What Paylocity (PCTY) Said on Its Q1 Earnings Call

Key Points

• Paylocity raised its fiscal 2027 outlook after first-quarter revenue reached $451.7 million, nearly 11% higher year over year and above guidance. It now expects total revenue of $1.910 billion to $1.925 billion and adjusted EBITDA of $711.5 million to $721.5 million.
• Management cited strong client retention, stable demand and interest income on client funds as outlook drivers. The company expects about $118 million in fiscal-year interest income, assuming no further rate changes.
• Paylocity is expanding AI and service offerings: early Recruiting Optimizer results included 35% higher recruiting productivity, roles filled 25% faster and 15% less candidate drop-off. It also repurchased 1.1 million shares for $152.5 million in the quarter.

Paylocity NASDAQ: PCTY raised its fiscal 2027 revenue and profit outlook after first-quarter sales exceeded its guidance, citing strong client retention, demand for new products and higher expected interest income on client funds.

The payroll and workplace software provider reported revenue of $451.7 million for the quarter ended September 30, 2026, up nearly 11% from a year earlier and $7.2 million above the top end of its guidance. Recurring and other revenue rose 12% to $424.5 million.

Chief Financial Officer Ryan Glenn said most of the revenue outperformance came from recurring and other revenue. The company raised its full-year total revenue outlook by $30 million at the midpoint, including a $15 million increase in its forecast for recurring and other revenue.

Higher Full-Year Outlook

Paylocity now expects fiscal 2027 total revenue of $1.910 billion to $1.925 billion, representing approximately 8% growth from fiscal 2026. It forecasts recurring and other revenue of $1.792 billion to $1.807 billion, or approximately 9% growth.

The company also raised its adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, forecast to a range of $711.5 million to $721.5 million. Excluding interest income on client funds, adjusted EBITDA is expected to be between $593.5 million and $603.5 million.

Glenn said the revised outlook reflects strong results across the company’s human capital management, finance and IT products, along with retention, a stable demand environment and higher interest rates. He said the $15 million increase in expected interest income was being passed through to the bottom line.

Paylocity expects approximately $118 million in interest income on client funds for the year, based on an average daily balance of $3.5 billion and an average annual yield of approximately 3.4%. Its forecast incorporates a September rate increase of 25 basis points but assumes no further changes in fiscal 2027.

For the second quarter, the company forecast total revenue of $452.5 million to $457.5 million and adjusted EBITDA of $152.5 million to $156.5 million.

AI Products and New Services

Executive Chairman Steve Beauchamp highlighted Recruiting Optimizer, a premium product that uses artificial intelligence agents to assist with candidate outreach, screening and interview scheduling. He said early results showed a 35% improvement in recruiting productivity, roles filled 25% faster and a 15% reduction in candidate drop-off.

Paylocity is taking two approaches to AI monetization, Beauchamp said. Some capabilities are embedded in existing products, such as payroll, while offerings including Recruiting Optimizer are sold separately. The company also plans to launch an Absence Management module in January.

“Our AI strategy is definitely a factor” in sales momentum, Beauchamp said, adding that prospective clients increasingly ask about current and planned AI capabilities during evaluations.

President and CEO Toby Williams said the company has seen strong interest in its recently launched Elevate Solutions and Paylocity for Retirement offerings from both new and existing clients. He described demand as stable and said first-quarter growth was fairly balanced between increased average revenue per user and new customer units.

Williams said Paylocity had invested in service teams to support Elevate Solutions, its managed-services offering. He expects the offering’s margin profile to be similar to the broader software business over the end of this fiscal year and into next year.

Profit and Repurchases

First-quarter net income was $57.6 million, while adjusted EBITDA was $159.5 million, representing a 35.3% margin. Excluding interest income on client funds, adjusted EBITDA margin improved by 30 basis points from a year earlier, Glenn said.

Asked about a year-over-year decline in gross margin, Glenn attributed it primarily to the timing of staffing and investment, including preparations for new offerings. He said he expected margins to rise as the fiscal year progresses and identified no significant concern related to AI costs.

Paylocity repurchased 1.1 million shares for $152.5 million during the quarter. Approximately $1.1 billion remained under its repurchase program, and Glenn said the company expects to continue buying back shares.

About Paylocity (NASDAQ:PCTY)

Paylocity Holding Corporation NASDAQ: PCTY provides cloud-based human capital management (HCM) and payroll software for organizations. Its platform is designed to help employers manage payroll, human resources, employee benefits, talent acquisition, onboarding, performance, learning, and workforce administration through an integrated system.

The company also offers tools for time and labor management, scheduling, employee communications, engagement, surveys, expense management, and other workplace activities.

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