Summary
Paylocity closed fiscal 2021 with a strong fourth quarter. Total revenue for the quarter ended June 30, 2021 was $167.45 million, up 28.2% from the prior-year quarter. That lifted full fiscal 2021 revenue to $635.63 million, up 13.2% year over year. The fourth quarter also delivered gross profit of $108.40 million, up 28.0%, and full-year gross profit of $416.33 million, up 9.8%. Operating income was $9.10 million in the quarter, up 44.1%, but full-year operating income fell 12.3% to $58.04 million. Net income was $11.88 million in the quarter, up 140.1%, and $70.82 million for the full year, up 9.9%. Full-year diluted EPS was $1.26, up 9.6%.
Margins tell a more mixed story. Fourth-quarter gross margin was 64.7%, down 0.1 percentage points from the prior-year quarter, while full-year gross margin was 65.5%, down 2.1 percentage points. Fourth-quarter operating margin was 5.4%, up 0.6 percentage points, but full-year operating margin was 9.1%, down 2.7 percentage points. The full-year compression reflects higher operating expenses across sales and marketing, research and development, and general and administrative, as well as cost of revenues that grew faster than total revenue. Management tied the gross margin decline to COVID-19 headwinds and a near zero interest rate environment.
Cash generation improved. Fourth-quarter operating cash flow was $39.09 million, up 51.2%, and full-year operating cash flow was $124.85 million, up 10.8%. Capital expenditures were $1.31 million in the quarter, down 34.7%, and $9.46 million for the full year, down 42.9%. Deferred revenue was $8.73 million at June 30, 2021, up 3.6% from the prior-year quarter, while remaining performance obligations were $47.85 million, up 0.5%. On a non-GAAP basis, fourth-quarter Adjusted EBITDA was $37.3 million, and full-year Adjusted EBITDA was $170.0 million, or 26.7% of revenue. Non-GAAP operating income was $27.4 million in the quarter and $130.8 million for the full year. Non-GAAP net income was $25.9 million in the quarter and $118.8 million for the full year, with non-GAAP net income per share of $0.46 and $2.11. Free cash flow for fiscal 2021 was $86.8 million, or 13.7% of revenue.
Operationally, Paylocity ended fiscal 2021 with approximately 28,750 clients, up 18% from approximately 24,450 a year earlier, excluding clients acquired through acquisitions. Its annual revenue retention rate has been in excess of 92% during each of the past three fiscal years. Recurring and other revenue accounted for 99% of total revenue for fiscal 2021. The company completed the acquisition of Samepage in November 2020 and reported increased utilization of Modern Workforce products such as Community, Surveys, Premium Video and Learning Management. Management also pointed to sales momentum across all market segments. For the first quarter of fiscal 2022, total revenue is guided to $171.5 million to $175.5 million, which represents approximately 26% to 29% growth over fiscal 2021 first quarter revenue. Adjusted EBITDA for that quarter is guided to $37.8 million to $40.8 million. For full fiscal 2022, management guided total revenue to a range of $790.0 million to $795.0 million, approximately 25% growth over fiscal 2021. Management guided Adjusted EBITDA for the full fiscal year to $209.5 million to $213.5 million. The company said it cannot reconcile forward-looking non-GAAP Adjusted EBITDA to its directly comparable GAAP measure without unreasonable effort.
