Paylocity Q2 Earnings Beat Estimates, Revenues Increase Y/Y

Core Insights - Paylocity (PCTY) reported a second-quarter fiscal 2026 non-GAAP net income of $1.85 per share, exceeding the Zacks Consensus Estimate by 17.83% [1] - Revenues increased by 10.4% year over year to $416.1 million, surpassing the Zacks Consensus Estimate by 1.78% [1] Revenue Growth - The top-line growth was driven by an 11.3% increase in recurring and other revenues, which accounted for 93% of total revenues, reaching $387 million [2][8] - Interest income on funds held for clients, representing 7% of total revenues, declined by 0.4% year over year to $29.2 million [2] Quarterly Financial Performance - Adjusted gross profit was $309.5 million, reflecting an 11.2% increase from the previous year, with an adjusted gross margin of 74.4%, up 50 basis points [3] - Non-GAAP operating income rose by 17.8% year over year to $119.1 million, with a non-GAAP operating margin expanding by 180 basis points to 28.6% [3] - Adjusted EBITDA increased by 13.1% to $142.7 million, with an adjusted EBITDA margin of 34.3%, up 90 basis points [3] Balance Sheet & Cash Flow - As of December 31, 2025, cash and cash equivalents were $162.5 million, down from $398.1 million as of June 30, 2025 [4] - Long-term debt stood at $81.3 million, reflecting borrowings to fund the acquisition of Airbase Inc. [4] - Net cash provided by operations for the first six months of fiscal 2026 was $203.5 million, compared to $145.7 million for the same period in fiscal 2025 [5] - The company repurchased shares worth $100 million during the fiscal second quarter [5] Guidance and Long-Term Targets - For the second quarter of fiscal 2026, total revenues are expected to be between $405.5 million and $410.5 million, indicating an 8% growth year over year [6] - Adjusted EBITDA is projected to be in the range of $131.5 million to $135.5 million [6] - For fiscal 2026, total revenues are anticipated to be between $1.715 billion and $1.730 billion, also implying an 8% growth [6] - Long-term financial targets have been updated, raising the total revenue target from $2 billion to $3 billion and increasing adjusted gross profit margin targets to 80% or higher [7][9]