase obligations** (**$57.6 million** due in next **12 months**)[267](index=267&type=chunk) [New Accounting Pronouncements](index=46&type=section&id=New%20Accounting%20Pronouncements) Refer to Note **2** of the **Notes** to the **Consolidated Financial Statements** for a discussion of recently issued **accounting standards**[268](index=268&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) **Paylocity's operations** are primarily in the United States, exposing it to **market risks** such as **interest rate fluctuations** and general **economic conditions** - **Paylocity's operations** are primarily in the U.S., exposing it to **interest rate** and general **economic condition risks**[269](index=269&type=chunk) - The company does not use **derivatives** to mitigate **market risks**[269](index=269&type=chunk) - As of June 30, 2025, **cash and cash equivalents** were **$398.1 million**, and **funds held for clients** were **$2,704.1 million**, with **investments** in liquid, **investment-grade marketable securities**[270](index=270&type=chunk) - **Interest Rate Sensitivity**: A **100-basis point increase** in **interest rates** would decrease the **market value** of **available-for-sale securities** by **$12.0 million**; a **100-basis point decrease** would increase it by **$12.0 million**[272](index=272&type=chunk)[273](index=273&type=chunk] - **Credit Facility**: **Borrowings** under the **$550.0 million credit facility** bear variable **interest rates** (Term SOFR plus **margin**), exposing the company to **changes** in underlying **index rates**. A hypothetical **100-basis point change** would not significantly impact **results of operations**[272](index=272&type=chunk)[273](index=273&type=chunk] - **Inflation** has not had a material effect on the **business**, but significant **pressures** could prevent offsetting **costs** through **price increases**[274](index=274&type=chunk) [Interest Rate Risk](index=46&type=section&id=Interest%20Rate%20Risk) **Paylocity** is exposed to **interest rate risk** on its **cash**, **cash equivalents** (**$398.1 million**), and **funds held for clients** (**$2,704.1 million**) as of June 30, 2025[270](index=270&type=chunk) - A **100-basis point increase** in **interest rates** would decrease the **market value** of **available-for-sale securities** by **$12.0 million**, while a **100-basis point decrease** would increase it by **$12.0 million**[272](index=272&type=chunk) - **Borrowings** under the **credit facility** (**$162.5 million outstanding** as of June 30, 2025) bear variable **interest rates**, but a hypothetical **100-basis point change** would not significantly impact **results**[273](index=273&type=chunk) [Inflation Risk](index=47&type=section&id=Inflation%20Risk) **Inflation** has not had a material effect on **Paylocity's business**, **financial condition**, or **results of operations**[274](index=274&type=chunk) - Significant **inflationary pressures** could prevent the company from fully offsetting higher **costs** through **price increases**, potentially harming the **business**[274](index=274&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=47&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item incorporates by reference the **consolidated financial statements** and accompanying **notes**, which begin on page F-1 of this **Annual Report** on Form **10-K** - **Financial statements** and **supplementary data** are incorporated by reference from page F-1 of the Form **10-K**[275](index=275&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=47&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no **changes** in or **disagreements** with **accountants** on **accounting** and **financial disclosure** - No **changes** in or **disagreements** with **accountants** on **accounting** and **financial disclosure** were reported[276](index=276&type=chunk) [Item 9A. Controls and Procedures](index=47&type=section&id=Item%209A.%20Controls%20and%20Procedures) **Paylocity's management**, including the CEO and CFO, evaluated the **effectiveness** of its **disclosure controls** and **procedures** as of June 30, 2025, concluding they were effective - **Disclosure controls** and **procedures** were evaluated as effective as of June 30, 2025[278](index=278&type=chunk) - **Management** concluded that **internal control** over **financial reporting** was effective as of June 30, 2025, based on the COSO (**2013**) framework[281](index=281&type=chunk) - The **assessment** of **internal control** over **financial reporting** excluded Airbase Inc., acquired in October 2024, which represented **9%** of **total assets** and less than **2%** of **total revenues**[282](index=282&type=chunk) - No material **changes** in **internal control** over **financial reporting** occurred during the fiscal quarter ended June 30, 2025[284](index=284&type=chunk) [Disclosure Controls and Procedures](index=47&type=section&id=Disclosure%20Controls%20and%20Procedures) **Management**, with CEO and CFO participation, concluded that **disclosure controls** and **procedures** were effective as of June 30, 2025[278](index=278&type=chunk) [Management's Report on Internal Control Over Financial Reporting and Attestation Report of the Registered Public Accounting Firm](index=47&type=section&id=Management%27s%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting%20and%20Attestation%20Report%20of%20the%20Registered%20Public%20Accounting%20Firm) **Management** concluded that **internal control** over **financial reporting** was effective as of June 30, 2025, based on the COSO (**2013**) framework[281](index=281&type=chunk) - The **assessment** excluded Airbase Inc., acquired in October 2024, which represented **9%** of **total assets** and less than **2%** of **total revenues**[282](index=282&type=chunk) - The independent registered **public accounting firm** also audited and reported on the **effectiveness** of **internal control** over **financial reporting**[283](index=283&type=chunk) [Changes in Internal Control Over Financial Reporting](index=48&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) No **changes** in **internal control** over **financial reporting** materially affected or are reasonably likely to materially affect **internal control** over **financial reporting** during the fiscal quarter ended June 30, 2025[284](index=284&type=chunk) [Limitations on Controls](index=48&type=section&id=Limitations%20on%20Controls) **Control systems** are designed to provide reasonable, not absolute, **assurance** and may not prevent or detect all **errors** and **fraud**[285](index=285&type=chunk) [Item 9B. Other Information](index=48&type=section&id=Item%209B.