Paylocity Q1 Revenue Rises 11%, FY2027 Outlook Targets Margin Growth

Paylocity Corporation reported an 11% year-over-year increase in fiscal first-quarter revenue to $452 million, while adjusted EBITDA rose to $160 million from $146 million. The cloud-based human capital management provider also maintained a fiscal 2027 outlook centered on further revenue growth and margin expansion.

For the full fiscal year ending June 30, 2027, Paylocity expects total revenue of $1.918 billion, compared with $1.771 billion in fiscal 2026. Recurring and other revenue is projected at $1.8 billion, up from $1.651 billion, while adjusted EBITDA is expected to reach $717 million from $655 million.

Adjusted EBITDA excluding interest income on funds held for clients is forecast at $599 million, representing a 33.3% margin. That compares with $535 million and a 32.4% margin in fiscal 2026. Paylocity said it intends to generate additional operating leverage primarily through cost of sales and general and administrative expenses.

Platform expansion supports revenue per client

Paylocity is expanding beyond its core payroll and HCM products into finance and IT software, offering tools for expense management, accounts payable automation, corporate cards, procurement, identity access and hardware management. The company is also embedding artificial intelligence into workflows, including recruiting tools designed to identify candidates, assess their fit for open roles and automate communication and interview scheduling.

The broader product portfolio has helped increase realized average revenue per client, calculated as recurring and other revenue divided by the number of clients. Realized ARPU reached $37,200 in fiscal 2026, up from $35,300 in fiscal 2025 and more than double its fiscal 2014 level. Non-GAAP research and development spending increased to $256 million in fiscal 2026 from $227 million a year earlier.

Paylocity had 44,400 clients as of June 30, 2026, with an average client size of more than 150 employees. Its target market covers businesses with 10 to 5,000 employees. The company said clients purchase, on average, more than half of its product suite, leaving room for additional product adoption within the existing customer base.

Client retention remains another focus. Paylocity reported net revenue retention of more than 92%, excluding interest income on funds held for clients from the calculation. More than 25% of new-client revenue comes through referral channels, while ADP and Paychex together represent its largest source of new clients won from competitors.

Cash flow and capital returns

Paylocity ended September 2026 with $194.5 million in cash and cash equivalents. During the fiscal first quarter, it repurchased approximately 1.1 million common shares for $152.5 million. Since May 2024, cumulative repurchases have totaled about $850 million, covering roughly 5.7 million shares. The company had $1.1 billion remaining under its existing authorization as of September 30, 2026.

Free cash flow excluding interest income on client funds was $308 million in fiscal 2026, equal to an 18.6% margin. That was up from $139 million and a 12.7% margin in fiscal 2023, reflecting nearly 600 basis points of margin expansion over that period.

At a longer-term revenue level of $3 billion, management is targeting an adjusted gross margin above 80%, an adjusted EBITDA margin of 40% to 45% and a free-cash-flow margin of 25% to 30%. The targets also assume non-GAAP research and development spending of 10% to 15% of revenue, sales and marketing spending of 15% to 20%, general and administrative expenses of 5% to 7%, and stock-based compensation of about 5%. The presentation did not specify a timetable for reaching those targets.

Paylocity cautioned that its outlook and long-term objectives are forward-looking and subject to known and unknown risks that could cause actual results to differ materially. The company also operates in a competitive market that includes large payroll providers, enterprise software companies, regional vendors and in-house systems. Its non-GAAP measures supplement, rather than replace, results prepared under U.S. GAAP.