Summary
Paylocity's fiscal 2021 third quarter, ended March 31, 2021, showed steady top-line growth but weaker profitability. Total revenue was $186.1 million, up 8.4% from the prior-year quarter. Recurring and other revenue represented 99% of total revenue and grew 11%. Gross profit was $128.7 million, up 4.2%, while gross margin slipped to 69.2%, down 2.8 percentage points. The company's growth came against continued COVID-19 pressure, including lower client employee counts on the platform.
Operating income was $39.1 million, down 18.0%, and operating margin fell to 21.0%, down 6.8 percentage points. Net income was $36.8 million, down 8.2%, and diluted EPS was $0.65, down $0.07. On a non-GAAP basis, operating income was $57.0 million, Adjusted EBITDA was $66.9 million, non-GAAP net income was $49.4 million, and non-GAAP net income per share was $0.88. The profitability decline reflected higher operating expenses, including stock-based compensation, as the company continued to invest in growth.
Cash generation was a bright spot in the quarter. Operating cash flow was $66.1 million, up 30.3%. For the first nine months of fiscal 2021, operating cash flow was $85.8 million, down 1.2%. Capital expenditures were $2.1 million in the quarter, down 3.2%, and $8.2 million year to date, down 44.1%. Deferred revenue was $8.8 million, down 1.9%, and remaining performance obligations were $47.6 million, flat. Year-to-date revenue was $468.2 million, up 8.7%, while year-to-date net income was $58.9 million, down 1.0%. Year-to-date gross margin was 65.8%, down 2.6 percentage points, and year-to-date operating margin was 10.5%, down 3.4 percentage points.
Guidance points to a stronger fourth quarter but a steady full year. For the fourth quarter of fiscal 2021, total revenue is expected to be $159.5 million to $163.5 million, which represents approximately 22% to 25% growth over fiscal 2020 fourth quarter revenue. Fourth quarter Adjusted EBITDA is expected to be $31.5 million to $34.5 million. For the full fiscal year 2021, total revenue is expected to be $627.7 million to $631.7 million, approximately 12% growth over fiscal year 2020 revenue. Full-year Adjusted EBITDA is expected to be $164.3 million to $167.3 million. Paylocity cannot reconcile forward-looking Adjusted EBITDA to GAAP without unreasonable effort.
Operational momentum included the release of the Modern Workforce Index, a proprietary algorithm that uses data from more than 25,000 clients to score HR processes and employee engagement. Management noted a strong selling season in a digital environment and expects a gradual return to a more normalized sales environment as state restrictions ease. Risks remain substantial. The COVID-19 pandemic continues to affect client headcount, business closures and delayed sales starts. Lower interest rates have already cut interest income on funds held for clients. Future revenue could be hurt by sustained lower employee counts, client losses, a slow macro recovery, competitive pressure, or a data security breach. Seasonality also matters: the fiscal third quarter benefits from W-2 preparation and higher funds held for clients, so investors should not treat those results as a reliable run rate.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $186.1M | $146.3M | +27.1% | $171.6M | +8.4% |
| Gross profit | $128.7M | $92.8M | +38.7% | $123.6M | +4.2% |
| Gross margin | 69.2% | 63.4% | +5.8 pp | 72.0% | -2.8 pp |
| Research & development | $18.5M | $19.3M | -4.6% | $15.6M | +18.2% |
| Sales & marketing | $40.1M | $37.8M | +6.0% | $37.8M | +6.0% |
| General & administrative | $31.1M | $29.3M | +6.0% | $22.4M | +38.6% |
| Total operating expenses | $89.6M | $86.4M | +3.6% | $75.8M | +18.1% |
| Operating income (loss) | $39.1M | $6.4M | +516.3% | $47.7M | -18.0% |
| Operating margin | 21.0% | 4.3% | +16.7 pp | 27.8% | -6.8 pp |
| Net income (loss) | $36.8M | $9.6M | +282.0% | $40.1M | -8.2% |
| Net margin | 19.8% | 6.6% | +13.2 pp | 23.4% | -3.6 pp |
| Diluted EPS | $0.65 | $0.17 | +$0.48 | $0.72 | -$0.07 |
Risks
The ongoing COVID-19 pandemic continues to impact client employee counts and business confidence, with total revenue growth for the three and nine months ended March 31, 2021 affected. MD&A warns future performance may be unfavorably impacted by sustained lower client employee counts, client losses, and delayed sales or starts.
Gross margin declined to 69% for the three months ended March 31, 2021 from 72% in the prior-year quarter, and operating margin declined to 21% from 28%. Cost of revenues increased 19% year over year for the quarter, outpacing revenue growth of 8%, as the company continues to invest heavily in personnel and infrastructure.
Interest income on funds held for clients decreased 75% for the three months ended March 31, 2021 and 78% for the nine months, due to Federal Reserve interest rate cuts during the pandemic. A continued low interest rate environment may further reduce this revenue stream and overall profitability.
SaaS KPIs
All quarters →Adjusted EBITDA
Non-GAAP Operating Income
Adjusted Gross Profit
Recurring and other revenue
Average Client Size
Total clients
Summary, forecast, risks and KPIs are extracted from Paylocity Holding Corp's SEC filings for Q3 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.