%20Other%20Information) This item contains no other information - No other information was reported[286](index=286&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=48&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item contains no **disclosure** regarding **foreign jurisdictions** that prevent **inspections** - No **disclosure** regarding **foreign jurisdictions** that prevent **inspections** was reported[287](index=287&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=49&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) **Information** regarding **directors**, **executive officers**, and **corporate governance** is incorporated by reference from the **Proxy Statement** for the **2026 annual meeting** of **stockholders**, to be filed within **120 days** after June 30, 2025 - **Information** on **directors**, **executive officers**, and **corporate governance** is incorporated by reference from the **2026 Proxy Statement**[289](index=289&type=chunk) [Item 11. Executive Compensation](index=49&type=section&id=Item%2011.%20Executive%20Compensation) **Information** regarding **executive compensation** is incorporated by reference from the **Proxy Statement** for the **2026 annual meeting** of **stockholders**, to be filed within **120 days** after June 30, 2025 - **Information** on **executive compensation** is incorporated by reference from the **2026 Proxy Statement**[290](index=290&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=49&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) **Information** regarding **security ownership** of certain **beneficial owners** and **management**, and related **stockholder matters**, is incorporated by reference from the **Proxy Statement** for the **2026 annual meeting** of **stockholders**, to be filed within **120 days** after June 30, 2025 - **Information** on **security ownership** and related **stockholder matters** is incorporated by reference from the **2026 Proxy Statement**[291](index=291&type=chunk) [Item 13. Certain Relationships and Related Transactions and Director Independence](index=49&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) **Information** regarding certain **relationships** and **related transactions**, and **director independence**, is incorporated by reference from the **Proxy Statement** for the **2026 annual meeting** of **stockholders**, to be filed within **120 days** after June 30, 2025 - **Information** on certain **relationships**, **related transactions**, and **director independence** is incorporated by referen

Company Performance - Paylocity (PCTY) reported quarterly earnings of $1.56 per share, exceeding the Zacks Consensus Estimate of $1.38 per share, and up from $1.48 per share a year ago [1] - The earnings surprise for this quarter was +13.04%, and the company has surpassed consensus EPS estimates in all four of the last quarters [2] - Revenues for the quarter ended June 2025 were $400.74 million, surpassing the Zacks Consensus Estimate by 3.10%, and up from $357.29 million year-over-year [3] Market Performance - Paylocity shares have declined approximately 8% since the beginning of the year, while the S&P 500 has gained 7.6% [4] - The current Zacks Rank for Paylocity is 4 (Sell), indicating expectations of underperformance in the near future [7] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $1.48 on revenues of $391.24 million, and for the current fiscal year, it is $7.03 on revenues of $1.71 billion [8] - The Internet - Software industry, to which Paylocity belongs, is currently ranked in the top 32% of over 250 Zacks industries, suggesting a favorable industry outlook [9]

Financial Data and Key Metrics Changes - Recurring revenue for Q4 was $369.9 million, an increase of 14%, with total revenue up 12% year-over-year [15] - For fiscal year 2025, recurring revenue grew 15% and total revenue grew 14%, ending the year with $1.6 billion in revenue [8][15] - Adjusted EBITDA for Q4 was $130.7 million, representing a 32.6% margin, exceeding guidance by $8 million [15] - Fiscal year 2025 adjusted EBITDA was $583 million, a 36.5% margin, reflecting a 15% increase from fiscal year 2024 [15] - Free cash flow margin for fiscal year 2025 was 21.5%, a 12% increase year-over-year [16] Business Line Data and Key Metrics Changes - Average revenue per client reached over $35,300 in fiscal year 2025, up approximately 8% from $32,800 in fiscal year 2024 [9] - The client base grew by 7% to 41,650 existing clients [9] Market Data and Key Metrics Changes - The broker channel represented more than 25% of new business in fiscal year 2025, indicating strong channel performance [12] - Revenue retention remained consistent at greater than 92% in fiscal year 2025 [12] Company Strategy and Development Direction - The launch of Paylocity for Finance aims to unify finance and HR functions, enhancing product offerings and driving future growth [9][12] - Continued investment in R&D is seen as crucial for product differentiation and future growth, with R&D investments at 14.3% of revenue for fiscal year 2025 [16][17] - The company is focused on expanding its sales force and enhancing productivity to drive recurring revenue growth [11] Management's Comments on Operating Environment and Future Outlook - Management noted a stable demand environment throughout fiscal year 2025, with consistent year-over-year growth in units and ARPU [30] - The company expressed confidence in its differentiated value proposition and operational strength, setting a positive outlook for fiscal year 2026 [21][22] Other Important Information - The company repurchased approximately 315,000 shares in Q4 at an average price of $178.21 per share, totaling $56 million [19] - The board increased the share repurchase authorization by an additional $500 million [20] Q&A Session Summary Question: How do we think about the demand environment right now? - Management observed a stable demand environment with consistent growth in units and ARPU throughout fiscal year 2025 [30] Question: Can you help us understand the significant jump in sales and marketing expenses? - The increase was attributed to typical year-end timing, including bonus payments and hiring in Q4 [32] Question: Does the integration of Airbase mean it's complete? - The first phase of integration is complete, with ongoing opportunities for further integration and enhancements [38] Question: What are the expectations for Paylocity for Finance? - Early feedback is positive, with expectations for gradual adoption and higher revenue per client compared to typical HCM modules [50][52] Question: What is the current stage of AI investments for internal operations? - The company is in the early stages of AI integration, with ongoing investments expected to enhance client experience and operational efficiency [67][68] Question: What is the retention rate for fiscal year 2025? - Retention remained strong at over 92%, with no significant changes noted [69]