Risks remain elevated. The ongoing COVID-19 pandemic could continue to pressure client employee counts, business confidence, and spending on payroll and HCM solutions. A low interest rate environment weighs on interest income on funds held for clients. Paylocity also faces risks tied to retaining existing clients and attracting new ones, selling new products, expanding its sales organization, reliance on its referral network, forecasting revenue, managing growth, regulatory uncertainty including potential repeal or replacement of the Affordable Care Act, protection of intellectual property, security breaches or unauthorized access to customer data, competition, and changes in employment rates. The full-year declines in operating income, gross margin, and operating margin show that growth has not come without cost pressure, even as the fourth quarter showed strong top-line momentum.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2021 | Q3 FY2021 | QoQ | Q4 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $167.5M | $186.1M | -10.0% | $130.6M | +28.2% |
| Gross profit | $108.4M | $128.7M | -15.8% | $84.7M | +28.0% |
| Gross margin | 64.7% | 69.2% | -4.5 pp | 64.9% | -0.1 pp |
| Research & development | $20.3M | $18.5M | +9.8% | $17.4M | +16.8% |
| Sales & marketing | $46.3M | $40.1M | +15.6% | $33.1M | +40.0% |
| General & administrative | $32.7M | $31.1M | +5.3% | $28.0M | +17.0% |
| Total operating expenses | $99.3M | $89.6M | +10.8% | $78.4M | +26.7% |
| Operating income (loss) | $9.1M | $39.1M | -76.8% | $6.3M | +44.1% |
| Operating margin | 5.4% | 21.0% | -15.6 pp | 4.8% | +0.6 pp |
| Net income (loss) | $11.9M | $36.8M | -67.7% | $5.0M | +140.1% |
| Net margin | 7.1% | 19.8% | -12.7 pp | 3.8% | +3.3 pp |
| Diluted EPS | $0.21 | $0.65 | -$0.44 | $0.09 | +$0.12 |
Risks
MD&A states COVID-19 has caused a global slowdown and may continue to unfavorably affect the business through reduced client employee counts, lower demand, delayed sales/starts and a low interest rate environment. Total revenues increased 13% in fiscal 2021 to $635.6 million, slower than the 20% increase in fiscal 2020, and growth was impacted by COVID-19.
Risk factors highlight new money transmitter or money services business statutes and regulators' changing interpretations, which could require registration or licensing, limit business activities, affect client fund investment, and expose Paylocity to civil or criminal fines if deemed unlicensed.
The payroll and HCM market is fragmented, highly competitive and rapidly changing, with competitors including ADP, Paychex, Paycom, Paycor and Ultimate Kronos Group. Larger competitors with greater resources may develop products better received by the market, respond faster to changing requirements, or engage in price competition, pressuring sales, profitability or market share.
Paylocity has experienced significant growth in users, transactions and data and relies on data centers in Franklin Park, Illinois and Kenosha, Wisconsin, plus third-party internet infrastructure. Service outages, capacity constraints, or data center operator issues could reduce revenues, trigger penalties or client losses, and adversely affect renewal rates.
The company depends on senior management and key employees and faces intense competition for skilled software, sales, client service and implementation personnel. Failure to attract, train, retain and motivate personnel could harm growth, productivity and the ability to manage increasing client demand.
Interest income on funds held for clients decreased 74% to $3.9 million in fiscal 2021 from $15.1 million in fiscal 2020, primarily due to lower average interest rates after Federal Reserve cuts. The risk factor notes a continued low interest rate environment could pressure results, and gross margin decreased to 65% in fiscal 2021 from 68% in fiscal 2020.
Paylocity may pay client employees and taxing authorities before client ACH funds are finally settled; if client payments are rejected or fail to clear, the company may need additional short-term liquidity and operating results could be adversely affected. This is a specific liquidity risk in the payroll funding process.
The company relies on third-party couriers such as UPS and agreements with eleven major U.S. banks for ACH and wire transfers; disruptions, failure to process transfers, or termination or restriction of dollar amounts could harm client relationships and impede funds processing.
Risk factors cite GDPR penalties of up to 4% of worldwide revenue, the CCPA and CPRA, and the Illinois Biometric Information Privacy Act with a private right of action. Compliance burdens or noncompliance could increase costs, limit data use, and reduce demand for Paylocity's solutions.
Paylocity faces complex and changing federal, state and local tax rules for services provided electronically. If taxing authorities determine taxes should have been paid in states where the company believed none were required, it could be liable for past taxes, interest and penalties, adversely affecting results.
Paylocity has acquired and may continue to acquire businesses or technologies, and fiscal 2021 investing activities included $15.0 million for an acquisition of business, net of cash acquired. Integration difficulties, client conversion issues, loss of key employees, dilution or goodwill impairment could disrupt operations and adversely affect operating results.
The five-year revolving credit agreement contains restrictive covenants, including limits on liens, indebtedness, mergers, asset sales and changes in business. Failure to comply could constrain operations and have a material adverse effect on financial condition.
SaaS KPIs
All quarters →Adjusted EBITDA
Annual Revenue Retention Rate
Total clients
Summary, forecast, risks and KPIs are extracted from Paylocity Holding Corp's SEC filings for Q4 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.